Q2 2025 Oncology Institute Inc Earnings Call
Speaker #3: Ladies and gentlemen, greetings and welcome to the Oncology Institute's second quarter 2025 earnings call. At this time, all participants are in the listen-only mode.
Speaker 2: Ladies and gentlemen, greetings and welcome to the Oncology Institute's second quarter 2025 earnings call. At this time, all participants are in the listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Hueppelsheuser, General Counsel at TOI. Please go ahead.
Speaker #3: A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad.
Speaker #3: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Hueppelsheuser, General Counsel at TOI. Please go ahead.
Speaker #4: The press release announcing the Oncology Institute's results for the second quarter of 2025 is available at the Investors section of the company's website, theoncologyinstitute.com.
Mark Hueppelsheuser: The press release announcing the Oncology Institute's results for the second quarter of 2025 is 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. 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 second quarter of 2025. Management may make forward-looking statements, including guidance on underlying assumptions. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause the 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 and free cash flow.
Speaker #4: 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 within the company's press release for the second quarter of 2025.
Speaker #4: Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially.
Speaker #4: 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.
Speaker #4: 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.
Mark Hueppelsheuser: 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. Joining me on the call today are our CEO, Dan Virnich, 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.
Speaker #4: Joining me on the call today are our CEO, Daniel Virnich, and our CFO, Rob Carter. Following our prepared remarks, we'll open the call for your questions.
Speaker #4: With that, I'll turn the call over to Dan.
Speaker #5: Thank you, Mark. Good afternoon, everyone, and thank you for joining our second quarter 2025 earnings call. I'm pleased to report another strong quarter of performance for TOI on our path to profitability driven by the contributions of our over 650 outstanding clinicians and teammates.
Dan Virnich: Thank you, Mark. Good afternoon, everyone, and thank you for joining our second quarter 2025 earnings call. I'm pleased to report another strong quarter of performance for TOI on our path to profitability, driven by the contributions of our over 650 outstanding clinicians and teammates. The strong momentum we saw in the first quarter continued into the second quarter, with year-over-year revenue growth of more than 20%. Our second quarter revenue of $120 million was driven by monthly records set in our pharmacy business, as well as 10% year-over-year growth in our fee-for-service business, driven by strong organic growth performance in Florida and Oregon. Our value-based contract pipeline remains equally strong, with contracts effective in Q2 adding over 50,000 capitated lives in Nevada and California.
Speaker #5: The strong momentum we saw in the first quarter continued into the second quarter, with year-over-year revenue growth of more than 20%. Our second quarter revenue of $120 million was driven by monthly records set in our pharmacy business, as well as 10% year-over-year growth in our fee-for-service business, driven by strong organic growth performance in Florida and Oregon.
Speaker #5: Our value-based contract pipeline remains equally strong, with contracts effective in Q2 adding over $50,000 capitated lives in Nevada and California. We anticipate new value-based partnerships to continue strong momentum in the second half of the year through several new contracts, which I will provide more detail on shortly.
Dan Virnich: We anticipate new value-based partnerships to continue strong momentum in the second half of the year through several new contracts, which I will provide more detail on shortly. At this point in the year, we remain confident in achieving positive adjusted EBITDA in the fourth quarter. Adjusted EBITDA loss of $4.1 million in Q2 represents a $4.6 million improvement compared to the same quarter last year, reducing the EBITDA loss by more than half, which was primarily the result of organic fee-for-service and pharmacy revenue growth, discipline and clinical payroll, and SG&A across higher volumes, as well as improving drug margins across IV and pharmacy, as TOI leverages its increased buying power and distributor relationships.
Speaker #5: At this point in the year, we remain confident in achieving positive adjusted EBITDA in the fourth quarter. An adjusted EBITDA loss of $4.1 million in Q2 represents a $4.6 million improvement compared to the same quarter last year, reducing the EBITDA loss by more than half. This improvement is primarily the result of organic fee-for-service pharmacy revenue growth, discipline and clinical payroll in SG&A across higher volumes, as well as improving drug margins across IV and pharmacy. TOI leverages its increased buying power and distributor relationships.
Speaker #5: Turning first to our patient service business, we delivered several new capitated contract wins and expansions in the second quarter, and continue to work through a robust pipeline of future opportunities which will go effective in Q3 and Q4.
Dan Virnich: Turning first to our patient service business, we delivered several new capitated contract wins and expansions in the second quarter and continue to work through a robust pipeline of future opportunities, which will go effective in Q3 and Q4. In addition to the two contracts which went effective in Q2 in Nevada and California, on July 1st, we went effective on an expanded capitation relationship with Silver Summit Health Plan in Nevada to serve all of their Medicaid patients in Clark County, adding an additional 49,000 patient lives to this market. The integration is underway and tracking according to plan. Additionally, in the quarter, we received exclusivity on a capitation contract for another key Optum region in California, which we attribute to our high-quality outcomes and ongoing strength of this important partnership.
Speaker #5: In addition to the two contracts which went effective in Q2 in Nevada and California, on July 1st we went effective on an expanded capitation relationship with Silver Summit Health Plan in Nevada, to serve all of their Medicaid patients in Clark County.
Speaker #5: Adding an additional 49,000 patient lives to this market. The integration is underway and tracking according to plan. Additionally, in the quarter, we received exclusivity on a capitation contract for another key Optum region in California, which we attribute to our high-quality outcomes and ongoing strength at this important partnership.
Speaker #5: Finally, we have reached a verbal agreement on expansion of our existing fully delegated capitated partnership in Florida with an Elevance Health Plan into two new counties in Central Florida, starting in 4Q of this year.
Dan Virnich: Finally, we have reached a verbal agreement on expansion of our existing fully delegated capitated partnership in Florida with an Elevant Health Plan into two new counties in Central Florida, starting in 4Q of this year, which will add over 40,000 additional Medicare Advantage lives, more than doubling our current relationship with this payer and bringing our total Medicare Advantage lives under capitation in the Florida market across all payers to over 100,000. This contract expansion will allow us to increase utilization of the existing clinic investments TOI has made in the state without adding significant SG&A and further validates the compelling value proposition of TOI's fully delegated model in Florida, where we are now capable of delivering high-quality coordinated cancer care across our hybrid employed clinic and MSO model.
