Oncology Institute, Inc. (TOI)·Q4 2024 Earnings Summary

Executive Summary

• Revenue grew 16.9% year over year to $100.267M, essentially flat sequentially (+0.4%), driven by record dispensary revenue; net loss improved to $(13.182)M and operating cash flow was positive for a second straight quarter at +$4.186M .
• SG&A fell 12% YoY and to 24.8% of revenue (from 32.7%), reflecting cost controls; however, Adjusted EBITDA declined YoY to $(7.828)M (vs. $(6.252)M in Q4’23) due to mix and non-cash items .
• Initial FY2025 guidance: revenue $460–$480M, gross profit $73–$82M, Adjusted EBITDA $(8)–$(17)M, and free cash flow $(12)–$(21)M; management targets positive EBITDA and cash flow breakeven in Q4 2025; Q1 2025 Adj. EBITDA expected at $(5)–$(6)M on seasonal headwinds .
• Strategic catalysts: signed/lauched value-based contracts (~250k+ lives added across H2’24; more in early 2025), improved drug supplier terms to lift drug margins, Florida delegated network launch, facility amendment (removed $40M minimum cash covenant) and $16.5M private placement to bolster liquidity .

What Went Well and What Went Wrong

• What Went Well

  • Positive operating cash flow for a second consecutive quarter (+$4.186M), aided by improved receivables, inventory and payables management; CEO: “reduce our cash burn and generate positive cash flow from operations” .
  • SG&A down 12% YoY (to 24.8% of revenue), reflecting streamlining, outsourcing and attrition; CEO highlighted “operational management, increased efficiencies” .
  • Dispensary set a record quarter; new drug distributor agreement added volume-based discounts and better payment terms, supporting margins and working capital .

• What Went Wrong

  • Adjusted EBITDA worsened YoY to $(7.828)M vs. $(6.252)M, with CFO noting a one-time ~$3M reduction in fee-for-service revenue unrelated to Q4 dates that weighed on results .
  • Patient services revenue fell 10.6% YoY due to a lost contract mid-2024, partially offset by new wins that will ramp over time .
  • Full-year gross profit declined 9.4% on margin compression (Part D reimbursement dynamics, DIR fee impacts), and equity fell materially YoY given cumulative losses and liabilities .

Financial Results

YoY and sequential commentary:

• Revenue +16.9% YoY (to $100.3M) and +0.4% QoQ, driven by dispensary growth tied to the California pharmacy .
• Gross profit reported as $15M with +1.8% YoY on press release; CFO cited $14.6M (note discrepancy between press and call) .
• Operating cash flow +$4.186M in Q4 (vs. $(3.882)M in Q4’23) on working capital improvements .

Segment revenue

KPIs

Guidance Changes

Additional color: Management expects progressive improvement through 2025 as capitation ramps (annualized ~$50M from deals starting Q3’24–Q2’25, ~2/3 recognized in 2025) and targets positive EBITDA and cash flow breakeven in Q4 2025 .

Earnings Call Themes & Trends

Management Commentary

• CEO: “We were able to reduce our cash burn and generate positive cash flow from operations for a second consecutive quarter, driven by disciplined working capital management… As we enter 2025, we will continue to build on our momentum through strong operational management, increased efficiencies, and strategic market expansion.” .
• CEO: “During the fourth quarter, we entered into a new multiyear agreement with our primary drug distributor, which drove substantial margin improvement starting in December, including volume-based discounts… [and] improves our payment terms and credit parameters.” .
• CFO: “Contributing to the Q4 loss was a $3 million onetime reduction in fee-for-service revenue unrelated to Q4 dates of service.” .
• CFO: “For the full year 2025, we expect revenue of $460 million to $480 million… gross profit $73 million to $82 million… adjusted EBITDA… negative $8 million to negative $17 million… [with] positive EBITDA in Q4.” .

Q&A Highlights

• 2025 growth drivers: Hitting targets requires growth across capitation, fee-for-service, and dispensary; capitation is the primary profitability lever, with clinical payroll as a % of revenue expected to fall as clinics fill (especially in Florida) .
• Florida vs. California operations: Benchmark oncology utilization higher outside CA; Florida clinics currently ~40% utilized vs. ~75% in CA, implying capacity-driven upside; aim to reach CA productivity in 2025 subject to contract execution .
• Reimbursement landscape: Potential IRA drug price impacts and any 340B changes could shift volume to community settings, a positive for TOI’s value-based model .
• Segment guidance: Management is not guiding by segment; capitation within patient services expected to be largest driver of profitability improvement, followed by dispensary .

Estimates Context

• S&P Global/Capital IQ Wall Street consensus for Q4 2024 (revenue/EPS/EBITDA) was unavailable in our data pull today; as a result, we cannot assess beats/misses versus consensus for the quarter. We attempted to retrieve: Primary EPS Consensus Mean, Revenue Consensus Mean, EBITDA Consensus Mean, and estimate counts for Q4 2024, which returned no values (S&P Global data). No estimate figures are shown due to unavailability.

Key Takeaways for Investors

• Mix shift underway: Dispensary strength offset patient services softness from a lost contract; improved drug procurement terms should support margin progression through 2025 as growth normalizes off a fully ramped pharmacy base .
• Capitation is the profit catalyst: New/expanded risk contracts (including Florida delegated model) underpin the FY25 profitability trajectory and should leverage existing clinical capacity, particularly in Florida .
• Cost discipline is real: SG&A down 12% YoY and to 24.8% of revenue; further operating leverage likely if capitation ramps as planned .
• Liquidity improved, covenant removed: Facility amendment (min cash covenant removed, $20M paydown), plus $16.5M private placement and Deerfield exchange enhance flexibility heading into FY25 ramp; management still guides to FCF breakeven in Q4’25 .
• Watch near-term seasonality: Q1’25 is guided as the trough (Adj. EBITDA $(5)–$(6)M) due to drug price resets and lower encounters; sequential improvement expected thereafter .
• Note data discrepancy: Press release cites Q4 gross profit of $15M (+1.8% YoY), while CFO remarks reference $14.6M; narrative unchanged but investors should note the difference and seek 10-K/10-Q detail for reconciliation .
• Risk/reward hinges on execution: Timely onboarding of cap lives, drug margin capture, and Florida scaling are the swing factors for achieving the targeted Q4’25 EBITDA/cash breakeven inflection .