Oncology Institute Inc (TOI) 2024 Q2 法說會逐字稿

Good afternoon, and welcome to The Oncology Institute Second Quarter 2024 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mark Hueppelsheuser, General Counsel at TOI. Thank you, and you may begin.

下午好，歡迎參加腫瘤研究所 2024 年第二季財報電話會議。今天的通話正在錄音。[操作員指示] 現在，我想將會議轉交給 TOI 總法律顧問 Mark Hueppelsheuser。謝謝您，您可以開始了。

The press release announcing The Oncology Institute's results for the second quarter of 2024 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.

宣布腫瘤研究所 2024 年第二季業績的新聞稿可在該公司網站 theoncologyinstitute.com 的投資者部分取得。本次電話會議結束後，也將在公司網站上提供本次電話會議的重播。

Before we get started, I would like to remind you of the company's Safe Harbor language included within the company's press release for the second quarter of 2024. 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.

在我們開始之前，我想提醒您注意公司 2024 年第二季新聞稿中包含的公司安全港語言。管理階層可能會做出前瞻性陳述，包括指導和基本假設。前瞻性陳述是基於涉及風險和不確定性的預期，這些風險和不確定性可能導致實際結果出現重大差異。有關與我們業務相關的風險的進一步討論，請參閱我們向 SEC 提交的文件。

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.

本次電話會議也將討論非公認會計準則財務指標，例如調整後的 EBITDA。這些非公認會計準則衡量標準與最具可比性的公認會計準則衡量標準的調節包含在向美國證券交易委員會提供的收益報告中，並可在我們的網站上取得。

Joining me on the call today is our CEO, Dan Virnich; 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 Dan.

今天和我一起參加電話會議的是我們的執行長 Dan Virnich；以及我們的財務長 Mihir Shah。在我們準備好的發言之後，我們將開始電話詢問您的問題。這樣，我就把電話轉給丹。

Thank you, Mark. Good afternoon, everyone, and thank you for joining our second quarter call. I want to start, as always, by thanking TOI's 126 providers and many teammates across our 73 clinics and corporate locations for another quarter of outstanding growth. The year is proving to be the most exciting in terms of growth in our history. Our services remain in high demand as payers struggle to maintain their margins in light of Medicare's V28 and increasing utilization trends.

謝謝你，馬克。大家下午好，感謝您參加我們的第二季電話會議。首先，我要一如既往地感謝 TOI 的 126 家提供者以及我們 73 家診所和公司地點的許多團隊成員，感謝他們在另一個季度實現了出色的成長。事實證明，今年是我們歷史上成長最令人興奮的一年。鑑於 Medicare 的 V28 和不斷增加的利用率趨勢，付款人努力維持利潤，因此我們的服務需求仍然很高。

As mentioned in last quarter's call, we signed a record number of new capitation contracts in Q1, and that pace continues with an additional three capitated contracts signed in Q2, covering two states and including both medical and radiation oncology services. One of the new capitated contracts is in our Nevada market, and marks our second direct-to-health plan capitation deal, a significant milestone for us that sets the stage for additional expansion in this important state in 2025. The broader pipeline, particularly in Florida, is pacing towards a very strong second half of 2024, setting the stage for Florida market profitability, 2025, and broader overall TOI profitability in mid-2025.

正如上季度電話會議中提到的，我們在第一季度簽署了創紀錄數量的新按人頭付費合同，並且在第二季度又簽署了三份按人頭付費合同，涵蓋兩個州，包括醫療和放射腫瘤服務。其中一份新的按人頭付費合約位於我們的內華達州市場，這標誌著我們的第二筆直接健康計劃按人頭付費交易，這對我們來說是一個重要的里程碑，為2025 年在這個重要州的進一步擴張奠定了基礎。更廣泛的管道（尤其是佛羅裡達州）正朝著 2024 年下半年的強勁勢頭邁進，為 2025 年佛羅裡達市場盈利能力以及 2025 年中期更廣泛的 TOI 整體盈利能力奠定基礎。

Our revenue grew 23% in the second quarter compared to the prior year period, driven by an exceptional 76% increase in oral drug revenue. Our latest full year projection for our California pharmacy has increased to over $70 million of incremental revenue as we continue to break monthly fill records.

