Good afternoon, and welcome to The Oncology Institute Third 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 would 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 third quarter 2023 are available at the investors section of the company's website, theoncologyinstitute.com. A replay of this call will also be available on 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, 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.

Thank you, Mark. Good afternoon everyone and thank you for joining our third quarter call. I'm excited by the progress made this quarter and want to begin again by thanking our clinical staff and teammates for their remarkable contributions to furthering community-based oncology care for our patients every day and driving efficiency and innovation in our clinical model. Their collective performance has resulted in another impressive quarter of financial growth. Starting with the top line, I'm very pleased to report that in the quarter, we achieved 26% revenue growth compared to Q3 of 2022, supported by strong demand for our services. Importantly, our organic growth rate was 20% and our same-store sales growth was 17%. Our performance in the quarter demonstrates our ability to execute our strategy as we significantly grew the top line while improving profitability. Gross profit has improved sequentially since we announced the headwind around IV drug margins in Q1 2023. Adjusted EBITDA improved $1.4 million compared to Q3 2022. Through a concentrated effort to improve collection timeliness, we have seen improvement in our cash position and expect the improvement to continue in Q4 2023. As such, we expect to have adequate funds to fulfill our expansion objective in 2024 and remain on track to achieve positive adjusted EBITDA by end of next year. Now I would like to highlight a few operational achievements since our last call. First, we hit a milestone by opening our 70th clinic. We anticipate four additional locations in Q4 in South Florida and we'll use our expanded footprint in Broward and Dade counties to serve a new value-based contract, which I'll touch on shortly. Second, we added five physicians in the quarter, primarily in Florida, bringing our total provider count to 112. Third, a significant portion of our providers have successfully…

Thank you, Dan, and good afternoon, everyone. As Dan shared we are pleased with our third quarter results. Lives under contract are at 1.8 million. I would like to point out that the Q2 acquisition of four radiation oncology clinics, we have now expanded radiation oncology risk on 130,000 of our existing lives. Third quarter results. Consolidated revenue for Q3 2023 was $82 million, an increase of 26% compared to Q3 2022, and a 2% increase compared to Q2 2022 [ph]. Gross profit in Q3 2023 was $16 million, an increase of 22% compared to Q3 2022. As mentioned in our Q2 call, we are seeing the results of our efforts to reduce overheads, which produced SG&A, including depreciation and amortization of $30 million in Q3 2023, a decrease of 9.7% compared to Q3 2022. As a percentage of revenue, SG&A was 36.5% in the quarter, down 1,000 basis points from Q2 2023. Loss from operations for Q3 2023 was $14 million, a decrease of $6.2 million compared to Q3 2022. Net loss for Q3 2023 was $17 million, an increase of $14.7 million compared to Q3 2022, preliminarily due to the change in the fair value of conversion options, derivative and earn-out liabilities offset by an increase in gross profit. Adjusted EBITDA for Q3 2023 was negative $5.4 million. Our adjusted EBITDA calculation does not add back provider startup costs, nor the consulting and legal fees associated with acquisition costs. Further details on how we define adjusted EBITDA can be found in our 10-K. Of note, starting 2022 Q4, we have modified our adjusted EBITDA calculation to now include cash compensation paid to our Board of Directors. As of the quarter end, our cash and cash equivalent balance was $27 million, and we have $16 million in investments for a total of $87 million of cash and cash equivalents and investments. Now turning to guidance, we are reaffirming our full year 2023 guidance. As a reminder, our revenue guidance 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. We continue to expect to end the year with 1.75 million to 2 million lives under capitation. I will now turn it back over to Dan for some summary remarks.

