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Operator: Good afternoon and welcome to The Oncology Institute’s First Quarter 2025 Earnings Conference Call. Today’s call is being recorded and we have allocated 1 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.

Mark Hueppelsheuser: The press release announcing The Oncology Institute’s results for the first quarter of 2025 are available at the Investors 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 first quarter 2025. 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. 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. 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. 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. With that, I’ll turn the call over to Dan.

Daniel Virnich: Thank you, Mark. Good afternoon everyone and thank you for joining our first quarter ’25 earnings call. Today, we will discuss first quarter 2025 results with a focus on our strong start to the year and momentum on our path to profitability and positive cash flow by the end of 2025. I’d like to start with some key updates on Q1 performance. I’m happy to report that revenue for Q1 increased by 10% versus the prior year period. This was driven by a few important factors. Our retail Pharmacy and Dispensary business continues to grow rapidly and set fill records, contributing $49.3 million in revenue and over $9 million in gross profit in Q1 alone. This business segment grew over 20% in the first quarter of 2025 versus prior year.

As noted on our year-end call in March, we had a very strong start to the year with new capitated contract wins, adding over 80,000 lives in the first quarter on 4 agreements across the Florida, California and Nevada markets. Anticipated new capitation contracts in the first half of 2025 are projected to add approximately $50 million in new revenue on an annualized basis. We started our first fully delegated capitation agreement with a major health plan in Florida on March 1 where we are delegated for utilization management, claims and network. This is going to be our preferred model for health plan relationships going forward as it gives us differential ability to manage therapeutics with our MSO practice partners as well as engage with them on future high-value opportunities for TOI through our retail pharmacy and clinical trials program.

We also signed a new capitation contract in Nevada during the first quarter which adds over 80,000 Medicaid lives to Clark County with an effective date of July 1. Our fee-for-service business also returned to growth in the quarter, growing 9% quarter-over-quarter and 2% year-over-year, highlighting the impact of our investments in referral relationship management and call center expansion. Achieving profitability and our near-term path to positive free cash flow generation in Q4 remain the management team’s North Star. Some highlights from Q1 related to this effort include: adjusted EBITDA loss of $5.1 million which is on the upper end of our guidance for the quarter; gross profit of $17.2 million which represents growth of 44.1% year-over-year; continued acceleration of near-term capitation opportunities in the pipeline, with line of sight to an additional 100,000 lives with anticipated effective dates in Q2 and Q3; focus on growing our radiation oncology and radiopharmaceutical segments which will be accretive to fee-for-service margins; successful outsourcing of our clinical trials program to Helios clinical trials.

Helios will operate as the site management organization and we believe their expertise will dramatically accelerate trials growth in existing and new markets in the second half of the year. However, the structure of the transaction will involve deconsolidating clinical research revenue from TOI’s income statement which will modestly impact our full year revenue which Rob will discuss in more detail shortly. As it stands today, we are not currently projecting a negative impact to drug costs in 2025 related to recently announced tariffs, although we are carefully assessing country of origin for all therapeutics in our portfolio, ensuring we have optionality for all disease classes to protect our margins. Finally, we successfully executed a partial paydown of our convertible preferred debt of $20 million in Q1, with permanent elimination of our minimum cash covenant, followed by a capital raise that added $16 million back to our balance sheet.

Combined, these transactions strengthen TOI’s financial position and provide us with greater flexibility to execute on our strategic priorities. Finally, this afternoon, we announced that Dr. Jeff Langsam is joining the TOI team as Chief Clinical Officer. Jeff joined us from Cigna, where he led national efforts in oncology and specialty pharmacy, lending to his role at TOI, where he will lead our efforts around therapeutics, utilization management and MSO practice engagement. The Chief Clinical Officer role was conceived as part of TOI’s evolution in light of the increasingly complex drug and delegation landscape in which TOI operates, allowing us to further distance our capabilities and delivered value. To this end, Dr. Langsam’s role is designed as a net addition to TOI’s central clinical infrastructure and is expected to remain collaborative but ultimately, distinct from that of TOI’s Chief Medical Officer, Dr. Yale Podnos, who will continue to serve as the chief clinician overseeing our provider staff.

Last week, we also announced that TOI will be presenting clinical trial data at the American Society of Clinical Oncology, ASCO Annual Meeting later this month which demonstrates the value and effectiveness of TOI’s clinical model at reducing cost of care while driving improvements in Part A utilization for the patients that we serve. With that, I will turn the call over to Rob to provide additional details on our Q1 performance and 2025 outlook.