在口服藥物收入大幅增加 76% 的推動下，我們第二季的營收比去年同期成長了 23%。隨著我們繼續打破月度填充記錄，我們對加州藥房的最新全年預測已增加至超過 7000 萬美元的增量收入。

In terms of profitability, the second quarter of 2024 saw continued reimbursement pressures on IV and oral drug margin, resulting in lower-than-expected gross margin. Q2 oral margins have compressed by 750 basis points compared to Q2 2023, driven primarily by 2023 DIR fee run out and historically low reimbursement. The DIR fee runout was anticipated, but was realized at record levels as a percentage of revenue. The specialty pharmacy industry attributes the historically low reimbursement net of DIR fees to the PBM's inappropriate response to the intended transparency of the Inflation Reduction Act.

在獲利能力方面，2024年第二季靜脈注射和口服藥物利潤率持續面臨報銷壓力，導致毛利率低於預期。與 2023 年第二季相比，第二季口頭利潤壓縮了 750 個基點，這主要是由於 2023 年 DIR 費用用完和歷史上較低的報銷額所致。DIR 費用的耗盡是在意料之中的，但其在收入中所佔的百分比卻達到了創紀錄的水平。專業製藥業將扣除 DIR 費用後的報銷額歷史較低歸因於 PBM 對《通貨膨脹減少法案》預期透明度的不當反應。

In light of the pressures seen year-to-date, we are updating our full year guidance for gross profit to $62 million to $69 million and adjusted EBITDA to negative $21 million to negative $28 million. Revenue guidance remains the same. While we are disappointed by the recent pressured performance, we feel the worst is behind us.

鑑於今年迄今所面臨的壓力，我們將全年毛利指引更新為 6,200 萬美元至 6,900 萬美元，並將 EBITDA 調整為負 2,100 萬美元至負 2,800 萬美元。收入指導維持不變。雖然我們對最近的壓力表現感到失望，但我們認為最糟糕的時期已經過去。

Looking forward to the remainder of the year, 2023 DIR runout is complete, IV margins in Q3 have improved, and with most of the capitated contracts signed in the first half of the year going live in Q3, we expect significant improvement in our net loss and in our adjusted EBITDA in the second half of the year. The annualized revenue of the new capitation deals signed year-to-date is over $41 million, and adjusted EBITDA contribution is expected to be $13 million.

展望今年剩餘時間，2023 年 DIR 運行已完成，第三季度的 IV 利潤率有所改善，並且隨著上半年簽署的大部分資本合約在第三季度生效，我們預計淨虧損將顯著改善以及我們下半年調整後的EBITDA。年初至今簽署的新按人頭付費協議的年化收入超過 4,100 萬美元，調整後的 EBITDA 貢獻預計將達到 1,300 萬美元。

In terms of cost management, I'm very proud of our operational efficiencies, which are driving flat corporate SG&A for the full year of 2024 compared to 2023 in terms of absolute dollars, and have reduced total SG&A as a percent of revenue by 15.1% for the same period despite growing the top line significantly. Our existing footprint and infrastructure in the markets we operate in today has the capacity to absorb significant growth without adding additional providers and overhead costs.

在成本管理方面，我對我們的營運效率感到非常自豪，這推動了 2024 年全年的企業 SG&A（以絕對美元計算）與 2023 年持平，並將 SG&A 總額佔收入的百分比降低了 15.1%儘管收入顯著成長，但同期仍維持不變。我們在當今營運的市場中現有的足跡和基礎設施有能力吸收顯著的成長，而無需增加額外的提供者和管理成本。

Lastly and very importantly, we believe our recent acceleration in growth in both our value-based care delivery and pharmacy businesses brings TOI to an important intersection in our corporate journey. We remain bullish on and adamantly confident in the direction of the company. It is with that in mind that after careful discussion with our Board of Directors, in consultation with management, we have decided to undertake a review of strategic, financial and operational alternatives.

