Q4 2024 The Oncology Institute Inc Earnings Call
Good afternoon, and welcome to the oncology institutes fourth quarter and full year 2024 earnings conference call.
Mark Hueppelsheuser: Good afternoon and welcome to the Oncology Institute's fourth quarter and full year 2024 earnings conference call. Today's call is being recorded and we have allocated one hour for prepared remarks and questions and At this time, I'd like to turn the conference over to Mark Hueppelsheuser, General Counselor at TOI. Thank you. You may begin.
Today's call is being recorded and we have allocated one hour for prepared remarks and questions and answers.
At this time I'd like to turn the conference over to Mark how about your general counsel at your life. Thank you you may begin.
The press release announcing the oncology institutes results for the fourth quarter and full year of 2024 are available at the investors section of the company's website Ecology Institute Dot com.
Mark Hueppelsheuser: The press release announcing the Oncology Institute's results for the fourth quarter and full year 2024 are available at the investor section of the company's website, theoncologyinstitute.com. A replay of this call will also be available at the company's website after the conclusion of this call.
A replay of this call will also be available at the company's website. After the conclusion of this call.
Mark Hueppelsheuser: Before we get started, I would like to remind you of the company's Safe Harbor language included within the company's press release for the fourth quarter and full year 2024. Management will 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.
Before we get started I would like to remind you of the company's safe Harbor language included within the company's press release for the fourth quarter and full year 2024 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 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 and free cash flow reconciliations 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 joined.
Mark Hueppelsheuser: This call will also discuss non-GAAP financial measures, such as adjusted EBITDA and free cash flow. 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.
Mark Hueppelsheuser: Joining me on the call today is our CEO, Dan Virnich, and our CFO, Rob Carter. Following our prepared remarks, we'll open the call for your questions.
Speaker Change: Joining me on the call today is our CEO, Dan Brown, and our CFO, Rob Carter following our prepared remarks, we'll open the call for your questions with that I'll turn the call over to Dan.
Daniel Virnich: With that, I'll turn the call over to Dan. Thank you, Mark. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2024 call. Today we will discuss 2024 results and we'll focus our attention on the positive developments that began in 2024 and have continued through the beginning of this year, all of which give us confidence that we can cross the line for profitability and positive cash flow by the end of 2025. Although our overall financial performance in 2024 did not meet our expectations, I'd like to highlight several notable developments that were key building blocks for 2025 and beyond.
Dan: Thank you Mark.
Dan: Good afternoon, everyone and thank you for joining our fourth quarter and full year 2024 call.
Dan: Today, we will discuss 2024 rebuilt we'll focus our attention on the positive development that began in 2024 and it continued really beginning this year.
Dan: All of which give us confidence that we can cross the line to profitability and positive cash flow by the end of 2025.
Dan: Although our overall financial performance in 2024 did not meet our expectations I'd like to highlight several notable developments.
Dan: The building blocks for 2025 and beyond.
Dan: First our revenue increased 21% over the previous year.
Daniel Virnich: First, our revenue increased 21% over the previous year. Inside of this headline number were several significant factors. Our historically highest growth business, Value-Based Patient Services, is finishing the year on stronger footing following the launch of six new contracts, totaling over 270,000 lives across the third and fourth quarters. We also achieved an important strategic milestone by proving our model outside of California with two new contracts signed in Florida during Q4 totaling over 200,000 lives and over 80,000 additional lives already signed in the first quarter of 2025 through four separate agreements across markets. Importantly, one of the 2025 wins includes 42,000 additional lives in Florida in our first fully delegated model with a health plan partner.
Dan: This headline number were several significant factors.
Dan: Historically ice great business value based patient surveys.
Dan: Finishing the year on stronger footing following the launch six new contracts totaling over 270000 bytes.
Dan: Third and fourth quarters.
Dan: We also achieved an important strategic milestone by proving our model outside of California, with two new contracts signed in Florida during Q4.
Dan: Totaling over 200000, Mark and over 80000 additional lives already signed in the first quarter of 2025 report separate agreements across markets.
Dan: Importantly, one of the 2025 wins include 42000 additional lives in Florida, and our first fully delegated model without a partner.
Daniel Virnich: Pharmacy, and Medically Integrated Dispensaries also grew rapidly in 2024, with $48 million for Q4 and $180 million for the full year, representing annualized growth of 73%. While increased revenue is an important part of the story, we are acutely aware that the growth in the top line must lead to profitability and positive cash flow in the near term. During 2024, we took several steps to accelerate our path to positive cash flow and profitability. On profitability, we saw sequential improvement in adjusted EBITDA in the second half of the year through our acceleration in capitated contract growth and quarterly drug margin improvement.
