Beta Bionics Inc

Comparison of the Three Months Ended March 31, 2025 and 2024

The following table summarizes our results of operations for the periods indicated:

* Not meaningful

(2)

Includes stock-based compensation expense as follows:

Net Sales

Net sales for thethree months ended March 31, 2025 was $17.6 million, compared to $12.9 million for thethree months ended March 31, 2024. This $4.7 million increase in net sales was driven by an increase in the number of single-use products sold. With the increase in the installed customer base, iLet users' consumption of associated single-use products, which are disposed of and replaced every 2-3 days, also increased proportionally. For thethree months ended March 31, 2025, single-use products sales accounted for 43% of net sales, up from 18% of net sales as of thethree months ended March 31, 2024.

Our net sales for thethree months ended March 31, 2025, were generated from customers within our DME and PBP channels, which represented 78% and 22% of net sales, respectively. Our net sales for thethree months ended March 31, 2024, were generated from customers within our DME and PBP channels, which represented 94% and 6% of net sales, respectively. The increase in sales within the PBP channel was primarily driven by expanded pharmacy benefit coverage for the iLet, enabled by the execution of contracts with pharmacy benefit managers (PBMs) and resulted in a higher proportion of new patient starts being reimbursed through the PBP channel.

Cost of Sales

Cost of sales was $8.6 million for thethree months ended March 31, 2025, compared to $5.7 million for thethree months ended March 31, 2024. This $2.9 million increase in cost of sales was primarily driven by higher sales volume in single-use products than the same period in 2024. This increase in the cost of sales also includes a $0.4 million increase in our product warranty expenses due to a higher installed customer base in the first quarter of 2025 as compared to 2024.

Gross Profit and Margin

Gross profit was $9.0 million for the three months ended March 31, 2025, compared to $7.2 million for the three months ended March 31, 2024. Gross margin was 51% for the three months ended March 31, 2025, compared to 56% in the three months ended March 31, 2024. The increase in gross profit was predominantly driven by higher sales volume, however, the decrease in gross margin percentage was primarily driven by the shift in the sales channels in which revenue was generated from customers. In the first quarter of 2025, a higher percentage of the new patients starts were through the PBP channel when compared to the same period in 2024. PBP reimbursement involves a smaller upfront payment by the user and insurance carrier for the iLet than in the DME channel, which negatively impacts gross margin when the percentage of new patient starts is higher in the PBP channel.

Research and Development Expenses

Research and development expenses were $7.6 million for thethree months ended March 31, 2025, compared to $5.5 million for thethree months ended March 31, 2024. This increase of $2.1 million was primarily attributable to a $1.1 million increase in engineering, materials, and clinical trial related expenses incurred for the development of our patch pump, bihormonal configuration of the iLet and incremental software and product updates. The remaining increase is attributable to a net increase of $0.9 million in payroll-related expenses and $0.1 million in allocated facilities-related expenses driven by an increase in headcount.

The table below summarizes the nature of research and development expense by major expense category:

(1)

External research and development costs primarily include expenses incurred with third-parties such as clinical research organizations conducting the clinical trials and engineering and product development consulting services associated with our development of the iLet.

(2)

Internal research and development costs primarily include personnel-related expenses for research and development functions, excluding stock-based compensation and internal costs to manufacture product candidates before FDA marketing authorization, such as raw materials and internal facilities-related expenses.

Sales and Marketing Expenses

Sales and marketing expenses were $13.4 million for the three months ended March 31, 2025, compared to $7.7 million for the three months ended March 31, 2024. This increase of $5.7 million was primarily attributable to an increase of $3.6 million in payroll-related costs, including salaries and wages, sales incentive bonuses, and stock-based compensation, as well as an increase of $0.9 million in travel-related expenses, due to an increase in headcount of our sales force and customer care team in connection with the expansion of our sales territories within the United States. The remaining increase includes $0.7 million in HCP-related marketing, training and professional education and $0.5 million in allocated facilities-related expenses driven by an increase in headcount.

General and Administrative Expenses

General and administrative expenses were $6.6 million for the three months ended March 31, 2025, compared to $3.5 million for the three months ended March 31, 2024. This increase of $3.1 million was primarily attributable to an increase of $1.5 million in payroll-related expenses, driven by an increase in headcount following the Company's growth post-commercialization, particularly within our quality assurance team to accommodate the growing demand for the iLet, as well as increased corporate bonus incentives provided to management level employees. The remaining increase is attributable to professional fees, including legal and accounting services of $0.8 million primarily related to our initial public offering, software license fees of $0.4 million, and other operating expenses of $0.4 million.

Other Income (Expense)

Total other expense, net was $10.0 million for thethree months ended March 31, 2025, compared to $3.0 million for thethree months ended March 31, 2024. This increase of $7.0 million was attributable to a $8.3 million increase in expense from the change in fair value of our warrant liabilities due to changes in inputs associated with the fair value measurement immediately prior to our initial public offering. This was partially offset by a $1.3 million increase in interest income from our short-term and long-term investments.

