The Oncology Institute, Inc. ( NASDAQ: TOI) Q2 2023 Profits Teleconference August 8, 2023 5:00 PM ET
Business Individuals
Mark Hueppelsheuser – General Counsel
Dan Virnich – Ceo
Mihir Shah – Chief Financial Officer
Teleconference Individuals
Taji Phillips – Jefferies
Operator
Excellent afternoon women and gentlemen and welcome to The Oncology Institute’s 2nd Quarter 2023 Profits Teleconference. Today’s call is being tape-recorded and we have actually designated one hour for ready remarks and Q&A.
At this time, I wish to turn the conference over to Mark Hueppelsheuser, General Counsel at TOI. Please go on sir.
Mark Hueppelsheuser
Journalism release revealing the Oncology Institute’s outcomes for the 2nd quarter of 2023 are offered at the Financiers area of the business’s site theoncologyinstitute.com. A replay of this call will likewise be offered at the business’s site after the conclusion of this call.
Prior to we begin, I want to advise you of the business’s Safe Harbor language. Management might make positive declarations consisting of assistance and underlying presumptions.
Positive declarations are based upon expectations that include threats and unpredictabilities that might trigger real outcomes to vary materially. For a more conversation of threats associated with our organization, see our filings with the SEC.
This call will likewise talk about non-GAAP monetary steps such as adjusted EBITDA. Reconciliation of these non-GAAP steps to the most similar GAAP steps are consisted of in the revenues release provided to the SEC and offered on our site.
Joining me on the call today is our CEO, Dan Virnich; and our CFO, Mihir Shah. Following our ready remarks, we’ll open the call for your concerns.
With that, I’ll turn the call over to Dan.
Dan Virnich
Thank you, Mark. Excellent afternoon everybody and thank you for joining our 2nd quarter call. I’m honored to have the chance to serve as the next CEO of The Oncology Institute.
As kept in mind in our June statement, I took control of as CEO on July 1st; and Brad Hively transitioned to the function of Vice Chairman where he stays on our Board and continues to offer tactical assistance for the company.
Because this is my very first revenues call as CEO of The Oncology Institute, I wish to begin by revealing my thankfulness to our remarkable group of doctors and care groups. Their devotion to medical care has actually made an extensive influence on the lives of the clients we serve every day. It is since of their dedication that we accomplished exceptional lead to Q2 of 2023.
Beginning with the topline. I am enjoyed share that in the 2nd quarter we accomplished 32% income development versus Q2 of 2022. Notably, our natural development rate was 24% and our same-store sales development was 18%. This strong income development shows the ongoing need for our ingenious care design amongst both our clients and our payer partners.
Now, transferring to gross earnings. On the very first quarter call, we discussed the pressures we were experiencing on our IV drug margins. I enjoy to report that through an increased concentrate on our drug procurement efforts, we saw a go back to anticipated levels in Q2, boosting our gross margin by 40 basis points over Q1 of 2023.
These strong outcomes led the way for our course to success as we head into the 2nd half of 2023. As we formerly discussed, we expect reaching success in 2024.
Now, I want to highlight a couple of functional accomplishments from the 2nd quarter. Initially, we are happy to reveal the acquisition of Southland Radiation Oncology, a multisite radiation oncology practice. This tactical relocation enhances our position in Southern California broadens our item offering, enables us to offer even much better care to our clients and will boost our running margins in this important market.
2nd, we have actually effectively obtained a drug store in Southern California, a tactical relocation focused on boosting our drug giving ability. We are presently in the procedure of acquiring approval from the Drug store Board, which we expect will take roughly 60 days.
When authorized, this drug store license will allow us to satisfy all prescriptions for our Medi-Cal clients a service we have actually been not able to offer because January of 2022. This advancement alone is anticipated to create upwards of $7 million in extra yearly income on clients that we currently deal with representing a significant development chance for us. Furthermore I enjoy to reveal that strategies are underway to open 3 extra dispensaries this year one in Fresno, California and 2 in South Florida.
Lastly, we are happy to reveal a couple of crucial collaborations that have actually been settled and will assist drive our development and margin growth efforts progressing. Our collaboration with Huge Bio will allow us to take advantage of the power of expert system and enhancing medical trial randomizations.
We have actually likewise signed a contract with Home Rx to enhance our drug store operations and development technique. These advancements show our dedication to continually enhance and progress as a healthcare service provider.