Speaker #5: This will add over $40,000 additional Medicare Advantage lives. More than doubling our current relationship with this payer, and bringing our total Medicare Advantage lives under capitation in the Florida market across all payers to over $100,000.
Speaker #5: This contract expansion will allow us to increase utilization of the existing clinic investments TOI has made in the state, without adding significant SG&A. This further validates the compelling value proposition of TOI's fully delegated model in Florida.
Speaker #5: We are now capable of delivering high-quality, coordinated cancer care across our hybrid employed clinic and MSO model. As a reminder, our fully delegated offering gives TOI control over utilization management, network design, and claims adjudication for the patients that we serve.
Dan Virnich: As a reminder, our fully delegated offering gives TOI control over utilization management, network design, and claims adjudication for the patients that we serve. We believe this will be our primary model of delivering value-based care in markets outside of California, where we will work more directly with health plans and risk arrangements. It increases our ability to not just deliver outstanding quality care and utilization improvement, but also enables access to ancillary services such as pharmacy and clinical trials for our MSO practice partners, which will drive value for them as well as TOI. As we look at the remainder of 2025 and beyond, we see opportunity in nearly every market where we operate to add new capitated relationships or expand upon existing partnerships. In regards to our pharmacy business, we experienced impressive growth of over 40% in the quarter versus Q2 of 2024.
Speaker #5: We believe this will be our primary model of delivering value-based care in markets outside of California, where we will work more directly with health plans and risk arrangements.
Speaker #5: An increase is our ability to not just deliver outstanding quality care and utilization improvement, but also enables access to ancillary services such as pharmacy and clinical trials for our MSO practice partners, which will drive value for them as well as TOI.
Speaker #5: As we look at the remainder of 2025 and beyond, we see opportunity in nearly every market where we operate to add new capitated relationships or expand upon existing partnerships.
Speaker #5: In regards to our pharmacy business, we experienced impressive growth of over 40% in the quarter versus Q2 of 2024. We are currently forecasting that our pharmacy will grow over 35% for the full year versus prior.
Dan Virnich: We are currently forecasting that our pharmacy will grow over 35% for the full year versus prior. The primary drivers of this impressive growth are an increase in patient volumes leading to additional fill opportunities, as well as a reduction in leakage of prescriptions written by TOI providers to outside pharmacies through operational discipline. We are expecting an additional TOI pharmacy location to open in Florida in the second half of this year, which will help fill both Part B and Part D medications where appropriate to our MSO affiliate practices. This will drive down the unit cost of medications where TOI has risk and offer a convenient alternative for our MSO providers to fill Part D medications where appropriate. Now, I would like to turn to leadership and culture. On our last call, we shared the addition of Dr.
Speaker #5: The primary drivers of this impressive growth are an increase in patient volumes leading to additional fill opportunities, as well as a reduction in leakage of prescriptions written by TOI providers to outside pharmacies through operational discipline.
Speaker #5: We are expecting an additional TOI pharmacy location to open in Florida in the second half of this year, which will help fill both Part B and Part D medications where appropriate to our MSO affiliate practices.
Speaker #5: This will drive down the unit cost of medications where TOI has risk and offer a convenient alternative for our MSO providers to fill Part D medications where appropriate.
Speaker #5: Now, I would like to turn to leadership and culture. On our last call, we shared the addition of Dr. Jeff Langsom, our new Chief Clinical Officer, who is focused on leading our efforts around therapeutics, utilization management, and MSO practice engagement.
Dan Virnich: Jeff Langsom, our new Chief Clinical Officer, who is focused on leading our efforts around therapeutics, utilization management, and MSO practice engagement. This is the core of our value proposition at TOI and will enable scalability of our delegated model across geographies, as well as unlock tremendous value for TOI and our payer partners. I'm also pleased to announce that Kristen England joined us in July as TOI's new Chief Administrative Officer. Ms. England brings over two decades of leadership experience in healthcare management and operations, most recently serving as a Senior Executive within McKesson's US Oncology Network. She will be overseeing our enterprise central business operations and technology strategy. Her role will be instrumental in driving our transformation into a technology and AI-enabled care delivery organization.
Speaker #5: This is the core of our value proposition at TOI and will enable scalability of our delegated model across geographies, as well as unlock tremendous value for TOI and our payer partners.
Speaker #5: I'm also pleased to announce that Kristen England, joined us in July as TOI's new Chief Administrative Officer. Ms. England brings over two decades of leadership experience in healthcare management and operations, most recently serving as a Senior Executive within McKesson's US Oncology Network.
Speaker #5: She will be overseeing our enterprise central business operations and technology strategy. Her role will be instrumental in driving our transformation into a technology and AI-enabled care delivery organization.
Speaker #5: This will not only drive a better patient and physician experience, but further reduce OPEX as a percent of revenue as we grow, driving margin and profitability.
Dan Virnich: This will not only drive a better patient and physician experience, but further reduce OPEX as a percent of revenue as we grow, driving margin and profitability. We are launching three AI enablement efforts in Q3 to make meaningful changes in performance and cost for revenue cycle management, prior authorization services, and our patient call center. Lastly, our current Chairman, Richard Barish, has decided to retire and will be stepping down effective August 12th. Richard has been an incredible mentor for the management team, and we thank him for his steady leadership of our board through our first years as a public company. I'm very pleased to announce that the board has voted unanimously to elect Anne McGeorge as our new Chair. Anne has been a TOI board member and Chair of our audit committee since we went public in 2021.
Speaker #5: We are launching three AI-enablement efforts in Q3 to make meaningful changes in performance and cost for revenue cycle management, prior authorization services, and our patient call center.
Speaker #5: Lastly, our current chairman, Richard Barish, has decided to retire and will be stepping down effective August 12. Richard has been an incredible mentor for the management team, and we thank him for his steady leadership of our board through our first years as a public company.
Speaker #5: I'm very pleased to announce that the board has voted unanimously to elect Anne McGeorge as our new chair. Anne has been a TOI board member and chair of our audit committee since we went public in 2021.