Dan: Pharmacy and medically integrated dispensaries also grew rapidly in 2024.
Dan: 48 million for Q4, and 180 million for the full year, representing annualized growth of 73%.
Dan: While increased revenue is an important part of the story, we are acutely aware that the growth in the top line must meet the profitability and positive cash flow in the near term.
Dan: During 2024, we took several steps to accelerate our path to positive cash flow and profitability.
Dan: On profitability, we saw sequential improvement in adjusted EBITDA in the second half of the year salary.
Dan: Celebration and complicated contract rather than quarterly drove margin improvement.
Dan: During the fourth quarter, we entered into a new multi year agreement with our primary drug distributor, which drove substantial margin improvement starting in December including volume based discounts, which optimizes our positioning.
Daniel Virnich: During the fourth quarter, we entered into a new multi-year agreement with our primary drug distributor, which drove substantial margin improvement starting in December, including volume-based discounts, which optimize our cost positioning. Part of this revised agreement also improves our payment terms and credit parameters, which was a key contributor to the working capital management that supported our positive cash position in Q4. We have more work to do and are continuing to diligently pursue cost optimization opportunities across our supply chain, including the creation of secondary pharmaceutical and medical product suppliers that will allow TOI to continue to grow while benefiting from a cost structure proportionate to our scale.
Dan: This revised agreement also increased our payment terms and credit parameters, which was a key contributor to the working capital management.
Dan: Our positive cash position in Q4.
Dan: We have more work to do and are continuing to diligently pursue cost optimization opportunities across our supply chain, including the creation of secondary pharmaceutical and medical products acquired that will allow T y.
Dan: Wrote while benefiting from our cost structure proportionate to our scale.
Dan: Lastly, we maintained tight control of our internal cost structure, reducing SG&A, 12% Q4 2024.
Daniel Virnich: Lastly, we maintain tight controls of our internal cost structure, reducing SG&A 12% in Q4 2024 versus Q4 2020. Our ability to grow top line while reducing SG&A expenses is a testament to our focus on operational excellence and strategic execution. This decrease is a direct result of our ongoing efforts to streamline operations, improve efficiency, and optimize our overhead resources. Through selective outsourcing, planned attrition, and modest downsizing, we have been able to lower operating costs without compromising the quality of care and service we deliver. Also importantly, we have reduced overall overhead costs while continuing to selectively recruit and promote top talent within our organization.
Dan: Q4 2023.
Dan: Our ability to grow top line, while reducing SG&A expenses is a testament to our focus on operational excellence and strategic execution.
Dan: This decrease is a direct result of our ongoing efforts to streamline operations improve efficiency and optimize our overhead resources.
Dan: Through selected outsourcing planned attrition and modest downside that we have been able to lower operating costs.
Dan: I think the quality of care and service we deliver.
Dan: Also importantly, we have reduced overall overhead costs, while continuing to collectively create and promote top talent within our organization.
Daniel Virnich: By recognizing, retaining, and attracting best-in-class performers within the healthcare ecosystem, we believe that we have been able to continually do more with less through a high-performance culture. We saw a sequential quarterly reduction in cash burn in the second half of the year as a result of our disciplined approach to working capital management. Improvements across receivables, inventory, and payables generated over $4 million of cash in the fourth quarter, our second consecutive quarter of positive cash from operations. We also have taken significant steps to improve our balance sheet, which has led to notable recent developments in early 2025.
Dan: By recognizing retaining and attracting best in class performers within the health care ecosystem. We believe that we've been able to continually do more with what you have a high performance culture.
Dan: We saw a sequential quarterly reduction in cash burn in the second half of the year as a result of our disciplined approach working capital management improvements across receivables inventory and payables generated over $4 million of cash in the fourth quarter, our second consecutive quarter of positive cash from operations.
Dan: We also have taken significant steps to improve our balance sheet, which has led to notable recent development in early 2025.
Dan: In February 2025, we successfully amended and restructured our facility agreement, including a $20 million principal pay down of our outstanding debt.
Daniel Virnich: In February 2025, we successfully amended and restructured our facility agreement, including a $20 million principal pay down of our outstanding debt. Through this amendment, we removed certain financial covenants, most notably permanent elimination of the $40 million minimum cash covenant. Strengthening our balance sheet remains a priority as we continue to enhance financial flexibility and position the company for sustainable growth. Finally, we are happy to announce that, following the principal paydown on our facility agreement, we have entered into agreements for a $16.5 million private placement of common equity. In addition, Deerfield converted $4.1 million of its outstanding debt to common equity on the same terms as the cash equity rate.
