Q4 2023 The Oncology Institute Inc Earnings Call

Operator: Good afternoon, and welcome to the Oncology Institute's fourth quarter 2023 and full year 2023 earnings conference call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the call over to Mark Hueppelsheuser, General Counsel, at TLR. Thank you. You may begin.

Good afternoon, and welcome to the oncology Institute's fourth quarter 2023, and full year 2023 earnings conference call.

Today's call is being recorded and we have allocated one tower block remarks and Q&A.

At this time I'd like to turn the conference over to Mark a couple of I think general counsel.

Mark: At T O.

Mark: Thank you you may begin the press release announcing the oncology institutes results for the fourth quarter and full year 2023 are available at the investors section of the company's website, the oncology Institute Dot Com a.

Mark Hueppelsheuser: The press release announcing the Oncology Institute's results for the fourth quarter and full year 2023 is available in the investor section of the company's website, theoncologyinstitute.com. A replay of this call will also be available on 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 included in the company's press release for the fourth quarter and full year 2023. Management may make forward-looking statements, including guidance and underlying assumptions.

Mark: A replay of this call will also be available at the company's website. After the conclusion of this call.

None: Before we get started I would like to remind you of the company's Safe Harbor language included in the company's press release for the fourth quarter and full year 2023.

None: Management may make forward looking statements, including guidance and underlying assumptions.

Mark Hueppelsheuser: 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 is included in the earnings release furnished to the SEC and available on our website.

None: Forward looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially.

None: For a further discussion of risks related to our business see our filings with the SEC.

None: This call will also discuss non-GAAP financial measures such as adjusted EBITDA.

None: 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.

Mark Hueppelsheuser: Joining me on the call today is our CEO, Dan Virnich, and our CFO, Mihir Shah. Following our prepared remarks, we'll open the call to your questions. With that, I'll turn the call over to Dan.

Dan: Joining me on the call today is our CEO, Dan vertical and our CFO Mihir Shah.

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

Daniel Virnich: Thank you, Mark. Good afternoon, everyone, and thank you for joining our fourth quarter full-year call. To start, I'm pleased with our performance during 2023, including several important milestones that will set us up to drive value to our shareholders in 2024 and beyond. As always, none of this would be possible without the contributions of our many physicians, clinical staff, and teammates who deliver outstanding care to the patients that we serve each day.

Daniel Virnich: Thank you Mark good afternoon, everyone and thank you for joining our fourth quarter full year call.

Daniel Virnich: I'm pleased with our performance during 2023, including several important milestones, which will set us up to drive value to our shareholders in 2024 and beyond.

Daniel Virnich: As always none of this would be possible without the contributions of our many physicians clinical staff and teammates who deliver outstanding care to the patients that we serve each day.

Daniel Virnich: Our strong performance led to year-over-year revenue growth of 20% in Q4 2023 versus Q4 2022 and 28% for the full year 2023. We exceeded the high end of our annual revenue guidance range by over $4 million, with both patient services and dispensary segments contributing to our outperformance. Gross profit came in at the low end of our annual guidance range, primarily due to the negative impact of unusually high direct and indirect remuneration, or DIR, fees on our Part D drug margins. Our experience with Pharmacy Benefit Managers, or PBMs, generated DIR fees in the fourth quarter is being felt across the oncology industry and is related to the point-of-sale DIR mandates that went into effect on January 1

Daniel Virnich: Our strong performance led to year over year revenue growth of 20% in Q4, 2023 versus Q4, 2022, and 28% for the full year 2023.

Daniel Virnich: We exceeded the high end of our annual revenue guidance range by over $4 million with both patient services and dispensary segments contributing to our outperformance.

Daniel Virnich: Gross profit came in at the low end of our annual guidance range, primarily due to the negative impact of unusually high direct and indirect brewing for numeration or DIR fees on our part D drug margins.

Daniel Virnich: Our experience with pharmacy benefit managers or Pbms generated DIR fees in the fourth quarter is being felt across the oncology industry as it related to the point of sale DIR mandate that went into effect on January 1st.

Daniel Virnich: Importantly, we expect to help offset this margin compression in 2024 as our California pharmacy and medically integrated specialty drug dispensaries across markets have been significantly outperforming expectations on fills and revenue contributions. For 2024, we are forecasting our California pharmacy to generate over $30 million in incremental revenue, and we expect full-year growth of approximately 50% in our Part D business. The strong revenue performance we have generated so far in Q1 gives us confidence that we will achieve our gross margin target for Part D fills. On that note, I want to provide some encouraging updates about the growth of our value-based contracts as we begin 2024. Firstly, demand for our services has never been stronger, leading to a highly successful start to the year for our business development team.