Speaker #5: Anne has a wealth of public and private company experience as both a senior executive and board member. She was the former National Managing Partner of Healthcare for Grant Thornton and, prior to that, a partner at Deloitte.
Dan Virnich: Anne has a wealth of public and private company experience as both a Senior Executive and board member. She was the former National Managing Partner of Healthcare for Grant Thornton, and prior to that, a partner at Deloitte. We are thrilled that Anne has been promoted into her new role and look forward to continuing to build on the success of TOI under her mentorship. I'll now turn the call over to our Chief Financial Officer, Rob Carter, to cover the second quarter financials in more detail. Rob?
Speaker #5: We are thrilled that Anne has been promoted into her new role and look forward to continuing to build on the success of TOI under her mentorship.
Speaker #5: I'll now turn the call over to our Chief Financial Officer, Rob Carter, to cover the second quarter financials in more detail. Rob?
Speaker #6: Thanks, Dan. And good afternoon, everyone. I want to echo Dan's enthusiasm about our solid second quarter results. In the quarter, we've seen continued momentum across our business, demonstrated margin expansion, and improved working capital, all while making meaningful progress on achieving adjusted EBITDA and free cash flow positivity by year-end.
Rob Carter: Thanks, Dan, and good afternoon, everyone. I want to echo Dan's enthusiasm about our solid second quarter results. In the quarter, we've seen continued momentum across our business, demonstrated margin expansion, and improved working capital, all while making meaningful progress on achieving adjusted EBITDA and free cash flow positivity by year-end. I'll start today with a review of the Q2 results and then close my prepared remarks by reviewing our financial outlook. Consolidated revenue of $119.8 million increased 21.5% compared to Q2 of 2024. Patient services revenue, which represents 47% of total revenue this quarter, was $55.9 million. This growth represents a 7% increase compared to a year ago, driven by fee-for-service revenue and a 5% sequential increase driven by CAT and fee-for-service revenue. Pharmacy revenue of $62.6 million increased 41% compared to Q2 of last year and 27% sequentially, and now represents 52% of total revenue.
Speaker #6: I'll start today with a review of the Q2 results and then close my prepared remarks by reviewing our financial outlook. Consolidated revenue of $119.8 million increased 21.5% compared to Q2 of 2024.
Speaker #6: Patient service revenue which represents 47% of total revenue this quarter was 55.9 million. This growth represents a 7% increase compared to a year ago, driven by fee-for-service revenue and a 5% sequential increase driven by CAC and fee-for-service revenue.
Speaker #6: Pharmacy revenue of $62.6 million increased 41% compared to Q2 of last year and 27% sequentially, and now represents 52% of total revenue. This strong growth was driven by increases in both our capitated and fee-for-service lives, as well as improved performance of our retail and MID pharmacies.
Rob Carter: This strong growth was driven by increases in both our capitated and fee-for-service lives and improved performance of our retail and MID pharmacies. Clinical trials and other revenue was $1.3 million at the quarter. Recall that we outsourced our clinical trials business to Helios in the middle of the second quarter. Moving down to P&L, our gross profit in the quarter of $17.5 million increased 34% year-over-year and 1.5% sequentially. Gross margin of 14.6% increased 140 basis points year-over-year, driven by expansion in our dispensary gross margin, partially offset by a slight decline in patient services gross margin. Within patient services, TOI saw a decrease in margin on capitation revenue and an increase in margin on fee-for-service revenue.
Speaker #6: Purple trials and other revenue was $1.3 million in the quarter. Recall that we outsourced our clinical trials business to Helios in the middle of the second quarter.
Speaker #6: Moving down the P&L, our gross profit in the quarter of $17.5 million increased 34% year-over-year and $1.5% sequentially. Gross margin of $14.6% increased 140 basis points year-over-year, driven by the expansion in our dispensary gross margin, partially offset by a slight decline in patient services gross margin.
Speaker #6: Within patient services, TOI saw a decrease in margin on capitation revenue and an increase in margin on fee-for-service revenue. As a reminder, when a new capitation contract begins, as several did in Q2 2025, we tend to experience lower margin as TOI generates value and manages our risk business through discrete and active management of patient populations.
Rob Carter: As a reminder, when a new capitation contract begins, as several did in Q2 '25, we tend to experience a lower margin as TOI generates value in our list business through discrete and active management of patient populations, which includes utilization management, formulary, and steerage activities, which take time to operationalize and mature. As a result, we expect margin in our capitation business to improve over time as these new populations are conformed to TOI's medical model. Meanwhile, we are seeing better profitability in the fee-for-service business, driven by increased provider utilization on higher patient volumes and improving drug margin performance due to the increasing scale and sophistication of TOI's drug inventory management system. On a sequential basis, you may note that gross margin declined approximately 190 basis points from 1Q. Recall that last quarter benefited from a one-time rebate from a drug supplier partner.
Speaker #6: Which includes utilization management, formulary, and steerage activities. This process takes time to operationalize and mature. As a result, we expect margin in our capitation business to improve over time as these new populations are conformed to TOI's medical model.
Speaker #6: Meanwhile, we are seeing better profitability in the fee-for-service business, driven by increased provider utilization on higher patient volumes, and improving drug margin performance due to the increasing scale and sophistication of TOI's drug inventory management system.
Speaker #6: On a sequential basis, you may note that gross margin declined approximately $190 basis points from 1Q. Recall that last quarter benefited from a one-time rebate from a drug supplier partner; if not for that, Q2 would have increased sequentially.
Rob Carter: If not for that, Q2 would have increased sequentially. SG&A of $26.9 million in Q2 of 2025 decreased from $27.9 million in a similar period last year, representing a 3.5% decrease. SG&A includes a $2.4 million one-time write-off of net assets related to outsourcing our clinical trials business, as mentioned earlier, which was added back to adjust the EBITDA in the quarter. Normalizing for this one-time item, SG&A would have decreased 12% year-over-year. The operating leverage in our platform represents another lever pull on our path to profitability. SG&A represented 22% of total revenue, a 580 basis point reduction year-over-year. We think there's further leverage in the model with increased scale, as well as the adoption of AI enablement we noted on our first quarter call.
