Q1 2024 The Oncology Institute Inc Earnings Call
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Operator: Good afternoon, and welcome to the Oncology Institute's first quarter 2024 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 would like to turn the conference over to Mihir Shah, Chief Financial Officer at TOI. Thank you. You may begin.
Good afternoon, and welcome to the oncology Institutes first quarter 'twenty 'twenty four earnings conference call.
Mihir Arunkumar Shah: The press release announcing the Oncology Institute's results for the first quarter of 2024 is available in the Investors section of CompaniesWeb, oncologyinstitute.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 safe harbor language included within the company's press release for the first quarter of 2024. Management may make forward-looking statements, including guidance and underlying assumptions.
Speaker Change: Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A at this time I would like to turn the conference over to MS. <unk> Shaw Chief Financial Officer at D. Y. Thank you you may begin.
Speaker Change: Yeah.
Speaker Change: The press release announcing oncology Institute and it goes for the first quarter of 'twenty 'twenty four and available at the investors section of Companys website.
Speaker Change: Oncology Institute Dot Com.
Speaker Change: Play off this call will also be available at the company's website. After the conclusion of this call.
Speaker Change: Before we get started I would like to remind you of.
Speaker Change: The company's Safe Harbor language included in today's press release for the first quarter 'twenty 'twenty Cool man.
Speaker Change: As you may make forward looking statements, including guidance and underlying assumptions.
Mihir Arunkumar Shah: Forward-looking statements are based on expectations that involve risk and uncertainties that could cause actual results to differ materially. For further discussions of risks related to our business, see our filings we have tested. This call will also discuss non-gap financial measures, such as adjusted debits. Reconciliation of these non-gap measures to the most comparable gap measures is included in the earnings release furnished to the SEC and available on our website. Joining me on the call today is our CEO, Dan Virnich. Following our prepared remarks, we will open the call to your questions. With that, I will turn the call over to Dan.
Speaker Change: We're looking statements are based on expectations that involve risks.
Speaker Change: Certainties that could cause actual results to differ materially.
Speaker Change: For further discussion of risks related to our business he ever filings metastases.
Speaker Change: This call will also discuss non-GAAP financial measures such as adjusted EBIDTA.
Speaker Change: He comes from the Asian Office non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the FCC and available on our website.
Dan: Joining me on the call today is our CEO, Dan worst well they've got my prepared remarks, we will open the call for your questions.
Daniel Virnich: With that I will turn the call over to Dan.
Speaker Change: Thank you.
Daniel Virnich: Good afternoon, everyone, and thank you for joining our first quarter call. In Q1 2024, our revenue grew 24% compared to Q1 2023, driven by an astounding 64% increase in oral drug revenue during the same period. The first quarter of 2024 saw TOI hit some significant milestones related to growth, with seven new capitation and value-based contracts signed across three states, our highest number ever in a quarter.
Daniel Virnich: Good afternoon, everyone and thank you for joining our first quarter call.
Daniel Virnich: In Q1, 2024 hour revenue grew 24% compared to Q1 2023, driven by an astounding, 64% increase in oral drug revenue in the same period.
Speaker Change: The first quarter of 2024, sorry T O I hit some significant milestones related to growth with seven new capitation and value based contracts signed across three states.
Speaker Change: Our highest number ever in a quarter.
Daniel Virnich: Full-year capitation revenue related to our seven contracts signed in Q1 is estimated to be in the range of $16 million and includes expansion of our risk business in both medical and radiation oncology. We are expecting termination of one legacy capitation contract in California in Q3, which we believe will be offset by better than expected new capitation contract starts and continued growth in our oral drug business. And as a result, we are not changing full-year guidance at this time.
Daniel Virnich: Full year capitation revenue related to our seven contracts signed in Q1 is estimated to be in the range of $16 million, which includes the expansion of our risk business in both medical and radiation oncology.
Daniel Virnich: We are expecting termination of one legacy capitation contract in California in Q3, which we believe will be offset by better than expected new capitation contract starts and continued growth in our oral drug business and as a result, we are not changing full year guidance at this time.