最後也是非常重要的一點是，我們相信，我們最近基於價值的護理服務和製藥業務的成長加速，將 TOI 帶到了我們企業發展歷程中的一個重要交叉點。我們仍然看好公司，對公司的發展方向充滿信心。考慮到這一點，在與董事會仔細討論並與管理層協商後，我們決定對策略、財務和營運替代方案進行審查。

The purpose of this review is to be transparent, fair and thorough in our consideration of all alternatives, with the goal of enhancing shareholder value. As stated in our press release, we have engaged Leerink Partners to assist the Board with the ongoing review. The Board plans to proceed in a timely manner, but has not set a timetable for completion of its review. The company does not intend to provide further updates on its review until it deems further disclosures to become appropriate or necessary.

此次審查的目的是透明、公平和徹底地考慮所有替代方案，以提高股東價值。正如我們在新聞稿中所述，我們已聘請 Leerink Partners 協助董事會進行持續審查。董事會計劃及時進行，但尚未設定完成審查的時間表。在認為進一步披露變得適當或必要之前，該公司不打算提供其審查的進一步更新。

Now I'll turn the call over to our CFO, Mihir Shah, to provide additional details on our second quarter financial results. Mihir?

現在我將把電話轉給我們的財務長 Mihir Shah，以提供有關我們第二季財務業績的更多詳細資訊。米希爾？

Thank you, Dan, and good afternoon, everyone. Second quarter 2024 results. Consolidated revenue for Q2 2024 was $98.6 million, an increase of 22.9% compared to Q2 2023 and a 4.1% increase compared to Q1 2024. This increase is driven primarily by our California-based pharmacy, which went live in late 2023.

謝謝丹，大家下午好。2024 年第二季業績。2024 年第二季的合併收入為 9,860 萬美元，較 2023 年第二季成長 22.9%，較 2024 年第一季成長 4.1%。這一增長主要是由我們位於加州的藥房推動的，該藥房於 2023 年底開業。

Gross profit in Q2 2024 was $13 million, an increase of 8.8% compared to Q1 2024. This increase is attributed to improved IV margin, which we expect to continue improving as the year progresses. In line with normal seasonality and additional fee rebate received through the volume-based tiering in our contractual pricing.

2024年第二季毛利為1,300萬美元，較2024年第一季成長8.8%。這一增長歸因於 IV 利潤率的改善，我們預計隨著時間的推移，IV 利潤率將繼續改善。符合正常的季節性和透過我們的合約定價中基於數量的分層獲得的額外費用回扣。

SG&A remains flat despite the strong growth in our top line. SG&A including depreciation and amortization was $29.4 million in Q2 2024, an improvement of 220 basis points compared to Q2 2023. As a percentage of revenue, SG&A including depreciation and amortization was 29.8% in the quarter, improving 480 basis points from Q4 2023 and 760 basis points from Q2 2023. I'm particularly proud of the efficiencies implemented and disciplines exemplified by our colleagues in growing top line over 20% while keeping SG&A flat. This is not an easy task.

儘管我們的營收強勁成長，但銷售、管理及行政費用 (SG&A) 仍持平。2024 年第二季的銷售管理費用（包括折舊和攤提）為 2,940 萬美元，比 2023 年第二季提高了 220 個基點。本季包括折舊和攤銷在內的 SG&A 佔營收的百分比為 29.8%，較 2023 年第四季提高 480 個基點，較 2023 年第二季提高 760 個基點。我對我們的同事所實施的效率和紀律感到特別自豪，他們在保持 SG&A 持平的同時使收入增長了 20% 以上。這不是一件容易的事。

Loss from operations for Q2 2024 was $16.4 million, an increase of $1.4 million compared to Q2 2023. This is driven primarily by the impact of 2023 DIR runout and lower-than-expected IV margin as Dan previously discussed.

2024 年第二季的營運虧損為 1,640 萬美元，比 2023 年第二季增加 140 萬美元。這主要是由於 Dan 先前討論的 2023 年 DIR 運行和 IV 利潤率低於預期的影響。

Net loss for Q2 2024 was $15.5 million, an improvement of $1.4 million compared to Q2 2023. This was from the change in the fair value of derivative liabilities of $3 million in Q2 2024 as compared to Q2 2023, offset by a decrease in gross profit of $2.1 million, an increase in net interest expense of $480,000 in Q2 2024 as compared to the same quarter the prior year.