Speaker #6: SG&A of 26.9 million in Q2 of 2025 decreased from 27.9 million in a similar period last year, representing a 3.5% decrease. SG&A includes a 2.4 million one-time write-off of net assets related to outsourcing our clinical trials business, as mentioned earlier.
Speaker #6: Which was added back to adjusted EBITDA in the quarter. Normalizing from this one-time item, SG&A would have decreased 12% year-over-year. The operating leverage in our platform represents another lever pull on our path to profitability.
Speaker #6: SG&A represented 22% of total revenue, a $580 basis point reduction year-over-year. We think there is further leverage in the model with increased scale, as well as the adoption of AI-enablement we noted on our first quarter call.
Speaker #6: We are planning to launch AI pilots around prior authorization, patient advocacy, and the next-gen call center in the third quarter, and we'll keep you posted on their progress.
Rob Carter: We are planning to launch AI pilots around prior auth, patient advocacy, and a next-gen call center in the third quarter, and we'll keep you posted on their progress. Loss from operations was $11.2 million, an improvement from a $16.4 million loss in Q2 of 2024. Adjusted EBITDA was negative $4.1 million, compared favorably to negative $8.7 million in Q2 of 2024. Moving on to the balance sheet and cash flow, as of the end of Q2 2025, our cash and cash equivalents were $30.3 million. Cash flow from operations for the first half of 2025 was a loss of $15.2 million, representing a 52% improvement from the first half of 2024. Free cash flow was negative $14.6 million for the first six months and did June 30th, 2025, a reduction of 54.1% from the same quarter in the prior year.
Speaker #6: Loss from operations was $11.2 million, an improvement from a $16.4 million loss in Q2 of 2024. Adjusted EBITDA was negative 4.1 million compared favorably to negative 8.7 million in Q2 of 2024.
Speaker #6: Moving on to the balance sheet and cash flow, as of the end of Q2 2025, our cash and cash equivalents were 30.3 million. Cash flow from operations for the first half of 2025 was a loss of 15.2 million, representing a 52% improvement from the first half of 2024.
Speaker #6: Free cash flow was negative $14.6 million for the first six months ended June 30, 2025, a reduction of 54.1% from the same quarter in the prior year.
Speaker #6: Integral to our management of rising drug costs is maximizing our drug rebates through strategic purchasing as well as more active formulary management. The net effect is improved drug margins, a temporary use of cash, and an increase to our rebate AR as payment of rebates varies by manufacturer but generally extends for multiple subsequent quarters.
Rob Carter: Integral to our management of rising drug costs is maximizing our drug rebates through strategic purchasing, as well as more active formulary management. The net effect is improved drug margins, a temporary use of cash, and an increase to our rebate AR as payment of rebates varies by manufacturer, but generally extends for multiple subsequent quarters. Additionally, with multiple months of concerted increases to our pharmacy revenue, pharmacy AR has also increased. All positive indicators for where the business is trending, but as such, we expect to end the year at the lower end of free cash flow guidance. Finally, turning to guidance, for the full year, we are reiterating our full year 2025 outlook. Specifically, we expect revenue of $460 to $480 million. Given the growth we've seen in the first half of the year, we believe that we will reach the high end of that range.
Speaker #6: Additionally, with multiple months of consecutive increases to our pharmacy revenue, pharmacy AR has also increased. All positive indicators for where the business is trending, but as such, we expect to end the year at the lower end of free cash flow guidance.
Speaker #6: Finally, turning to guidance for the full year, we are reiterating our full year 2025 outlook. Specifically, we expect revenue of $460,000 to $480 million, given the growth we've seen in the first half of the year, we believe it will reach the high end of that range.
Speaker #6: Adjusted EBITDA of a loss of $17 million to a loss of $8 million. At this point in the year, we have a solid line of sight to the midpoint of that range.
Rob Carter: Adjusted EBITDA of a loss of $17 million to a loss of $8 million. At this point in the year, we have a solid line of sight to the midpoint of that range, as our Florida oncology networks are just starting to ramp. I'd also like to take a moment to talk about some of the assumptions that support second half growth. In terms of revenue, we expect quarterly revenue to continue to increase sequentially in Q3 and Q4. Driving this is the initiation of new risk contracts, particularly our delegated network deal in Florida, continued growth in our pharmacy business, and a substantial positive year-over-year organic fee-for-service performance in Florida and Oregon.
Speaker #6: At our Florida oncology networks, we are just starting to ramp. I'd also like to take a moment to talk about some of the assumptions that support second-half growth.
Speaker #6: In terms of revenue, we expect quarterly revenue to continue to increase sequentially in Q3 and Q4. Driving this is the initiation of new risk contracts, particularly our delegated network deal in Florida, continued growth in our pharmacy business, and a substantial positive year-over-year organic fee-for-service performance in Florida and Oregon.
Speaker #6: As we think about gross margin in the back half of the year, we anticipate sequential improvement as we further optimize risk margins, partially offset by the start of new contracts, and benefit from natural expansion in drug pricing spread through year-end. We will continue our process of optimizing our drug supply chain and clinical formulary management.
Rob Carter: As we think about gross margin in the back half of the year, we anticipate sequential improvement as we further optimize risk margins, partially offset by the start of new contracts, and benefit from natural expansion and drug pricing spread through year-end and continue our process of optimizing our drug supply chain and clinical formulary management. Specifically, our increased scale allows us to work more effectively with our drug distributor and manufacturer partners, and our investments in personnel and clinical technology allow us to be more active and precise in managing patient utilization and drug formulary. Our adjusted EBITDA, we anticipate further sequential improvement. In Q3, we expect adjusted EBITDA of negative $2.5 million to negative $3.5 million. And as Dan noted, we are on track to show positive results in Q4. With that, I'll turn the call back over to Dan for closing comments.
Speaker #6: Specifically, our increased scale allows us to work more effectively with our drug distributor and manufacturer partners. Our investments in personnel and clinical technology allow us to be more active and precise in managing patient utilization and drug formulary.
