The Oncology Institute, Inc. (TOI) 12 Nov 222022 Q3 Earnings call transcript

Good afternoon, and welcome to The Oncology Institute's Third Quarter 2022 Earnings Conference Call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Mark Hueppelsheuser, General Counsel at TOI. Thank you.

You may begin.

I harbor to language. started, the you get safe company's we would remind like of Before Management and underlying make assumptions. may forward-looking statements, including guidance

uncertainties based involve results Forward-looking expectations differ that and to are actual could statements materially. cause on risks that

included measures to GAAP adjusted discussion with the our SEC of EBITDA. in This will A related SEC. measures financial non-GAAP non-GAAP business, also see reconciliation For a our discuss furnished risks to measures release our comparable to further available call of and are the website. filings most the such earnings these as the on

Joining Shah. me call our is Mihir Hively; CEO, Brad on the CFO, and our today

prepared that, our your we'll the for Brad. call questions. I'll Following With open call remarks, the turn over to

thank Parikh's the where We of Broward to new call in results. acquisition you physicians, Fort the the de This third quarter Lauderdale, QX the acquisition joining XXX execute quarter, and growth partners we'll network strategy. trained practice including two added to pleased continue our our and with overall today, We're everyone growth as clinics XX five over states. Thanks our results to in X of discuss of Mark, expands novo Texas. specialty clinics practice, Associates and TOI's Oncology clinics, advanced the Florida Las across Dr. in openings California Vegas we

an increased desire oncology for ours. model and care is markets, gaining need unique signaling our a Our solution in more traction for like cost-effective expansion

current in and volume Florida interest share in markets. experience to and partners from in a California from our expansion continue steady gain new referral We increase in and contracts payer

we opening and South acquisition Oncology with recently advanced of play of we mentioned, plan Florida counties Plantation a additional expansion strategy novo and in into Broward XXth Associates market of In to as with December. months, Dade These and all the practices expansion the critical expand a this with will role market. stages of in announcement de two the in opened planning. critical new Florida, growth our in coming in serve clinic Broward As in our four the our in cornerstone clinics,

development business market. in oncology I'll will South additional to oncology state-of-the-art growth services now clinics to patients. robust accelerate offer team our this progress pipeline quarter. Our has expand this access of The some comprehensive partners area Florida in care payer medical a provide highlights on designed past for to

trajectory. ability notes. investment in Deerfield First, enhances investment TOI X, our million strategic This August on received a to Management of form our from continue aggressive $XXX convertible XXXX, the growth

Second, TOI certification received very safety one our feel of creating the Agency a We're this as patient as an quality for continue input to provide elevate to Healthcare empowered certification safety, to key company care. proud patient tenets Research teammates is our and culture and of of organization. where Quality accredited

and leaders Third, And optimistic and we're Vice with role. play respectively. our compliance to several Both SOX newly of our opportunities Chief Information about as Reger, strategy Cristina welcomed we've as for created of Officer issues the business trials quarter new care. and we unique we our procedures. making Overall, will Cristina continue expansion lead our over we and they to fourth, Research; IT and critical model the made including strengthen roles in good progress we're Philip in working past President to Philip this clinical growth company related strategy, infrastructure pleased through public to as remediation Clinical Green continue TOI, of the progress be

in primarily acquisitions. While slower-than-expected closing related to we're strides continue making experienced as we important expand, we growth have delays to revenue

certain our close quarter early not to in the close. about being M&A are activity did we third projected disciplined deals and We had

will outline revenue detail. growth, a Mihir are we approach updating cost To remains result, with that our ensure As taking a in full multi-pronged are structure our guidance, more which we reduction our XXXX to aligned spend remain as invest difficult, will industry-leader of contract in we highly will controlling growth. competitive a costs, steps continue vendor TOI and workforce and including allow a to reduction. but These to necessary year

We become on for in and even innovate system. new overall our opportunities expect to to time patients stronger over the healthcare U.S. capitalize

Now, on I'll quarter additional Mihir turn detail to results. third the call provide over to our financial

statement. Thanks income Brad. with Starting

a in X.X% For third our $XX generated increase year-over-year revenue top XX.X% to of total XXXX. a QX the increase line, million we compared quarter, and

in As a our this revenue late made third and strategic impacted we have in large growth Absent been decision XX.X%. contract terminate this in year-end the our we our would call, discussed XXXX, quarter. payer growth conference to XXXX a termination,

a For gross XX.X% million, period. over profit increase our quarter, year prior the $XX was the third

gross Our On net XX%. a was the GAAP loss was our million for quarter. $X margin basis,

For the quarter, negative million. our $X.X adjusted EBITDA was

in as our costs Our can XX-Q. well define calculation on as adjusted we EBITDA costs. provider acquisition adjusted EBITDA includes start-up Further found how be details

and quarter-end, equivalent we in million, was cash to moving At million cash sheet. and balance $XX balance Now $XX investments. had our

for our this months. capital expect the and support to sufficient We to XX growth next operations be enhance

Now to guidance. turning

We are range acquisitions. to primarily closing to full million, in a due to our $XXX lowering million $XXX of guidance year of delay top line

