The Oncology Institute(TOI) - 2024 Q2 - Quarterly Results

The Oncology Institute Q2 2024 Earnings Release Financial & Operational Highlights TOI's Q2 2024 saw 22.9% revenue growth, driven by Dispensary, but gross profit declined and Adjusted EBITDA loss widened Second Quarter 2024 Financial Highlights | Metric | Q2 2024 ($ million) | Q2 2023 ($ million) | Change | | :--- | :--- | :--- | :--- | | Consolidated Revenue | $99 | $80 | +22.9% | | Gross Profit | $13 | $15.1 (approx) | -13.9% | | Gross Margin | 13.2% | 18.8% | -5.6 p.p. | | Net Loss | $(15.5) | $(16.9) | +8.3% (Improvement) | | Adjusted EBITDA | $(8.7) | $(6.9) | -26.1% (Worsened) | | Cash, cash equivalents, and marketable securities | $46.4 | N/A | N/A | - Key operational achievements in Q2 2024 include a 76% year-over-year increase in Dispensary segment revenue and the signing of 3 new capitation contracts, bringing the 2024 total to 10. The company has also initiated a process to explore strategic alternatives[2] Management Commentary & Outlook Management expects H2 2024 improvement in profitability, updating full-year guidance for lower gross profit and Adjusted EBITDA - CEO Daniel Virnich highlighted strong revenue growth and reduced SG&A, noting that the worst of recent performance pressure is likely over. He anticipates significant improvement in net loss and Adjusted EBITDA in H2 2024, driven by improving IV margins and new capitated contracts becoming effective[3] Updated Full-Year 2024 Guidance | Metric | 2024 Guidance - Updated ($ million) | 2024 Guidance - Previous ($ million) | | :--- | :--- | :--- | | Revenue | $400 to $415 | $400 to $415 | | Gross Profit | $62 to $69 | $68 to $79 | | Adjusted EBITDA | $(21) to $(28) | $(8) to $(18) | - The guidance was updated due to slower-than-expected margin growth, primarily related to prior year direct and indirect remuneration (DIR) fees run-out and the termination of a capitation contract[4] Financial Performance Analysis Strong revenue growth, especially in Dispensary, did not translate to improved profitability due to cost pressures and DIR fees Second Quarter 2024 Results Q2 2024 revenue grew 22.9% to $98.6M, but gross profit fell 13.8% to $13M, while net loss narrowed slightly Q2 2024 Revenue Breakdown | Revenue Segment | Q2 2024 ($ million) | Q2 2023 ($ million) | YoY Change | | :--- | :--- | :--- | :--- | | Patient Services | $52.5 | $53.4 | -1.8% | | Dispensary | $44.4 | $25.2 | +76.4% | | Clinical Trials & Other | $1.7 | $1.6 | +4.7% | | Consolidated Revenue | $98.6 | $80.2 | +22.9% | - Gross profit decreased by 13.8% YoY to $13 million, primarily due to ongoing cost management fluctuations and the run-out of DIR fees for oral and IV drugs[5] - SG&A expenses decreased to $27.9 million (28.3% of revenue) from $28.7 million (35.8% of revenue) in Q2 2023, reflecting better cost control and lower share-based compensation[6] First Half 2024 Results H1 2024 revenue rose 23.5% to $193.2M, gross profit declined, but net loss improved due to non-recurring impairment H1 2024 Revenue Breakdown | Revenue Segment | H1 2024 ($ million) | H1 2023 ($ million) | YoY Change | | :--- | :--- | :--- | :--- | | Patient Services | $104.9 | $103.7 | +1.2% | | Dispensary | $84.1 | $49.4 | +70.2% | | Clinical Trials & Other | $4.2 | $3.3 | +28.3% | | Consolidated Revenue | $193.2 | $156.4 | +23.5% | - Net loss for H1 2024 decreased by $11.5 million to $35.4 million, primarily due to a $16.9 million goodwill impairment in H1 2023 that was not repeated in 2024[9] - Adjusted EBITDA for H1 2024 was a loss of $(19.7) million, a $5.3 million greater loss compared to H1 2023, mainly due to the