The Oncology Institute(TOI) - 2024 Q1 - Quarterly Report

Part I – Financial Information This section details the unaudited financial statements and management's analysis for the quarter ended March 31, 2024 Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2024, along with detailed accounting notes Condensed Consolidated Balance Sheets As of March 31, 2024, total assets decreased slightly to $204.5 million, while total liabilities increased to $163.2 million, resulting in a decrease in total stockholders' equity to $41.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $36,055 | $33,488 | | Accounts receivable, net | $58,760 | $42,360 | | Total current assets | $141,192 | $143,488 | | Total assets | $204,532 | $209,240 | | Liabilities & Stockholders' Equity | | | | Accounts payable | $21,015 | $14,496 | | Total current liabilities | $45,768 | $34,798 | | Long-term debt, net | $88,385 | $86,826 | | Total liabilities | $163,236 | $152,215 | | Total stockholders' equity | $41,296 | $57,025 | Condensed Consolidated Statements of Operations Total operating revenue increased by 24.2% to $94.7 million for Q1 2024, leading to a net loss of $19.9 million, a significant improvement from the $30.0 million net loss in Q1 2023 due to the absence of a goodwill impairment charge Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Patient services revenue | $52,453 | $50,273 | | Dispensary revenue | $39,679 | $24,240 | | Total operating revenue | $94,666 | $76,192 | | Total operating expenses | $112,638 | $109,059 | | Loss from operations | $(17,972) | $(32,867) | | Net loss | $(19,889) | $(29,998) | | Net loss per share (Basic & Diluted) | $(0.22) | $(0.33) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $15.9 million for Q1 2024, offset by $19.4 million provided by investing activities, resulting in a $2.6 million increase in cash and cash equivalents to $36.1 million by period-end Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,883) | $(15,452) | | Net cash provided by investing activities | $19,388 | $18,401 | | Net cash used in financing activities | $(938) | $(1,709) | | Net increase in cash and cash equivalents | $2,567 | $1,240 | | Cash and cash equivalents at end of period | $36,055 | $15,250 | Notes to Condensed Consolidated Financial Statements These notes detail the company's accounting policies, revenue recognition, debt structure, and other significant financial disclosures - The company operates as a community oncology practice with 126 professionals across 73 clinic locations in California, Florida, Arizona, and Nevada, providing a full suite of medical oncology services[21][23][24] - In Q1 2023, the company recorded a goodwill impairment charge of $16.9 million, with no impairment recorded in Q1 2024[41] Revenue Disaggregation (in thousands) | Revenue Type | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Capitated revenue | $17,667 | $16,568 | | FFS revenue | $34,786 | $33,705 | | Patient services total | $52,453 | $50,273 | | Dispensary revenue | $39,679 | $24,240 | | Clinical research & other | $2,534 | $1,679 | | Total | $94,666 | $76,192 | - The company has a $110 million Senior Secured Convertible Note due August 9, 2027, with a 4.00% interest rate, and a net carrying amount of $88.4 million as of March 31, 2024[100][101][119] Management's Discussion and Analysis (MD&A) Management discusses the Q1 2024 financial results, highlighting a 24.2% revenue increase to $94.7 million, an improved net loss of $19.9 million, and sufficient liquidity for the next 12 months Results of Operations Total operating revenue for Q1 2024 increased by 24.2% to $94.7 million, primarily driven by a 63.7% surge in dispensary revenue, while the operating loss significantly narrowed due to the absence of a prior-year goodwill impairment charge Revenue Comparison (in thousands) | Revenue Stream | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Patient services | $52,453 | $50,273 | $2,180 | 4.3% | | Dispensary | $39,679 | $24,240 | $15,439 | 63.7% | | Clinical trials & other | $2,534 | $1,679 | $855 | 50.9% | | Total operating revenue | $94,666 | $76,192 | $18,474 | 24.2% | - The increase in dispensary revenue was primarily due to a 70.3% increase in the number of prescriptions filled[219] Operating Expense Comparison (in thousands) | Expense Item | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Direct costs – patient services | $49,497 | $42,814 | $6,683 | 15.6% | | Direct costs – dispensary | $32,809 | $19,145 | $13,664 | 71.4% | | Goodwill impairment charges | $0 | $16,867 | $(16,867) | N/A | | SG&A expense | $28,452 | $28,830 | $(378) | (1.3)% | | Total operating expenses | $112,638 | $109,059 | $3,579 | 3.3% | Key Business Metrics The company expanded its operational footprint to 87 clinics and increased lives under value-based contracts to 2.0 million, though Adjusted EBITDA declined to $(10.9) million for the quarter Key Metrics Comparison (in thousands, except as noted) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Clinics | 87 | 77 | | Markets | 14 | 15 | | Lives under value-based contracts (millions) | 2.0 | 1.8 | | Adjusted EBITDA (in thousands) | $(10,940) | $(7,363) | Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Reconciliation Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss | $(19,889) | $(29,998) | | Depreciation and amortization | $1,489 | $1,269 | | Interest expense, net | $1,985 | $1,443 | | Share-based compensation | $4,087 | $4,965 | | Goodwill impairment charges | $0 | $16,867 | | Changes in fair value of liabilities | $0 | $(4,214) | | Other adjustments | $1,398 | $2,312 | | Adjusted EBITDA | $(10,940) | $(7,363) | Liquidity and Capital Resources As of March 31, 2024, the company held $36.1 million in cash and $29.8 million in marketable securities, which management deems sufficient to fund operations for at least the next 12 months, with material cash requirements totaling $165.1 million over five years - As of March 31, 2024, the company had $36.1 million in cash and cash equivalents and $29.8 million in current marketable securities[236] - Management believes that cash on hand and marketable securities will be sufficient to fund operating and capital needs for at least the next 12 months[239] Material Cash Requirements (in thousands) | Requirement | Total | | :--- | :--- | | Convertible note (principal & interest) | $124,923 | | Operating leases | $37,478 | | Deferred acquisition and contingent consideration | $2,549 | | Other (finance leases) | $146 | | Total | $165,096 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include interest rate fluctuations on cash and marketable securities, inflationary pressures on operating costs, and potential impairment of goodwill and intangible assets - Interest rate risk is present for the company's $36.1 million in cash and $29.8 million in marketable securities, but management believes the exposure is not material due to the short-term nature of these assets[270] - Inflation is a key risk, potentially increasing the costs of drugs, labor, and other business expenses, which could accelerate cash usage[271] - The company faces impairment risk for its goodwill and intangible assets, which could result in a material write-down if economic conditions worsen or business performance declines[272] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective[273] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[274] Part II – Other Information This section provides additional information, including legal proceedings and updated risk factors Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business, financial condition, or results of operations - The company states it is not currently involved in any legal proceedings that would have a material adverse effect on its business[278] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - No material changes to the risk factors from the Annual Report on Form 10-K for the year ended December 31, 2023, have been reported[279]