Q3 2023 The Oncology Institute Inc Earnings Call

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Yeah.

Good afternoon, and welcome to the Oncology Institute.

The 2023 earnings conference call.

Today's call is being the contract and we have allocated one off with prepared remarks and Q&A at this time I would like.

I turn the conference over to Mark up Reiser gender, Wisconsin at T. O Y. Thank you you may begin.

The press release announcing your oncology Institute results for the third quarter 2023 are available at the investors section of the company's website, the oncology Institute Dot Com a.

A replay of this call will also be available.

Right.

Thanks, Paul.

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.

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 your filings with the SEC.

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

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

Joining me on the call today is our CEO, Dan Berger CFO here shop, following our prepared remarks, well open the call for your questions.

That I will turn the call over to Dan.

Thank you Mark.

Good afternoon, everyone and thank you for joining our third quarter call.

I'm excited by the progress made this quarter I want to begin again by thanking our clinical staff and teammates for their remarkable contributions to furthering community based oncology care for our patients every day and driving efficiency and innovation and our clinical model.

Their collective performance has resulted in another impressive quarter our financial growth.

Starting with the topline.

I'm very pleased to report that in the quarter, we achieved 26% revenue growth compared to Q3 of 2022.

By strong demand for our services.

Importantly, our organic growth rate was 20% and our same store sales growth was 17%.

Our performance in the quarter demonstrates our ability to execute our strategy as we significantly grew the top line, while improving profitability.

Gross profit has improved sequentially since we announced the headwind around IV drug margin in Q1 2023.

Adjusted EBITDA improved $1 4 million compared to Q3 2022.

Through a concentrated effort to improve collection timely that we have seen improvement in our cash position and expect the improvement to continue in Q4 2023.

As such we expect that adequate funding to fulfill our expansion objectives in 2024.

And remain on track to achieve positive adjusted EBITDA by end of next year.

Now I would like to highlight a few operational achievements since our last call.

First we hit a milestone by opening our 78 quake.

We anticipate four additional locations in Q4 and South Florida.

And we'll use our expanded footprint in Broward and Dade County is sort of a new value based contract, which I'll touch on shortly.

Okay.

We added five physicians in the quarter, primarily in Florida, bringing our total provider count to 112.

Third a significant portion of our providers I think that's we integrated ambien.

Powered platform designed for clinical documentation workflows and enhancing the patient experience.

As we continue to implement this tool we aim to increase efficiency.

Optimized charge capture.

And improve overall patient satisfaction.

That's creating more capacity to accommodate our growing number of encounters.

Fourth we recently welcomed Jeremy Castle, as our new Chief operating officer.

Jeremy joins us with over 15 years of oncology industry experience.

Has a track record of driving growth and profitability for multistate physician groups here.

Jeremy as key strengths to our executive team on operational excellence drug procurement strategy right.

The radiation oncology optimization in addition to other skills.

Lastly, with the recent appointment of Jessica Yankee as our new National Pharmacy leader. We are now fully prepared commenced our 2024 operations with a strong focus on expanding our oral and specialty drug business and enhancing margins through improved drug procurement strategies.

Yeah, I think that brings valuable experience from Amerisourcebergen and her previous tenure.

At Mckesson.

Before I turn it over to Mihir to walk you through the financials I want to provide an update on a significant milestone for T O y.

Effective January one 2024.

We entered into a full risk complicated contract in South Florida.

<unk> per.

The contract covers medical and radiation oncology services.

This is a milestone for T O I as our first direct to health plan capitation contract and will help us elevate the level of community based oncology services for the patients we will treat through this partnership.

This displaces the more common network model solution, which has been prevalent in Florida for many years and we anticipate it to act as a catalyst for our continued growth.

As we demonstrate to you why the ability to deliver superior outcomes for both payers and patients.

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

Thank you Dan and good afternoon, everyone.

As Dan shared we are pleased with our third quarter results.