In regards to management group focus, we have 4 essential objectives that will allow us to boost investor worth and continue as a leader in value-based oncology. Objective top, get rid of money burn. We are devoted to remove our money burn by the end of 2024 making sure a solvent and sustainable future for our company.
Our restructuring efforts from the very first half of 2023 are on track to provide $1 million to $3 million in in-year 2023 SG&A decreases. Complete year, we anticipate $6 million to $10 million in understood decreases.
Objective second, broadening client lives under care in our tradition markets of California Nevada and Arizona stays a concern as we aim to boost success and strengthen our position as a leading doctor in these areas.
Objective number 3, enhancing brand-new markets. In our growth markets of Florida and Texas, we are devoted to growing our client base and enhancing our value-based design that is both scientifically exceptional and economically practical.
Objective number 4, leading the value-based oncology market. We take pride in our position as leaders in the value-based oncology market, directed by medical development and its unfaltering dedication to exceptional client care we intend to set brand-new requirements for quality in this market.
By non-stop pursuing these objectives, we are positive in our capability to accomplish sustainable development and provide even higher worth to our clients, partners and stakeholders.
Now, I’ll turn the call over to our CFO, Mihir Shah, to offer extra information on our 2nd quarter monetary outcomes.
Mihir Shah
Thanks Dan, and excellent afternoon. As Dan stated, we are delighted about our 2nd quarter results as we are on track to provide the upper end of income and changed EBITDA assistance. Prior to we enter into the financials, I wish to advise you of the share purchase program revealed on June 15. Pursuant to the statement, TOI redeemed 1.59 million shares of its typical stock in free market purchases.
After our acquisition of Southland Radiation Oncology centers, our center count is 67 with the service provider counts at 99. Consolidated income for Q2 2023 was $80 million, a boost of 32% compared to Q2 2022 and a 5% boost compared to Q1 2022. Gross earnings in Q2 2023 was $15 million, a boost of 36% compared to Q2 2022.
SG&A in Q2 2023 was $30 million, a boost of 3% compared to Q2 2022. On a portion of income basis Q2 2023 was 38%, down 900 basis points from Q2 2022. We took a number of tactical actions to minimize our overhead concern in Q2 and anticipate the complete effect to be understood in the 2nd half of this year.
Loss from operations in Q2 2023 was $15 million, a decline of $3.3 million compared to Q2 2022. Bottom line for Q2 2023 was $17 million, a decline of $11.4 million compared to Q2 2022, mostly due to a modification in reasonable worth of earn-out liabilities and boost in operating income balanced out by goodwill problems charge.
Changed EBITDA for Q2 2023 was unfavorable $7 million. Our changed EBITDA estimation does not include back the broader start-up expense nor the consulting and the legal costs connected with acquisition expenses.
More information on how we specify changed EBITDA can be discovered in our 10-Q. Of note, beginning Q4 2022, we have actually customized our existed EBITDA estimation to now consist of money payment paid to our Board of Directors.
Since quarter end, our money and money comparable balance was $29 million and we had $69 million in financial investment for the overall of $98 million in money and money equivalents and financial investments. This represents $11 countless money burn in 2nd quarter.
Notably, just $3.3 countless this money burn was associated with operations while $5.2 countless the money burn was associated with acquisition and share buyback in June. Our money burn in Q2 was assisted by a really strong collection activities.
Our complete year 2023 assistance stays the same. Our income assistance variety is $290 million to $320 million. This represents 15% to 27% development over 2022 income. Our gross earnings assistance variety from $60 million to $70 million and our adjusted EBITDA assistance variety from unfavorable $25 million to unfavorable $28 million. We continue to anticipate to end the year with 1.75 million to 2 million in lives under capitation.
I will now turn it back over to Dan for some summary remarks.
Dan Virnich
Thanks Mihir. While we came across some pressure from lower than anticipated IV drug margins in Q1, I take pride in how our group reacted to the obstacle in Q2 to drive our monetary efficiency. I’m thrilled about the momentum that our essential tactical efforts acquired in the previous quarter and anticipated to continue speeding up in the approaching quarters.
As an outcome, we expect a beneficial pattern in adjusted EBITDA as the year advances. Our efforts in minimizing money burn will lead us to a margin favorable position by the end of 2024. We do not expect any extra financing requires to perform our present development strategies.
Being the leading service provider of value-based oncology care in the United States, we stay devoted to broadening our client base creating brand-new value-based collaborations and making sure premium results for oncology clients. I’m thrilled about the possibilities that lie ahead for us, and we’ll keep you upgraded on our improvements throughout future calls.