Rob Carter: Thanks, Dan and good afternoon everyone. Let’s begin by reviewing our financial performance for the quarter. Consolidated revenue for Q1 2025 was $104.4 million, an increase of 10.3% compared to Q1 2024. The increase in revenue was driven primarily by a 24.2% growth in TOI’s Dispensary segment due to continued growth in the attachment of prescriptions to our patient visits. Notably, we saw our fee-for-service business return to growth during the first quarter, increasing 2.3% to $35.6 million in 2025 versus the prior year period. We are encouraged by the positive patient and referral feedback on TOI services. And our strong track record for high-quality care, combined with our value-oriented model, gives us confidence in our continued fee-for-service growth driven by patient choice and health system and community providers’ patient referrals.

Gross profit in Q1 of 2025 was $17.2 million, an increase of 44.1% compared to Q1 of 2024. This increase is attributed to improvement in revenue and margin in both capitation and fee-for-service with inpatient services as well as improvement in both revenue and margin in TOI’s Dispensary segment. Margin improvement in the first quarter for both patient services and Dispensary businesses is attributable to the recognition of a onetime rebate recognized over the fourth quarter of 2024 and first quarter of 2025 related to the renewal of a 3-year contract with TOI’s primary drug supplier. This is not expected to recur in future quarters, although we do expect the benefit of drug price increases to improve over the course of 2025. SG&A, including depreciation and amortization was $27.2 million in Q1 of 2025, a 9% decline compared to Q1 of 2024.

As a percentage of revenue, SG&A, including depreciation and amortization, was 26% in the quarter, decreasing 560 basis points from Q1 of 2024. Loss from operations was $9.9 million, an improvement from an $18 million loss in Q1 of 2024. Net loss was $19.6 million in the quarter, an improvement of $303,000 compared to Q1 of 2024. Adjusted EBITDA was negative $5.1 million compared to negative $10.9 million in Q1 of 2024. Free cash flow was negative $3.9 million compared to negative $15.4 million in Q1 of 2024. Moving to the balance sheet. As of the end of Q1 2025, our cash and cash equivalents balance was $39.8 million. This represents an increase of $3.7 million of cash and cash equivalents compared to Q1 of 2024. This is attributable to our capital raise completed in the first quarter as well as efforts to maximize efficiencies in working capital, particularly in accounts receivable and inventory management.

Also, we were able to reduce our principal balance on our senior secured convertible note through our debt pay-down and debt-to-equity exchange agreement, reducing our quarterly cash interest payments by approximately $1 million annually. As Dan mentioned, in the first quarter, we successfully closed a private placement that resulted in gross proceeds of approximately $16.5 million and further contributes to our prioritization of organic growth and building working capital and liquidity to fund TOI’s ongoing growth. In conjunction with this transaction, a major shareholder entered into an exchange agreement, whereby approximately $4.1 million of aggregate principal amount of senior secured convertible notes were exchanged for common equivalent preferred stock and warrants for common stock.

Turning to guidance. Following our strong first quarter results, we remain confident in our trajectory for the remainder of the year and are reaffirming our fiscal year 2025 guidance. As Dan mentioned earlier, we are outsourcing our clinical trials business to Helios clinical trials. Under the terms of the new arrangement, TOI will recognize revenue solely for our share of the profit which will reduce our expected revenue for the year by $5 million. However, we are not revising our full year guidance as we anticipate the increased revenue from the Dispensary segment will offset this impact. Therefore, we continue to expect revenue in the range of $460 million to $480 million; adjusted EBITDA in the range of negative $8 million to negative $17 million; and free cash flow of negative $12 million to negative $21 million for the year.

Additionally, we remain on track to deliver positive adjusted EBITDA in the fourth quarter. We will also be providing select guidance for the second quarter of 2025. In Q2, we expect adjusted EBITDA loss will be in the range of negative $4 million to negative $5 million. We expect the positive margin contribution of our fully delegated Florida contract combined with increased encounter volume in radiation oncology and continued growth in our Dispensary segment will support the quarter-to-quarter improvements in adjusted EBITDA. All in all, we believe our execution to date with accelerating growth and improving profitability sets us up well to achieve our full year targets. Before I wrap up, I’d like to briefly address 2 political headlines that have been topical recently.

On the topic of tariffs and any possible impact on TOI, as it currently stands, we have not observed any impact related to tariffs or drug price inflation and our pricing catalogs are fixed through the second quarter with our suppliers. We do not currently anticipate any trends in drug prices that will create risk trends or business performance but we are continuing to closely monitor the situation and we are actively evaluating country of origin for TOI’s supply chain. Importantly, due to TOI’s significant experience actively managing drug formulary as a core capability of our value-based care model, we do believe our clinical team has the ability to mitigate any potential impact from tariffs on individual drugs or manufacturers were it to materialize.