Our growth guidance XX% XXXX represents to updated over XX% revenue.

our continued $XX near-term to negative EBITDA profit million. are business margin million Therefore, to lower a million guidance our throughout these supporting lag to $XX we guidance the gross our Despite of our invest $XX in of original seen lowering in have have growth we to $XX due coming profit gross the than gross we negative million our range long-term headwinds, improve is while guidance range revenue. in to to adjusted and Additionally, year, trajectory.

new reminder, XXXX, services. in regarding a January reimbursement policy Medi-Cal implemented of a As pharmacy

be chemotherapy reimbursed was part drugs intended Medi-Cal change to some Medi-Cal guidance benefit. policy though Medi-Cal the to prescription administered be benefits to California to outpatient transition Department administer early pharmacy billed necessary year nevertheless, all available in the of as issued drugs Although, Services through physician of way at claims not payable has our the of the these a Managed the The are Care benefit. under offices began continue Healthcare Medi-Cal clarifying in

in minimal IV dispensed reimbursement. dispensary, insurance, of oncolytics and XXXX otherwise of we impact patients first a some being Medi-Cal currently to this $X respect we the are the covered oral not what million historically drug into XXXX, Medi-Cal our to under fill. our During generated. have of are scripts to which Rx translate to we in certain reduction able three saw chemotherapy quarters now would We we in estimate revenue to have With compared

going actively pharmacy. a or launching opportunities to to the forward, assess continue impact including our acquiring business on We mitigate

available. we in SG&A, our with update spend on are We to will far With information so you once track is XXXX. respect more

We costs We new particular to in to Brad to supporting sites over to turn public adjusted we those now make costs company will are back corporate P&L some EBITDA, investments nor for continue to to targeted new related we and adding growth providers. it infrastructure I summary trajectory. cost are our reemphasize that want back not any or adding start-up in back related remarks.

good several quarter, and summary, of unique Mihir. model into group. we continues our Thanks By are communities. to make patients nation's make in efforts the value-based to our care and TOI markets the In to expanding progress more to completing acquisitions leading more important new in be continuing oncology bringing in strides

Deerfield, the over look QX turn to forward with the there And in demand making agreements Our execute have it it growth our for next recent I'll back is and to amongst continued on investment with We from more million expanded progress our an partners. update strategy. additional tools that And on up questions. gain open $XXX we operator share and our value-based show Session that, providing to and call. Question-and-Answer earnings resources to

Instructions] question Jefferies. session. have Brian we Ladies Thank a gentlemen, first Tanquilut sir. be and conducting The will you, now from we from question-and-answer [Operator

guess, good there that Hey, good Brad, or your year-over-year. that as for as guy, that's by prepared shared Thanks to why number capitated is? the Is first, you the asking, anything remarks. afternoon I guys. to call revenue I'll look for down the start you in quarter, reported morning at all that out color I

Yeah.

any lost haven't We contracts.

lost have haven't but membership, any contracts. some we our of lost Some partners

it. putting to is pushing just I And in about and the delayed year you way, think cited think the Got out it? way to Okay. basically myth acquisition right, that is about then, that earnings next as power potential a closing, think moving for view, I and modeling as in where parts? XXXX QX versus the if pre about cuts cost place, about you're your some obviously, So, is you thinking are are those how

question, That's Brian. Yeah. a good

we I catch to wanted to of the up of the where be by the will year. end think we most way

more strategy. the way trajectory and we're our expectations. trying way acquired And our be could disciplined I as So, with most more up, and below paid practices, up. of result fallen acquired our revenue but be very that to not caught been amount will have of M&A a mentioned, Like the we've exit the caught we disciplined all but has

So we'll exit mostly think I on trajectory but not up, completely. catch an

Got coming earnings? should EBITDA your outlook cut be I well is right, like I down, it. generation I about guidance the your And cut mean, or -- burn, cash free flow that worsening about we cash I EBITDA guess, here, think and as obviously the then, and with free guidance here, cuts mean, as thinking with cash

Yeah.

a on equivalents versus really relatively versus a a small cash change and certainly in focus additional something that of good we have it's little guidance, targets, our to it's cash here. to our the When We're EBITDA burning does $X laser the you cash we mean we are a pretty runway adjusted change runway. and balance feeling to adjusted estimates. sheet. the of So, have and cash on EBITDA small impact free It's flow. the look When previous equivalents amount balance of Yes. million sheet amount million like cash at a lowered cash we $X on we about cash bit

and So, we we everything cash with right do we want the on feel execute need have today. to we like that now can

Mihir. question last then And it. for Got

guidance any place? As put that? forward, comment on can help you I you about us modeling expense you've into just hedging interest also, us going give any just strategies or give any And can maybe think in that

first so So, interest. going I'm last a to it just let me part, on in the question I the second. come missed to answer back the

Deerfield our in August For $XXX interest, million. it's that mostly we related to financing from completed

itself. accounting component on based has upon the to is There how So to document it. that nuance a the it interest we do around it

the So, offline, overall, should up I but model $XXX how is follow at with million for the X% can you overall. interest you

you've rate hedges And interest it. Got put any to help you just in that with risk forward? going place then,

Exactly.