Daniel Virnich: Importantly, we expect to help offset this margin compression in 2024 at our California, pharmacy, and medically integrated specialty drug dispensaries across markets have been significantly outperforming expectations on sales and revenue contribution.

Daniel Virnich: For 2024, we are forecasting our California pharmacy to generate over $30 million in incremental revenue and we expect full year growth of approximately 50% in our part D business.

Daniel Virnich: The strong revenue performance, we have generated so far in Q1 gives us confidence that we will achieve our gross margin target for part D cells.

Daniel Virnich: On that note I want to provide an encouraging updates about the growth of our value based contracts as we begin 2024.

Daniel Virnich: First demand for our services has never been stronger leading to a highly successful start to the year for our business development team.

Daniel Virnich: We have signed for our near completion of six new full-risk contracts in Q1. These new relationships will benefit several existing and new markets and include risk that extends beyond our historic Part B medical oncology capitation to include Part D and radiation oncology services. Due to the higher utilization patterns we see outside of California, as well as the predominance of Medicare Advantage-only contracting opportunities, many of these new relationships have a significant improvement in economics on a per-member basis versus the highly competitive rate environment in California.

Daniel Virnich: We have signed or are near completion on six new full risk contracts in Q1.

Daniel Virnich: These new relationships will benefit several existing and new markets and include risk that extends beyond our historic part B medical oncology capitation to include part D and radiation oncology services.

Daniel Virnich: Due to the higher utilization patterns, we see outside of California as long as the predominance of Medicare advantage only contracting opportunities. Many of these new relationships have a significant improvement in economics on a per member basis versus the highly competitive rate environment in California.

Daniel Virnich: In an effort to provide more clarity to analysts and our shareholders on our performance, we have moved from reporting value-based members to reporting revenue or value-based members. We believe this change is important because we are evolving our business to take on adjacent specialty risk and establishing more Medicare Advantage-only contracts outside of California. This will provide a clearer picture of the impact of incremental contracts signed and growth across markets on a quarterly basis. Now, I would like to highlight a few operational achievements since our last call. On January 1st, we started our first capitation contract in Florida with a health plan that is a member of the Elements Network.

Daniel Virnich: In an effort to provide more clarity to analysts and our shareholders on our performance. We have moved from reporting value based numbers to reporting revenue or value based member.

Daniel Virnich: We believe this change is important because we are evolving our business to take on adjacent specialty risk and establishing more Medicare advantage only contracts outside of California.

Daniel Virnich: This will provide a clear picture of the impact of incremental contracts signed and growth across markets on a quarterly basis.

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

Daniel Virnich: On January 1st we started our first capitation contract in Florida with a health plan that has a number of the elements network.

Daniel Virnich: This relationship is off to a very good start, and we are encouraged by the strong operational and clinical performance of serving their members. During Q1, we signed our first three independent practices to our MSO model in Florida as we scale our ability to provide value-based oncology services to patients outside of our employed clinic model. In the fourth quarter, we added seven new employed physicians, primarily in Southern California, bringing our total employed physician and advanced practice provider count to 119.

Daniel Virnich: This relationship is off to a very good start and we are encouraged by the strong operational and clinical performance from serving their members.

Daniel Virnich: During Q1, we signed our first three independent practices to our MSL model in Florida, as we scale our ability to provide value based oncology services to patients outside of our employed clinic model.

Daniel Virnich: In the fourth quarter, we added seven new employed physicians, primarily in southern California, bringing our total employed physician and advanced practice provider count to 119.

Daniel Virnich: We successfully acquired and launched our California-based pharmacy in December and have already completed over 1,300 specialty medication fills. We recently announced a new partnership with Max Health in Florida to take on medical oncology Part B and D and radiation oncology cost-of-care risk across five Florida counties for their Medicare Advantage members. This will be a service fund contract.

Daniel Virnich: We successfully acquired and launched our California based pharmacy in December and have already completed over 1300 specialty medications filled.

Daniel Virnich: We recently announced a new partnership with Max Health in Florida to take on medical oncology part B and D and radiation oncology cost of care risk across five Florida counties for their Medicare advantage members. This will be a service contract.