2024 年第二季的淨虧損為 1,550 萬美元，比 2023 年第二季減少 140 萬美元。這是由於2024 年第二季衍生性商品負債公允價值較2023 年第二季變動300 萬美元，但被毛利潤減少210 萬美元以及2024 年第二季淨利息支出較2023 年第二季增加48 萬美元所抵銷。

Adjusted EBITDA for Q2 2024 was negative $8.7 million. As of Q2 2024, our cash and cash equivalent balance was $36.4 million, and we had $9.9 million in short-term investments for a total of $46.4 million of cash, cash equivalents and short-term investments.

2024 年第二季調整後 EBITDA 為負 870 萬美元。截至 2024 年第二季度，我們的現金和現金等價物餘額為 3,640 萬美元，短期投資為 990 萬美元，現金、現金等價物和短期投資總額為 4,640 萬美元。

The impact of Q2 operating losses, deferred acquisition payments, and an AR growth in our new pharmacy resulted in the reduction in cash, cash equivalents, and short-term investments of $19.5 million relative to Q1 2024. We had a tremendous month of collections in July and have implemented a comprehensive drug purchase and inventory management process to further reduce working capital burn going forward.

與 2024 年第一季相比，第二季營運虧損、遞延收購付款以及新藥局 AR 成長的影響導致現金、現金等價物和短期投資減少 1,950 萬美元。我們在 7 月進行了龐大的收款活動，並實施了全面的藥品採購和庫存管理流程，以進一步減少未來的營運資金消耗。

I will now turn it back to Dan for closing comments.

我現在將其轉回丹以徵求結束意見。

Thanks, Mihir. To summarize, Q2 represented a strong quarter of growth for TOI as measured by further capitation wins across markets and further momentum in growth of our Part D business. While we are frustrated about drug margin compression related to DIR fee changes and 2023 fee hangover, a headwind affecting many oncology businesses in this space, we believe we are now through the period of fee assessments from 2023 and have positive momentum on growth and ongoing drug margin expansion efforts in the back half of 2024.

謝謝，米希爾。總而言之，第二季度代表了 TOI 強勁的季度成長，這可以從跨市場的人頭付費進一步獲勝以及我們的 D 部分業務的進一步成長勢頭來衡量。雖然我們對與DIR 費用變化和2023 年費用拖累相關的藥品利潤率壓縮感到沮喪，這是影響該領域許多腫瘤學業務的逆風，但我們相信我們現在已經度過了2023 年起的費用評估期，並且在成長和持續藥物方面具有積極的勢頭2024 年下半年的利潤擴張努力。

Lastly, we are confident we can achieve our path to profitability with our current level of cash generation. It is against that backdrop that we believe a thorough review of strategic alternatives will ensure we are pursuing opportunities that deliver the maximum value to our shareholders. With that, we're now ready to take your questions. Operator?

最後，我們有信心以目前的現金產生水準來實現獲利。正是在這種背景下，我們相信對策略選擇的徹底審查將確保我們尋求為股東帶來最大價值的機會。至此，我們現在準備好回答您的問題了。操作員？

[Operator Instructions] The first question comes from the line of Jack Slevin with Jefferies.

[操作員說明] 第一個問題來自 Jack Slevin 和 Jefferies 的線路。

I wanted to start with maybe sort of bridging forward, obviously, some margin pressures in the quarter and some improvement that's implied in the updated guidance. I wanted to get a sense for, if you could give a little more color on exactly sort of what the building blocks are getting from where we are in the second quarter on margins in particular and then moving forward.

顯然，我想從某種程度的過渡開始，本季的一些利潤壓力以及更新的指導中暗示的一些改進。我想了解一下，您是否可以對我們在第二季的狀況（特別是利潤率）以及接下來的進展中所獲得的具體內容提供更多的說明。

So I guess the three areas I'd really be curious to hear about are sort of how big was that DIR fee impact, and how should we be thinking about that improvement, and then IV margins and the layering on of the new cap contracts being the other pieces. But if you have a different way of thinking about the bridge, open to hearing that, too.

因此，我想我真正想知道的三個領域是 DIR 費用影響有多大，我們應該如何考慮這種改進，然後是 IV 利潤率和新上限合約的分層其他部分。但如果你對這座橋有不同的看法，也願意聽聽看。

Yes. Thanks so much, Jack. Appreciate that question. Obviously, a lot to unpack there. So in quarter, the impact of the DIR fee to margin was about $2.3 million, which is obviously sizable for a business our size. And hopefully this came through in the call, but the issues we're dealing with in Q1 and Q2 were the change in assessment of DIR fees to point-of-sale plus the overhang from fees assessed in arrears for 2023.

