Q4 2022 Oncology Institute Inc Earnings Call

Adjusted EBITDA was negative $24 million.

SG&A expenses for the year ended December 31, 2000, $20 million to $119 million or 47, 3% of revenue compared with $83 million or 41, 1% of revenue in prior year.

2020 to share based compensation expense was $28 million or and SG&A related to transaction cost was $3 million.

The remainder of the SG&A growth was due to head count and other costs associated with operating as a public company and to support our revenue growth and expansion into new markets.

At year end, our cash and cash equivalent balance was $14 million and we had $118 million in investments. We expect this capital to be sufficient to support our operations and enhance our growth for 2023 and 2024.

Now turning to 2023 guidance.

Full year 2023.

Got into a revenue range of $219 million with $320 million.

This represents 15% to 27% growth over 2022.

Our gross profit guidance range from 60 million to $70 million and our adjusted EBITDA guidance range from negative <unk> 5 million to negative 28 million.

To end the year with $1 75 million to two 1 million lives under computation.

I will now turn it back over to Brad for some summary remarks.

Thank you Bahir <unk>.

<unk> 22 was a pivotal year for <unk>.

During our first year as a publicly traded company, we invested to drive growth in our priority markets expanded our gain share portfolio and providing creative and innovative solutions to our partners.

We expanded into our 15th market and surpassed 100 positions in <unk> employed by practice.

We ended the year with a strong liquidity position and prioritize clinical outcomes by launching a patient safety organization.

We expect 2023 to be another year of progress and growth.

To ensure that success our focus is aligned on three primary areas first refining and optimizing our model and expansion markets, including optimizing referral capture and transitioning gained share contracts population risk agreements second.

Second growing our legacy markets by expanding service offerings in existing clinics and expanding to new counters and finally.

Reducing cash burn by improving efficiency with new technology solutions, optimizing drug margins and taking a more sustainable approach to new market entry.

In summary, we are very optimistic about 2023 and look forward to sharing our progress as we move through the year.

And with that I'll turn it back over to the operator to open it up for questions. Thank you.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

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Please while we poll for questions.

Your first question comes from Brian <unk> with Jefferies. Please go ahead.

Hey, good afternoon guys.

How're you doing.

Good how are you doing.

Good good I guess, Brad My first question since you alluded to the California issue.

Just wanted to hear if you could share any color with us on.

What's going on there.

Like any.

Any cures or anything going on that will address that issue going forward.

Yes, so with respect to the.

The California issue around the medical.

Drug prescribing.

When when California transitioned to a new vendor last year first of all last year.

It essentially precluded us.

From prescribing drugs to a certain portion of our Medicare patients because we operated as a medically integrated dispensary not as a pharmacy.

And so as we've discussed on previous calls if and when we become licensed as a pharmacy. We would then be able to prescribe drugs to those patients.

We have been endeavoring to become a pharmacy.

It turns out though that.

Our physician ownership and our practice is too high right now so we need to wait until our physician ownership and our practice goes below a certain threshold and then we will apply to become a pharmacy and can can re access those scripts.

But until then.

We can't access those bills.

So that's that's the latest on that issue.

That's what I understand and then I guess as I think about the guidance for EBITDA for this year relative to say.

The budget that you laid out.

The destock just curious what has changed and what are the moving parts and how do that how does that stack versus your expectation say maybe at the beginning of Q4 heading into this year.

Yes, I think you know we have tried to put out guidance that we believe we can achieve.

So we're taking a conservative view to all four categories on guidance.

There are certain realities that we haven't grown quite as fast as we projected to grow in some of our expansion markets.

And so so we haven't had the revenue growth needed to scale and cover some of those fixed SG&A expenses that we had expected.

Which is why you heard me talk about one of our priorities is optimizing our expansion markets.

We have also seen a little bit of compression on IV drug margins as we started the year.

That is to a large extent out of our control until we see a little bit of pressure on the buy and bill part B IV margins.

That that is partially due to reimbursement changes and partially just due to drug mix.

Things going on patent are off patent.

So we've taken a conservative view on guidance, obviously, we hope to beat it.

But that's why you see slightly lower EBITDA than I think we had originally predicted.

And Brad maybe just to clarify too.

Just check what the guide any assumptions embedded for unannounced acquisitions in there right now.

Here, you want to take that one.

Sure Hey, Brian .

So to your point the guidance right now does not include any.

The announced acquisitions that we might do in <unk>, so that would be upside from there right now.

Got it okay awesome alright, thank you guys.

Thank you Brian .

Next question Sandy Draper with Guggenheim. Please go ahead.

Thanks, very much I guess first just a follow up to that.

You closed the acquisition.

From the fourth quarter, they got pushed out I guess, that's the first question.

Okay.

Yeah.

So yes.

Yeah go ahead.

Yes, we have not.

Not closed any acquisitions.

In 2023 that we have not announced.

Okay, but the ones that were announced that you've talked about in the third and fourth quarter that got delayed that caused the lower revenue last year.