Daniel Virnich: As noted, Q1 also saw TOI hitting a record amount of prescription fills and revenue through our medically integrated dispensaries and pharmacy, with over 4500 fills representing over 39 million in revenue in Q1. Oral drug gross profit in the segment remains on track to expectations at $31 million for the full year due to outperformance of the top line. Our newly acquired pharmacy in California continues to exceed expectations, and our latest projection shows incremental growth of over 45 million dollars from this location for full year 2023.
Daniel Virnich: As noted Q1 also saw toi hitting a record amount of prescription sales and revenues through our medically integrated dispensaries in pharmacy with over 4500 sales representing over $39 million in revenue in Q1.
Daniel Virnich: Oral drug gross profit in the segment remains on track to expectations at $31 million for the full year due to outperformance of top line.
Daniel Virnich: Our newly acquired pharmacy in California continues to exceed expectations and our latest projection shows incremental growth of over $45 million from dislocation from full year 2023.
Speaker Change: Despite topline outperformance the first quarter came with challenges, particularly related to drug margin compression on both part B and D drugs with the transition and direct and indirect remuneration or DIR fees to point of sale and intermittent disruption to collections due to the change healthcare cyber.
Daniel Virnich: Despite top-line outperformance, the first quarter came with challenges, particularly related to drug margin compression on both Part B and D drugs, with the transition of direct and indirect remuneration, or DIR, fees to point of sale, and intermittent disruption to collections due to the Change Healthcare cyberattack, which was deemed to be not material. In addition to the industry-wide drug margin compression related to DIR fee changes, we historically see compression in our IV margins in the first quarter driven by manufacturer price increases and shifts in reimbursement. This year was no exception, and several of our most utilized IV medications saw decreases in reimbursement while costs increased. Our top 10 drugs saw a decline of 130 basis points in margin.
Daniel Virnich: Jack which was deemed to be not material.
Daniel Virnich: In addition to the industry wide drop margin compression related to D. A R. E changes, we historically see compression in our margins in the first quarter driven by manufacturer price increases and shifts in reimbursement.
Daniel Virnich: This year was no exception and several of our most utilized IV medications saw decreases to reimbursement while costs increased.
Daniel Virnich: Our top 10 drugs saw a decline of 130 basis points in margin.
Daniel Virnich: This margin compression culminated in operating losses above our expectation for Q1, although, as with prior years, we expect this trend to improve as the year progresses and have already started to see improvement in margin in April by 70 basis points. We are also proactively making changes to our procurement strategy as it relates to our distributors, which we project to positively impact the second half of the year. Now, I would like to highlight a few operational achievements since our last call.
Daniel Virnich: This margin compression culminated in operating losses above our expectation for Q1, although as with prior years. We expect this trend to improve as the year progresses and have already started to see improvement in margin in April by 70 basis points.
Speaker Change: We are also proactively making changes to our procurement strategy as it relates to our distributors, which we projected positively impact the second half of the year.
Daniel Virnich: We added 7 new clinicians, primarily in Southern California, bringing our total employed physician and advanced practice provider count to 126. We opened two new clinics in South Florida, bringing our total clinic count to 73. One of our new capitated contracts will bring us to a new market, Oregon, with a legacy capitation partner. We expect to commence clinic operations there in Q4. All issues related to the Change Healthcare cyberattack have been mitigated.
Speaker Change: Now I would like to highlight a few operational achievements since our last call.
Speaker Change: We added seven new clinicians primarily in southern California, bringing our total employed physician and advanced practice provider count to 126.
Speaker Change: We opened two new clinics in South, Florida, bringing our total clinic count to 73.
Speaker Change: One of our new calculated contracts will bring us to a new market, Oregon with a legacy capitation partner.
Speaker Change: We expect to commence clinical operations there in Q4.
Speaker Change: All issues related to the change healthcare cyber attack had been mitigated this.
