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

Part I – Financial Information This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of its financial condition and operating performance Item 1. Financial Statements (Unaudited) This section contains the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in convertible preferred stock and stockholders' equity, and cash flows, with detailed notes covering business description, significant accounting policies, risks, debt, equity, leases, goodwill, and intangible assets Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity | Metric (thousand USD) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Total Assets | $179,602 | $209,240 | | Total Liabilities | $150,396 | $152,200 | | Total Stockholders' Equity | $29,206 | $57,040 | | Cash and Cash Equivalents | $36,424 | $33,400 | | Marketable Securities | $9,939 | $49,300 | | Accounts Receivable, Net | $54,017 | $42,300 | - As of June 30, 2024, total assets and total stockholders' equity decreased from December 31, 2023, with a significant reduction in marketable securities and an increase in net accounts receivable[5] Condensed Consolidated Statements of Operations This section details the company's financial performance over specific periods, including revenue, expenses, and net loss Operating Data for the Three Months Ended June 30 (thousand USD) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :----------------- | :-------- | :-------- | :--------- | :--------- | | Total Operating Revenue | $98,578 | $80,224 | $18,354 | 22.9% | | Patient Service Revenue | $52,461 | $53,426 | $(965) | (1.8)% | | Pharmacy Revenue | $44,440 | $25,196 | $19,244 | 76.4% | | Operating Loss | $(16,364) | $(14,938) | $(1,426) | 9.5% | | Net Loss | $(15,479) | $(16,897) | $1,418 | (8.4)% | | Basic Loss Per Share | $(0.17) | $(0.19) | $0.02 | (10.5)% | Operating Data for the Six Months Ended June 30 (thousand USD) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :----------------- | :--------- | :--------- | :--------- | :--------- | | Total Operating Revenue | $193,244 | $156,416 | $36,828 | 23.5% | | Patient Service Revenue | $104,914 | $103,699 | $1,215 | 1.2% | | Pharmacy Revenue | $84,119 | $49,436 | $34,683 | 70.2% | | Operating Loss | $(34,336) | $(47,805) | $13,469 | (28.2)% | | Net Loss | $(35,368) | $(46,895) | $11,527 | (24.6)% | | Basic Loss Per Share | $(0.39) | $(0.52) | $0.13 | (25.0)% | - Total operating revenue significantly increased in Q2 and H1 2024, primarily driven by strong pharmacy revenue growth, while net loss narrowed year-over-year, partly due to the absence of goodwill impairment charges in 2024[8][196][208] Condensed Consolidated Statements of Convertible Preferred Stock and Changes in Stockholders' Equity This section outlines changes in the company's convertible preferred stock and overall equity structure over time | Metric (thousand USD) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Total Stockholders' Equity | $29,206 | $57,025 | | Accumulated Deficit | $(181,518) | $(146,150) | | Net Loss for Q1 2024 | $(19,889) | N/A | | Net Loss for Q2 2024 | $(15,479) | N/A | - As of June 30, 2024, total stockholders' equity significantly decreased from year-end 2023, primarily due to accumulated net losses during the period[10] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Cash Flow Data for the Six Months Ended June 30 (thousand USD) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :--------------------------- | :--------- | :--------- | :--------- | :--------- | | Net Cash Used in Operating Activities | $(31,543) | $(24,112) | $(7,431) | 30.8% | | Net Cash Provided by Investing Activities | $37,564 | $43,304 | $(5,740) | (13.3)% | | Net Cash Used in Financing Activities | $(3,085) | $(4,310) | $1,225 | (28.4)% | | Net Increase in Cash and Cash Equivalents | $2,936 | $14,882 | $(11,946) | (80.3)% | | Cash and Cash Equivalents at End of Period | $36,424 | $28,892 | $7,532 | 26.1% | - In H1 2024, cash outflow from operating activities increased, and cash inflow from investing activities decreased, mainly due to reduced sales of marketable securities, while cash and cash equivalents at period-end increased[13][232][236] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Description of the Business This note describes the company's core business, services, and operational footprint - The Oncology Institute, Inc. (TOI) is