On the topic of executive orders related to pharmaceutical pricing practices, while it’s too early to draw any concrete conclusions on the altered outcome of drug regulation, I believe there are several factors that make TOI less susceptible to drug pricing impact: the size and scale of our capitated business, where drug costs are inversely correlated with profits; the ability of TOI to control formulary in our clinics and influence formulary in our delegated network to manage drug pricing risk within clinical guidelines; and the multiple variables that contribute to fee-for-service and pharmacy drug margins which constitute the spread between costs and reimbursement rather than the absolute cost of the drugs themselves. This spread relationship may or may not be impacted by any drug pricing reform.

With that, I’ll turn it back to Dan for closing comments.

Daniel Virnich: Thanks, Rob. Looking to the remainder of the year, we will continue to build on our momentum through strong operational management, increased efficiencies and strategic market expansion. As we discussed today, we are executing against a near-term path to sustained cash flow positivity and profitability in the second half of 2025, setting up well to deliver profitable growth in 2026. Our organic fee-for-service growth, pharmacy attachment and existing value-based contract pipeline give me confidence in our strong trajectory, supporting our progress against our strategic priorities. We appreciate the continued support of our shareholders and the great work from our team as we execute against our plans to drive long-term shareholder value. With that, we’re now ready to take your questions. Operator?

Operator: [Operator Instructions] And our first question comes from David Larsen with BTIG.

David Larsen: Congratulations on a good start to the year. Can you talk a little bit about the gross profit growth of 44% year-over-year? What was the main driver of that? In my mind, that’s obviously a very important metric, considering like, I think for 2024, gross profit actually maybe declined by 9% year-over-year. So thanks very much, driver of gross profit would be great.

Rob Carter: Yes, David, this is Rob. Thanks for the question. So a couple of things contributing to this. First off the bat is the onetime rebate that we mentioned that was attributable to a new contract signed with our primary distributor. The second piece is that, as you know, drug pricing changes quarterly. January is a big quarter for drug price changes. It was relatively favorable from what we’ve seen in previous years. So that, combined with some nice volume increases, particularly on the dispensary side, contributed to the pickup in overall margin.

David Larsen: How much was the rebate for, please?

Rob Carter: About $1.5 million.

David Larsen: $1.5 million, okay. It looks like your gross profit on a year-over-year basis was up more than $5 million, so there was still very good growth beyond that. Okay. And then can you talk a little bit about your fee-for-service revenue, please, your patient service revenue? Like the cap revenue, was that down 1% year-over-year and fee-for-service was up 2% year-over-year? I guess I would have thought there would have been more growth than that. And do I see 81 clinics compared to 87 clinics in the year ago period? Was there a change there? Just any thoughts around the patient service revenue, as it looked a little bit light to me on a year-over-year basis?

Rob Carter: Yes, I’ll start on the cap side. So as we’ve called out, the pipeline is robust, numerous launches. The most meaningful and impactful launched in March. That’s the fully delegated contract in Florida. The impact of that will be seen to a much greater degree later in the year. Also a couple of other launches here in the next upcoming months that will also contribute significantly.

Daniel Virnich: David, it’s Dan Virnich. I can comment on the sites going from 87 to 81. Compared to this quarter a year ago, we closed a couple volume locations that were unprofitable for TOI and you’re seeing that reflected in the change from 87 to 81. However, I will call out that we’ve added over 30 additional MSO sites of care in the Florida market. So as you move to this hybrid, employed and MSO model in our delegated contracts, our total available sites of care actually went up.

David Larsen: Right. I’ll take earnings growth over revenue growth all day long, so okay, great. And then can you talk a little bit about your SG&A management? It looks like SG&A costs declined 11% year-over-year and by like around 600 basis points of revenue which is obviously great. Just what are your thoughts in terms of total SG&A savings expectations for 2025?

Daniel Virnich: Yes. We remain committed to keeping SG&A roughly flat for 2025 which I think is important to note, given our overall projections on growth for the organization. We’ve been very disciplined in our approach related to vendor and labor management and continue to seek ways to operate our business more efficiently. We have a number of initiatives going on in the technologies as well, where we are going to — looking to engage agentic AI and some key workflow processes over the next 12 to 18 months which we believe will drive even greater efficiencies and manage down our SG&A as a percent of revenue.

David Larsen: Okay. And then in 2024, there was a pretty significant impact from DIR fees. I did not hear you mention those on this call. Are we now past DIR fees or is that still a potential headwind this year?