decrease in gross profit[9] Review of Strategic Alternatives The Board initiated a review of strategic alternatives to maximize shareholder value, engaging Leerink Partners and Latham & Watkins - The Board of Directors has initiated a full review of a broad range of alternatives to maximize shareholder value[10] - TOI has engaged Leerink Partners as its financial advisor and Latham & Watkins LLP as its legal advisor to assist in the process[10] - The Board has not set a timetable for the completion of its review and does not intend to provide updates until it is appropriate or required[10] Non-GAAP Financial Measures The report defines and reconciles Adjusted EBITDA, a key non-GAAP measure, to net loss for Q2 and H1 2024 - TOI defines Adjusted EBITDA as net (loss) income adjusted for depreciation, amortization, interest, taxes, share-based compensation, goodwill impairment, changes in fair value of liabilities, and other specific costs like acquisition-related fees, certain consulting fees, and infrastructure costs[17] Reconciliation of Net Loss to Adjusted EBITDA (Q2) | (in thousands) | Q2 2024 ($ thousands) | Q2 2023 ($ thousands) | | :--- | :--- | :--- | | Net loss | $(15,479) | $(16,897) | | Adjustments | $6,770 | $9,953 | | Adjusted EBITDA | $(8,709) | $(6,944) | Reconciliation of Net Loss to Adjusted EBITDA (H1) | (in thousands) | H1 2024 ($ thousands) | H1 2023 ($ thousands) | | :--- | :--- | :--- | | Net loss | $(35,368) | $(46,895) | | Adjustments | $15,718 | $32,592 | | Adjusted EBITDA | $(19,650) | $(14,303) | Financial Statements Unaudited consolidated financial statements detail the company's financial position, operations, and cash flows for the period Consolidated Balance Sheets Total assets decreased to $179.6M by June 30, 2024, primarily due to reduced marketable securities, impacting equity Key Balance Sheet Items | Account | June 30, 2024 ($ thousands) | Dec 31, 2023 ($ thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $36,424 | $33,488 | | Marketable securities | $9,939 | $49,367 | | Total Assets | $179,602 | $209,240 | | Long-term debt, net | $89,950 | $86,826 | | Total Liabilities | $150,396 | $152,215 | | Total Stockholders' Equity | $29,206 | $57,025 | Consolidated Statements of Operations Q2 revenue was $98.6M with a $15.5M net loss; H1 revenue was $193.2M with a $35.4M net loss Statement of Operations Summary | Metric | Q2 2024 ($ thousands) | Q2 2023 ($ thousands) | H1 2024 ($ thousands) | H1 2023 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenue | $98,578 | $80,224 | $193,244 | $156,416 | | Loss from Operations | $(16,364) | $(14,938) | $(34,336) | $(47,805) | | Net Loss | $(15,479) | $(16,897) | $(35,368) | $(46,895) | | Basic & Diluted EPS | $(0.17) | $(0.19) | $(0.39) | $(0.52) | Consolidated Statements of Cash Flows H1 2024 saw $31.5M cash used in operations, offset by $37.6M from investing, increasing cash by $2.9M Cash Flow Summary for Six Months Ended June 30 | Cash Flow Activity | 2024 ($ thousands) | 2023 ($ thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(31,543) | $(24,112) | | Net cash provided by investing activities | $37,564 | $43,304 | | Net cash used in financing activities | $(3,085) | $(4,310) | | Net increase in cash | $2,936 | $14,882 | | Cash at end of period | $36,424 | $28,892 | Key Business Metrics As of Q2 2024, The Oncology Institute operated 87 clinics, expanding value-based care to 2.1 million lives Key Business Metrics Comparison | Metric | As of June 30, 2024 | As of June 30, 2023 | | :--- | :--- | :--- | | Clinics | 87 | 83 | | Markets | 14 | 15 | | Lives under value-based contracts | 2.1 million | 1.8 million |