a community oncology practice company operating a value-based oncology services platform, offering comprehensive medical oncology services[16] - Company services include physician services, in-house infusion and pharmacy, clinical trials, radiation therapy, educational seminars, support groups, counseling, and 24/7 patient assistance[18] - TOI operates 73 clinics across California, Florida, Arizona, and Nevada, with 126 oncologists and mid-level professionals, serving Medicare, Medi-Cal, and commercial patients[19] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements - The interim condensed consolidated financial statements are unaudited and prepared in accordance with Article 10 of Regulation S-X promulgated by the SEC[20] - The company consolidates entities where it has a controlling financial interest, including Variable Interest Entities (VIEs) controlled through Master Service Agreements (MSAs), with TOI Management as the primary beneficiary[21][24] - The company segments its business into patient services, pharmacy, and clinical trials and other, based on how the Chief Operating Decision Maker (CODM) manages the business[26] - As an "emerging growth company," the company has elected to use the extended transition period for complying with new or revised financial accounting standards[45][46] - Due to historical Direct and Indirect Remuneration (DIR) fee data and low reimbursement rates, the company changed its DIR fee estimate, resulting in an approximate $2.4 million reduction in pharmacy operating revenue and net income for Q2 and H1 2024[28] Note 3. Significant Risks and Uncertainties Including Business and Credit Concentrations This note details the company's exposure to various risks, including credit risk and concentrations in key payers and suppliers - The company faces credit risk, including cash accounts potentially exceeding FDIC coverage and inherent collection risks in accounts receivable[54][55] Patient Service Net Revenue Payer Concentration | Payer | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Payer A | 10% | 10% | N/A | 11% | | Payer B | 16% | 14% | 16% | 15% | Direct Cost Key Supplier Concentration | Supplier | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Supplier A | 99% | 100% | 99% | 100% | Note 4. Accounts Receivable This note provides a breakdown of the company's accounts receivable by type and changes over time Accounts Receivable Composition (thousand USD) | Accounts Receivable Type | June 30, 2024 | December 31, 2023 | Change ($) | Change (%) | | :----------------------- | :------------ | :---------------- | :--------- | :--------- | | Oral Drug Receivables (Pharmacy) | $10,553 | $2,914 | $7,639 | 262.2% | | Capitation Receivables (Patient Services) | $3,661 | $1,757 | $1,904 | 108.4% | | FFS Receivables (Patient Services) | $30,572 | $30,173 | $399 | 1.3% | | Clinical Trial Receivables | $2,268 | $2,595 | $(327) | (12.6)% | | Other Trade Receivables | $6,963 | $4,921 | $2,042 | 41.5% | | Total | $54,017 | $42,360 | $11,657 | 27.5% | - Total accounts receivable significantly increased as of June 30, 2024, primarily driven by growth in pharmacy oral drug receivables and patient service capitation receivables, with no allowance for credit losses recorded by the company[59] Note 5. Revenue This note details the company's revenue streams, including patient services, pharmacy, and clinical trials Revenue Breakdown (thousand USD) | Revenue Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Patient Services | $52,461 | $53,426 | $104,914 | $103,699 | | Pharmacy Revenue | $44,440 | $25,196 | $84,119 | $49,436 | | Clinical Trials and Other | $1,677 | $1,602 | $4,211 | $3,281 | | Total | $98,578 | $80,224 | $193,244 | $156,416 | - Pharmacy revenue grew by 76.4% and 70.2% in Q2 and H1 2024, respectively, primarily due to increased prescription volume from California pharmacies[199][200] - As of June 30, 2024, contract liabilities were $861 thousand, an increase from $545 thousand as of December 31, 2023[63] Note 6. Inventories This note provides a breakdown of the company's inventory by type Inventory Composition (thousand USD) | Inventory Type | June 30, 2024 | December 31, 2023 | Change ($) | Change (%) | | :--------------------- | :------------ | :---------------- | :--------- | :--------- | | Oral Drug Inventory | $3,953 | $3,640 | $313 | 8.6% | | Intravenous Drug Inventory | $7,369 | $10,038 | $(2,669) | (26.6)% | | Total | $11,322 | $13,678 | $(2,356) | (17.2)% | - As of June 30, 2024, total inventory decreased from year-end 2023, mainly due to a reduction in intravenous drug inventory[65] Note 7. Marketable Securities and Fair Value Measurements This note details the company's marketable securities and their fair value measurements Fair Value of Marketable Securities (thousand USD) | Security Type | June 30, 2024 | December 31, 2023 | Change ($) | Change (%) | | :----------------------------- | :------------ | :---------------- | :--------- | :--------- | | U.S. Treasury Bills (Cash Equivalents) | $24,920 | $22,783 | $2,137 | 9.4% | | Short-Term U.S. Treasury Notes (Marketable Securities) | $9,939 | $49,367 | $(39,428) | (79.9)% | | Total Available-for-Sale Securities | $34,859 | $72,150 | $(37,291) | (51.7)% | - As of June 30, 2024, total available-for-sale securities significantly decreased, primarily due to a reduction in short-term U.S. Treasury notes, with the company recording a $34 thousand net unrealized loss in Q2 2024[66][67][68] - Fair value measurements categorize cash equivalents, marketable securities, derivative warrant liabilities, and contingent consideration liabilities as Level 2, while conversion option derivative liabilities are Level 3[70][74] Note 8. Property and Equipment, Net This note provides a breakdown of the company's property and equipment, net of accumulated depreciation Property and Equipment, Net Composition (thousand USD) | Asset Type | June 30, 2024 | December 31, 2023 | Change ($) | Change (%) | | :--------------------- | :------------ | :---------------- | :--------- | :--------- | | Computers and Software | $3,606 | $3,035 | $571 | 18.8% | | Leasehold Improvements | $10,660 | $9,214 | $1,446 | 15.7% | | Construction in Progress | $2,386 | $1,801 | $585 | 32.5% | | Less: Accumulated Depreciation | $(7,626) | $(6,180) | $(1,446) | 23.4% | | Total | $12,232 | $10,883 | $1,349 | 12.4% | - As of June 30, 2024, property and equipment, net, increased, primarily due to investments in leasehold improvements and construction in progress[80] - Depreciation expense for Q2 2024 was $745 thousand, higher than $601 thousand in the prior year period[81] Note 9. Accrued Expenses and Other Current and Non-Current Liabilities This note details the composition of the company's accrued expenses and other current and non-current liabilities Accrued Expenses and Other Current Liabilities Composition (thousand USD) | Liability Type | June 30, 2024 | December 31, 2023 | Change ($) | Change (%) | | :----------------------------- | :------------ | :---------------- | :--------- | :--------- | | Compensation (including bonuses, benefits, and payroll taxes) | $5,155 | $5,518 | $(363) | (6.6)% | | Contract Liabilities | $861 | $545 | $316 | 58.0% | | Deferred Acquisition and Contingent Consideration | $331 | $2,206 | $(1,875) | (85.0)% | | Total | $12,831 | $13,996 | $(1,165) | (8.3)% | - As of June 30, 2024, total accrued expenses and other current liabilities decreased, primarily due to a reduction in deferred acquisition and contingent consideration and the settlement of the D&O insurance premium principal balance[82][83] Note 10. Leases This note provides information on the company's lease arrangements, including lease costs and future lease payments Lease Expenses (thousand USD) | Lease Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Operating Lease Cost | $1,995 | $1,838 | $3,992 | $3,600 | | Variable Lease Cost | $424 | $308 | $785 | $582 | - As of June 30, 2024, the weighted-average remaining lease term for operating leases was 4.97 years, with a weighted-average discount rate of 6.56%[88] - The present value of future operating lease payments is $31,056 thousand[87] Note 11. Debt This note details the company's debt obligations, including its senior secured convertible notes - The company holds $110,000 thousand in senior secured convertible notes, maturing on August 9, 2027, with an annual interest rate of 4.00%[91][92] Long-Term Debt, Net (thousand USD) | Metric | June 30, 2024 | December 31, 2023 | | :--------------------------- | :------------ | :---------------- | | Senior Secured Convertible Notes | $110,000 | $110,000 | | Less: Unamortized Debt Issuance Costs | $2,556 | $2,875 | | Less: Unamortized Debt Discount | $17,494 | $20,299 | | Long-Term Debt, Net | $89,950 | $86,826 | - The notes include embedded