Dan: Through this amendment, we removed certain financial covenants, most notably permanent elimination of about $40 million minimum cash covenant.
Dan: Our balance sheet remains a priority as we continue to enhance our financial flexibility.
Dan: The company for sustainable growth.
Dan: Finally, we are happy to announce that following the principal pay down on our facility agreement, we have entered into agreements or a $16 5 million private placement of common equity in.
Dan: In addition, Deerfield converted 4.1 million of our outstanding debt to common equity on the same terms as the cash equity raise.
Daniel Virnich: The capital raise included a combination of management, board members, as well as existing and new outside investors. This transaction, in addition to our ongoing cash management efforts, strengthens our financial position and provides TOI with greater flexibility to execute on its strategic priorities. In the aggregate, the outstanding principal balance of the debt has been reduced from $110 million at year-end to $86 million. The additional cash reserve will support our rapid organic growth, including implementing technologies that the company believes will drive improved efficiency and margin expansion.
Dan: The capital raise included a combination of management board members as well.
Dan: And new outside investors.
Dan: This transaction in addition to our ongoing cash management efforts strengthened our financial position and provide <unk> with greater flexibility to execute on our strategic priorities.
Dan: In the aggregate the outstanding principal balance of the debt has been reduced from $110 million at year end to 86 million.
Dan: The additional cash reserve will support our rapid organic growth.
Dan: <unk> implementing technology that the company believes will drive improved efficiency and margin expansion.
Speaker Change: Now I'll turn the call over to our CFO, Rob Carter to provide additional details on our fourth quarter and full year 2024 financial results, along with 2025 guidance and additional operational and strategic updates.
Rob Carter: Now, I'll turn the call over to our CFO, Rob Carter, to provide additional details on our fourth quarter and full year 2024 financial results, along with 2025 guidance and additional operational and strategic updates. Thanks, Dan. And good afternoon, everyone.
Speaker Change: Thanks, Dan and good afternoon, everyone coming off my first quarter as CFO of Xilai I'm more excited than ever to be part of this incredible team and working with all of them as we continue to execute our strategy and drive drive long term value.
Rob Carter: Coming off my first quarter as CFO of TOI, I'm more excited than ever to be part of this incredible team, and working with all of them as we continue to execute our strategy and drive long term value. Let's begin by reviewing our financial performance for the fourth quarter and full year 2025. Consolidated revenue for Q4 2024 was $100.3 million, an increase of 17% compared to Q4 2025. The increase is driven primarily by our dispensary revenue due to our California-based pharmacy, which continues to exceed fill expectations. As Dan mentioned, we expect to see more normalized levels of growth in the dispensary business going forward now that a full year of operations has passed.
Speaker Change: Let's begin by reviewing our financial performance for the fourth quarter and full year 2024.
Speaker Change: Consolidated revenues for Q4, 2024 was $100 3 million, an increase of 17% compared to Q4 2023 the.
Speaker Change: The increase was driven primarily by our dispensary revenue due to our California based pharmacy, which continues to exceed still expectations as Dan mentioned, we expect to see more normalized levels of growth in the defense business going forward. They have a full year of operations has lapsed.
Rob Carter: Gross profit in Q4 2024 was $14.6 million, an increase of 2% compared to Q4 2024. This increase is attributed to the contribution of our dispensaries. We were able to decrease our SG&A in Q4 2024 by 12% as compared to Q4 2023, despite the strong growth in our top line, which is a testament to our commitment towards driving operational efficiency and our goal towards profitability. As a percentage of revenue, SG&A, including depreciation and amortization, was 26% in the quarter, a decrease of 8% as compared to Q4 2020. Loss from operations for Q4 2024 was $11.9 million, an improvement of $3.4 million compared to Q4 2023.
Speaker Change: Gross profit in Q4, 2024 was $14 6 million, an increase of 2% compared to Q4 2023.
Speaker Change: This increase is attributed to the contribution of our dispenser segment.
We were able to decrease our SG&A in Q4, 'twenty 'twenty four by 12% as compared to Q4 2023. Despite the strong growth in our top line, which is a testament to our commitment towards driving operational efficiency and our go towards profitability.
Speaker Change: As a percentage of revenue SG&A, including depreciation and amortization was 26% in the quarter, a decrease of 8% as compared to Q4 2023.
Speaker Change: Loss from operations for Q4, 2024 was $11 9 million an improvement of $3 4 million compared to Q4 2023.
