Greetings, and welcome to The Oncology Institute Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Hueppelsheuser, General Counsel. Thank you, sir. You may begin.

The press release announcing The Oncology Institute's results for the fourth quarter of 2025 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 included within the company's press release for the fourth quarter of 2025. 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 and free cash flow. 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 are our CEO, Daniel Virnich; and our CFO, Rob Carter. Following our prepared remarks, we'll open up 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 fourth quarter and full year 2025 earnings call. Before getting into the results, I want to start by thanking our physicians, clinicians and employees across The Oncology Institute. Their continued focus on delivering high-quality oncology care in the community is what drives the progress we are seeing across the business. Most importantly, the fourth quarter marked an important milestone being our first profitable quarter as a public company from an adjusted EBITDA perspective. Based on the momentum that we have built, we are reaffirming our expectation to achieve full year positive adjusted EBITDA in 2026. The biggest driver of this progress continues to be the expansion of our capitated care model, particularly through our delegated arrangements, which enables us to manage the oncology benefit more comprehensively while aligning incentives with our payer partners across markets and delivering quality clinical outcomes to the patients that we serve. Stepping back, 2025 was a very productive year for TOI and one where we made progress across multiple areas of the organization. From a financial perspective, we delivered strong top line growth with revenue increasing approximately 28% year-over-year and surpassing $500 million for the first time in our history. We continued expanding our capitated footprint, initiating 9 new capitated contracts during 2025 in California, Florida and Nevada, representing approximately 260,000 additional patient lives under management. Another key contributor to this growth was our Part D dispensing platform, which remains an important part of our integrated care model as we continue to increase prescription volumes and attachment rates within our network. This segment of our business reached almost $270 million in total revenue and contributed close to $50 million in gross profit for the full year. From an operating standpoint, we continue improving…

Thanks, Dan, and good afternoon, everyone. I want to echo Dan's comments on what was a significant year for TOI. In the fourth quarter, we continued to build momentum across both our fee-for-service and capitation businesses as well as dispensing while at the same time moving toward positive adjusted EBITDA. On today's call, I'll start by addressing the expected impact of the Inflation Reduction Act, then review our key financial highlights for 2025, walk through our fourth quarter results and finally discuss our guidance and outlook for 2026 and beyond. Regarding the Inflation Reduction Act, we expect the impact to IMBRUVICA in 2026 to be minor, representing an unfavorable impact of less than 1% of total pharmacy revenue and gross margin. Importantly, as IMBRUVICA and additional drugs are subject to maximum fair price negotiations under the IRA, we have multiple levers available to help offset this impact, including, but not limited to, optimization of our pharmacy mix via increased utilization of alternative therapies, a function which TOI has significant control over through our centralized utilization management process. Additionally, the reimbursement shift in certain disease state categories introduced by the IRA allows TOI an opportunity to leverage relationships with drug manufacturers and distributors to reassess category economics, discussions which are benefited by TOI's improving purchasing power as we scale as a drug purchasing organization. As a result of the foregoing, we do not expect the IRA specifically to materially alter the long-term economics or trajectory of our platform. Turning to full year 2025. The year marked meaningful operational and financial progress for TOI. We delivered revenue growth of approximately 27.8% year-over-year from $393.4 million to $502.7 million, driven by continued expansion in both patient volumes and services per patient. Our fee-for-service business grew 9% year-over-year, from $136.2 million to $148.5 million,…

Thanks, Rob. In closing, 2025 represented an important step forward for TOI. We delivered impressive growth, strengthened our balance sheet and exited the year with positive adjusted EBITDA while expanding the number of patients across the country that come to us for high-quality cancer care in the communities that we serve. As we look ahead, our guidance reflects a prudent and disciplined approach while still positioning the company to invest in growth and unlock the long-term value of our platform. With that, I'll turn the call back to the operator for questions. Operator?

[Operator Instructions] The first question comes from David Larsen with BTIG.

Congratulations on the good quarter and year. I guess for your dispensing revenue in the quarter, it came in a lot higher than what we were modeling. Just any thoughts or color around the driver of that and what we should expect for '26?

Dave, thanks for the great question. Yes, the fourth quarter was a very strong quarter in terms of dispensing revenue and performance, and that was really driven by 2 things. One was ongoing operational execution in terms of mitigating leakage of scripts outside of our pharmacies and dispensaries where we could still be medication. Two was very strong patient encounter growth related to our capitated contract growth across markets.

Okay. And then did I hear you say that you're going to double the size of your Elevance contract in the state of Florida in '26?

Yes, that's our goal.

Okay. And then is the Humana contract, is that a new contract signed in the fourth quarter or in the first quarter? You did not have a deal with Humana previously. Is that correct?

Yes, that went effective in the fourth quarter, and that was for both Humana and CarePlus for Medicare Advantage lives in South Florida on behalf of risk-bearing medical groups that they partner with.

Could you just give us a sense for the size of, I guess, the TAM for Elevance or Humana? Like how much revenue or how many lives could you potentially grow into in those states for Elevance and Humana alone? I would imagine it's pretty significant.