Daniel Virnich: We also announced a partnership with Karim Health in Nevada on our new prospective bundle payment model for breast cancer patients, which is our first partnership to serve patients on behalf of employer groups. Finally, before I turn it over to our CFO, Mihir Shah, I would like to walk you through our 2024 guidance. For the full year 2024, we expect revenue of $400 to $415 million, representing 23 to 28% growth over the full year 2023. This growth is driven by several factors, including our dispensary business, particularly our pharmacy, as well as the continued expansion of our value-based contracts and organic growth, especially in Florida. We expect gross profit in the range of 68 to 79 million dollars and adjusted EBITDA in the range of negative 18 to negative 8 million dollars, reducing our EBITDA loss in the range of 30 to nearly 70 percent.

Daniel Virnich: We also announced a partnership with care and health in Nevada on a new perspective bundled payment model for breast cancer patients, which is our first partnership to serve patients on behalf of employer groups.

Daniel Virnich: Finally, before I turn it over to our CFO Mihir Shah I would like to walk you through our 2020 for guidance.

Mihir Arunkumar Shah: For the full year 2024, we expect revenue of 400 $415 million, representing 23% to 28% growth over full year 2023.

This growth is driven by several factors, including our dispensary business, particularly our pharmacy as well as the continued expansion of our value based contracts and organic growth, especially in Florida.

Mihir Arunkumar Shah: We expect gross profit in the range of $68 million to $79 million and adjusted EBITDA in the range of negative <unk> 18 to negative $8 million, reducing our EBITDA loss in the range of 30 to nearly 70%.

Daniel Virnich: Finally, while we've been impacted by the recent healthcare cyber attack, which has caused disruptions to healthcare companies across the U.S., our team has been actively collaborating with our practice management vendor to swiftly establish alternate channels for transmitting claims to payers. Significant progress has been made in successfully submitting claims to commercial payers, and we've completed applications for Medicare and Medicaid agencies to accept our claims through a new intermediary, which is pending approval. It is anticipated that the delays in claim submissions will lead to an increase in our day's sales outstanding, DSO, and temporarily impact our cash flow in the first and second quarters of 2024. Nevertheless, we do not believe the impact to be material and remain confident in our ability to resolve these challenges. Now, I'll turn the call over to our CFO, Mihir Shah, to provide additional details on our fourth quarter and 2023 financial results. Thanks, Dan. And good afternoon, everyone.

Mihir Arunkumar Shah: Finally, while we have been impacted by the recent change health care cyber attack, which has caused disruptions to health care companies across the U S. Our team has been actively collaborating with our practice management vendor to swiftly establish alternate channels for transmitting claims to payers.

Mihir Arunkumar Shah: Significant progress has been made and successfully submitting claims to commercial payers and we've completed applications for Medicare and Medicaid agencies to accept our claims through a new intermediary, which is pending approval.

Mihir Arunkumar Shah: It's anticipated that the delays in claims submissions will lead to an increase in our days sales outstanding DSO and temporarily impact our cash flow in the first and second quarters of 2024.

Mihir Arunkumar Shah: Nevertheless, we do not believe the impact to be material and remain confident in our ability to resolve these challenges.

Mihir Arunkumar Shah: Now I'll turn the call over to our CFO Mihir Shah to provide additional details on our fourth quarter and 2023 financial results.

Mihir Arunkumar Shah: Thanks, Dan.

Mihir Arunkumar Shah: And good afternoon, everyone I will start with our quarterly results.

Mihir Arunkumar Shah: I will start with our quarterly results. Consolidated revenue for Q4 2023 was $85.8 million, an increase of 20% compared to Q4 2022 and a 4.6% increase compared to Q3 2023. Gross profit in Q4 2023 was $14.4 million, a decrease of 8% compared to Q4 2022. This decrease is attributed to the increase in DIR fees Dan previously mentioned.

Mihir Arunkumar Shah: Holiday revenue for Q4, 2023 was $85 8 million, an increase of 20% compared to Q4, 2022, and a four 6% increase compared to Q3 2023.

Mihir Arunkumar Shah: Gross profit in Q4 2023.

Mihir Arunkumar Shah: $14 4 million, a decrease of 8% compared to Q4 2022.

Mihir Arunkumar Shah: This decrease is attributed to the increase in DIR fees, Dan previously mentioned.