conversion options and optional redemption features, which are bifurcated and accounted for as derivative liabilities, and as of June 30, 2024, the company was in compliance with its financing agreement covenants[95][99][93] Note 12. Income Taxes This note provides information on the company's income tax expenses and effective tax rate - The company recorded no income tax expense for Q2 and H1 2024, compared to $99 thousand and $143 thousand for the corresponding periods in 2023[111] - The effective tax rate for H1 2024 was 0.00%, primarily due to changes in valuation allowance, non-deductible expenses, and limitations on compensation and interest expense under Sections 162(m) and 163(l)[112] Note 13. Stockholders' Equity This note details the components of the company's stockholders' equity, including common stock and preferred stock - As of June 30, 2024, the company had 77,224,263 shares of common stock issued and 75,490,489 shares outstanding[113] - The company holds 165,045 shares of Series A common stock equivalent convertible preferred stock, convertible into 100 shares of common stock per preferred share, subject to a 4.9% beneficial ownership limitation[116][117][118] - As of June 30, 2024, the company had not declared any dividends on common or preferred stock[115][120] - The company repurchased 1,593,128 shares of common stock ($894 thousand) and 140,646 shares of common stock ($125 thousand) in 2023, but made no repurchases in 2024[124] Note 14. Share-Based Compensation This note provides information on the company's share-based compensation plans and related expenses - Total share-based compensation expense for H1 2024 was $7,474 thousand, lower than $9,072 thousand for the corresponding period in 2023[132] - Stock options granted in H1 2024 totaled 1,579,393 units, and Restricted Stock Units (RSUs) granted totaled 1,381,983 units[128][132] - As of June 30, 2024, unrecognized compensation cost for unvested service stock options was $3,920 thousand, expected to be recognized over 2.96 years; unrecognized RSU compensation expense was $3,891 thousand, expected to be recognized over 3.00 years[130][133] Note 15. Commitments and Contingencies This note outlines the company's commitments and potential contingent liabilities, including legal proceedings and indemnifications - The company is involved in legal proceedings in the ordinary course of business, but management believes their outcomes will not materially impact the condensed consolidated financial statements[140] - The company provides indemnification to its directors, officers, and lessors, and believes it complies with HIPAA and HITECH regulations and applicable healthcare laws[141][142] - As of June 30, 2024, and December 31, 2023, the company had not accrued any reserves for regulatory matters[144] - The company and certain subsidiaries have pledged substantially all their personal and real property as collateral for outstanding debt under financing agreements[146] Note 16. Business Combinations This note provides information on the company's business combinations and asset acquisitions - No business combinations or asset acquisitions occurred in H1 2024, while two acquisitions were completed in 2023: Southland Practice Acquisition (June 2023) and Bolsa Pharmacy Acquisition (November 2023)[147] - The Southland acquisition involved $4,300 thousand in cash and $1,813 thousand in deferred contingent consideration, with $2 million paid in June 2024[149][150] - In Q2 and H1 2024, the company recognized $19,700 thousand in cumulative revenue and $3,396 thousand in cumulative net income from clinical practices acquired in the prior year[157] Note 17. Variable Interest Entities This note explains the company's consolidation of Variable Interest Entities (VIEs) - The company consolidates its Variable Interest Entities (VIEs), namely TOI PCs (TOI CA, TOI FL, TOI OR, and TOI TX), as TOI Management is their primary beneficiary through Master Service Agreements[158] VIEs Assets and Liabilities (thousand USD) | Metric | June 30, 2024 | December 31, 2023 | | :------------ | :------------ | :---------------- | | Total Assets | $75,983 | $71,305 | | Total Liabilities | $250,348 | $210,422 | Note 18. Goodwill and Intangible Assets This note details the company's goodwill and intangible assets, including their carrying amounts and impairment testing - As of June 30, 2024, total goodwill was $7,230 thousand, with no goodwill impairment charges recorded in Q2 and H1 2024[166][167] Intangible Assets, Net (thousand USD) | Metric | June 30, 2024 | December 31, 2023 | | :---------------------- | :------------ | :---------------- | | Total Intangible Assets, Net | $16,357 | $17,904 | - As of June 30, 2024, net intangible assets decreased due to amortization, with an estimated $1,547 thousand in amortization expense for H2 2024[164][165] Note 19. Net Loss Per Share This note provides the basic and diluted net loss per share calculations Net Loss Per Share (USD) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Basic Loss Per Share | $(0.17) | $(0.19) | $(0.39) | $(0.52) | | Diluted Loss Per Share | $(0.17) | $(0.19) | $(0.39) | $(0.52) | - Basic and diluted net loss per share improved in both Q2 and H1 2024, with all potentially dilutive securities (including convertible notes, stock options, RSUs, earn-out shares, and warrants) excluded from diluted EPS calculation due to their anti-dilutive effect[170][171][172] Note 20. Segment Information This note provides financial information broken down by the company's operating segments Segment Revenue (thousand USD) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Patient Services | $52,461 | $53,426 | $104,914 | $103,699 | | Pharmacy | $44,440 | $25,196 | $84,119 | $49,436 | | Clinical Trials and Other | $1,677 | $1,602 | $4,211 | $3,281 | | Consolidated Revenue | $98,578 | $80,224 | $193,244 | $156,416 | Segment Operating Income (thousand USD) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Patient Services | $4,720 | $7,426 | $6,443 | $13,804 | | Pharmacy | $5,609 | $5,056 | $12,448 | $10,135 | | Clinical Trials and Other | $1,393 | $1,431 | $3,481 | $2,924 | | Total Segment Operating Income | $11,722 | $13,913 | $22,372 | $26,863 | - Pharmacy segment revenue showed significant growth in both Q2 and H1 2024, while patient services segment operating income decreased[173][174] Note 21. Related Party Transactions This note details transactions with related parties Related Party Payments (thousand USD) | Period | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total | $143 | $108 | $276 | $218 | - Related party payments primarily covered consulting services, clinical trials, and director fees, with no outstanding related party balances as of June 30, 2024, and December 31, 2023[176] Note 22. Subsequent Events This note describes significant events that occurred after the reporting period - On July 1, 2024, the company's capitation contract with Regal Medical Group, Inc. (Regal) was terminated[177] - Regal's revenue accounted for approximately 5.3% and 5.0% of the company's consolidated operating revenue, and approximately 10.0% and 9.2% of patient services segment revenue, in Q2 and H1 2024, respectively[177] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and operating results for the three and six months ended June 30, 2024, highlighting revenue growth, operating losses, and liquidity Overview This section provides a high-level description of the company's business model and mission - The company is a leading value-based oncology company managing community-based oncology practices across 87 clinic locations in 14 markets and 4 states in the U.S.[181][217] - As of June 30, 2024, the company managed approximately 2.1 million patients under value-based agreements[181][217] - The company's mission is to heal and empower cancer patients through compassion, innovation, and state-of-the-art medical care, committed to providing higher quality, lower cost cancer care[182][183] Components of Results of Operations This section breaks down the various components contributing to the company's financial performance, including revenue and operating expenses - Company revenue sources include Capitation, Fee-for-Service (FFS), Pharmacy, and Clinical Trials and Other[185] - Capitation revenue is collected on a per-member-per-month (PMPM) basis, FFS revenue is collected for specific medical services, pharmacy revenue is from oral prescription drug sales, and clinical trials and other revenue is from research activities[186][187][188][189] - Operating expenses include patient services direct costs, pharmacy direct costs, clinical trials and other direct costs, and selling, general, and administrative (SG&A) expenses[191][192] - SG&A expenses are expected to increase in absolute terms in the future