Daniel Virnich: This incredible effort by our Revenue Cycle Management team has led to record cash collections in the month of April. Finally, before I turn it over to our CFO, Mihir Shah, I have some important updates regarding our leadership team at TOI. On April 1st, we welcomed Jordan McInerney to oversee growth as our new Chief Development Officer. He joins our other outstanding growth executives and comes to us from the value-based orthopedics platform, HOPCO, where he had a strong track record of driving value-based agreements.
Speaker Change: This incredible effort by our revenue cycle management team has led to record cash collections in the month of April.
Speaker Change: Finally, before I turn it over to our CFO Mihir Shah I have some important updates regarding our leadership team at T O y.
Speaker Change: On April 1st we welcome Jordon Mcinerney oversea growth as our new Chief Development Officer.
Speaker Change: He joins our other outstanding growth executives and joins us from the value based orthopedics platform Hopkins, where he had a strong track record of driving value based agreements.
Daniel Virnich: We believe his deep network and knowledge of value-based care, particularly in the important Florida market, will further accelerate our growth in the coming quarters. Now, I'll turn the call over to our CFO, Mihir Shah, to provide additional details on our first quarter financial results. Thank you, Dan.
Speaker Change: We believe his deep network knowledge of value based care, particularly in the important Florida market will further accelerate our growth in upcoming quarters.
Speaker Change: Now I'll turn the call over to our CFO Mihir Shah to provide additional details on our first quarter financial results.
Mihir Arunkumar Shah: Thank you, Dan, and good afternoon, everybody. Consolidated revenue for Q1 2024 was $94.7 million, an increase of 24.2% compared to Q1 2020 and a 10.3% increase compared to Q4 2020. Gross profit in Q1 2024 was $11.97 million, a decrease of 16.8% compared to Q4 2020. This decrease is attributed to lower IV and oral reimbursement than previously mentioned.
Mihir Arunkumar Shah: Thank you Dan and good afternoon, everyone.
Mihir Arunkumar Shah: SG&A remains flat despite the strong growth in our topic. SGNA, including depreciation and amortization, was $29.9 million in Q1 2025. This was a decrease of 50 basis points compared to Q1 2020. As a percentage of revenue, SG&A, including depreciation and amortization, was 31.6% in the quarter, down 300 basis points from Q4 2023 and 790 basis points from Q1 2023. Loss from operations for Q1 2024 was 18 million, a decrease of $14.9 million compared to Q1 2020.
Mihir Arunkumar Shah: Consolidated revenue for Q1, 'twenty 'twenty four was $94 7 million an increase of 24, 2%.
Speaker Change: Back to Q1 2023.
Mihir Arunkumar Shah: And a 10, 3% increase compared to Q4 2023.
Mihir Arunkumar Shah: Gross profit in Q1, <unk> was 11, nine 7 million a decrease of 16, 8% compared to Q4 for India.
Mihir Arunkumar Shah: This decrease is attributed to the lower IV and old reimbursement Bang previously mentioned.
Mihir Arunkumar Shah: SG&A remained flat despite the strong growth in our top line.
Mihir Arunkumar Shah: SG&A, including depreciation and amortization was $29 9 million in Q1 2024.
Mihir Arunkumar Shah: Decrease of 50 basis points compared to Q1 2023.
Speaker Change: As a percentage of revenue SG&A, including depreciation and amortization was 31, 6% in the quarter down 300 basis point from Q4, 2023, and 790 basis points from Q1 2022.
Mihir Arunkumar Shah: Loss from operations for Q1, 2024 was 18 million.
Mihir Arunkumar Shah: A decrease of $14 9 million compared to Q1 2023.
Mihir Arunkumar Shah: The net loss for Q1 2024 was $19.9 million, an improvement of $10.1 million compared to Q1 2024, primarily due to guerrilla impairment charges of $16.9 million in Q1 2020 that did not occur in Q1 2021, offset by gains in the fair value of earn out and derivative liabilities of 4.2 million in the prior year quarter that did not occur in the same quarter of the current year. The adjusted beta for Q1 2024 was negative 10.9 million.
Speaker Change: Net loss for Q1, 2024 was $19 9 million an improvement of $10 1 million compared to Q1 2022.
Mihir Arunkumar Shah: Primarily due to goodwill impairment charges.