是的。非常感謝，傑克。感謝這個問題。顯然，那裡有很多東西需要解開。因此，在本季度，DIR 費用對利潤率的影響約為 230 萬美元，對於我們這樣規模的企業來說，這顯然是相當大的。希望這一點能夠在電話會議中得到落實，但我們在第一季和第二季處理的問題是 DIR 費用評估對銷售點費用的變更，以及 2023 年拖欠費用評估的懸而未決。

That obviously won't be an issue in Q3 and Q4, plus we have the go-live of all the capitation contracts we signed in the first half of this year in Q3 and Q4, all culminating in both improvement in drug margin as well as improvement in our capitated revenue in our existing sort of clinic footprint. So that's where we're seeing that fairly significant pickup in Q3 and Q4 to the rest of the year.

這顯然不會成為第三季和第四季的問題，而且我們在今年上半年第三季和第四季簽署的所有按人頭付費合約都已上線，所有這些最終都改善了藥品利潤率以及改善我們現有診所足跡的人均收入。因此，我們看到第三季和第四季到今年剩餘時間的成長相當顯著。

Okay. Got it. That's really helpful. And then so maybe just on the Dispensary piece then. If you back out some of the DIR fees, it looks like margins perhaps getting a little better, is that fair to say, on sort of the core margin ex DIR fees in Q1 and Q2, that sort of that progression we had thought about is improving? Or is it still holding about the same?

好的。知道了。這真的很有幫助。然後也許就在藥局那篇文章上。如果你取消一些 DIR 費用，看起來利潤率可能會好一點，公平地說，就第一季和第二季的核心利潤率（除 DIR 費用）而言，我們考慮過的這種進展是改善？或者它仍然保持不變嗎？

That's exactly right. Yes. So there's other factors as well besides the DIR fees. So there's additional improvement in margin related to expansion in the actual business, Part D business itself, relating to improvement in our rebate hearing. There's seasonality effects, which hit in Q1, which then wash out in the back half of the year, all which drive additional margin improvement in Q3 and Q4.

完全正確。是的。因此，除了 DIR 費用之外，還有其他因素。因此，與實際業務、D 部分業務本身的擴張相關的利潤率還有額外的改善，這與我們的回扣聽證會的改善有關。季節性影響在第一季受到影響，然後在下半年消失，所有這些都推動了第三季和第四季的利潤率進一步提高。

Got it. Really helpful, Dan. Last one for me. Mihir, I appreciate some of the comments you had on cash flows. I guess entering the quarter, the thought was some of that receivable impact we were seeing related to change in other disruptions might reverse. It didn't really reverse in the quarter. I just want to make sure I got your commentary right. How should we be thinking about moving cash burn forward in light of some of the working capital efforts that you highlighted?

知道了。真的很有幫助，丹。最後一張給我。Mihir，我很欣賞您對現金流的一些評論。我想進入本季度，我們看到的與其他中斷變化相關的一些應收影響可能會逆轉。本季情況並沒有真正逆轉。我只是想確保我的評論是正確的。鑑於您強調的一些營運資本努力，我們應該如何考慮推進現金消耗？

So the impact of Change Healthcare was almost all reversed in Q2. The increase in AR in Q2 is solely related to our pharmacy business, which -- about 90% of which is from medical, state of California medical Rx, where the state were holding funds for about three weeks due to its fiscal year end, which has been -- those funds have been collected in the first half of July. So it was timing due to state's holding funds due to its fiscal year.

因此，Change Healthcare 的影響在第二季幾乎全部逆轉。第二季 AR 的成長完全與我們的製藥業務有關，其中約 90% 來自醫療、加州醫療 Rx，該州由於財政年度結束而持有資金約三週，這這些資金已於7 月上半月籌集完畢。因此，由於國家在其財政年度持有資金，因此時機成熟。

Okay, got it. That's really helpful. I appreciate all the questions, guys.

好的，明白了。這真的很有幫助。夥計們，我很感激所有的問題。

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

謝謝。今天的電話會議到此結束。此時您可以斷開線路。感謝您的參與。