Good afternoon. Welcome to The Oncology Institute First Quarter 2023 Earnings Conference Call. Today's call is being recorded, and we have allocated one 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.

The press release announcing The Oncology Institute's results for the first quarter of 2023 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. 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. 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, Brad Hively; and our CFO, Mihir Shah. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Brad.

Thanks Mark, and thank you to everyone joining us today. We started off the year strong continuing our positive momentum from the fourth quarter. It was a record-setting quarter for fee-for-service revenue, dispensary revenue, oral drugs dispensed, and organic growth as we made meaningful progress towards refining and optimizing our model and expansion markets, specifically organic growth in Florida. The growth in our dispensary business in particular was driven by operational effectiveness in optimizing our existing dispensaries and scale in Florida. As you'll hear from Mihir, when he goes through our financial results, we generated top line growth of 38%. Importantly, our organic growth rate was 25% and our same-store sales growth was 21%. We are very proud of this growth as it demonstrates extremely strong demand for our model from both patients and payers. Our value-based lives continue to grow. And as the cornerstone of our model, I'm happy to share that we signed two new value-based contracts since the beginning of the year: one in Southern California and another in our Texas market. The recent contract in Texas is particularly notable as it marks our first value-based contract with a primary care partner in that market. And it also marks our first total cost of care contract where we take accountability for both quality outcomes as well as Part A, B, and D costs. Our business development pipeline remains strong and deep, and I look forward to updating you as the year progresses. On a related note, we are excited to report that we've received data from the first performance period for one of our value-based partners in Florida. The data showed greater than 50% referral capture and greater than 30% cost savings. This is a significant milestone for TOI and a strong proof point of our model's differentiated approach and meaningful cost savings. Concurrently, we experienced significant downward pressure on our IV drug margins in the first quarter as manufacturers hedged against the upcoming Inflation Reduction Act, and as reimbursement and costs realigned with certain generic drugs becoming established in the market. Our team has been swift to respond, identifying opportunities to save, including membership in an oncology-specific GPO, which began in Q2. As a result, we expect to generate additional savings on several key infusion drugs in Q2 and beyond from this membership. I'm proud of our team's ability to adapt and innovate. And I want to thank them for their dedication and effectiveness. As I've mentioned previously, Medi-Cal's 2022 policy is preventing us from dispensing oral drugs to our Medi-Cal members. We have now entered into an LOI to acquire a retail pharmacy in California, which once acquired and credentialed will enable us to dispense oral drugs to those patients once again. As you are all aware, much of the innovation in oncology therapeutics has resulted in new oral therapies. It is important for TOI to have access to dispense both oral and IV medications. Therefore, our acquisition of a retail pharmacy will be an important milestone to achieve this objective. Additional highlights from the quarter include oral drug dispensed increased 34% compared to Q1 2022; total patient visits increased 17% compared to Q1 2022; and the TOI patient was the first worldwide to be treated with a promising alternative to chemotherapy for metastatic ovarian cancer through our partnership with Tempus Laboratories. This is yet another example of TOI bringing cutting-edge treatments into the local community. Now, I'll turn the call over to Mihir to provide additional details on our first quarter financial results.

Thanks, Brad. Starting with the top line. Consolidated revenue for Q1 2023 was $76 million, an increase of 38.1% compared to Q1 2022 and a 6.7% increase compared to Q4 2022. Gross profit for Q1 2023 was $14 million, an increase of 14% compared to Q1 2022. Net loss for Q1 2023 was $30 million, a decrease of $49 million compared to Q1 2022, preliminarily due to changes in fair value of earn-out liabilities and an increase in operating revenue, offset by a goodwill impairment charge. Adjusted EBITDA was negative $7.9 million. Adjusted EBITDA calculation does not add back provider start-up costs nor the consulting and legal fees associated with the acquisition costs. Further details on how we define adjusted EBITDA can be found in our 10-K. Of note, starting Q4 2022, we have modified our adjusted EBITDA calculation to now include cash compensation paid to our Board of Directors. As of quarter end, our cash and cash equivalent balance was $15 million and we had $99 million in investments for a total of $114 million of cash, cash equivalents, and investments. We expect this capital to be sufficient to support operations and enhance our growth through 2024. Now, talking about guidance. Our full year 2023 guidance remains unchanged, and we continue to expect to end the year with 1.75 million to 2.0 million lives under capitation. Our revenue range is $290 million to $320 million. This represents 15% to 27% growth over 2022 revenue. Our gross profit guidance ranges from $60 million to $70 million. And our adjusted EBITDA guidance ranges from negative $25 million to negative $28 million. I will now turn it back over to Brad for some summary remarks.