Speaker Change: $16 9 million in Q1 do you see.
Mihir Arunkumar Shah: That did not occur in Q1 2024.
Mihir Arunkumar Shah: Offset by gains in the fair value of earn out and deliver to liability of $4 2 million in the prior.
Mihir Arunkumar Shah: Nearly a quarter that did not occur in the same quarter of the current year.
Mihir Arunkumar Shah: Adjusted EBITDA for Q1, 2024 was negative $10 9 million.
Mihir Arunkumar Shah: As of the end of Q1 2024, our cash and cash equivalent balance was $36.1 million, and we had $29.7 million in short-term investments for a total of $65.8 million of cash, cash equivalents, and short-term investments. The impact of Q1 operating losses, the changed healthcare impact, and AR lag in our new pharmacy resulted in a reduction of cash and cash equivalents of $17 million related to Q4 2020. Thanks to our swift response to the changing healthcare situation and work around pharmacy collections, we project the cash flow impact to be simply one of a kind, without full year impact on cash. I will now turn it back to Dan for closing.
Mihir Arunkumar Shah: As of end of Q1, 2024, our cash and cash equivalent balance was $36 1 billion and rehab drinking $9 7 million and short term investments for a total of $65 8 million of cash cash equivalents and short term investments.
Speaker Change: The impact of Q1 operating losses, the change health care cost impact and a lag in our new pharmacy, zircon and reduction of cash and cash equivalents of 17.
Mihir Arunkumar Shah: Relating to Q4 2023.
Mihir Arunkumar Shah: Thanks to our Swift response to change healthcare situation and working it out pharmacy collections.
Mihir Arunkumar Shah: The cash flow impact to be simply one off type of thing.
Mihir Arunkumar Shah: Without full year impact on cash flow.
Daniel Virnich: I will now turn it back to Dan for closing comments.
Daniel Virnich: Thanks Bahir.
Daniel Virnich: I want to close our call by providing an update on progress towards our four key strategic priorities at the Oncology Institute. Priority number one is to eliminate cash.
Daniel Virnich: Want to close our call by providing an update on progress towards our four key strategic priorities at the oncology Institute.
Daniel Virnich: Priority number one eliminate cash burn.
Daniel Virnich: While we had year-over-year improvement in burn relative to Q1 2023, the drug margin compressions in Q1 did result in higher use of cash than Q4. We are confident that this will improve over the remainder of 2024 as a result of both our already signed and near-term growth in new contracts, procurement improvement efforts, and ongoing efforts to ensure we tightly manage SG&A down as a percent of revenue following our restructure last year.
Speaker Change: While we had year over year improvement in burn relative to Q1 2023 drug margin compressions. In Q1 did result in higher use of cash than Q4.
Daniel Virnich: We are confident that this will improve over the remainder of 2024.
Daniel Virnich: As a result of both are already signed and near term growth and new contracts procurement improvement efforts and ongoing efforts to ensure we tightly manage SG&A down as a percent of revenue following a restructure last year.
Daniel Virnich: Priority number two, grow and drive margin in our legacy market. Our newly signed medical and radiation oncology contracts in California and Nevada represent important new partnerships and expansion of our risk across both radiation and medical oncology. These new partnerships, coupled with outperformance on orals through our California pharmacy, will continue to help drive profitability in our legacy market. Additionally, we will adjust variable staffing related to areas served by our one terminating contract to mitigate margin compression.
Daniel Virnich: Priority number two grow.
Daniel Virnich: [noise] and drive margin in our legacy markets.
Daniel Virnich: Our newly signed medical and radiation oncology contracts in California, and Nevada represent important new partnerships and expansion of our risk across both radiation and medical oncology. These new partnerships, coupled with outperformance on oracles through our California Pharmacy will continue to help drive profitability in our legacy market.
Daniel Virnich: <unk>.
Daniel Virnich: We will adjust variable staffing related to areas served by our one terminating contracts to mitigate margin compression.