With that, we’re now all set to take your concerns. Operator?
Question-and-Answer Session
Operator
Thank you quite, sir. Ladies and gentlemen, we will now be carrying out a question-and-answer session. [Operator Instructions] Our very first concern originates from Brian Tanquilut of Jefferies. Please go on.
Taji Phillips
Hi, excellent night. You have actually got Taji on for Brian. Thank you for taking my concern. So very first I wish to discuss assistance, if I annualize the very first half of 2023 in regards to income, it appears like you’re tracking ahead of your expectations in regards to income assistance or a minimum of I indicate I believe your– I’m navigating like $312-ish million in regards to annualized earnings. And it simply normally seems like from your commentary, there’s a great deal of favorable momentum in business with your drug procurement efforts and the pending approval from the Drug store Board. Simply curious, if there’s anything else or any other elements that are driving the outlook or a minimum of the assistance reaffirmation for the rest of the year? Anything else we should be thinking of, as it associates with business? And after that, as I move that to EBITDA, right? If I do the exact same thing, I’m tracking around unfavorable 28% still within your assistance variety. As we type of analyze all of the elements that you’ve detailed, I think anything else that would type of uplift that run rate I think from very first half to 2nd half?
Dan Virnich
Yes, absolutely. Thanks a lot for the concern. As we get in the back half of 2023, we see a number of tailwinds associated with all of our essential development levers that affect income. So, continuing to see strong fee-for-service development, continuing to have a number of chances in the pipeline for our value-based collaborations in both recognized and brand-new markets. We have tailwinds in our orals organization associated to our dispensary and drug store areas opening along with your home Rx collaboration and continuing to see terrific chances in our medical trials program with numerous of the brand-new collaborations with entities like Huge Bio which we called out. So I would anticipate the back half of the year to continue to speed up.
Taji Phillips
Great. That’s actually useful. Dr. Virnich. And after that, type of returning to this discussion around the outcomes of your drug procurement efforts, I believe you had actually called out 40 basis points of enhancement. Simply curious, just how much more runway is left, I believe within that effort? And I think, if there’s more, just how much more I believe do you believe you can eject of gross margin enhancement for this year? And how does that notify stabilized gross margins even beyond this year?
Dan Virnich
Yes. Our company believe that there are a number of elements that are going to continue to enable us to get margin on our [indiscernible] organization or at procurement and orals also. And it actually fixates a number of various things. One is driving discipline around procurement choices through increased analytics abilities internal and working more carefully with a few of our essential suppliers. 2 is, actually a few of the improvements we’re making to our usage procedure, usage evaluation procedure. And after that 3, as we scale, we get advantages of rates as total volume boosts. So there’s considerable runway there. It’s tough to put a specific number on the 2nd half, however it’s going to continue to drive forward.
Taji Phillips
Great. That’s actually useful. And after that simply for my last concern, I understand you ‘d type of discussed you’re seeing the pipeline of doctor collaborations looking quite strong as you lead into the back half? And normally, how we have actually been hearing that usage in the oncology area has actually been quite strong. I think, can you perhaps define the chance? Is it looking more so around your capitation book gain sharing? Any other information you can offer around, what that’s appearing like for business and for the rest of the year?
Dan Virnich
Yes. So it’s actually in a number of various containers. So our standard capitation plans in tradition markets are continuing to reveal a robust pipeline of development chances, which we anticipate to recognize in Q4 and into next year. In brand-new markets, we actually have actually rotated from sort of the gainshare design to more of a capitation like design, which is adjudicated through service funds. So that’s much better for medical groups, much better for TOI and honestly much better for clients and efficiently assists produce a number of the characteristics that we have in capitation designs and tradition markets. And after that we are broadening our efforts around our capability to manage Part An invest through our high-value cancer care program and even that offer worth to a few of our health insurance and medical group partners.
Taji Phillips
Thank you, a lot.
Dan Virnich
You’re welcome.
Operator
[Operator Instructions] Ladies and gentlemen, without any additional concerns originating from the line, I would now hand it back to management for closing remarks.
Dan Virnich
Thanks, a lot. In summary, our company believe we had an actually strong 2nd quarter. We’re actually delighted about the 2nd half of 2023 and see a lot of tailwinds to business, which are going to continue to drive our course to success and boost our development moving forward. I wish to thank you all for signing up with the call today and the thoughtful concerns. Thank you.
Operator
Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for going to and you might now detach your lines.