Rob Carter: Net loss for Q4 2024 was $13 million, an improvement of $5.6 million compared to Q4 of 2020. Adjusted EBITDA for Q4 of 2024 was negative $7.8 million compared to negative $6.3 million in Q4 of 2024. Contributing to the Q4 loss was a $3 million one-time reduction in fee-for-service revenue unrelated to Q4 dates of service. As Dan noted, net cash from operations for Q4 2024 was a positive $4.2 million, and our cash and cash equivalents increased $2.3 million compared to Q3 2024 due to working capital management and non-cash expenses in excess of operating loss.
Speaker Change: Net loss for Q4, 2024 was $13 million, an improvement of $5 6 million compared to Q4 of 2023.
Speaker Change: Adjusted EBITDA for Q4, 2024, it was negative $7 8 million compared to negative $6 3 million in Q4 of 2023 <unk>.
Speaker Change: Contributing to the Q4 loss with a 3 million one time reduction in fee for service revenue unrelated to Q4 days of service.
Speaker Change: As Dan noted net cash from operations for Q4, 2024 was a positive $4 2 million and our cash and cash equivalents increased $2 3 million compared to Q3 2024 due to working capital management and non cash expenses in excess of operating losses.
Speaker Change: Moving to our full year results consolidated revenue for 2024.
Rob Carter: Moving to our full year results, consolidated revenue for 2024 was $393 million, an increase of 21.3% compared to 2023, driven by the contribution of our California-based pharmacy. Gross profit for 2024 was $54 million, a decrease of 9.4% compared to 2020. The loss in gross profit is largely attributable to lower infusion drug margin in Part B, due to drug price inflation, outpacing reimbursement, as well as higher clinical payroll as TOI built its care infrastructure around anticipated growth in new contracts that we are now seeing materialize as we exit For more information visit www.FEMA.gov SG&A, including depreciation and amortization, is $114 million in 2024, a decrease of $5.6 million compared to 2023.
Speaker Change: $393 million, an increase of 21, 3% compared to 2023, driven by the contribution of our California based pharmacy.
Speaker Change: Gross profit for 2024 was 54 million a decrease of nine 4% compared to 2023.
Speaker Change: Lawson gross profit is largely attributable to lower infusion drug margin in part D. Due to drug price inflation outpacing reimbursement as well.
Speaker Change: Well as higher clinical payroll as T O I built its care infrastructure around anticipated growth in new contracts and we are now seeing that materialize as we exit the year.
Speaker Change: SG&A, including depreciation and amortization.
Speaker Change: Is $114 million in 2024, a decrease of $5 6 million compared to 2023.
Rob Carter: As a percentage of revenue, SG&A was 29% in 2024, down 800 basis points from 2020. Loss from operations for 2024 was $60 million, an improvement of $16.9 million compared to 2023. Net loss for 2024 was $64.6 million, a decrease of $18.4 million compared to 2023. And adjusted EBITDA for 2024 was negative $35.7 million.
Speaker Change: As a percentage of revenue SG&A was 29% in 2024 down 800 basis points from 2023.
Speaker Change: Loss from operations for 2024 was $60 million, an improvement of $16 9 million compared to 2023.
Speaker Change: Net loss for 2024 was $64 6 million a decrease of $18 4 million compared to 2023.
Speaker Change: Adjusted EBITDA for 2024 hours and they get a 35 7 million.
Rob Carter: Further details on how we define non-GAAP financial measures can be found in our Form 10-K and press release. Moving to the balance sheet, as of the end of Q4 2024, our cash and cash equivalence balance was $49.7 million. This represents an increase of $2.3 million of cash and cash equivalence compared to Q3 2024, which is a result of efforts to maximize efficiencies in working capital. particularly in Inventory Management. Additionally, as mentioned in our last earnings call, we received a cash inflow of $4.1 million as a result of a favorable legal settlement in Q4, which strengthened our balance sheet and added to our liquidity position.
Speaker Change: Further details on how we define non-GAAP financial measures can be found in our Form 10-K and press release.
Speaker Change: Moving to the balance sheet.
Speaker Change: At the end of Q4, 2024, our cash and cash equivalents balance was $49 7 million.
Speaker Change: This represents an increase of $2 3 million of cash and cash equivalents compared to Q3, 2024, which is a result of efforts to maximize efficient efficiencies in working capital, particularly.
Speaker Change: Particularly in the inventory management. Additionally, as mentioned in our last earnings call.
Speaker Change: We received a cash inflow of $4 1 million as a result of a favorable legal settlement in Q4 strengthen our balance sheet and added to our liquidity position.
