Q2 2023 The Oncology Institute Inc Earnings Call

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Good afternoon, ladies and gentlemen, and welcome to the Oncology Institute second quarter 'twenty Trinketry earnings Conference call today's call is being recorded.

In our case one paid.

Page remarks and Q&A.

At this time I'd like to turn the countries is it cheap well hidden hi, Sharon General Counsel I E. L D piece.

Please go ahead Sir.

The press release announcing the oncology institutes results for the second quarter of 2023 are available at the investors section of the company's website Ecology Institute Dot Com a replay of this call will also be.

Available at the company's website after the conclusion of this call.

Before we get started I would like to remind you of the company's Safe Harbor language management may make forward looking statements, including guidance and underlying assumptions.

Forward looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially.

For a further discussion of risks related to our business see our filings with the SEC.

This call will also discuss non-GAAP financial measures such as adjusted EBITDA.

Reconciliation of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website joining.

Joining me on the call today is our CEO Dan Burton.

CFO Mihir Shah.

Growing our prepared remarks, we'll open the call for your questions with that I'll turn the call over to Dan.

Patience and our payer partners.

Now moving to gross profit on the first quarter call. We mentioned the pressures we were experiencing on our IV drug margins.

I'm happy to report that through a heightened focus on our drug procurement efforts, we saw a return to expected levels in queue to bolstering our gross margin performance by 40 basis points over Q1 of 2023.

The strong results pave the way for our path to profitability as we head into the second half of 2023.

As we previously mentioned, we anticipate reaching profitability in 2024.

Now I would like to highlight a few operational achievements from the second quarter.

First we are delighted to announce the acquisition of Southland radiation oncology, a multi side radiation oncology practice.

The strategic move strengthens our position in southern California expands our product offering.

To provide even better care to our patients and will enhance our operating margins in this critical market.

Second we have successfully acquired a pharmacy in southern California, a strategic move aimed at bolstering our drug dispensing capability.

We are currently in the process of obtaining approval from the Pharmacy Board, which we anticipate will take approximately 60 days.

Once approved this pharmacy license will enable us <unk> all prescriptions for our medical patients.

A service we have been unable to provide since January of 2022.

This development alone is expected to generate upwards of $7 million in additional annual revenue on patients that we already treat representing a substantial growth opportunity for us.

Additionally, I'm happy to announce that plans are underway to open three additional dispensaries. This year, one in Fresno, California, and two in South Florida.

Finally, we are proud to unveil a few important partnerships that have been finalized and will help drive our gross margin expansion efforts moving forward.

Our partnership with massive bio will enable us to leverage the power of artificial intelligence and optimizing clinical trial randomization.

We have also sign an agreement with house R X to optimize our pharmacy operations and growth strategy.

These developments reflect our commitment to continuously improve and evolved as a health care provider.

In terms of management team focus we have four <unk> that will enable us to enhance shareholder value and continue at a meter and value based oncology.

Phone number one eliminate cash burn we are committed to eliminate our cashback by the end of 2024, insuring it financially stable and sustainable future for our organization.

Our restructuring efforts from the first half of 2023 are on track to deliver $1 million to $3 million and in year 2023, SG&A reductions four year, we expect $6 million to $10 million and realized productions.

Phone number too.

Spanning patient lives under care and our legacy markets of California, Nevada, and Arizona remains a priority as we strive to enhance profitability and solidify our position as a leading health care provider in these regions.

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Proving new markets and.

And our expansion markets of Florida, and Texas, where community growing a patient base improving our value based model.

Clinically excellent and financially viable.

Phone number four leading the value based on college market.

We take pride in our position at meters and the value based on apology market guided by clinical innovation and a steadfast commitment to outstanding patient care, we aim to set new standards for excellence and its industry.

By relentlessly pursuing these goals you're confident in our ability to achieve sustainable growth and deliver even greater value to our patients partners and stakeholders.

Now I'll turn the call over to our CFO Mihir shop to provide additional details on our second quarter financial results.

Thanks, Dan and good afternoon.

<unk> really excited about our second quarter results as we are on track to deliver the upper end of Avenue and adjusted EBITDA guidance before we did entered the financials I want to remind you off the share purchase program in Dallas on June 15th.

The announcement P Y the purchase 1.59 million shares of common stock and open the market purchases.

After we're exposition of Southland radiation oncology clinics.

Clinton account is 67 with a provider accounts at 99 <unk>.

Consolidated revenue for clear through 2023, plus 80 million an increase of 32 per cent compared to appear to 2022, and a 5% increase compared to Q1 2020.

Gross profit interior two 393 was 15 million an increase of 36% compares to do 220, if you're ready to <unk>.

<unk> <unk> 2023, 430 million, an increase of 3% compared to two 220 22 on a percentage of revenue base is cute you 2023 was 30th person down 900 basis points from two to 2022.

Richard several started to take steps to reduce our overhead burden and Q2 and expect to the full impact to be realized in the second half of this year.

Loss from operations into 220, 23 was 15 million a decrease of 3.3 million compared to Q2 2022.

Four Q2, 2023 was 17 million a decrease of 11.4 million compared to Q2 2022.

Primarily due to a change in fair value of liabilities and increasing operating revenue offered by goodwill impairment charge.

<unk> <unk> 23, Disney was negative seven menu.

<unk> calculation does not add back the wider startup costs, nor the consulting and the legal fees associated with acquisition costs.

Further details on how we define it just it <unk> can be found in our 10-K off note <unk> Q4, 2022, we have modified what existed that calculation to now include cash compensation, a two hour board of directors.

There's a quarter and our cash in cash equivalent balance was 29.