Mihir Arunkumar Shah: We are continuing to see the results of our reduced overheads, which resulted in SG&A, including depreciation and amortization, of $29.7 million in Q4 2023, a decrease of 3.6% compared to Q4 2022. As a percentage of revenue, SG&A was 35% in the quarter, down 8.5% from Q4 2022. Loss from operations for Q4 2023 was $15 million, a decrease of $9.8 million compared to Q4 2022. Net loss for Q4 2023 was $18.8 million, an increase of $7.7 million compared to Q4 2022, primarily due to the change in the fair value of conversion options, derivatives, and earn-out liabilities, offset by an increase in gross profit. Adjusted EBITDA for Q4 2023 was negative 6.3 million.

Mihir Arunkumar Shah: We are continuing to see the results of our reduced overheads richford views and SG&A, including depreciation and amortization of $29 7 million in Q4 2023, a decrease of three 6% compared to Q4 2012.

Mihir Arunkumar Shah: You too.

Mihir Arunkumar Shah: As a percentage of revenue SG&A was 35% in the quarter down eight 5% from Q4 2022.

Mihir Arunkumar Shah: Loss from operations for Q4 2023.

Mihir Arunkumar Shah: $15 million.

Mihir Arunkumar Shah: A decrease of $9 8 million compared to Q4 2022.

Mihir Arunkumar Shah: Net loss for Q4, 2023 was $18 8 million, an increase of $7 7 million compared to Q4 2022.

Mihir Arunkumar Shah: Primarily due to the change in the fair value of conversion options derivatives and earn out liabilities.

Mihir Arunkumar Shah: Offset by an increase in gross profit.

Mihir Arunkumar Shah: Adjusted EBITDA for Q4, 2023 was negative $6 3 million.

Mihir Arunkumar Shah: Moving to full-year results, I am pleased to report that we have achieved financial guidance for the year while outperforming on revenue. Revenue per capitated member was $1.40 per member per year at December 31, 2023, an increase of 10.5% compared to 2022.

Mihir Arunkumar Shah: Moving to full year results I am pleased to report that we have achieved our financial guidance.

Mihir Arunkumar Shah: For the year, while outperforming on revenues.

Mihir Arunkumar Shah: Revenue per cabinet and member was dollar 40 per member per year.

Mihir Arunkumar Shah: At December 31, 2023, an increase of 10, 5% compared to 2022.

Mihir Arunkumar Shah: Consolidated revenue for 2023 was $324 million, an increase of 28% compared to 2022. Gross profit in 2023 was $60 million, an increase of 14% compared to 2022. SG&A, including depreciation and amortization, of $120 million in 2023, a decrease of $4.4 million compared to 2022. As a percentage of revenue, SG&A was 37% in 2023, down 1,200 basis points from 2022. Loss from operations for 2023 was $77 million, a decrease of $5 million compared to 2022. Net loss for 2023 was $83.1 million, a decrease of $83.2 million compared to 2022, primarily due to the change in the fair value of conversion options, derivatives, and earn-out liabilities, offset by an increase in gross profit. Adjusted EBITDA for 2023 was negative $25.8 million.

Mihir Arunkumar Shah: Consolidated revenue for 2023 was $324 million, an increase of 28% compared to 2022.

Mihir Arunkumar Shah: Gross profit in 2023 or $60 million, an increase of 14% compared to 2022.

Mihir Arunkumar Shah: SG&A, including depreciation and amortization of $120 million in 2023, a decrease of $4 4 million compared to 2022.

Mihir Arunkumar Shah: As a percentage of revenue SG&A was 37% in 2023 down to about 100 basis points from 2022.

Mihir Arunkumar Shah: Loss from operations for 2023 was 77 million a decrease.

Mihir Arunkumar Shah: $5 million compared to 2022.

Mihir Arunkumar Shah: Net loss for 2023 was $83 1 million a decrease of $83 2 million compared to 2022, primarily due to the change in the fair value of conversion option Daddy rays and earn out liabilities.

Mihir Arunkumar Shah: Set by an increase in gross profit.

Mihir Arunkumar Shah: Adjusted EBITDA for 2023 was negative $25 8 million.