Daniel Virnich: Priority number three, improving new markets. Our first full quarter of capitation in Florida with Elevens has gone well as we welcomed new patients to our clinics, and we anticipate several other near-term capitation arrangements in this market. As already mentioned, we are also starting services in Oregon in Q4 through another new capitation deal signed this quarter. This new deal represents a tremendous opportunity to improve quality and utilization versus the legacy high rates seen in this market.
Daniel Virnich: Priority number three proving new markets.
Speaker Change: Our first full quarter of capitation in Florida with elegance has gone well as we welcomed new patients to our clinics and we anticipate several other near term capitation arrangements in this market.
Speaker Change: As already mentioned, we are also starting services in Oregon in Q4 through another new competition deal signed this quarter.
Speaker Change: This new deal represents a tremendous opportunity to improve quality and utilization versus the legacy high rates seen in this market.
Daniel Virnich: Priority number four, leading the value-based oncology market. Our significant uptick in new capitation contracts signed and continued momentum in our new contract pipeline represents validity of our model with payers as risk-bearing primary care groups and health plans seek partnership with TOI to help manage the unsustainable cost trends in oncology. We strongly believe we can continue to advance this lead for the patients and payers that we serve, and 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.
Speaker Change: Priority number four leading to value based oncology market.
Daniel Virnich: Our significant uptick in new capitation contracts signed and continued momentum in our new contract pipeline represents validity of our model with pairs as risk bearing primary care groups and health plans seek partnership with T Y to help manage the unsustainable cost trends in oncology. We strongly believe we can continue to advance this lead.
Daniel Virnich: The patients and payers that we serve and we look forward to updating you on our continued progress toward our key priorities on our next earnings call.
Speaker Change: With that we're now ready to take your questions operator.
Speaker Change: Thank you.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keyboard. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your questions from the chat. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions.
Speaker Change: We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on the telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your questions from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: The first question comes from the line of Jack Slevin with Jefferies. Please go ahead.
Jack Garner Slevin: Hey, good afternoon, guys. Nice work on the quarter. I want to start with the DIR impacts in both IV and on the dispensary side. Just wondering if you can give a little more color in terms of, you know, how heavily that was weighted in each of those areas, you know, did one side see a little bit more than the next, and then maybe sort of using that as a jumping off point for how you're thinking about progression of margins throughout the year. Obviously, patient services margins came down pretty significantly under some of those headwinds, and I'm just trying to get a sense for how you're thinking.
Jack Garner Slevin: Hey, good afternoon, guys and nice work on the quarter.
Jack Garner Slevin: Wanted to start with the DIR impact.
Speaker Change: Ivy and on the Dispensary side, just wondering if you can give a little more color in terms of how heavily weighted.
Jack Garner Slevin: And each of those areas.
Speaker Change: It did one side to see a little bit more than next and that maybe sort of using that as a jumping off point for for how youre thinking about progression on margins throughout the year, obviously patient services margins came down pretty significantly and there are some headwinds and just trying to get a sense for how you're thinking that's going to progress toward a more gradual as theirs.
Speaker Change: Back in Q2, just want to understand what you're thinking yes. Thanks.
Speaker Change: Yeah.
Daniel Virnich: Yeah, hi, Jack. Thanks for the great question. I think there are a couple factors that impacted drug margins in Q1 on our fee-for-service business that we expect to see improve throughout the course of the year. The first factor, which we deal with every year, is seasonality, as we commented on during our earnings call. So we've already started to see that improve in April and expect that trend to continue to improve over the course of the year, driven by both changes in the level of sophistication we're bringing to procurement and just that seasonality impact.
Jack Smith: Yeah, Hi, Jack Thanks for the Great question I think there's a couple of factors that impacted drove margins in Q1 on our fee for service business that we expect to see improved throughout the course of the year.
Jack Smith: The first factor, which we deal with every year seasonality as you commented about on our earnings.
Jack Smith: So we've already started to see that improve in April and expect that trend to continue to improve over the course of the year driven by both changes in the level of sophistication are bringing to procurement.
Jack Smith: And just that seasonality impact the DIR fee issue, which is the other major factor that we faced in Q1, which compressed margins on our fee for service drugs.