Speaker #6: For adjusted EBITDA, we anticipate further sequential improvement. In Q3, we expect adjusted EBITDA of negative $2.5 million to negative $3.5 million. As Dan noted, we are on track to show positive results in Q4.
Speaker #6: With that, I'll turn the call back over to Dan for closing comments.
Speaker #5: Thanks, Rob. In closing, in the second quarter, we delivered solid top-line growth in all lines of our business while driving a meaningful year-over-year reduction in EBITDA loss.
Dan Virnich: Thanks, Rob. In closing, in the second quarter, we delivered solid top-line growth in all lines of our business while driving meaningful year-over-year reduction in EBITDA loss. We made meaningful progress expanding our capitated partnerships, saw strong growth in our pharmacy and fee-for-service business, reduced SG&A over 12% from the same quarter prior year, and set a path for further efficiencies in our cost structure as we scale through technology enablement. We anticipate these efforts will continue to gain momentum through the rest of the year and remain on track to deliver adjusted EBITDA positivity in Q4. Operator, at this point, let's open the call to questions.
Speaker #5: We made meaningful progress expanding our capitated partnerships, saw strong growth in our pharmacy and fee-for-service business, reduced SG&A over 12% from the same quarter last year, and set a path for further efficiencies in our cost structure as we scale through technology enablement.
Speaker #5: We anticipate these efforts will continue to gain momentum through the rest of the year and remain on track to deliver adjusted EBITDA positivity in Q4.
Speaker #5: Operator, at this point, let's open the call to questions.
Speaker #3: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad.
David Brown: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question comes from David Larson with BTIG. Please go ahead.
Speaker #3: A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue.
Speaker #3: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions.
Speaker #3: Our first question comes from David Larson with BTIG. Please go ahead.
Speaker #7: Hey, congratulations on the very good quarter! Can you talk a little bit about the dispensing gross margin? That looked like it was up a lot year-over-year, maybe almost 600 basis points.
David Larson: Hey, congratulations on the very good quarter. Can you talk a little bit about the dispensing gross margin? That looked like it was up a lot year over year, maybe almost 600 basis points. Just any thoughts on like what's driving that? Are there any specific drugs? Is it Part B or is it Part D? So just any color there would be very helpful. Thank you.
Speaker #7: Just, just any thoughts on like what's driving that? Are there any specific drugs? Is it Part B or is it Part D? So, just any color there would be very helpful.
Speaker #7: Thank you.
Speaker #5: Hey David, it's Rob. Yeah, so Q2 of last year was the worst impact from the DARP clawback. And so that's the quarter specifically where we took a 2023 date of service reduction.
Dan Virnich: Hey, Dave, it's Rob. Yeah, so Q2 of last year was the worst impact from the DARP clawback. And so that's the quarter specifically where we took a 2023 date of service reduction. And so dispensary margin in Q2 of 2024 was, I would say, artificially low because of that. Even normalizing for that, though, you're looking at double-digit growth year over year. That actually has a lot to do with the way in which we're procuring drugs at this point. Our scale at this point is providing new opportunities for us, including incremental rebates, as well as some other pricing considerations that's just yielding better rebates and margin overall.
Speaker #5: And so dispensary margin in Q2 of 2024 was, I would say, artificially low because of that. Even normalizing for that though, you're looking at double-digit growth year-over-year.
Speaker #5: That actually has a lot to do with the way in which we're procuring drugs at this point. Our scale at this point is providing new opportunities for us, including incremental rebates as well as some other pricing considerations.
Speaker #5: That's just yielding better rebates and margin overall.
Speaker #7: Are Are these infused oncology medications dispensed in the office as part of like Part B as in boy?
David Larson: Are these infused oncology medications dispensed in the office as part of like Part B as in boy?
Speaker #5: No, hey David, it's Dan Vernick. No, we're talking about Part D medications, so primarily oral specialty or self-injectables where they can be compliantly given in a Part D.
Dan Virnich: No. Hey, Dave, it's Dan Ring. No, we're talking about Part D medications, so primarily oral specialty or self-injectables where they can be compliantly given in a Part D.
Speaker #7: Okay, great. And then just any thoughts on the potential impact for drug pricing reform, the Inflation Reduction Act, most favored nation comments, just any thoughts on how that would impact your business, if at all?
David Larson: Okay. Great. And then just any thoughts on like the potential impact for drug pricing reform, the Inflation Reduction Act, most favored nation comments, just any thoughts on how that would impact your business, if at all?
Speaker #5: Yeah, we continue to follow that very closely and we continue to believe that it's going to be net positive for TOI. For a couple of reasons.
Dan Virnich: Yeah, we continue to follow that very closely, and we continue to believe that it's going to be net positive for TOI for a couple of reasons. One, reduction in pricing on our capitated business is obviously favorable for capitated margins and for our patients. And then on the fee-for-service side of the house, which is what most practices in the country are doing exclusively, we believe there will be some sort of make-hold through rebates or another mechanism to help keep those practices afloat. So in totality, those two forces will be net positive for TOI.
Speaker #5: One, reduction in pricing on our capitated business is obviously favorable for capitated margins and for our patients. And then on the fee-for-service side of the house, which is, you know, what most practices in the country are doing exclusively, we believe there will be some sort of make hole through rebates or another mechanism to help keep those practices afloat.
Speaker #5: So, in totality, those two forces will be net positive for TOI.
Speaker #7: Okay. And there's, and then just like option care as an example, they've been talking about a certain drug like Stelara. There's some changes in pricing for that medication.
David Larson: Okay. And then just like OptionCare as an example, they've been talking about a certain drug like Stelara. There's some changes in pricing for that medication. It's not even an oncology drug. I think that's more like in the gut. But that one drug, changes in pricing for that one drug is having a significant impact on OptionCare's EBITDA. Is there anything like that in your book of business that investors should be aware of as we get to the back half of the year or into 2026? Are there any one or two or three drugs that might be going like biosimilar with one manufacturer? Just any thoughts there would be helpful.
Speaker #7: It's not even an oncology drug. I think it's more related to the gut. But that one drug, changes in pricing for that one drug, are having a significant impact on Option Care's EBITDA.