Rob Carter: Our private placement will further bolster this cash position in this quarter.
Speaker Change: Private placement will further bolster this cash position in this quarter.
Dan Brown: Before I turn the call over to Dan for closing comments.
Rob Carter: Before I turn the call over to Dan for closing comments. I would like to walk through our 2025 guide. The cornerstone of our 2025 guidance is the execution of several recent capitation contracts, which are expected to deliver significant improvement in profitability in 2025 and beyond. As mentioned, the annualized revenue of the new capitation deals, starting between Q3 2024 and the second quarter 2025, is approximately $50 million, with only two-thirds of that to be recognized in 2025 due to staggered start dates of the contract. We are well positioned to handle substantial growth in the markets we serve without needing to add more providers or increase overhead costs.
Dan Brown: I would like to walk through our 2025 guidance.
Dan Brown: The cornerstone of our 2025 guidance, it's the execution of several recent competition contracts, which are expected to deliver significant improvement to our profitability in 2025 and beyond.
Dan Brown: As mentioned the annualized revenue of the new capitation deals starting between Q3 2024 in the second quarter 2025 is approximately $50 million with only two thirds of that to be recognized in 2025 due to staggered start dates of the contracts.
Dan Brown: We are well positioned to handle substantial growth in the markets, we serve without needing to add more providers or increased overhead costs.
Rob Carter: For the full year 2025, we expect revenue of $460 million to $480 million, representing 17% to 22% growth over full year 2024. This growth is driven by several factors, including our dispensary business, particularly our pharmacy, as well as the continued expansion of value-based contracts and organic growth, especially in Florida. We expect gross profit in the range of $73 million to $82 million, an increase from $54 million in 2024, representing a $214 to $336 basis point increase in margin over 2024. We expect adjusted EBITDA in the range of negative $8 to negative $17 million, of which we expect $5 to $6 million of a loss to occur in the first quarter, with an expected progression to profitability in the second half of the year.
Dan Brown: For the full year 2025, we expect revenue of 460 million to $480 million, representing 17% to 22% growth.
Dan Brown: For full year 2024.
Dan Brown: This growth was driven by several factors, including our dispensary business, particularly our pharmacy as well as the continued expansion of value based contracts and organic growth, especially in Florida.
Dan Brown: We expect gross profit in the range of 73 million to 82 million an increase an increase from $54 million in 2024, representing a 214 to 336 basis point increase in margin over 2024.
Dan Brown: We expect adjusted EBITDA in the range of negative eight to negative 17 million of which we expect $5 million to $6 million of a loss to occur in the first quarter with an expected progression to profitability in the second half of the year.
Rob Carter: C1 of 2025 will be our worst quarter due to seasonal factors such as New Year drug price increases and lower encounter volume. However, we anticipate a steady improvement in drug margins as reimbursement aligns with price adjustments and as encounter volumes grow organically. A key value-based contract in Florida launched in March, with several more contracts set to launch in Q3. The margin contribution from these contracts will increase throughout the year, driven by TUI and our payer partners directing more patients to our provider network, which helps reduce leakage costs, which reduce the capitation payment received by TUI, as we are typically responsible for external oncology spend.
Speaker Change: She one of 2025 will be our worst quarter due to seasonal factors such as new year drug price increases and lower encounter volumes. However, we anticipate a steady improvement in drug margins as reimbursement aligns with price adjustments and has encountered volumes grow organically.
Dan Brown: Key value based contract in Florida launched in March with several more contracts set to launch in Q2.
Dan Brown: The margin contribution from these contracts will increase throughout the year driven by July and our payer partners directing more patients to our provider network, which helps reduce leakage costs, which reduced the capitation payments received by T Y because we're typically responsible for external oncology space.
Rob Carter: As a result, we expect a gradual reduction in losses over the course of the year, ultimately achieving positive EBITDA in Q4.
Dan Brown: As a result, we expect a gradual reduction in losses over the course of the year ultimately achieving positive EBITDA in Q4.
Dan Brown: In an effort to provide more clarity on the cash use and runway we are providing free cash flow guidance for 2025 in the first half of the year, we expect cash burn from operating losses with progressive improvement as the year progresses.
Rob Carter: In an effort to provide more clarity on cash use and runway, we are providing pre-cash flow guidance for 2025. In the first half of the year, we expect cash burn from operating losses, with progressive improvement as the year progresses. Working capital is expected to generate cash through reductions in fee-for-service DSOs and improved inventory management. In addition to the burn associated with operating losses, we expect modest capital expenditures of $2 million and one-time expenses and add-backs of $5 million. As such, we are guiding to free cash flow in the range of negative $12 million to negative $21 million for full year 2025, with anticipated cash flow break-even in the fourth quarter of 2025.