Daniel Virnich: The DIR fee issue, which is the other major factor that we faced in Q1, compressed margins on our fee-for-service drugs. Again, I think there's industry-wide momentum for driving change in that throughout the rest of the year, but the time course of that is really hard to predict at this point. So again, we're trying to control the factors we can and expect the remaining three quarters of the year to drive improvement in those margins, but it's hard to say at what pace that DIR fee issue will resolve itself.
Jack Smith: Again, I think there's industry wide momentum on driving change and that throughout.
Jack Smith: The rest of the year, but the time course of that is really hard to predict at this point.
Jack Smith: So again, we're trying to control the factors, we can expect the remaining three quarters of the year to drive improvement in those margins, but it's hard to say at what pace that DIR fee issue will resolve itself.
Jack Garner Slevin: Got it. That's really helpful. And next, Mihir, I want to ask about the change impact. Is this the right way to think about that, sort of the just over 16 million of AR drag that you saw in the first quarter? Should we just see a reversal of that? Is that a decent way to size up sort of how to think about the snapback in 2Q now that you've resolved that issue?
Speaker Change: Got it that's very helpful and next.
Speaker Change: Here wanted to ask on the the change impact.
Speaker Change: It's the right way to think about that.
Speaker Change: Sort of the.
Speaker Change: Just over 16 million of AAR drag that you saw in the first quarter should we just see a reversal of that is that a decent way to size up sort of how to think about the snapback in <unk> that you resolve that issue.
Jack Smith: Okay.
Mihir Arunkumar Shah: Yes, so about $15 million of that, we believe, will be timing. A couple of million will be related to the increased revenue that we have seen, so it's just adding slightly more to the working capital for the pharmacy revenue that we added in Q1.
Speaker Change: Yes, so we.
Speaker Change: About $15 million of that we believe will be.
Tammy: Tammy couple of million will be related to the increased revenue that we have seen so it's just adding slightly more to the working capital.
Speaker Change: For the pharmacy revenue that we added in Q1.
Jack Garner Slevin: Okay, got it. Really helpful. And the next, you know, appreciate all the commentary on the new cap contracts. And it sounds really good. Sounds like there's one incremental one compared to when we last spoke on the 4Q call. Maybe just, you know, I heard the $16 million of annualized revenue. Sounds like a great number.
Speaker Change: Okay got it really helpful.
Speaker Change: And then next I appreciate all the commentary on the the the new cap contracts and it sounds really good it sounds like Theres, one incremental one to when we last spoke on the <unk> call them. Maybe just you know I heard the 16 million of annualized revenue. It sounds like a great number I just wanted to make sure I got all the commentary on the pacing of that.
Daniel Virnich: Just want to make sure I got all the commentary on the pacing of how those should launch, the seven contracts. And then, you know, maybe if you could touch a little bit more on how the pipeline is looking. You know, is it still strong? Should we expect to have sort of a steady flow of announcements? Or was it a little bit front loaded as far as the 1Q deals closing for 2024?
Speaker Change: Those should watch the southern contracts and then you know me.
Speaker Change: Maybe if you could potentially get a bit more on on how the pipeline's looking is it still strong should we expect.
Speaker Change: Sort of a steady flow of.
Speaker Change: Announcements or was it a little bit front loaded as far as the Waikiki deals closing for 2024.
Jack Garner Slevin: Yeah, another great question, Jack. So, the contracts were all signed and executed, the seven, in Q1. The pacing of start on those contracts, the majority of them are Q3 timing for go live. And, you know, that's a way to think about that in terms of impact to revenue this year versus full year. I would say on the pipeline question: our pipeline at this point is, I mean, as robust as we've ever seen it.
Jack: Yeah. Another great question, Jack So the contracts are all signed and executed the seven in Q1, the piecing a start on those contracts. The majority of them are Q3 timing for go live.
Jack: And that's.
Jack: That's that's the way to think about that in terms of impact to revenue this year versus full year I would say on the pipeline question. Our pipeline at this point is as robust as we've ever seen and so we've got a lot of good stuff in the near term pipeline, which we expect to get you need to announce over the rest of the year 2024.