-- So, as have investing have we of the started money. we QX,

balance our So, cash at will see and the you places. look different equivalent in cash our sheet, if three money you --

you interest at a in are rate, are we recently good invested So, the funds really current know, is, which as market.

So, we funds slightly above our earning are our interest -- rates where are are.

Awesome. Thank you.

Brain. you, Thank

we Guggenheim. have question next is from The from [Operator Sandy Instructions] Draper

Thanks very that unclosed assumed question much. Mihir, in correctly, it I no the guidance. revenue the Is there guess, I reading a clarification just Brad is from a am first prior. more or the so statement? fair is acquisition

The be high whether close some would our or and not. the difference acquisitions low planned between estimates of

it's we to we time and about totally just basically do make or do ourselves you're Or would are Okay. cushion maybe give then That's about I really Or do When when as more? of to forward, of differently? is is control, going get cushion? look think as try lots our prudence. Are ability And there I just things appreciate want have closing Got that give to just control you it faster? I there so it. to things we -- ourselves the to helpful. sure out think can and delays, need just just this to could like, totally you we your the extra you really learn

good a and talked Two It's things. that question Yeah. one about. we've

in That's estimates closing. do call of to the think Obviously, So, I bit a We first conservative long more are other our it move half that acquisition being out potential little of that the half. how our of control. from we takes process. timeline control only controls to seller

long become started just to how on with we've conservative it M&A us through average pipeline. something the to so, move takes more And

our said, is about that into put top we to the lot we're the more the a very that trying fit more more top opportunities Because have. talk into funnel, selection we only because we really be practices acquire the funnel, putting disciplined thing other we The of as and model. the of the

obviously, we funnel, more through greater top gives can the So, a selection. the us get of the

effort outreach so smarter doing adding fit think pretty our M&A and And rigorous opportunities staff of data well. team, and practices more that's identifying physician to that with being also we our a the model would

on the the treatment. or couple think Unfortunately, get there will to cancer along is having any more over you And oncology be practices or that you insulated? then, Do One next need years, and M&A to get term slowdown? side. sell Great. groups the doctor pretty macro because if Okay. the impact more willing cancer, environment reason think is of any people you longer

don't they're know doing really anything. to be I'm that But it the some But people stuff. I on, So then maybe other term, any or of sort it to slower People longer something not like, of to seeing because get or thoughts short-term. on spending not to going what's be causes has just going practices? just want things stay accelerate vastitudes sell their consumer had could are trying impact

practices or trends given my great a on relatively Yeah. right? small our given pipeline do to at any XX comment XX we're It's I question, macro end, time. So, at Sandy. in looking hesitate

practices prices XX to staff great up, are for careful of it's you. small overall The amidst labor couple small that the the ability of But the a the weather practices those have that with the market. -- what hard I'm physician really cost in don't -- One, costs time retaining increases. hits seeing labor and And to market, labor to lot it's have practices. So, recession. with going that thoughts those attracting -- times, a we're a particularly extrapolate small

of So, caused about I economic I pieces some more to to selling our of practices think be two think, those have us. excited the situation,

about to us. selling Some be of our excited targets more to

in if insurance. can general, is with rotation It commercial insurance way, go a we're that sort other just The recession, other comes rotation. it government-sponsored to a employment or numbers starting now a the see the thing of and of into be

that seeing mix on depending our declines. that little to on those of be government-sponsored on with growth tend may rotation. actually populations commercial more practice may patient the more some And be focus practices Those focus so, targets, the some populations, that seeing a

target. practice that at, one your on let the I piece and negative And the recession positive depending but of feel there a rising like there. I the or actually didn't me more maybe so, that unemployment get can question to, type we're was stop on looking of have impact

helpful. No. no, No, was great. that really That was

Okay.

and that the the potentially decremental. it's the you suggest like covered you that it taking just at is one higher in question corporate I buying incremental not the not all. trying costs in margin, revenue are do EBITDA reduction revenue, No, just just Maybe last came I'm maybe revenue acquisitions math out? over slightly you're over. does that turn it there, I'll versus If a and costs it simple reduction think, fixed on that or more And looks it some to was now Thanks. fixed there's slightly

Yeah.

Mihir, I off on don't you I can it's any bit little don't that. of That's tongue, an offer that. my So, to actually it's of I on insight interesting if than -- finer so the a have numbers both. question. point any additional it would tip the put hesitate know

No.

summed of We It's the at details split I have combination both. right. think this those it point. between a to don't and you

Okay. Thanks.

further There be Q&A Thank to you. time. turn Brad sir. over Instructions] Please ahead, [Operator Hively like at questions for back seems I of closing End would to go comments. this to it no

with you excited Have We earnings we everybody you evening. ahead, for in updating up forward following our on a days We're to and Okay. Thank about you coming look thank good joining progress next today. path our very look you. on forward weeks. call And call. the to and the TOI's

us. Ladies concludes for you, conference. you sir. Thank then that today's and joining gentlemen, Thank

You now your lines. disconnect may