Thanks, Mihir. While our first quarter results were pressured by lower-than-expected IV drug margins, I am proud of how our team responded to this challenge. Overall, we expect seasonally lower adjusted EBITDA in Q1, with current year initiatives beginning to ramp, payroll taxes resetting, and new drug manufacturer price increases. We do expect adjusted EBITDA margins to trend favorably as the year progresses. As the US market leader in value-based oncology care, we continue to expand our patient base, grow the number of value-based partnerships, and deliver high-quality outcomes to cancer patients. As I mentioned in last quarter's call, our top three priorities in 2023 are first, refining and optimizing our model and expansion markets, including optimizing referral capture and transitioning gainshare contracts to population risk agreements; second, growing our legacy markets by expanding our service offerings in existing clinics and expanding to new counties; and third, reducing cash burn by improving efficiency with new technology solutions, optimizing drug margins, and taking a more sustainable approach to new market entry. I look forward to updating you on our progress across these three items on future calls. With that, we're now ready to take your questions.

Thank you. We will now be conducting a question-and-answer session. Thank you. Our first question is from Brian Tanquilut with Jefferies. Please proceed with your question.

Hey good afternoon guys.

Hey Brian.

So I guess Brad, maybe for my first question, as I think about the total cost of care contracts, maybe if you can share with us what you're seeing in the market in terms of appetite or interest level from other folks in similar types of arrangements.

Yes, sure. I'm glad you asked about it. It's an exciting milestone for the company because it allows us to manage a larger portion of the total spending related to oncology patients. This expands our total addressable market or share of wallet with our customers. We believe we can significantly improve outcomes and reduce costs beyond just the drug and physician expenses associated with oncology, including hospitalization costs for oncology patients. We've noticed an increased interest from our primary care partners in taking on total cost of care, not just for oncology drugs and physician nursing services. Part of this aligns nicely with our holistic approach to managing patients, and our partners are eager to adopt this model for all costs. This trend also reflects what's happening in other specialties, like nephrology, where total cost of care arrangements are more common. Primary care groups are engaged in these arrangements with various specialties and are saying that since these models are successful in other areas, they want to try it out in oncology. We've seen a lot of interest in this area this year.

Got it. Okay. And then Brad on the oncology GPO discussion is there any way you can quantify the cost savings that you're expecting and maybe the time frame to realize them? And maybe what is in the guidance for that initiative?

Yes, we are not ready to publicly share the expected cost savings at this point. It hasn't prompted us to alter our guidance for the year. Since we just began our involvement last month, we prefer to observe the outcomes over a few months before making any definitive statements regarding quantification. However, we believe the potential savings are not significant enough to necessitate a change in our full-year guidance.

Got you. Okay. No, that's awesome. And then maybe last question for me. As I look at the one oncology deal and obviously getting closer with ABC here. Any thoughts on what that could potentially do to the industry or to your business more specifically?

Yes, absolutely. Firstly, I believe it highlights significant demand for oncologists and oncology practices, as well as interest from several parties looking at that deal. It indicates a widespread interest in owning and managing oncology practices due to the substantial spending we oversee. Overall, I think it illustrates a strong demand for companies like ours. In some respects, it shows that there remains considerable revenue potential in fee-for-service oncology, as evidenced by the interest from drug distributors in controlling oncologists. We aim to focus on value-based oncology and demonstrate that it can also be profitable. Our goal is to persuade our customers to reward us for the savings we generate while improving outcomes and reducing costs.

Got you. Okay. Awesome. Thank you, guys.

You’re welcome.

Thank you. Our next question is from Sandy Draper with Guggenheim Partners. Please proceed with your question.

Hi. This is Mitchell on for Sandy.

Hey, Mitchell.

Hey, how is it going?

Good.

One question on guidance. So we've seen over the past several years that you've grown revenue sequentially throughout the year. And here if we look at the Q1 print and we annualize it, we get to right around the midpoint of the full year guide. So just trying to understand what's embedded in that guide and any color there would be helpful.

Yes sure. I'll start and Mihir jump in anywhere you'd like. We were very pleased with top-line growth this quarter. 25% organic growth is really spectacular. And so we started the year very strong from a revenue perspective. Mihir, anything you want to add to that?

No, I think you covered it well. I want to remind everyone that our guidance does not factor in any acquisitions for the year. We believe that from Q1 to Q4, we are comfortable with our guidance as it stands.

Awesome. Thank you. That’s helpful. And then just one more just, kind of, on the broader environment. Has anything changed in the acqua-hire environment in terms of multiples? And just kind of broadly are people more or less willing to sell their practices? And just any color on the pipeline there would be helpful.

I'm always careful about drawing broad conclusions from a limited number of acquisitions we are currently pursuing. While I exercise caution, I'm open to sharing my thoughts. We've noticed that as the overall market has slightly dipped, there seems to be a delay in sellers adjusting their expectations to align with current market multiples. However, on the whole, those expectations have decreased a bit. Sellers are becoming more realistic and starting to recognize that some of the valuation multiples from 2021 are no longer applicable today. Gradually, with some delay, these expectations are starting to fall.

Got it. Thanks. That’s all I had appreciate it.

Great. You’re welcome.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Brad Hively for closing comments.

Great. Well thank you all for joining our call today and we look forward to following up with you in the coming weeks. We're very excited about TOI's path ahead and we look forward to updating you on our progress on our next earnings call. Thank you and have a good day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.