Mihir Arunkumar Shah: Further details on how we define non-gap financial measures can be found in our Form 10-K and press release. As of year-end, our cash and cash equivalent balance was $33 million, and we had $49 million in short-term investments for a total of $83 million of cash, cash equivalents, and short-term investments. Finally, we have remedied previously disclosed material weaknesses in internal controls over the review of complex accounting transactions and concluded that our internal controls or financial reporting were effective as of December 31, 2023. I will now turn it back to Dan for closing comments. Thanks, Mihir. I want to close our call by providing an update on progress towards our four key strategic priorities at the Oncology Institute. Priority one, eliminate cash burn. In the fourth quarter, we reported the lowest SG&A as a percent of revenue since going public.

Mihir Arunkumar Shah: Further details on how we define non-GAAP financial measures can be found in our Form 10-K and press release.

Mihir Arunkumar Shah: As of year end, our cash and cash equivalent balance was $33 million and we had $49 million in short term investments for a total of $83 million of cash.

Cash equivalents and short term investments.

Finally, we have remediated previously disclosed material weakness in internal controls over review of complex accounting transactions and concluded that our internal controls or financial reporting that effective as of December 31 2023.

Mihir Arunkumar Shah: I will now turn it back to Dan for closing comments.

Daniel Virnich: Thanks, Nick here.

Daniel Virnich: I want to close our call by providing an update on progress towards our four key strategic priorities at the oncology Institute.

Daniel Virnich: Priority one eliminate cash burn in the fourth quarter, we reported the lowest SG&A as a percent of revenue since going public net cash and cash equivalents used in operating activities decreased 49% in the second half of 2023 compared Q.

Daniel Virnich: Net cash and cash equivalents used in operating activities decreased 49% in the second half of 2023 compared to the first half of 2023 following our restructuring at the end of Q2. Since we are a rapidly growing business and margins remain fluid, we will continue to carefully manage our overhead as we scale to ensure we have enough capital to continue funding our long-range growth plan. Priority number two, grow and drive margin in our legacy markets of California, Nevada, and Arizona. Grow high-value capitated contracts. Despite some of the pressure on capitated rates in California, we continue to have several near-term growth opportunities for medical and radiation oncology, which will expand our already dominant footprint as a value-based oncology provider in these markets.

Daniel Virnich: First half 2023.

Daniel Virnich: Boeing are restructuring at the end of Q2.

Daniel Virnich: Since we are a rapidly growing business and margins remain fluid we will continue to carefully manage our overhead as we scale to ensure we have enough capital to continue funding our long range growth plan.

Daniel Virnich: Priority number two.

Daniel Virnich: Grow and drive margin in our legacy markets of California, Nevada and Arizona.

Grow high value calculated contracts. Despite some of the pressure on cap rates in California, We continue to add several near term growth opportunities for medical and radiation oncology, which will expand our already dominant footprint as a value based oncology provider in these markets.

Daniel Virnich: Expansion of radiation oncology, expanding radiation oncology provides enhanced continuity of care for patients requiring radiation.

Daniel Virnich: Expanding radiation oncology provides enhanced continuity of care for patients requiring radiation, is a differentiator to fewer play medical oncology practices, and drives margin on our fee-for-service business. We continue to see growing patient volumes at our six radiation oncology centers, as well as the opportunity to add capitation to this important service line. Expansion of our ability to serve patients through our new specialty pharmacy in California. As noted, our pharmacy has been outperforming expectations on fills and is helping drive convenience, fast fill times, and affordability to our very important Medi-Cal patient population. Priority number three, expanding into new markets. As announced on our last earnings call, we started our first fully capitated agreement with a national payer in Florida on January 1st.

Daniel Virnich: As a differentiator to pure play medical oncology practices and drives margin on our fee for service business.

Daniel Virnich: We continue to see growing patient volumes at our <unk> radiation oncology centers as well as the opportunity to add competition to this important service line.

Daniel Virnich: Expansion of our ability to serve patients through our new specialty pharmacy in California. As noted our pharmacy has been outperforming expectations on sales and is helping drive convenience fast fill times and affordability to our very important medical patient population.

Daniel Virnich: Priority number three.

Daniel Virnich: Moving new markets.

Daniel Virnich: As announced on our last earnings call. We started our first fully compensated agreement with a national payer in Florida on January one.

Daniel Virnich: So far, it has been a very successful partnership, and we followed this up with our recent announcement of our expanded agreement with Max Health, which is another key milestone for TOI. We have several other near-term follow-on growth opportunities in the very important Florida market and other new markets where we are seeing substantial opportunities to drive value due to higher utilization and the opportunity to work directly with health plan partners. Priority number four, leading the value-based oncology market. We remain the largest value-based oncology physician group in the country by lives served and revenue under value-based arrangements.