We had 69 Emilia and investment for the total of 98 million in cash and cash equivalents an investment.

<unk> 11 million cash my name's they kept water importantly, only 3.3 million office cashback was related to operations, while 5.2 million off the cash, but it wasn't related to acquisition and share buyback Andrew R. Cashback and Q2 was held by a very strong collection activities.

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A full year 2023 <unk>.

<unk> is 290 million to 320 million misrepresents 15 per cent to 27% growth or 2022 with everything.

Most profit guidance range from 60 million to 70 million.

And our adjusted EBITDA guidance range for I'm negative 25 billion to negative 28 <unk>.

We continue to expect to end the year with 1.7, finally entered get 2 million and license computation.

Now turn it back over to Dan for some <unk> remarks.

Thanks Me here.

While we encountered some pressure from lower than expected IV drug margins in Q1, I'm proud of how our team responded to the challenge in queue to to drive our financial performance.

I'm excited about the momentum that are key strategic initiatives gained in the past quarter and expect you to continue accelerating any upcoming quarters <unk>.

As a result, we anticipate a favorable trend and adjusted EBITDA as the year progresses.

Our efforts in reducing cashback will lead us to a margin positive physician by the end of 2024.

We do not anticipate any additional funding needs to execute our current credit plans.

In the leading provider of value based on college, you care in the U S. We remain dedicated to expanding our patient base.

Ordering new value based partnerships and ensuring high quality outcomes for oncology patients.

I'm excited about the possibility that lie ahead for us and we'll keep you updated on our advancements during the teacher calls.

With that we are now ready to take your questions operator.

Okay. Thank you very much then Lady said transfer amount to come talk to increase your consultation.

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The confirmation 10 will indicate taking on using the Christian Q.

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Full participants, making use of speaking equipment it may be necessary to pick up your <unk> <unk>.

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Oh for this Christian comes from Brian <unk>.

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Hi, Good evening, you've got <unk> from Brian . Thank you for taking my question. So first I want to touch on guidance you know F I.

Annualize the first half of 2023 in terms of revenue it looks like your tracking head of your expectations in terms of revenue guidance or at least I mean, you know I think you're.

I'm getting around like you know 312 ish in terms of annualized revenues and it just generally sounds like from your commentary with a lot of positive momentum in a business with your truck procurement efforts and the pending approval from the pharmacy Board just curious if there's anything else or any other factors that are driving the outlook or at least the guidance for you <unk> <unk>.

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For the remainder of the year and anything else, we should we be thinking that as it relates to the business and then F. I ship that to EBITDA right. If I do the same thing I'm tracking around you know negative 20th so within your guidance range you know as we can.

Think through all of the <unk>.

Factors that you've outlined you know I guess anything else that would kind of.

Lift with that you know run rate I guess from <unk>.

First half the second half.

Yes definitely <unk>. Thanks, so much for the question as we entered the back half of 2023, we see several tailwinds related to all of our key growth levers the impact revenue. So continuing see strong cheaper service growth continuing to have several opportunities in the pipeline for a value based partnerships in both established and.

New markets.

Tailwind are orals business related to our dispensary in pharmacy locations opening as well as the house or X partnership and continued to see great opportunities in our clinical trials program with several of the new partnerships with entities like massive by which he called out so would expect the back happier to continue to accelerate.

Okay.

Great that's really helpful. Dr Furnish and then.

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Kind of going back to this conversation around the results of your drug procurement efforts Uhm and I think he had called out 40 basis points for improvement just curious how much more of a runway is left.

I think within that effort and you know I guess.

If there's more how much more I think do you think you can squeeze out of gross margin improvement for this year and how does that inform normalized gross margins.

Even beyond this year.

Yeah. We believe that there are several factors that are <unk> gonna continue to allow us to grab margin unarmed peaceful with business procurement in the world as well and it really centered around a couple different things one is driving discipline around procurement decisions through heightened analytics capabilities in house and working more closely with some of our key distributors.

Two is really somebody enhances we're making to our utilization process you will need to review process and then three as we scale. We get you know benefits of of pricing as overall volume increases. So there is substantial runway there. It's hard put an exact number on the second half, but it's gonna continue to drive forward.

Great. That's really helpful. And then just for my last question I know you kind of touched upon you know you're seeing you know the pipeline a physician partnerships looking pretty strong you know escalate into the back half and it generally how we we've been hearing that you know utilization in the oncology space has been pretty strong.

You know I guess can you maybe characterize the opportunity is it looking more cell around your competition gain sharing you know any other details you can provide around you know you know what that's looking like for the business and for for the remainder of the year.

Yeah. So it's really in in a couple of different bucket. So our traditional cavitation arrangements in legacy markets are keen to show robust pipeline of growth opportunities, which we expect you to realize in Q4 and into next year in new market. We really are pivoted from sort of the the gains. Your models you more of a competition like model, which is a <unk>.

Get it through service funds. So that's you know better for medical groups better for T y and and frankly better for patients and effectively helped create many of the dynamics. It we haven't cavitation models and legacy markets and then we are expanding our efforts around our ability to control part a spend throw how 'bout cancer care program anything that provide value some of our health plan a medical group <unk>.

Hers.

Thank you so much.

You're welcome.

Thank you.

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Remarks.

Thanks, So much in summary, you know we believe we had a really strong second quarter. We're really excited about the second half of 2023 and see a whole lot of tailwind to the business, which are gonna continue drive or path to profitability enhance our growth going forward and Wanna. Thank you all for joining the call today and the thoughtful questions.

Thank you.

Thank you.

Thank you ladies and change within this concludes today's conference. Thank you for attending and even noticed connect two lines.

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