Speaker #7: Is there anything like that in your book of business that investors should be aware of as we get to the back half of the year or into 2026?
Speaker #7: Are there any one or two or three drugs that might be going like biosimilar with one manufacturer? Just any thoughts there would be helpful.
Speaker #5: No, not, not that, not that we forecast. You've looked very extensively at our current drug portfolio. I think oncology benefits from the fact that, you know, within any given class, there are multiple different options that can be clinically equivalent, including biosimilars and non-biosimilars, as well as other combinations.
Dan Virnich: No, not that we forecast. We've looked very extensively at our current drug portfolio. I think oncology benefits from the fact that within any given class, there's multiple different options that can be clinically equivalent, including biosimilar or non, as well as other combinations. And within that, we see no situation where we have a single drug that is placing substantial risk on TOI's portfolio related to that sort of situation.
Speaker #5: And within that, we see no situation where we have a single drug that is placing substantial risk on TOI's portfolio related to that sort of situation.
Speaker #7: And then just one more quick one for me before I hop in the queue. Can you just talk a little bit more about the pressure on the gross patient service margin?
David Larson: And then just one more quick one for me before I hop in the queue. Can you just talk a little bit more about the pressure on the gross patient service margin? Like how much of that gross profit is, we'll call it, capitated versus how much is fee-for-service? And then you know how much time will it take for that margin to kind of pick back up? Thank you.
Speaker #7: Like how much of that gross profit is, we'll call it capitated versus how much is fee-for-service? And then, you know, how much time will it take for that, that margin to kind of pick back up?
Speaker #7: Thank you.
Speaker #5: Yeah, it's primarily related to CAP margin. And so we had a pretty sizable contract launch in March, this is in our Florida oncology network.
Dan Virnich: Yeah, it's primarily related to cap margin. And so we had a pretty sizable contract launch in March. This is in our Florida oncology network. We are barely through the continuity of care period where patients are remaining with the existing provider before moving over to TOI. And so it wasn't a surprise at all. It's at this point where we expect to see the patients being transferred over to us. The margin will correspond and pick up over the next three months. So no surprise there. And that's one of the main catalysts for future margin progression is these new cap contracts maturing as they age.
Speaker #5: We are barely through the continuity of care period where patients are remaining with the existing provider before moving over to TOI. And so, it wasn't a surprise at all.
Speaker #5: It's at this point where we expect to see the patients being transferred over to us. The margin will correspond and pick up over the next three months.
Speaker #5: So no surprise there. And that's one of the main catalysts for future margin progression is these new CAP contracts maturing as they age.
Speaker #7: So, I think what I heard you say is you are now responsible for those members. You're collecting the PMPM rate, but they're getting their care where they had been originally, and they haven't yet transferred their care into the TOI clinics.
David Larson: So I think what I heard you say is you are now responsible for those members. You're collecting the PMPM rate, but they're getting their care where they had been originally, and they haven't yet transferred their care into the TOI clinics. And once they do that, then we'll see the margins improve. Did I hear that correctly?
Speaker #7: And once they do that, then we'll see the margins improve. Did I hear that correctly?
Speaker #5: That's right.
Dan Virnich: That's right.
Speaker #7: Okay. I got a bunch more, but I'm going to hop back in the queue. Thanks.
David Larson: Okay. I got a bunch more, but I'm going to hop back in the queue. Thanks.
Speaker #5: Thanks. Thanks, Dan.
Dan Virnich: Thanks. Thanks, Dan.
Speaker #3: Thank you. Our next question comes from Huanjie with BYL Securities. Please go ahead.
David Brown: Thank you. Our next question comes from Huang Ji with Bee Riley Securities. Please go ahead.
Speaker #8: Thank you for taking our questions, and congrats on a good quarter. I have a couple of inquiries. First, one of your value-based care peers experienced the highest level of oncology spend in history and continues to forecast a high level of expense in the second half of 2025.
Huang Ji: Thank you for taking our questions and congrats on a good quarter. I got a couple. So first, one of your value-based care peers experienced the highest level of oncology spend in history and continued to forecast a high level of spend in the second half of 2025. What was your observation in Q2 2025, and will you be able to continue managing the cost at a relatively low level in the second half of 2025?
Speaker #8: What was your observation in Q2 2025, and will you be able to continue managing the cost at a relatively low level in the second half of 2025?
Speaker #5: Yes, hi Juan. It's Dan. Thanks for the great question. Yeah, I mean, 2025 was no surprise in the sense that we saw another year of huge increases in drug cost trend.
Dan Virnich: Yeah. Hi, Juan. It's Dan. Thanks for the great question. Yeah, I mean, 2025 was no surprise in the sense that we saw another year of huge increases in drug cost trend, driven by, again, overutilization as well as just increase in cost overall for procurement. So that benefits TOI in the sense that there is more opportunity for us to provide value to our payer partners. We, as a whole, have seen our MLR remain relatively stable. And again, that's due to a couple of different things. One is our ability to narrow networks to drive care to lower-cost sites of care and the high degree of control that our program provides over ensuring NCCN compliance, but also value-based therapeutic decision-making. So while the overall oncology-wide cost trend went up, again, that provides opportunity for us to engage and provide more value to payer partners.
Speaker #5: Driven by, again, overutilization as well as just an increase in costs overall for procurement. So that benefit, benefits TOI in the sense that there is more opportunity for us to provide value to our payer partners. We, as a whole, have seen our MLR remain relatively stable.
Speaker #5: And again, that's due to a couple of different things. One is our ability to narrow networks to drive care to lower-cost sites of care.
Speaker #5: And the high degree of control that our program provides over ensuring NCCN compliance, but also value-based therapeutic decision making. So while the overall oncology-wide cost trend went up, again, that provides opportunity for us to engage and provide more value to payer partners and then internally when we look at our drug cost trend, it's been, been stable.
Dan Virnich: And then internally, when we look at our drug cost trend, it's been stable.
Speaker #8: Got Got it. Can you quickly comment on this timeline of this opportunity with 11th in Florida? I think it starts in 4Q. Can you recognize revenue in 4Q or it's more in first half of 2026?