Dan Brown: Working capital is expected to generate cash through reductions in fee for service Dsos and improved inventory management. In addition to the burn associated with operating losses, we expect modest capital expenditures of 2 million in one time expenses and add backs of $5 million.
Dan Brown: As such we are guiding to free cash flow in the range of negative $12 million to negative 21 million for full year 2025 with anticipated cash flow breakeven in the fourth quarter of 2025.
Daniel Virnich: With that, I'll turn it back to Dan for closing comments. Thanks, Rob. As mentioned earlier, subsequent to year end 2024, we strengthened our balance sheet through two key initiatives, a debt pay down and a successful capital raise. We remain committed to reducing leverage and improving our financial flexibility. This new capital strengthens our balance sheet and positions us to execute on our strategic priorities. We are pleased with the strong interest from investors and broad support from the board, which reflects confidence in our business model and long-term growth prospects. As we enter 2025, we will continue to build on our momentum through strong operational management, increased efficiencies, and strategic market expansion, and expect a near-term path to sustained cash flow positivity and profitability in the second half of 2025.
Dan Brown: With that I'll turn it back to Dan for closing comments.
Dan Brown: Thanks, Rob.
Dan Brown: As mentioned earlier subsequent to year end 2024, we strengthened our balance sheet through two key initiatives a debt paydown at the castle capital raise we remain committed to reducing leverage and improving our financial flexibility. This new capital strengthens our balance sheet and position to execute on our strategic priorities we are.
Dan Brown: Pleased with the strong interest from investors and broad support from the board, which reflect confidence in our business model and long term growth prospects.
Dan Brown: As we enter 2025, we will continue to build on our momentum with strong operational management increased efficiency and strategic market expansion and expect a near term path to sustained cash flow positivity in profitability in the second half of 2025.
Operator: With that, we're now ready to take your questions. Operator. 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 keypad. A confirmation toll will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, we'll pause.
Dan Brown: With that we're now ready to take your questions operator.
Speaker Change: Great. Thank you well now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove yourself from the queue.
Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please pull for questions.
Speaker Change: Our first question is from UNC from B Riley. Please go ahead.
UNZ: Our first question is from UNZ from B-Rally, please go ahead. Thank you for taking our questions. I have a couple of them, if I may.
Speaker Change: Thank you for taking our questions I have come off.
Speaker Change: Iraq before Chinese under final guidance.
Rob Carter: Rob, for 2025 guidance, what are the significant moving factors there? Do you need to sign new contracts to get the revenue and the gross profit goal there?
Speaker Change: The significant moving factor there do you need to sign new contracts to got the revenue and the gross profit.
Speaker Change: Goals are.
Speaker Change: Hi, yes. Thanks for the question, yes, it's several things contributing to the growth on 2025 guidance among them as you mentioned growth and capture cap contracts, yes. It is integral to us hitting our targets and we also have organic growth planned for both fee for service and dispensary.
Rob Carter: Hi. Yes, thanks for the question. Yes, several things contributing to the growth on 2025 guidance. Among them, as you mentioned, growth in cap contracts, yes, is integral to us hitting our targets. We also have organic growth planned for both fee-for-service and dispensary. We'll need to hit on all of those in order to hit that target, but the combination of those are how we're viewing growth in 2025. Beyond that, as mentioned a little bit in the section that I just went through, is a reduction in our clinical payroll as a percentage of revenue. As mentioned, we incurred expenses in 2024 in terms of putting in clinics and doctors in our growth markets, particularly in Florida, and we're now in the position where these incremental lives from these value-based contracts will fill the clinics, thus reducing the overall cost of clinical payroll as a percentage of revenue and the cost.
Speaker Change: We will need to hit on all of those are in order to eat to hit that target, but the combination of those are or how we're viewing growth in 2025 beyond that as mentioned a little bit in in this section that I. Just went through is a reduction in our clinical payroll as a percentage of revenue.
Speaker Change: As mentioned, we incurred expenses in 2024.
Speaker Change: In terms of putting in clinics and doctors in our growth markets, particularly in Florida.
Speaker Change: And we're now in a position where these incremental lives from these value based contracts will fill the clinics, thus, reducing the overall cost of clinical payroll as a percentage of revenue and then the cost per visit.
Speaker Change: Yeah, Yeah, we won't get into that in a moment.
UNZ: Yeah, got it. Yeah, we will get into that in a moment.