Selected Quarterly Financial Information

The following tables set forth our selected unaudited quarterly statements of operations data for each of the eight quarters in the period ended March 31, 2025. The information for each of these quarters has been prepared in accordance with GAAP, on a basis consistent with our unaudited condensed financial statements included elsewhere in this Quarterly Report and our audited financial statements included in our 2024 Annual Report and include, in our opinion, all normal recurring adjustments necessary for the fair presentation of the results of operations for the periods presented, with the exception of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), which is a non-GAAP financial measure discussed below. Our historical quarterly results are not necessarily indicative of the results that may be expected in the future and these quarterly results are not necessarily indicative of our operating results for a full year. The following quarterly financial information should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Quarterly Report.

The following tables set forth our selected unaudited quarterly statements of operations data for the periods presented:

(1)

Includes stock-based compensation expense as follows:

Adjusted EBITDA

In addition to our financial results determined in accordance with GAAP, we believe the following adjusted EBITDA non-GAAP measure is useful in evaluating our operating performance. We use adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for adjusted EBITDA to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure, and not to rely on any single financial measure to evaluate our business.

The following table presents a reconciliation of adjusted EBITDA from the most comparable GAAP measure, net loss, for the eight quarters in the period ended March 31, 2025:

Adjusted EBITDA is a key performance measure that we use to assess our operating performance. Because adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes.

We calculate adjusted EBITDA as net loss adjusted to exclude (i) depreciation and amortization expense, (ii) stock-based compensation expense, (iii) interest income, (iv) provision for state taxes and (v) change in fair value of warrant liabilities.

Some of the limitations of adjusted EBITDA include: (i) adjusted EBITDA does not properly reflect capital commitments to be paid in the future and (ii) although depreciation and amortization expense are non-cash charges, the underlying assets may need to be replaced and adjusted EBITDA does not reflect these capital expenditures. Our adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure. In evaluating adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider adjusted EBITDA alongside other financial performance measures, including our net loss and other GAAP results.

Selected Quarterly Trends

Net sales

Our quarterly net sales increased from the second quarter 2023 to the fourth quarter 2024, primarily due to an increase in the number of patients adopting the iLet resulting in an increase in installed customer base. The increase in installed customer base also contributes to an influx in net sales of single-use products that are disposed of and replaced every 2-3 days. Our quarterly net sales decreased from the fourth quarter 2024 to the first quarter 2025 primarily driven by seasonality and product mix, with an increase in the proportion of lower-revenue single-use products sold.

Cost of sales

Our quarterly cost of sales increased from the second quarter 2023 to the fourth quarter 2024, primarily due to an increase in the number of patients adopting the iLet, resulting in a higher installed customer base and additional product warranty liability. The increase in net sales from the iLet also contributed to an increase in cost of sales from royalties expense, which are based on a percentage of net sales. Our quarterly cost of sales decreased from the fourth quarter 2024 to the first quarter 2025 primarily driven by product mix, which included more single-use products at a lower margin.

Gross Margin

Gross margin increased from the second quarter 2023 to the fourth quarter 2023 primarily due to growth in Net Sales. Gross margin then decreased from the fourth quarter 2023 to the first quarter 2025 primarily due to a higher percentage of the new patients starts reimbursed through the PBP channel. In the fourth quarter of 2023 through the third quarter of 2023, a mid-single digit percentage of our new patient starts were reimbursed through the PBP channel, compared to a low-teens percentage in the fourth quarter of 2024. For the three months ended March 31, 2025, a low-twenties percentage of our new patient starts were reimbursed through the PBP channel. The PBP channel, in contrast with the DME channel, recognizes less revenue in the fiscal quarter when the iLet is sold.

Operating expenses

Our quarterly research and development expenses increased in all periods presented, except the second quarter of 2023 and third quarter of 2024, primarily due to increases in engineering, third-party consulting costs and payroll-related expenses incurred to support our continued research and development efforts to enhance our existing product and develop new products.

Our sales and marketing expenses increased in all periods presented, primarily due to increases in payroll-related expenses driven by headcount increases in our sales force and customer care team, as well as other expenses incurred to market, educate and enhance the visibility of our product to HCPs.

Our general and administrative expenses increased in all periods presented, except the third quarter of 2023, primarily due to increases in payroll-related expenses driven by headcount increases in our quality assurance team, and public company costs, including accounting and audit services, insurance premiums and legal expenses, as well as expenses incurred for operational overhead expenses to meet the growing demand for the iLet.

Adjusted EBITDA

Our quarterly Adjusted EBITDA increased from the second quarter 2023 to the fourth quarter of 2023 primarily due to an increase in Net Sales and Gross Profit. Our quarterly Adjusted EBITDA decreased from the fourth quarter of 2023 to the third quarter of 2024 primarily due to increases in Sales & Marketing and Research & Development expenses. The decrease in Adjusted EBITDA from the third quarter of 2024 to the fourth quarter of 2024 was primarily driven by a $3.0 million milestone payment made to Xeris in the fourth quarter of 2024 for the achievement of certain developmental milestones. The decrease in Adjusted EBITDA from the fourth quarter of 2024 to the first quarter of 2025 was primarily driven by an increase in the change in fair value of warrant liabilities and an increase in stock compensation expenses as a result of additional headcount.