Daniel Virnich: So far it has been a very successful partnership and we followed this up with our recent announcement of our expanded agreement with Max Health, which is another key milestone for <unk>.

Daniel Virnich: We have several other near term follow on growth opportunities and the very important Florida market and other new markets, where we are seeing substantial opportunity to drive value due to higher utilization and the opportunity to work directly with health plan partners.

Daniel Virnich: Priority number four leading to value based oncology market, we remain the largest value based oncology physician group in the country by live serve and revenue under value based arrangements. We strongly believe we can continue to advance this lead by being an employer of choice for oncologists and driving innovation and community base.

Daniel Virnich: We strongly believe we can continue to advance this lead by being an employer of choice for oncologists and driving innovation in community-based cancer care for the patients and payers that we serve. We look forward to updating you on our continued progress toward our key priorities on our next earnings call. With that, we're now ready to take your questions. Operator?

Daniel Virnich: Cancer care for the patients and payers that we serve.

Daniel Virnich: We look forward to updating you on our continued progress toward our key priorities on our next earnings call.

None: With that we're now ready to take your questions operator.

Operator: Thank you. We will now begin conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

None: Thank you we will now begin conducting a question and answer session.

None: I'd like to ask a question. Please press star one on your telephone keypad.

None: A confirmation tone will indicate your line is in the question queue.

None: You May press Star two if you would like to remove your question from the queue.

None: Participants using speaker equipment, it may be necessary to pick up your handset before pressing with Jackie.

Operator: You may press star two if you would like to remove your question from the list. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment while we poll for questions. Your first question comes from Jack Slevin with Jeff. Hey, good afternoon, guys, and congrats on the. Maybe to kick it off, give it, in those three areas. [inaudible] Thanks so much for the question, Jack. Yes, so we see a couple of things. One is an increased opportunity to grow our business through new value-based contracts as, you know, there's top-line pressure from risk-bearing primary care groups and health plans seek better partners for community-based oncology care. Overall, our strategy is to be the oncology practice of choice for both plans and delegated medical groups. And the way that we do this is by not just providing great medical oncology services in the community but also expanding to radiation oncology.

None: One moment, while we poll for questions.

None: Your first question comes from Jack <unk> with Jefferies.

Jack: Hey, good afternoon, guys and congrats on the quarter and all of the announcements.

Jack: Maybe to kick it off.

Jack: Thinking about the six opportunities you discussed.

Jack: Can you give a sense for sort of what this will look like and maybe.

Jack: Sort of pushing that against.

The most recent things that you've announced being.

Jack: The contract in Florida on the MA side Caramels announcement, and then the expansion the Max Health agreement.

Jack: Yeah.

Jack: Using those three areas in the six.

Jack: Are the biggest opportunities going forward.

Jack: Cross the board is it more M&A deals and Thats, primarily it or should we should we expect to see sort of a wide variety of things.

Jack: Yeah.

Thanks, So much for the question Jack Yes, So we see a couple of things one is increased opportunity to grow our business through new value based contracts.

None: As you know there's top line pressure from risk bearing primary care groups and health plans seek better partners community based oncology care.

None: Overall, our strategy is to be obviously, the oncology practice of choice for both planned and delegating medical groups and the way that we do this is by not just Brian Great Medical oncology services and media, but also expanding to radiation oncology. So as we noted in our script, we're seeing opportunities to when possible.

Daniel Virnich: So, as we noted in our script, we're seeing opportunities to, when possible, take on as many of those services as we can, preferably under capitation or risk agreements. And that covers the majority of the opportunities we see in the pipeline. We also did announce the partnership with CARIM, which is our first employer-based partnership model.

None: As many of those services as we can preferably under capitation or risk agreements.

None: That covers the majority of the opportunities we see in the pipeline.

None: We also did announce the partnership with <unk>, which is our first employer.

Daniel Virnich: And again, that opens up a whole new channel of opportunities for us that we see as expansion opportunities over the next couple of years. Got it. I appreciate that. And then maybe turning to the guidance. I guess the DIR challenge. When you think about, this is the right way to think about it, low end. www.youtube.com walk me through sort of what gets you high.

None: Based partnership model and again that opens up a whole new channel of opportunities for us that we see as expansion opportunities over the next couple of years.

None: Got it I appreciate that and then maybe turning to the guidance.

None: And looking at gross profit and particular I guess.