I see.

No.

Both of those we believe are are unlikely to close ever.

Okay. So they're so they're not even in <unk>.

Those are not in your Guy was just trying to make sure it stays where it sounds like theyre not because it sounds like they're never happened.

Yeah, we think for different reasons, both of those are likely not to happen never say never.

I can always come back, but our view right now is that they probably not not likely to happen.

Okay got it and then maybe a different I appreciate the commentary around the EBITDA.

And one for lower but.

What's a little bit issue to me is actually relative to my model you finished stronger gross margin in 'twenty, two and your guidance for a little bit of improvement in gross margin and 23, and so I'm just trying to it's not a lot but midpoint. It's like 50 to 70 basis points. What are the drivers there and then just want to make sure that income.

It'll cost you are talking about.

Any of those the cost of goods are they all below cost of goods and down below in SG&A.

Yes, I can start and Bahir you. Please fill in if I Miss anything.

The compression of IV drug margins on the buy and Bill that's in cost of goods sold so that's reflected in our gross profit guidance.

We have chosen in several areas to invest in that hit our SG&A.

Including most.

Most importantly, our technology.

Department and our clinical research Department.

So we're investing in both of those departments, which is adding some to our SG&A.

We're also we hope to get better scaling some of our SG&A is variable.

And does scale up with with the number of patients we treat so obviously, we focus on trying to get that lower and lower every every year as a percent of revenue and so we think there are there are some opportunities.

Two to get better scaling out of our SG&A, but theres also some fixed SG&A with technology and clinical research that we've chosen to invest for the future.

Great. That's helpful. And then that sort of leads me into my final question.

It may be still too early I know you hired a new head of your clinical trials Division our clinical research.

Any any updates I guess, it's been maybe six months or maybe it's only three I can't remember, but so maybe too early but any updates on sort of changes that are being made and how that's going thanks.

Yeah sure we've been spending a lot of time focused on clinical research because we think it's a real differentiator Ti's business model and also we think there's a lot of untapped potential even though we.

We are very advanced much further along than most community oncology practices with respect to clinical research. We've seen examples of community practices out there that are further along than we are.

And so we endeavor to be the best and so we've set really high targets and goals for our clinical research Department.

One of the things that we have done we've rebranded the entire division we used to call. It a cri innovative clinical research.

And we rebranded that Toi clinical research, which we think is more understandable from a patient perspective, and we've also changed a lot of our processes and protocols around patient identification. So that we can start talking to patients earlier about clinical trials that they may be.

Eligible for <unk>.

Have very aggressive growth targets. So we will see we expect a lot of growth throughout 2023.

Started the year strong so that feels good.

But that's those are some of the things that we're doing around Toi clinical research.

Great. Thanks.

Once again, if you would like to ask a question. Please press star one on your telephone keypad.

Our next question comes from Gary Taylor with Cowen and company. Please go ahead.

Hey, guys a couple questions.

One just on the 23 revenue guidance.

How much of that pick up.

Year over year $40 million to $70 million pick up.

Is already sort of in the bag. If you will because of the acquisitions that have closed and you just get the.

The pick up to the true or the annual run rate in 'twenty three.

Yes, I mean, we exited 2022.

If you look at our fourth quarter revenue about two eight core run rate.

So.

That's a significant portion of the way Theyre already just with our exit run rate.

Fourth quarter, a little bit.

Stronger there's a bit of seasonality. So it's not a perfect annualized nation, but that gives you a sense.

Okay I didn't know if the deals were in there for the full or the deals were there for the full fourth quarter.

Or not.

But that's helpful.

Your new gained share contracts. So the three in Florida was one of those with 10 minute or all those worth kinmen or whats or are different.

Payers or providers.

Just one of those.

With tender yup.

And is that.

Like single County kind.

Kind of a pilot I mean, obviously, there you know mulch.

Multiple <unk> multiple states so is there.

What's the outlook that that relationship could get larger.

Yeah, I mean, we have a lot of optimism for that relationship where were started partnering with them in central Florida.

And we hope to expand that to many other locations, but the initial focus of central Florida.

And then we'll follow that on with other places for example, South, Florida and elsewhere, where we have market overlap with Jim.

And then the $59 million of non current investments I presume just because you've got plenty of liquidity and maybe more than youll put to use right away made more sense to.

Do something that would earn a little more can you tell us what that's in.

Do you want to grade or.

Yes, yes, I can take that.

Mostly in.

In the T bills, but to me that the GAAP accounting allows us to recognize it needs to be in non correct, but most of it is available for all of our operations and acquisition news.

Okay. Thank you.

Thank you.

Thank you I would like to turn the floor over to Brad <unk> for closing remarks.

Okay, well. Thank you everybody for joining our call today, and we look forward to following up with you in the coming weeks and.

And we're very excited about Tijuana path ahead, and we look forward to updating you on our progress on the next earnings call. Thank you and have a good evening.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

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