Huang Ji: Got it. Can you quickly comment on this timeline of this opportunity with 11th in Florida? I think it starts in 4Q. Can you recognize revenue in 4Q or it's more in first half of 2026?
Speaker #5: Yeah. So we are tracking towards Q4. At this point, that's when we would start recognizing revenue.
Dan Virnich: Yeah. So we are tracking towards Q4 at this point, and that's when we would start recognizing revenue.
Speaker #8: Got it. And one last question from me, maybe related to the prior question from David, that some PBMs are shifting infusion drugs from the clinic to their own pharmacy as a way to shift margin.
Huang Ji: Got it. And one last question from me, maybe related to the prior question from David, that some TBMs are shifting infusion drugs from clinics to their own pharmacy as a way to shift margin, basically from provider-administered drugs to from medical benefits to pharmacy benefit coverage. Did you notice that, and will that be a negative impact to you for any oncology infusion drug?
Speaker #8: Basically, from provider-administered drugs to medical benefits to pharmacy benefit coverage. Did you notice that, and will that have an active impact on you for any oncology infusion drug?
Speaker #5: Yeah, are you referencing—did you say PBMs are getting very...are you saying is that an opportunity for TOI to fill under pharmacy benefit versus Part B as a way to manage our risk, or am I misinterpreting the question?
Dan Virnich: Yeah. Are you referencing you said TBMs is beginning very. Are you saying is that an opportunity for TOI to fill under pharmacy benefit versus Part B as a way to manage our risk, or am I misinterpreting the question?
Speaker #8: Yeah, so some of the PBMs are shifting infusion drugs which are provider-administered and medical benefits. To their own pharmacy benefit coverage. So it could be to your pharmacy, but it could also be for example, CVS pharmacy out there.
Huang Ji: Yeah. So some of the TBMs are shifting infusion drugs, which are provider-administered and medical benefits, to their own pharmacy benefit coverage. So it could be to your pharmacy, but it could also be, for example, CVS pharmacy out there. I'm just curious, have you noticed such a trend, and will that impact your have a negative impact on you?
Speaker #8: I'm just curious, have you noticed such trend and will that impact your have a negative impact on you?
Speaker #5: Yeah, so almost without exception, our risk contracts are Part B, as in boy, risk only. So shifting drugs from Part B to Part D would shift them out of risk.
Dan Virnich: Yeah. So almost without exception, our risk contracts are Part B, as in boy, risk only. So shifting drugs from Part B to Part D would shift them out of risk. So that would remove cost that was at risk to TOI. So that would be net positive for us, assuming you could compliantly fill a medication under Part D in a PBM drive that change.
Speaker #5: So that would remove cost that was at risk to TOI. So that would be net positive for us. Assuming you could compliantly fill a medication under Part D in a PBM drug, that change.
Speaker #8: Got Got it. Thank you for taking our questions.
Huang Ji: Got it. Thank you for taking our question.
Speaker #5: Thanks.
Dan Virnich: Thanks.
Speaker #3: Thank you. Our next question comes from Robert Liboyer with Noble Capital Markets. Please go ahead.
David Brown: Thank you. Our next question comes from Robert LeBoya with Noble Capital Markets. Please go ahead.
Speaker #9: Congratulations on a very nice quarter. I had a question about the new patient center coming on from the contracts that you had previously announced.
Robert Leboyer: Congratulations on a very nice quarter. I had a question about the new patients that are coming on from the contracts you had previously announced, as well as the ones that you mentioned for the second half. And I was wondering if you could give any details about the ones that are online and getting the monthly payment compared with those left to go from the first half or contracts signed in the first half and the ones that will be coming on in the second half, just to get an idea of the additional patient lives that will be added going forward. And who are the startups at the higher cost compared with who's going to be in the continuing care at the slightly improved costs?
Speaker #9: As well as the ones that you mentioned for the second half. I was wondering if you could give any details about the ones that are online and getting the monthly payment compared with those left to go from the first half or contracts signed in the first half.
Speaker #9: And the ones that will be coming on in the second half, just to get an idea of the, the additional patient lives that'll be added going forward and who was the, who are the startups at the higher cost compared with who's going to be in the continuing care at the slightly improved costs?
Speaker #5: Hey Robert, it's Dan. Thanks for the great question. So, yeah, our growth in the second half of 2025 is primarily occurring outside of California.
Dan Virnich: Hey, Robert. It's Dan. Thanks for the great question. So yeah, so our growth in the second half of 2025 is primarily occurring outside of California. It's across, it's primarily Medicare Advantage, but then we also just, as we discussed, started a new Medicaid risk contract outside of California. Because of the nature of utilization outside of California being much higher across product lines, these are at higher utilization, therefore higher PMPMs, still generating substantial savings for our payer partners. So you would expect on a per-member basis higher revenue contribution.
Speaker #5: It's across; it's primarily Medicare Advantage. But then we also just, as we discussed, started a new Medicaid risk contract outside of California. Because of the nature of utilization outside of California being much higher, across product lines, these are at higher utilization; therefore, higher PMPMs, still generating substantial savings for our payer partners.
Speaker #5: So you would expect, on a per-member basis, higher revenue contribution.
Speaker #9: Okay, great. And you mentioned Florida and the expansion there. Is there any percentage of the new people compared with continuing patients or any kind of sense of how much expansion in the number of lives there will be in Florida or in the entire network?
Robert Leboyer: Okay, great. And you mentioned Florida and the expansion there. Is there any percentages of the new people compared with continuing patients or any kind of sense of how much expansion in the number of lives that there will be in Florida or in the entire network?
Speaker #5: Yeah, I mean, just broadly speaking, we project that Florida will end the year for TOI with right around 100,000 Medicare Advantage lives. For Medicare Advantage, that we're taking risk on, we have some non-Medicare Advantage risk in that market as well.
Dan Virnich: Yeah. I mean, just broadly speaking, we project that Florida will end the year for TOI with right around 100,000 Medicare Advantage lives for Medicare Advantage that we're taking risk on. We have some non-Medicare Advantage risk in that market as well. Versus current is about half that. So that's a substantial amount of growth just within Florida. If you look at the total number of lives that TOI has under risk right now, we're right at right around 1.9 million. So that 50,000 in Florida that we're going to see in the second half of this year represents an incremental 2.5% on our total portfolio, roughly.