Rob Carter: So maybe a quick follow up there. How do we think about the contribution from the patient service segment and or dispensary? Will patient service be a meaningful growth driver there in 2025? Yes, the CAHPS segment being a part of patient services will be the primary and most significant driver of our improvement of overall profitability. We expect organic growth in fee-for-service to continue at sort of market rates and levels, but the main contribution from the patient services segment will be within CAHPS. Yeah, got it.
Speaker Change: Maybe a quick follow up there how should we think about the Congress delusion from the patient is a patient service center.
Speaker Change: Orbis and the rates, we are patient service be a meaningful growth driver there.
Speaker Change: Yes.
Speaker Change: Our cap segment being a part of patient services will be the primary and most signet significant driver of our improvement of overall profitability.
Speaker Change: We expect organic growth in fee for service.
Speaker Change: To continue.
Speaker Change: Market rates and levels.
Speaker Change: But the main contribution from the patient services segment, and we will be within the cat.
Speaker Change: Yeah got it.
Daniel Virnich: And either Rob or Daniel, can you provide more operating or operation metrics comparing the new territories such as Florida versus established market in California and what's the goal there in 2025? Yeah, absolutely. I'm happy to take that one. We continue to grow in California, which is our oldest market. However, there's several things about Florida and other new expansion markets, which are very attractive to TOI. It makes our value proposition even stronger with payer partners and patients. One, we see benchmark oncology utilization much higher than California in new markets. So the opportunity to provide value against that much higher benchmark is significant.
Speaker Change: Either Rob or Daniel can you provide more operating our operation metrics, comparing the new territories, such as the Florida versus established market in California, and Wassa goes there in Congress under five.
Speaker Change: Okay.
Speaker Change: Yeah, absolutely I'm happy to take that one week.
Speaker Change: We continue to grow in California, which is our oldest market. However, there are several things about Florida and other new expansion markets, which are very attractive with Eli makes our value proposition, even stronger with payer partners and patients.
Speaker Change: We see benchmark oncology utilization much higher in California, and new markets. So the opportunity to provide value against that much higher bench markets, Michigan.
Daniel Virnich: The other key difference is that almost all markets outside of California are pure Medicare Advantage risk markets, which creates a much higher opportunity given the higher prevalence rate and spend associated with the senior population versus commercial and managed Medicaid, which predominates in addition to Medicare Advantage in California. Got it.
Speaker Change: The other key difference is that almost all markets outside of California are pure Medicare advantage risk markets, which creates a much higher opportunity given the higher prevalence rate.
Speaker Change: Senior population versus commercial and managed Medicaid, which predominates in addition to Medicare advantage in California.
Speaker Change: Got it just maybe some softness there.
Daniel Virnich: Maybe some specifics there, where are we in terms of the capacity of the new clinics in Florida versus, let's say, in California, you are already in 90 or 100% capacity? Yeah, so our California clinics are below 90%. They're about 75%. So there's opportunity for additional capacity in California. In Florida, we've got much greater capacity, we're currently operating about 40%, depending on the clinic across our clinics in five counties in that market. So we've got the opportunity just in those five counties to add significant contribution to our P&L.
Speaker Change: Are we in terms of the capacity of the new clinic, Florida versus let's say in California.
Speaker Change: Already 90 or 100%.
Speaker Change: Yeah, So our California. The next are below 90% or about 75%. So there is a traditional path in California, and Florida, We've got much greater capacity. We're currently operating about 40%.
Speaker Change: Turning on the clinic across our clinic than five counties in that market.
Speaker Change: So we've got the opportunity just in those five counties to add significant contribution to our P&L.
Daniel Virnich: There's also other high priority markets in Florida that we don't currently have clinics, or we've got near term expansion opportunities in California. Yeah, got it.
Speaker Change: There is also other high priority markets in Florida that we don't currently have clinics, where we've got near term expansion opportunities reallocation.
Speaker Change: Yes got it.
Speaker Change: Actually on that on the 40% right now is there a goal to achieve the intended clarify Rick how are you seeing similar need to California out at 75% or slightly lower than they are in.
Daniel Virnich: Especially on that, on the 40% right now, is there a goal to achieve in 2025? Are we targeting similarly to California at 75% or slightly lower, but to get there in 2026? Yeah, our goal is to grow, I mean, as fast and efficiently as we can. We definitely have the clinical capacity to achieve California productivity in 2025. There are substantial contracts in the pipeline in Florida and new markets that could bring us to those levels, depending on the speed of execution beyond those which have already signed. Yeah, got it.