but decrease as a percentage of revenue over the long term[192] Results of Operations This section provides a detailed analysis of the company's financial results, including revenue and expense trends Revenue Growth (Year-over-Year) | Revenue Type | Q2 2024 vs Q2 2023 | H1 2024 vs H1 2023 | | :--------------------- | :----------------- | :----------------- | | Total Operating Revenue | Growth 22.9% | Growth 23.5% | | Patient Services | Decrease 1.8% | Growth 1.2% | | Pharmacy | Growth 76.4% | Growth 70.2% | | Clinical Trials and Other | Growth 4.7% | Growth 28.3% | Operating Expense Growth (Year-over-Year) | Expense Type | Q2 2024 vs Q2 2023 | H1 2024 vs H1 2023 | | :--------------------- | :----------------- | :----------------- | | Patient Services Direct Costs | Growth 3.7% | Growth 9.5% | | Pharmacy Direct Costs | Growth 92.9% | Growth 82.4% | | Selling, General, and Administrative Expenses | Decrease 3.0% | Decrease 2.1% | - Pharmacy revenue growth was primarily driven by a significant increase in prescription volume from California pharmacies (89.9% in Q2 and 80.5% in H1)[199][200] - No goodwill impairment charges were incurred in Q2 and H1 2024, compared to $16,867 thousand in H1 2023[208] Other Expenses (Income) This section discusses non-operating expenses and income affecting the company's net results Total Other Non-Operating Expenses (Income) (thousand USD) | Period | 2024 | 2023 | Change ($) | Change (%) | | :---------------------- | :-------- | :-------- | :--------- | :--------- | | Three Months Ended June 30 | $(885) | $1,860 | $(2,745) | (147.6)% | | Six Months Ended June 30 | $1,032 | $(1,053) | $2,085 | (198.0)% | - Changes in other non-operating expenses (income) are primarily attributable to significant gains from the decrease in fair value of conversion option derivative liabilities and unrealized gains on marketable securities[211][213][215] - Net interest expense increased due to reduced interest income from marketable U.S. Treasury notes[212] Key Business Metrics This section presents key operational metrics used to evaluate the company's performance and growth Key Business Metrics | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Clinic Count | 87 | 83 | 87 | 83 | | Value-Based Contract Covered Lives (millions) | 2.1 | 1.8 | 2.1 | 1.8 | | Adjusted EBITDA (thousand USD) | $(8,710) | $(6,944) | $(19,650) | $(14,303) | - Clinic count and value-based contract covered lives both increased, indicating business expansion, while Adjusted EBITDA decreased in H1 2024, primarily due to increased infrastructure and labor costs and reduced share-based compensation expense[217][224][225] - Adjusted EBITDA is a non-GAAP financial measure used to assess operating performance and trends[218][219] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations - As of June 30, 2024, the company had $36,424 thousand in cash and cash equivalents and $9,939 thousand in liquid marketable securities[227] - Management believes existing cash and investments are sufficient to meet the company's operating and capital needs for at least the next 12 months[228] - Net cash used in operating activities for H1 2024 was $31,543 thousand, an increase from the prior year period[232] Significant Cash Requirements for the Next Five Years (thousand USD) | Period | Convertible Notes | Operating Leases | Deferred Acquisition and Contingent Consideration | Other | Total | | :--------------------- | :---------------- | :--------------- | :---------------------------------------------- | :---- | :------ | | 2024 (remaining six months) | $2,237 | $4,147 | $383 | $24 | $6,791 | | 2025-2026 | $8,922 | $15,691 | $50 | $81 | $24,744 | | 2027-2028 | $112,664 | $10,548 | — | $29 | $123,241 | | Thereafter | — | $6,427 | — | — | $6,427 | | Total | $123,823 | $36,813 | $433 | $134 | $161,203 | Critical Accounting Policies This section highlights the accounting policies that require significant judgment and estimation - Critical accounting policies include leases, Variable Interest Entities (VIEs), segment reporting, revenue recognition (capitation, fee-for-service, pharmacy, clinical research, and other), direct cost of sales, and goodwill and intangible assets[242][246][247][248][257][258] - Lease policy requires classification as operating or finance leases and recording of right-of-use assets and lease liabilities[243][244] - Revenue recognition follows ASC 606, recognizing