Lives under contract at one eight.

I would like to point out that our Q2 acquisition of for radiation oncology clinics. We have now expanded radiation oncology address 130000 of our existing lines.

Third quarter results.

Consolidated revenue for Q3, 2023 was 82 million and.

An increase of 26% compared to Q3 2022.

And a 2% increase compared to Q2 'twenty Greg.

Gross profit in Q3, Randy granted me was 16 million an increase of 22% compared to Q3 2022.

As mentioned in our Q2 call. We are seeing the results of our efforts to reduce overhead.

Wichita abuse, SG&A, including depreciation and amortization of 30 million in Q3 Randy.

A decrease of nine 7% compared to Q3 2022.

As a percentage of revenue SG&A was $36 five persons in the quarter down 1000 basis points from Q2 2020.

Loss from operations for Q3 2023.

Okay.

A decrease of $6 2 million compared to Q3 2022.

Net loss for Q3 2023.

17 million.

The increase of $48 7 million compared to Q3 'twenty to 'twenty two.

Preliminarily due to the change in the fair value of conversion options very risky and earn out liabilities offset by an increase in gross profit.

Adjusted EBITDA for Q3, 2023 was negative $5 4 million.

Our adjusted EBITDA calculation does not add back a wider startup cost nor the consulting and legal fees associated with acquisition costs.

Or are there details on how we define adjusted EBITDA can be found in our 10-K.

Oh, no starting 'twenty 'twenty to Q4, we have modified or adjusted EBITDAX calculation to now include cash compensation paid to our board of directors.

As of quarter end, our cash and cash equivalent balance was 27 million and we had 16 billion investment for a total of 87 million cash and cash equivalents and investments.

Now turning to guidance.

We are reaffirming our full year 2023 guidance.

As a reminder, our revenue guidance range is 219 million to 300 and shrinking.

So that presents a king first.

27% growth over 2022.

Our gross profit guidance ranges from 60 million to 17 mobile apps.

Our adjusted EBITDA guidance ranges from negative granted 5 million to negative.

We continue to expect to end the year with one twice they've been 5 million to 2 million lives under capitation.

I'll now turn it back over to Dan for some somebody who can locks.

Thanks Amir.

Want to close our call by providing an update on our progress towards meeting our four key strategic priorities, which I outlined during last quarter's call.

Priority number one eliminate cash burn.

Q3 of 2023 would be the lowest SG&A as a percent of revenue we had seen since going public.

Came after our restructure which we completed in Q2 and.

And we expect to achieve continued benefit in the key ratio.

Through 2024.

Priority number two.

Expanding patient lives under care through value based partnership.

We continue to drive margin improvement in our legacy market through three key efforts.

Ongoing expansion of calculated value based partnerships.

We had several near term pipeline opportunities, which will expand our already dominant footprint.

Nissan called you provider in these markets.

Expansion of radiation oncology.

It provides enhanced continuity of care for patients requiring radiation differentiator, a pure play medical oncology practices and drags margin on a fee for service business.

Great.

Spansion of our clinical trials program.

We are investing in infrastructure and technology.

And you can drive randomization opportunities with the patients we serve and our legacy market we.

We are truly differentiated in our ability to bring trial the patient population that are challenged with access.

Potentially lifesaving opportunities and it is a key opportunity at margin and manage risk for our payer partners.

Priority number three proving our new market.

Our fully cascaded agreement with a national payer in Florida.

Stork milestone for T O y.

We are excited to prove our model, which means dramatically lower cost for our air partners, while maintaining the highest standards of care.

We believe follow on growth opportunities in new markets using this new direct to health plan model will be a key driver of cascaded growth for us in upcoming years.

Priority number four.

Leading to value based oncology market.

We remain the largest validates oncology provider group in the country I liked or revenue under value based arrangements.

We strongly believe we can continue to advance lead by being an employer of choice for oncologists and driving innovation and community based cancer care for the patient and payers that we serve and look forward to continued focus on our top four priorities as we move forward.