Rob Carter: No. We are past DIR fees. DIR fees, as they used to exist, no longer do. It’s all priced as a point of sale. The impact that we saw last year was overall reimbursement pressure as that change went into effect. And so that’s behind us and things are looking significantly better relative to last year.

David Larsen: So that was a $15 million drag on revenue and EBITDA last year and you have completely sort of lapped that. Is that correct?

Rob Carter: That’s right. That’s right. What we consider as dispensary margins going forward are steady state.

David Larsen: Okay, good. And then there was 1 large payer contract that I think was maybe 11% of revenue. That kind of disappeared in 2024. I think you’ve kind of fully lapped that. And what I’m also hearing from you is you’re actually entering into, I think you highlighted, 4 new arrangements this quarter and we should see patient service revenue ramp as we progress through the year because of these new contracts. Is that correct?

Daniel Virnich: That’s correct, yes. That was in reference to the new capitated contracts signed as part of our value-based arrangements. But all of those are tied to fee-for-service revenue that flows through our dispensary. And then we are seeing additional growth in just fee-for-service patient services revenue.

David Larsen: Can you provide a little color around why that contract ended? And just like the purpose of that question, as you know, is are there any other contracts in ’25 that might be at risk? How is your relationship with some of the largest plans that you’re working with?

Daniel Virnich: Yes. Yes, that was a contract that — was an old contract where we had kind of a mutually agreeable termination related to a number of disputes. So we, overall, have a very stable contract portfolio. We’ve got an incredibly low historical contract turn rate and do a lot to manage our client relationships and show the value that we provide. So I don’t anticipate any likely terminations as we progress through 2025.

David Larsen: Okay. And then do you have any thoughts on IV margins? I think that was a little bit of a headwind early last year. Just any thoughts there?

Rob Carter: Yes. Similar to dispensary, what we’ve seen so far based on the year pricing is favorable to what we were expecting, certainly favorable to 2024. The general progression that we see throughout the year is improvement in overall margins and so things are going slightly better than planned there.

David Larsen: Okay, that’s great. And then you mentioned tariffs and this executive order and then there’s also the most favored nation clause or executive order that may or may not get through. So if drug prices, let’s say, go up by 25% across the board, is that good or is that bad for The Oncology Institute? Because higher drug prices would eventually result in more revenue and probably more margin for you in your fee-for-service book. Is that correct?

Rob Carter: Yes. Yes, that’s exactly right.

David Larsen: And in dispensary. And it’s mainly Medicare Part B as in boy, not Medicare Part D, is that correct?

Rob Carter: Sorry, mainly in terms of what?

David Larsen: In terms of reimbursement for fee-for-service revenue and also…

Rob Carter: Yes, that’s correct. I mean, hypothetically, it would impact B and D.

David Larsen: Okay, okay. It looks like a pretty good quarter. Congrats on a good start to the year.

Operator: And our next question comes from Yuan Zhi with B. Riley Securities.

Yuan Zhi: Dan, maybe we can start with the recent report by UnitedHealth. It was reported that the seniors within their Medicare Advantage plan used health care services twice as much as last year. I want to check if you noticed just similar trends within oncology practice or is it related to some other diseases or surgery practice?

Daniel Virnich: Yes, I can’t speak to what other drivers might be associated with that. What I can say is that we track that on a very close basis for the oncology care needs of the populations we serve and we haven’t seen a jump to the amount that United mentioned. I don’t know if that’s driven by other drugs outside of oncology or other utilization trends which have been more unfavorable than expected.

Yuan Zhi: Yes, maybe a follow-up question here. So they also reported that the enrolled patients are sicker. I guess my question is 2-part. First, did you notice similar trends there? And two, when you negotiate a value-based contract with there, is it based on historical data from insurance companies? Or is it based on your own database and external service to reflect the latest patient profile?

Daniel Virnich: Yes. So for the first part of the question, we haven’t noticed the change in prevalence or average stage of cancer patients we’re treating. So that would correlate to a care population that hasn’t pivoted that we’ve noticed. In terms of pricing, we do that based off of historical utilization up through the most recent period before we make a contract effective. So we have a pretty recent trend on utilization. And then we factor in a cost trend related to historical drug price changes as well in our forward-looking utilization. So that’s pretty real-time as far as how it’s contributing to the pricing of our contracts.

Yuan Zhi: Yes, got it. So on your new territory part, is there any metrics you can share on the progress to fill up the capacities in your Florida clinics, whether it is the lives under management in terms of overall capacity or patients encountered?