None: IR challenges in some of the things in the quarter. It all makes sense.

None: When you think about the low end and the high end of the guidance is the right way to think about it sort of in the low end as sort of a continuation of the pressure you're seeing and then.

None: Unlocking further upside comes mostly from sort of alleviating some of that pressure on the pharmacy margin or maybe if you could just walk me through sort of what gets you to the high end versus the low end of the gross profit guide that'd be helpful.

Daniel Virnich: Yeah, absolutely. That's a great question. So, in general, the low end of our range assumes no improvement in some of the macro issues that are facing oncology right now related to DIR fees and margin compression on drugs throughout the rest of 2024, as well as no additional growth beyond our kind of high certainty opportunities that we're seeing in Q1. And then everything upside to that is driven by improvement in some of those macro headwinds on the drug side, which there's obviously not a great deal of certainty about timing on right now.

None: Yeah, absolutely that's a great question. So in general at the low end of our range assumes no improvement in some of the macro issues that are facing oncology right now related to DIR fees and margin compression on drugs throughout the rest of 2024 as well as no additional growth beyond our kind of high certainty opportunity.

None: That we're seeing in Q1.

None: And then everything upside to that is driven by both improvement in some of those macro headwinds on the drug side.

None: Which there's obviously not a great deal of certainty on timing on right now.

Daniel Virnich: Strategic efforts we are taking internally specific to TOI to drive margin to counteract those macro pressures, and then additional acceleration and growth beyond what's baked into the high certainty pipeline for Q1. Awesome. And then last one for me, you know, the free cash, understand sort of change. I just want to make sure.

None: Strategic efforts, we are taking internally civic toi to drive margin to counteract those macro pressures and then additional acceleration in growth Jan what's baked into the high certainty pipeline for Q1.

Jan: Awesome and then last one for me.

None: Free cash.

None: Burn rate sort of coming down to below $5 million by my math looks really nice in the quarter.

None: I understand sort of change creates some noise in the first half I just want to make sure I got all that right. So is the right way to think about it that youll sort of see drag on Dsos in Q1, and Q2, but the thought processes all of that should reverse in the back half and maybe more broadly.

Daniel Virnich: That's the right way to think about it, cash. Yeah, absolutely. That's another great question.

None: Should we think about the progression on on free cash going forward.

None: Yeah, absolutely that's another great question I'll, let our CFO me here shot address that one amir.

Mihir Arunkumar Shah: I'll let our CFO Mihir Shah address that one. Hey, Jack. I think you called out the right mat. Our Q4 was the lowest cash burn since we went public, around $5 million. Q1, calling out the DSO issues, and I also want to point out there are some Q1 cost-related pressures related to payroll taxes and other pieces, so that's an anomaly that happens in Q1, but outside of that, the trajectory of cash burn being low compared to each prior quarter is what we are targeting as well. Okay.

None: Hey, Jack I think that's your.

Amir: You called out the right, Matt our Q4 was the lowest cash burn since we went public.

Amir: Around 5 million Q1 call.

None: Calling out the DSO issues.

Jack: I also want to point out there are some Q1 cost related pressures related to the payroll taxes and other pieces. So that anomaly that happens in Q1, but outside of that the trajectory of cash burn being low compared to the prior each prior quarter.

Jack: <unk> is what we're targeting as well.

None: Okay got it really helpful. I appreciate it guys and congrats again.

Mihir Arunkumar Shah: Really helpful. I appreciate it, guys. Thank you so much, Jack. That does conclude our question and answer session. I would like to turn the floor back over to Daniel Virnich for closing comments. Yeah, thank you so much. As I mentioned, we'd like to thank all of our providers and employees for a phenomenal 2023 and a strong start to 2024, as well as all of our investors and folks that joined the conference call today and the great questions you received. We look forward to updating you on future quarterly earnings calls as we progress through 2024. Thank you so much. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. [inaudible] transcript Emily Beynon

None: Thank you so much.

Daniel Virnich: That does conclude our question and answer session I would now like to turn the floor back over to Daniel damage for closing comments.

Daniel: Yes. Thank you so much as I mentioned, we'd like to thank all of our providers and employees for a phenomenal 2023 and strong start to 2024.

Daniel: As well as all of our investors and folks that joined the conference call today and the great questions. You received we look forward to updating you in future quarterly earnings calls as we progress through 2024. Thank you so much.

None: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Yes.

None: [music].