American Oncology Network, Inc. (AONC)·Q4 2023 Earnings Summary

Executive Summary

• Q4 2023 revenue was $324.2M, up 7.9% year over year, driven by 9.5% growth in patient encounters; net loss swung to $(22.4)M versus $1.4M profit in Q4 2022 due to approximately $20.7M non-recurring implicit price concessions tied to the legacy billing system exit .
• Adjusted EBITDA declined to $5.0M from $8.0M in Q4 2022, primarily on higher drug costs and mix; operating loss was $(20.6)M vs $3.3M profit last year .
• Management highlighted successful transition to a new enterprise revenue cycle platform (AthenaIDX) in Q4 and resilience through the Change Healthcare outage; AON remains one of only 44 practices in CMS’s Enhancing Oncology Model, supporting long-term differentiation .
• No formal quantitative guidance was issued; management emphasized growth via provider additions and M&A pipeline, and expects margin improvement longer-term through GPO scale and purchasing strategies (directional commentary only) .

What Went Well and What Went Wrong

What Went Well

• “This strategic investment [enterprise revenue cycle platform] not only helps to ensure that AON is well positioned for the future, but also it allows AON to successfully navigate the recent Change Healthcare outage…” .
• Patient encounter growth accelerated: +9.5% YoY in Q4; FY encounters +7.9% YoY, supporting double-digit revenue growth (FY +11.3% to $1.279B) .
• Participation in CMS’s Enhancing Oncology Model (one of 44 practices) and expansion of research capabilities (new clinical trial management system) strengthen strategic positioning .

What Went Wrong

• Revenue per encounter decreased 1.8% in Q4 due to ~$20.7M incremental AR reserves associated with the legacy billing system transition, pressuring revenue quality and profitability .
• Cost of revenue rose sharply (+$42.0M YoY in Q4), driven by higher drug/supply prices and mix, lifting cost per encounter and compressing margins .
• Adjusted EBITDA fell to $5.0M (−37.6% YoY), with management citing drug cost inflation and limited forward-buy opportunities in certain periods to manage price/reimbursement lags .

Financial Results

Consolidated P&L (Quarterly comparison, oldest → newest)

Notes:

• Q3 2023 diluted EPS not presented in the document; Q4 2022 EPS not applicable given public listing timing .

Margins (derived; citations reference underlying revenue and profit/EBITDA figures)

Calculation method: Margin = metric divided by Total Revenue; figures sourced from cited tables .

Revenue Breakdown

KPIs and Drivers

Liquidity snapshot (Q4 2023): Total liquidity $105.3M (cash/cash equivalents $28.5M; short-term marketable securities $35.4M; incremental borrowing capacity $41.4M); debt outstanding $81.3M under PNC facility; operating cash flow FY 2023 used $(18.1)M including $31.2M transaction expenses .

Guidance Changes

Management explicitly declined to provide quantitative guidance during Q4 call .

Earnings Call Themes & Trends

Management Commentary

• “This strategic investment [revenue cycle platform]… allows AON to successfully navigate the recent Change Healthcare outage that disrupted many other healthcare providers.” — Todd Schonherz, CEO .
• “We continue to be the leader in transformative payment programs… one of only 44 practices in the country to participate in CMS’ Enhancing Oncology Model.” — Todd Schonherz .
• “Adjusted EBITDA was $5 million… a decrease of $3 million or 38%, primarily due to higher drug costs.” — David Gould, CFO .
• “We achieved record top line revenues of almost $1.3 billion… growth of 20 new providers and the addition of 2 new strategic states for the network.” — Todd Schonherz .

Q&A Highlights

• Margin trajectory: Management expects margins to expand over time via GPO scale and purchasing strategies but provided no formal guidance; drug pricing/reimbursement lag cited as structural challenge managed via forward purchasing when available .
• M&A environment: AON sees a unique, differentiated model versus aggregators/private equity, with strong Q1 BD momentum and an expanding pipeline .
• “AON light” pharmacy MSA model: Extends purchasing scale to smaller practices without full-practice MSAs; supports pipeline development and incremental economics .

Estimates Context

• Wall Street consensus (S&P Global) for Q4 2023 and FY 2023 could not be retrieved due to S&P Global daily request limit constraints; therefore, beat/miss vs estimates is unavailable at this time [GetEstimates error].
• Given lack of consensus data, investors should focus on reported YoY growth, margin pressures, and non-recurring items impacting Q4 comparability .

Key Takeaways for Investors

• Q4 2023 showed solid top-line growth (+7.9% YoY) on strong encounter growth (+9.5%), but profitability was impacted by ~$20.7M non-recurring AR reserves tied to the billing system transition and elevated drug/supply costs .
• Adjusted EBITDA compressed to $5.0M; margins reflect a reimbursement lag against rising drug costs and mix; longer-term margin improvement depends on purchasing/GPO scale execution .
• Operational execution is a positive catalyst: enterprise billing migration completed and demonstrated resilience through industry-wide Change Healthcare disruption .
• Strategic differentiation persists: EOM participation, research platform expansion, and provider/M&A growth into new states underpin medium-term volume and service mix opportunities .
• Liquidity remains adequate ($105.3M at FY-end) with debt at $81.3M under PNC facility; FY operating cash flow reflects transaction expenses, highlighting the impact of one-time public listing costs .
• Near-term trading lens: narrative likely centers on normalization post-transition, drug cost dynamics, and validation of margin actions; watch for updates on estimate context once consensus becomes available .
• Medium-term thesis: scalable community oncology platform, adjacent services, and tech-enabled operations (with AI analytics emerging in Q1 2024) should support growth and margin recovery as non-recurring impacts roll off .