Speaker #5: Versus current, it is about half that. So that's, you know, a substantial amount of growth just within Florida. If you look at the total number of lives that TOI has under risk right now, we're right around 1.9 million.
Speaker #5: So, that 50,000 in Florida that we're going to see in the second half of this year represents an incremental 2.5% of our total portfolio, roughly.
Speaker #9: Great. Thank you for that detail.
Robert Leboyer: Great. Thank you for that detail.
Speaker #3: Thank you. Our next question is a follow-up from David Larson with BTIG. Please go ahead.
David Brown: Thank you. Our next question is a follow-up from David Larson with BTIG. Please go ahead.
Speaker #7: Can you talk a little bit more about your, you used the phrase 'fully delegated risk arrangements.' Like, what does that mean? Are you taking full risk for all services being provided to those members, including non-oncology care?
David Larson: Can you talk a little bit more about your, you used the phrase fully delegated risk arrangements. Like what does that mean? Are you taking full risk for all services being provided to those members, including non-oncology care?
Speaker #5: No, great, great question, David. Thanks for bringing it up. No, when we say fully delegated, what we are saying specifically is we are taking risk for Part B for oncology medical and radiation oncology spend, but the delegation part of that refers to TOI being given authority by our payer partner for three services.
Dan Virnich: No. Great question, David. Thanks for bringing it up. No, when we say fully delegated, what we are saying specifically is we are taking risk for Part B for oncology, medical and radiation oncology spend, but the delegation part of that refers to TOI is now given authority by our payer partner for three services: utilization management, not just for TOI employed physicians, but on behalf of the physicians in our network outside of our employed four walls, so the independent oncologists who are providing care for those patients. Two is network design, meaning we work closely with our payer partners to get high-cost centers out of the network that show poor clinical care, poor utilization, and align more closely with providers that have a value-based orientation. But ultimately, that contract exists between TOI and the independent provider, not the payer and the provider. And then three, claims adjudication.
Speaker #5: Utilization management is not just for TOI employed physicians, but on behalf of the physicians in our network outside of our employed four walls. This includes independent oncologists who are providing care for those patients.
Speaker #5: Two is network design, meaning we work closely with our payer partners to get high-cost centers out of the network that show poor clinical care, poor utilization, and align more closely with providers that have a value-based orientation. But ultimately, that contract exists between TOI and the independent provider.
Speaker #5: Not the payer and the provider. And then three, claims adjudication. So TOI is getting prepaid capitation for the risk that we're taking, and we are paying the claims for those non-TOI employed providers in the network.
Dan Virnich: So TOI is getting prepaid capitation for the risk that we're taking, and then we are paying the claims for those non-TOI employed providers in the network. So because it's a great degree of control over oncology spend across broader populations, it allows the faster, more cash-efficient scalability of our MSO model. And as we develop that MSO, it allows us to provide value to those independent practices and TOI by engaging with them not just on value-based care, but also engagement with our pharmacy services and clinical trials support. So it's a much more robust model in terms of being able to provide scaled value-based care than the legacy model in California, where we simply have a narrow network, TOI is the only oncology provider in the network, and we're not delegated. We're just given risk and managing our four walls.
Speaker #5: So, because it's a great degree of control over oncology spend across broader populations, it allows for faster, more cash-efficient scalability for our MSO model.
Speaker #5: And as we develop that MSO, it allows us to provide value to those independent practices and TOI by engaging with them not just on value-based care, but also on engagement with our pharmacy services and clinical trials support.
Speaker #5: So, it's a much more robust model in terms of being able to provide scaled value-based care than the legacy model in California, where we simply have a narrow network. TOI is the only oncology provider in the network, and we're not delegated; we're just given risk and managing our four walls.
Speaker #5: And frankly, better for patients and our payer partners.
Dan Virnich: And frankly, better for patients and our payer partners.
Speaker #9: So, so what I'm hearing is you've been doing a really good job for the plans. So they're giving you more lives and more responsibility to continue to manage the care for those lives.
David Larson: So what I'm hearing is you've been doing a really good job for the plans. So they're giving you more lives and more responsibility to continue to manage the care for those lives. And you also have the power of prior auth, I'm assuming, and the ability to narrow the network and influence formulary. So you have a high level of control, more control over the care that will be delivered over this expanded base, right?
Speaker #9: And you also have the power of prior authorization, I'm assuming, and the ability to narrow the network and influence the formulary. So you have a high level of control—more control over the care that will be delivered over this expanded base, right?
Speaker #5: That's, that's absolutely right.
Dan Virnich: That's absolutely right.
Speaker #7: Okay, so it's not like Agile, for example, where that stock has been under enormous pressure because they're bearing risk for everything in the world.
David Larson: Okay. So it's not like an Agilon, for example, where that stock has been under enormous pressure because they're bearing risk for everything in the world. You're focused in on oncology where you know how to basically drive margin and improve clinical care. Okay. Thanks very much.
Speaker #7: You're focused in on oncology, where you know how to basically drive margin and improve clinical care. Okay, thanks very much.
Speaker #5: Yeah, just a, sorry, just one last comment on that. Yeah, we're taking the exact same risk. We're just given additional tools to help manage that risk and drive performance.
Dan Virnich: Yeah, just to, sorry, just one last comment on that. Yeah, we're taking the exact same risk. We're just given additional tools to help manage that risk and drive performance.
Speaker #7: Okay. Thanks,
Speaker #5: Thank you.
David Larson: Okay. Thanks very much. I'll hop back in the queue.
Speaker #7: Thanks very much. I'll hop back in the queue.
Speaker #3: Thank you. At this time, there are no further questions. The conference of the Oncology Institute has now concluded. Thank you for your participation. You may now disconnect your lines.
David Brown: Thank you. At this time, there are no further questions. The conference of the Oncology Institute has now concluded. Thank you for your participation. You may now disconnect your lines. Thank you.