Daniel Virnich: I’m so sorry, Yuan, could you please repeat the first part of the question?

Yuan Zhi: Yes. Is there any metrics you can share on the progress to fill up capacities in your Florida clinics?

Daniel Virnich: Yes, absolutely. So we track — we project encounters by market and by down to the detail by clinic across our portfolio as we forecast each year. And we are tracking right to plan in terms of capacity fill in both our legacy markets and then the newer markets like Florida. There is some additional upside, we believe, in the back half of this year related to some contract wins which are in the pipeline but not in the forecast. So all is going to plan as far as filling capacity.

Yuan Zhi: Yes, got it. And maybe one last question from me. Just to clarify, do you aim to have cash flow positivity and profitability in the second half of 2025 versus 4Q 2025 from your last earnings call? Was there any change there?

Rob Carter: No change to guide. We expect full cash flow and adjusted EBITDA positivity in Q4 of 2025.

Operator: [Operator Instructions] Our next question comes from the line of Bill Sutherland with The Benchmark Company.

Bill Sutherland: Most of mine have been asked. But going back to a couple of the key business metrics. The slight decline in the lives under value-based contracts, is that related to that contract you were talking about that went away last year?

Daniel Virnich: Yes, exactly. As measured by lives, that is a decrease. But I would just keep in mind that there is a product mix in every contract and that specific contract had a heavy predominance of Medi-Cal and commercial lives which are high numbers but low PMPM reimbursement typically versus our newer markets where we’re signing MA-only contracts which are lower lives but higher reimbursement.

Bill Sutherland: Got it. Any important renewals coming up as far as contracts?

Daniel Virnich: Nothing significant to mention, no. Most of our relationships are multiyear. Many of them date back over 10 years. They typically auto renew. And then yes, there’s no significant renewals in the near future on the top.

Bill Sutherland: And then the guidance for the year, is there any pipeline conversion that you need to execute to do the numbers? Or is it basically all set up at this point?

Rob Carter: Yes, we don’t need any additional value-based contracts that are in the pipeline to achieve guidance. So any additional wins that are in the pipeline would be upside to what we’ve guided to.

Bill Sutherland: Okay. And finally, just an interesting trend and I’m not sure if — it’s not really part of your model. But I keep hearing from health systems about trying to do more of the cancer cases in the home with everything else. How does that trend kind of segue with your business, if at all?

Daniel Virnich: Yes. I mean, I think it would be a very positive trend for TOI if more cancer care was delivered in the home. We work pretty closely with our payer partners and trying to find innovative ways to deliver therapeutics in the home. I’d say it’s much easier than the oral specialty medication side than it is with infusables. But that being said, there’s no reason why we can’t achieve that as a future state. So again, that gets back to our mission to deliver higher level of care in the community and something we would definitely want to be a part of.

Bill Sutherland: Got it, okay. Nice quarter.

Operator: And our next question comes from Robert LeBoyer with NOBLE Capital Markets.

Robert LeBoyer: Congratulations on a nice quarter. My question has to do with the number of lives under contract and covered by the managed care policies. The previous number was 1.9 million. It looks like you’re adding 100,000 in the first and second quarter and then another 80,000 in Nevada after July 1. So is that just simply additive to the 1.9 million? Or is there some more nuanced way to project the number of lives that are covered?

Rob Carter: No, it’s additive. That’s the right way of thinking about it. The nuance in terms of modeling the financial impact would be where those lives are located. And so as we’ve talked about before in some of our material [ph], there’s a higher PMPM for contracts in Nevada and Florida than there is in California due to the overall cost of care. So that would be the 1 nuance to consider.

Robert LeBoyer: Okay, great. And in terms of seasonality or any kind of other trends that you see throughout the year, have you noticed anything in the first quarter versus other quarters throughout the year at this point?

Rob Carter: Yes. So our first quarter is always seasonally the lowest in terms of encounter volume. And so that’s just part of the whole picture. When you’re looking at the full year guide, we knew that it would be the lowest quarter in terms of revenue, the worst quarter in terms of adjusted EBITDA loss. And so we expect to see progressive improvement quarter-over-quarter both due to seasonality as well as the addition of new contracts and lives and encounter growth.

Robert LeBoyer: Okay, good. And just one last question. In terms of the top 3 plans and clients that you have, what would be the percentage of each of the top 3 in terms of revenues?

Rob Carter: As a percent of cap revenue, it’s probably about 20%, if you’re looking at the top 3 contracts.

Robert LeBoyer: Okay, great. All right. Thank you very much.

Operator: [Operator Instructions] Okay, there are no further questions at this time. And with that, this does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.