Thanks, Mihir. I want to close our call by providing an update on our progress towards meeting our four key strategic priorities, which I outlined during last quarter's call. Priority number one, eliminate cash burn. Q3 of 2023 was the lowest SG&A as a percent of revenue we have seen since going public. This came after our restructure, which we completed in Q2, and we expect to achieve continued benefit in this key ratio as we scale through 2024. Priority number two. Expanding patient lives under care through value-based partnerships. We continue to drive margin improvement in our legacy markets through three key efforts. One, ongoing expansion of capitated value-based partnerships. We have several near-term pipeline opportunities, which will expand our already dominant footprint as a value-based oncology provider in these markets. Two, expansion of radiation oncology. This provides enhanced continuity of care for patients requiring radiation to the differentiator to cure play medical oncology practices and drives margin on our fee-for-service business. Three, expansion of our clinical trials program. We are investing in infrastructure and technology to continue to drive randomization opportunities with the patients we serve in our legacy markets. We are truly differentiated in our ability to bring trials to patient populations that are challenged with access to these potentially life-saving opportunities and it is a key opportunity to add margin and manage risk for our payer partners. Priority number three, proving our new market. Our fully capitated agreement with a national payer in Florida is a historic milestone for TOI. We are excited to prove our model which means dramatically lower costs for our payer partners while maintaining high standards of care. We believe follow on growth opportunities in new markets using this new direct to health plan model will be a key driver of capitated growth for us in upcoming years. Priority number four, leading the value-based oncology market. We remain the largest value-based oncology provider group in the country by lives served and revenue under value-based arrangements. We strongly believe we can continue to advance this lead by being an employer of choice for oncologists, driving innovation in community-based cancer care for the patients and payers that we serve and look forward to continued focus on our top four priorities as we move forward. With that, we're now ready to take your questions. Operator?

Thank you. [Operator Instructions] The first question comes from the line of Brian Tanquilut with Jefferies. Please go ahead.

Hey, good afternoon and thanks for taking the questions. It's Jack Slevin on for Brian. I wanted to start with the Florida cap contract. I know sort of working towards that point has been a big part of the story since you all came public, so congrats on that front. Maybe just to get into the nuts and bolts right away, is there any way to size, maybe the immediate opportunity in 2024 both from a revenue and gross profit perspective? And then maybe any thoughts you could add in terms of what you can do with that contract to scale it over time as you continue to build out the footprint in Florida?

Yes, absolutely. I think the things that make this new capitated sort of contracting model really attractive to TOI and thank you for the question. It's a really great one. One, it includes both medical and radiation oncology capitation. Two, it's structured in a way that we will be working, not just through our employer clinics, but with independent oncologists, which provides a number of benefits for TOI and for patients. And three, with this relationship as well as several that are in the pipeline in 2024 because it's a national payer, if we do a fantastic job, which I'm confident we will there should be follow-on expansion opportunities to build the relationship. It's a much larger pipeline than the sort of delegated medical market, which has been our historic and very important partners for the last 16 years.

Got it. That's helpful. It's great color. Then maybe just stepping to the guidance for the full year based on the performance you've got to date, it looks to me both based on sort of the progress you've seen on the SG&A front and sort of the way things have progressed that we might be leaning towards the lower end of the gross profit range to hit on EBITDA. Is that the right way to think about it or can you give me sort of the moving pieces there considering sort of that SG&A pathway that you guys have been able to show some progress on?

Sure. I can take that. I think we should be doing okay in the gross profit range. As you know, we went through some restructuring in our SG&A in the first half of this year. So I think that has some overhang that is not flowing through the bottom line for the full year yet. So our exit run rate would be much better than what we see it for the full year, for this year.

Got it. That makes sense. And then last one from me, just on looking at the cash flow, we've got almost $10 million of free cash burn in the quarter. I appreciate the comments you gave on the confidence in getting to EBITDA positive by the end of next year. Can you just walk me through sort of the moving pieces on the cash flow side to think about as you build that progression forward, should it really just be sort of a step down of a few million less than the EBITDA path or are there any larger items we should think about as you achieved sort of that progression on EBITDA? Thanks.

Yes, yes, excellent question and good point out about the $10 million ramp. Our $10 million spend this quarter, which as you can see from the prior quarters, is close to $6 million to $7 million better than the prior quarter, right? So this was our onset of from second quarter to third quarter. We did put significant focus in the timeliness and accuracy of our collection, which we are also seeing benefit of. Taking that to next year, you are right, we should see most of the burn would be from negative adjusted EBITDA, some CapEx and potentially some acquisitions. So we do not see any other non-structure spend next year.

Got it, really helpful. Thanks again and congrats on the quarter.

Thank you.

Thank you.

Thank you. There are no further questions at this time. I would now like to turn the floor over to Daniel for any closing comments.

Thanks so much and thank you all for joining our earnings call today. In summary, I'm very pleased with our performance in the third quarter. I'm really looking forward to wrapping up the fourth quarter of this year. Again, this past quarter we delivered strong growth year-over-year, expanded our gross margin and reduced SG&A, all of which is helping drive us towards our elimination of cash burn and path to profitability towards the end of next year. And we are seeing incredible growth opportunities in our pipeline as outlined with our new relationship we are starting in Florida and several additional opportunities, which we expect to announce in the upcoming quarters. Thank you all for joining today and that concludes my comments.

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