revenue based on the transfer of control of goods and services, with specific methods for different revenue types[248][249][250][251][254][255] - Goodwill is not amortized but tested for impairment annually; finite-lived intangible assets are amortized using the straight-line method and reviewed for impairment periodically[258][259] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks primarily related to inflation and interest rate changes, with low interest rate risk due to the short-term nature of cash and cash equivalents, while inflation could increase operating costs and necessitate earlier capital raises, and goodwill and intangible asset impairment risks are assessed annually - The company's market risk exposure primarily stems from potential changes in inflation or interest rates, and it does not hold financial instruments for trading purposes[260] - Interest rate risk is low due to the short-term nature of cash and cash equivalents[261] - Inflation risk could adversely affect the company by increasing costs for drugs, clinical trials, research, and administrative expenses, potentially requiring the company to raise additional capital sooner than anticipated[262] - Goodwill and intangible asset impairment risk is tested annually in Q4, and underperforming operating units, deteriorating economic conditions, or sustained increases in interest rates could lead to impairment charges[263] Item 4. Controls and Procedures As of June 30, 2024, the company's CEO and CFO assessed and certified the effectiveness of disclosure controls and procedures, with no significant changes in internal control over financial reporting during the quarter, acknowledging the inherent limitations of all control systems - As of June 30, 2024, the company's CEO and CFO certified that disclosure controls and procedures were effectively designed and operated[264] - No significant changes in the company's internal control over financial reporting occurred during Q2 and H1 2024[265] - Management acknowledges that all control systems have inherent limitations and can only provide reasonable assurance, regardless of how well designed and operated[266] Part II – Other Information This section covers legal proceedings, risk factors, equity security sales, senior security defaults, mine safety, other information, and a list of exhibits Item 1. Legal Proceedings The company may be involved in various legal proceedings and claims in the ordinary course of business, but currently, no legal proceedings are deemed to have a material adverse effect on its business, operating results, cash flows, or financial condition - The company is not currently involved in any legal proceedings deemed to have a material adverse effect on its business, operating results, cash flows, or financial condition[268] Item 1A. Risk Factors There have been no material changes to the risk factors described in the company's Form 10-K annual report as of December 31, 2023 - No material changes occurred to the risk factors described in the Form 10-K annual report as of December 31, 2023[269] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Not applicable - Not applicable[269] Item 3. Defaults Upon Senior Securities Not applicable - Not applicable[269] Item 4. Mine Safety Disclosures Not applicable - Not applicable[269] Item 5. Other Information During the quarter ended June 30, 2024, no directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by any director or officer during Q2 2024[270] Item 6. Exhibits This section lists all exhibits filed with the 10-Q report, including certifications, interactive data files, and documents incorporated by reference - Exhibits include certifications filed pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350[272] - Interactive data files (XBRL format) contain the condensed consolidated balance sheets, statements of operations, changes in convertible preferred stock and stockholders' equity, cash flows, and notes to financial statements[272] - Documents incorporated by reference include the Agreement and Plan of Merger, Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and Warrant Agreement[273] Signatures This section formally attests to the accuracy and completeness of the report through authorized signatures - This registration statement was duly signed by Mihir Shah, Chief Financial Officer of The Oncology Institute, Inc., on August 13, 2024[276]