Jack Garner Slevin: So, we've got a lot of good stuff in the near-term pipeline, which we expect to continue to announce over the rest of the year 2024. And I think there are a lot of different reasons for this. I think one is just increasing the sophistication of our growth team with sort of implementing our model in new markets, expanding our range of clients that we can work with beyond just delegated medical groups to plans and even now employer groups.
Jack: I think there's a lot of different reasons for that I think one is just increasing sophistication of our growth team with sort of implementing our modeling new markets expanding our.
Jack: Our range of client that we can work with beyond just delegated medical groups to plans and even now employer groups and then lastly, I think a lot of the topline pressure related to the 28 as resulted in groups that are taking risk finding other ways to try and drive their MLR through finding better ways to manage their specialty cost. So again phenomenal Q1 in terms of number of contracts.
Jack: <unk>.
Jack: I can't promise the exact number for second quarter, but we are seeing a pretty tremendous pipeline ahead of us.
Daniel Virnich: Okay, thanks. That's a great color, Dan. And then last one for me here.
Speaker Change: Okay. Thanks, that's great color, Dan and then last one for me here.
Speaker Change: Yes, I think all things considered the cash burn looked really strong performance there considering change.
Speaker Change: Normalizing for change does it feel like we're sort of in the right ballpark area on ashburn or sort of what's the outlook at this point as we progress through the rest of 'twenty four.
Mihir Arunkumar Shah: Yeah, so... Q1 had cash burn from the AR growth related to change and increase in our pharmacy revenue and also some compression in margin in Q1 that we saw, right? We will see both of them reverse AR, reverse much faster in Q2 and continue in Q3. Our margin compression should also improve in Q2 and Q3. So I would say this Q1 would potentially be the extreme scenario of our cash burn.
Speaker Change: Yeah. So.
Speaker Change: Q1 had cash burn from a our growth related to change in increase in our pharmacy revenue.
Speaker Change: And also some compression.
Speaker Change: Compression in margin in Q1 that we saw right.
Speaker Change: We will see both of them really worse E R.
Speaker Change: Our reverse much foster.
Speaker Change: In Q2 and continue in Q3 or.
Speaker Change: Core margin compression should also improve in Q2 and Q3.
Speaker Change: So I would say this would have this Q1 would be potentially be the extreme scenario of our cashmere.
Jack Garner Slevin: Got it. Really helpful. Appreciate all the color guys and congrats on all the progress.
Speaker Change: Got it really helpful. I appreciate all the color guys and congrats on all the progress.
Speaker Change: Perfect. Thank you.
Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I would now like to turn the floor over to Daniel Virnich for closing comments.
Speaker Change: Thank you.
Daniel Virnich: Ladies and gentlemen that concludes our question and answer session I would now like to turn the floor over to Daniel <unk> for closing comments.
Daniel <unk>: Okay.
Daniel Virnich: Thank you so much, and thank you to everyone who joined our earnings call today. The management team at TOI is incredibly excited about the number of new partnerships that we were able to effectively start in Q1, and look forward to serving patients associated with those new contracts as they go live throughout the remainder of 2024. We're also very excited about the near-term prospects in our pipeline related to growth, as well as all the activities that our team is taking to, again, combat some of the margin compression on the drug side of business, which we saw in Q1. We'd like to thank everyone for joining our call today, and look forward to updating you on continued progress in our business in subsequent quarters. Thank you so much.
Daniel Virnich: Thank you so much and thanks, everyone, who joined our earnings call today are the management team at T. O is incredibly excited about the number of new partnerships that we were able to effectively start in Q1.
Daniel Virnich: And look forward to serving patients associate with those new contracts as they go live throughout remainder of 2024. We're also very excited about the near term prospects in our pipeline related to growth as well as all the activities that our team is taking to again combat some of the margin compression on the drug side of the business, which we saw in Q1.
Speaker Change: Thank everyone for joining our call today and look forward to updating you on continued progress in our business in subsequent quarters. Thank you so much.
Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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