The Oncology Institute, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Revenue growth: Revenue increased 21% over 2023. Value-based patient services had strong growth with new contracts, and pharmacy and dispensaries grew rapidly with 73% annualized growth.
• Profitability efforts: Saw sequential improvement in adjusted EBITDA in the second half of 2024. Entered into a new multiyear agreement with primary drug distributor in Q4, driving margin improvement and better payment terms. Reduced SG&A by 12% in Q4 2024 through operational streamlining.
• Cash flow and balance sheet: Sequential quarterly reduction in cash burn in the second half of 2024, with $4 million cash generated in Q4. Successfully amended and restructured facility agreement in February 2025, with $20 million principal paydown and elimination of minimum cash covenant. Entered into $16.5 million private placement of common equity and Deerfield converted $4.1 million debt to common equity, reducing debt principal from $110 million to $86 million.

Segment Performance

• Value-based patient services: Historically highest growth business. Finished 2024 on stronger footing with six new contracts in Q3 - Q4 totaling over 270,000 lives. Signed two new contracts in Florida in Q4 2024 totaling over 200,000 lives and 80,000 additional lives signed in Q1 2025 through four agreements.
• Pharmacy and medically integrated dispensaries: Grew rapidly in 2024 with $48 million in Q4 and $180 million for the full year, representing annualized growth of 73%.
• Financial results for Q4 2024: Consolidated revenue was $100.3 million, an increase of 17% compared to Q4 2023. Gross profit was $14.6 million, an increase of 2% compared to Q4 2023. SG&A decreased by 12% compared to Q4 2023. Loss from operations was $11.9 million, improvement of $3.4 million compared to Q4 2023. Net loss was $13 million, improvement of $5.6 million compared to Q4 2023. Adjusted EBITDA was negative $7.8 million compared to negative $6.3 million in Q4 2023.
• Financial results for full year 2024: Consolidated revenue was $393 million, an increase of 21.3% compared to 2023. Gross profit was $54 million, a decrease of 9.4% compared to 2023. SG&A, including depreciation and amortization, was $114 million in 2024, a decrease of $5.6 million compared to 2023. Loss from operations was $60 million, an improvement of $16.9 million compared to 2023. Net loss was $64.6 million, a decrease of $18.4 million compared to 2023. Adjusted EBITDA was negative $35.7 million.

Guidance

• Revenue: Expect revenue of $460 million to $480 million for full year 2025, representing 17% to 22% growth over 2024.
• Gross profit: Expect gross profit in the range of $73 million to $82 million, an increase from 2024.
• Adjusted EBITDA: Expect adjusted EBITDA in the range of negative $8 million to negative $17 million, with $5 million to $6 million of loss expected in Q1 2025 and progression to profitability in the second half.
• Cash flow: Guide to free cash flow in the range of negative $12 million to negative $21 million for full year 2025, and anticipate cash flow breakeven in Q4 2025.

Risks

• Business growth reliant on new contract signings; if new contracts are not signed as expected, revenue and profit may be affected.
• Uncertainty in operational cost control; if cost optimization does not meet expectations, profit margin may be impacted.
• Changes in medical industry policies, such as healthcare reimbursement policy changes, may affect revenue and gross profit.
• Intensified market competition may impact market share and revenue growth.

Question and Answer Q: 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?

A: Several things are contributing to the growth on 2025 guidance. Growth in capitation contracts is integral to hitting targets. Also have organic growth planned for both fee-for-service and dispensary. Need to hit on all of those to hit the target. The combination of capitation contracts, organic growth in fee-for-service and dispensary is how we are viewing growth in 2025.

Q: How do we think about the contribution from the patient service segment and oral dispensary? Will patient service be a meaningful growth driver there in 2025?

A: The capitation segment being a part of patient services will be the primary and most significant driver of our improvement of overall profitability. Expect organic growth in fee-for-service to continue at the sort of market rates and levels. But the main contribution from the patient services segment will be within the capitation.

Q: Can you provide more operating or operation metrics comparing the new territories such as Florida, versus established marketing California and what is the goal there in 2025?

A: California clinics are below ninety percent, about seventy-five percent. In Florida, currently operating at about forty percent across clinics in five counties in that market. Our goal is to grow as fast and efficiently as we can. 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.

Q: Any thoughts on the recent reimbursement landscape, anything you are watching for with this new administration, including new CMS administrators in the office now?

A: All of the general macro trends that we see in the oncology industry are favorable to The Oncology Institute, Inc. Changes related to IRA, any reduction in more expensive oncology drugs benefits us since we are capable of managing in a value-based construct. If anything happens with 340B pricing, which we do not benefit from, that would push volume from hospital-based infusion centers oncology practice out into the community again, which would ultimately benefit us in terms of growth and working with payers.

Q: I was looking at the revenue guidance. And wondering if you could give any of the individual line items, the patient services dispensary and clinical trial breakout as to what the revenue expectations and growth for each of those areas is.

A: At this point, we are not guiding to specific segments. The thought here, though, is as I mentioned before that in terms of overall contribution to profitability, capitation is going to be the greatest contributor followed by dispensary and then fee-for-service. We expect organic growth from both dispensary and fee-for-service with this robust pipeline that we have driving the capitation.