With that we're now ready to take your questions.

Operator.

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.

Confirmation tone will indicate your line is in the question queue home up I stopped to if you would like to remove your questions from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the stock East one moment. Please while we poll for questions.

The first question comes from the line of Brian <unk> with.

Jefferies. Please go ahead.

Hey, good afternoon, thanks for taking the questions as Jack Levine on for Bryan.

Wanted to start with the Florida cap contract I know I'm sort.

Sort of working towards that point has been a big part of the story since all came public so congrats on that front.

Just to get into the nuts and bolts right away is there any way to size maybe.

The immediate opportunity in 2024, both from a revenue and gross profit perspective, and then maybe any thoughts you could add in terms of what you can do with that contract to scale. It over time as you continue to build out the footprint in Florida.

Yeah, absolutely I think the things that make this new cabinet hated contracting model really attractive tty and thank you for the question. It's a really great one or one and includes both medical and radiation oncology cavitation to our it structure in a way that we will be working not just you are employed clinics, but with independent oncologists.

<unk>, which provides a number of benefits for T O I and for patients and three with this relationship as well as several that are in the pipeline in 2024, because it's a national payer.

Fantastic job, which I'm confident we will there should be follow on expansion opportunities to build the relationship.

A much larger pipeline than they sort of delegated medical group market, which has been our historic and very important partners for the last 16 years.

Okay.

Got it that's helpful and that's great color.

And then maybe just stepping to the guidance for the full year based on the performance you've got to date.

It looks to me both based on sort of the progress you've seen on the SG&A front and sort of the way things are progressing and we might be leaning towards the lower end of the gross profit range.

To hit on EBITDA is that the right way to think about it or can you give me sort of the moving pieces there considering sort of that SG&A pathway that you guys have been able to show some progress on.

Sure I can take that I think we should be doing okay and the gross profit range. As you know we went through some restructuring in our SG&A in the first half of this year. So I think that has some overhang that is not a not flowing through the bottom line for the full year yet.

Exit run rate would be much better than what you what we see for the full year for this year.

Got it that makes sense and then last one for me just.

Looking at the cash flow, we've got you know almost $10 million of free cash burn in the quarter I. Appreciate the comments you gave on the confidence in getting to EBITDA positive by the end of next year can you just walk me through sort of the moving pieces on the cash flow side to think about as you are as you build that progression forward should it really just.

Be sort of a step down of a few million less than the EBITDA path or are there any larger items. We should think about as you you achieved sort of that progression on EBITDA. Thanks.

Yeah, Yeah excellent question and good good point out about the $10 million ramp our 10 minutes spend this quarter, which as you can see from the prior quarters, it's close to $6 million to $7 million better than the prior quarter right. So this was our onset from second quarter to third quarter.

We did.

Put significant focus in the timeliness and accuracy of for our collection, which we are also seeing benefit off.

Taking that to next year you are right, we should see you.

Most of the burn.

Would it be from negative adjusted EBITA, some capex and potentially some acquisitions. So we do not see any other non structural spend next year.

Got it really helpful. Thanks, again, and congrats on the quarter.

Thank you.

Thank you.

There are no further questions at this time I would now like to turn the floor over to Daniel when Nick for closing comments.

Thanks, so much and thank you all for joining our earnings call today in summary, I'm very pleased with our performance in the third quarter and really looking forward to wrapping up the fourth quarter of this year again this past quarter, we delivered strong growth year over year expanded our gross margin and reduced SG&A all of which is helping drive.

It is towards our elimination of cash burn and how the profitability towards the end of next year.

And we are seeing incredible growth opportunities in our pipeline as outlined with our new relationship with we're starting in Florida, and several additional opportunities, which we expect to announce in the upcoming quarters. Thank you all for joining today and that concludes my comments.

Thank you.

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

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Yeah.

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