Speaker Change: Yes.
Speaker Change: Yeah. Our goal is to grow I mean is back then, especially as we can we definitely have the clinical path EQ achieve California productivity and frankly by there are substantial contracts in the pipeline in Florida, and new markets that could bring us to those levels, depending on the speed of execution beyond those which are already thought.
Speaker Change: Yeah got it maybe one last question from me.
Daniel Virnich: Maybe one last question from me. Any thoughts on the recent reimbursement landscape? Anything you are watching for with this new administration, including new CMS administrators in the office now? Yeah, absolutely. I think all of the general macro trends that we see in the oncology industry are favorable for the Oncology Institute. So the big changes which have been discussed, although it's debatable as to how fast it would take place, would be changes related to IRA. Any reduction in more expensive oncology drugs would ultimately benefit the Oncology Institute since we're capable of managing a value-based construct, and we've been doing that for 18 years.
Speaker Change: His thoughts on the recent reimbursement landscape anything you are watching for is this new administration, including New CMO Dominion Street or in the office.
Speaker Change: Yeah, absolutely I think all of the general macro trends that we see in the oncology industry are favorable for the oncology Institute.
Speaker Change: So the big changes, which had been at Scotts, although it's debatable as to how fast they would equate would be changes made to the I R. Eight any reduction in no more expensive oncology drugs will ultimately benefit <unk>.
Speaker Change: Since we're capable of managing value based contracting and been doing that for 18 years that would be harder obviously on a pure fee for service oncology business, but we think that'll be favorable rats.
Daniel Virnich: That would be harder, obviously, on a pure fee-for-service oncology business, but we believe that would be favorable for us.
UNZ: And then if anything ever happens with 340B pricing, which the Oncology Institute does not benefit from, that would push volume from hospital-based infusion centers, oncology practice out into the community, again, which we believe would ultimately benefit us in terms of both growth, organic growth in our clinic visits, as well as increased opportunity, again, working with payers. Got it. Yeah, thanks for the helpful color. I will hop back in the As a reminder, if you'd like to ask a question, it is star 1.
Speaker Change: And then anything ever happens with 40, B pricing, which does.
Speaker Change: There's not been a big problem that would push volume from hospital based infusion centers I'll be properties out in the community again, which we believe will ultimately benefit us in terms.
Speaker Change: The growth organic growth because it is all a increased opportunity again with my parents.
Speaker Change: Got it thanks for the household color I will hop back in the queue.
Speaker Change: As a reminder, if you'd like to asking questions. It is star one.
Speaker Change: Next question is from Robert Leboyer from Noble capital markets. Please go ahead.
Robert LaVoyer: Questions from Robert LaVoyer from Noble Capital Markets, please go ahead. Good afternoon and congratulations on the quarter. I was looking at the revenue guide.
Robert Leboyer: Good afternoon, and congratulations on the quarter.
Robert Leboyer: Looking at the revenue guidance and wondering if you could give an E of the individual line items the patient services dispensary in clinical trial breakout as to what the revenue expectations and growth for each of those areas.
Rob Carter: I'm wondering if you could give any of the individual line items. Dispensary and Clinical Trial Breakout. what the revenue expectations and growth for each of those areas.
Robert Leboyer: Hi, Robert Yeah at this point, we're not guiding to specific segments.
Rob Carter: Hi, Robert. Yeah, at this point, we're not guiding to specific segments. The thought here, though, is, as I mentioned before, that in terms of overall contribution to profitability, CAP is going to be the greatest contributor, followed by dispensary and then fee-for-service. You know, we expect organic growth from both dispensary and fee-for-service with this robust pipeline that we have driving the CAP. Okay, great.
Robert Leboyer: The thought here, though is as I mentioned before that in terms of overall contribution to profitability cap is going to be the greatest contributor.
Robert Leboyer: Uh Huh, followed by Dispensary, and then fee for service.
Robert Leboyer: We expect organic growth from both dispensary in fee for service with this robust pipeline that we have driving driving the cap.
Robert Leboyer: Okay, great. Thank you.
Operator: Thank you. Once again, as a reminder, if you'd like to ask a question, this star one. There's no further questions.
Speaker Change: Once again as a reminder, if you'd like to ask a question. Please star one.
Speaker Change: We have no further questions. This concludes the question and answer session. This also concludes today's teleconference. You may disconnect. Your lines at this time. Thank you again for your participation.
Operator: This concludes the question and answer session. This also concludes today's teleconference. You may disconnect your lines at this time.
Operator: Thank you again for your participation.
Speaker Change: [music].