Yes. I mean there's publicly available data on MA penetration in Florida by payer, which, if you look at that versus our current capitated book across the payers that we partner with in that state, is many multiples of our current capitated revenue. So just tremendous opportunity. And really what excites us a lot about that market is many, many years ahead of growth for TOI as we continue to execute.

Okay. And then just one more quick one for me before I hop back in the queue. For the capitated revenue, how are your margins looking? And how are volumes and cost trend looking relative to expectations, I guess, for both the fourth quarter and the first couple of months of '26?

Dave, it's Rob. Performance, both in terms of volume and MLR is coming in exactly as we expect it to be. As you know, we have real-time views into our claims. And so our ability to manage that MLR is materially higher than what you see in the market. So no surprises right now, things are looking quite good.

And then for the lives that started in 4Q of '25, would you expect to get to, say, an 85% MLR by late '26? Is that fair?

So we have 2 types of contracts. For the delegated contracts that launched in Florida, yes, I think that's fair, 85% MLR. Within the contracts that launched were also some narrow network contracts in California, and we would expect, as we mentioned in our earnings material, a lower MLR with a slightly faster ramp to that MLR as well.

And then do the plans prefer the narrow networks or the broader networks? Do they have a preference? Just any color there would be helpful.

Yes, absolutely. It's really 2 different customer types. So plans, for the most part, is our delegated capitation model where they prefer a network that is open, inclusive of both our TOI employed clinics as well as the oncology network that we contract and own after delegation. The narrow network legacy capitation model really applies to our customers that are risk-bearing medical groups with the Knox-Keene license that, again, for fully narrowing the network to one oncology provider.

The next question comes from Yuan Zhi with B. Riley.

Rob or Dan, based on the guidance, you will have a meaningful growth in the capitated contracts in 2026, almost double there. As you ramp up the capitated contracts in delegated network, should we anticipate a dip in profit margin in mid-2026 because of this patient transition period?

Yes. Rob, could you try that?

Yes. Yuan, it's Rob. Yes, specific to the delegated contracts, yes. Yes. You'll probably see a slightly higher MLR, again, just specific to those contracts. As it relates to total weighted gross margin percentage, no, I don't think that you're going to see a dip at that aggregate level.

Got it. And then on the press release, I think the latest number of affiliated and network clinics are 146. Can you share more details of that? I think the last number we saw was 86.

Yes. So yes, absolutely. So we got our 80 employed sites of care across 5 states. The network is actually larger than that. So it's over 200 by headcount in the network in Florida now, brings our total up close to 300 combined.

Got it. And then one last question related to the CAR T. I think in last June, the FDA removed the Risk Evaluation and Mitigation Strategy, the REMS, requirements for all currently approved CAR T therapies. Is your -- so in your next contract updating and signing, do you think or do you anticipate that you will need to add CAR T into your treatment offerings or contracts? Or have you thought about that?

No. We across the board do not take risk on CAR T simply because it is a very low incidence therapy and then not offered currently in a high number of locations in the community. There are some interesting businesses out there that are trying to develop models for CAR T therapy in the community. We view that as very positive for patients if that were to happen in the future. And certainly expanding access if the utilization and indications for that therapy grow over time, is definitely something we would consider adding to our value-based contracting platform. But as of right now, we do not take risk on CAR T.

The next question comes from Matthew Shea with Needham & Company.

Congrats on a strong finish to the year here. Wanted to start with maybe double-clicking on the wins in the quarter. So one of the deals with Humana and CarePlus. Anything you can share on those deals? Were those competitive processes? And I believe Humana represents an expansion deal. So any commentary on how success with the prior markets led to expansion would be helpful. And for CarePlus, I believe that's a net new logo. So I would love to hear if they were managing -- or how they were managing oncology prior? And ultimately, how do they land on TOI?

Yes. Matt, thanks for -- that's a great question. Yes. So both actually -- the patients that we have now capitated through Humana and CarePlus are net new payer partner adds. They're both in Florida, in South Florida specifically. Those are Medicare Advantage populations delegated to risk-bearing medical groups that they partner with in that market. And as far as the incumbent oncology provider for those populations, we can't really comment on that, but I will say that the reason why we were able to win that business was again sort of our reputation for providing access and high-quality care and really coordinating closely with referring primary care physicians, which is what led to sort of the initial outreach. But we're really excited about both of those relationships and our partnerships with their risk-bearing medical group constituents in that market.

Got it. Appreciate that. Maybe hitting on AI. Last quarter, you laid out the 3 buckets of RCM, prior auth and patient call center. And it sounds like prior auth is the furthest along with your early estimates suggesting $2 million, I believe, in operating expense efficiencies. What are you assuming in terms in the 2026 guide in terms of AI-related efficiencies? And should we expect majority of the near-term unlock to remain focused on prior auth? Or any update on RCM or call center?

Yes. Yes, absolutely. Thanks. That's a great question. So as we mentioned in our last earnings call, we expect in 2026, the impact of AI-related efficiencies across prior authorization, call center and RCM to generate about $2 million in SG&A savings specific to the portions of those departments that they are going to help augment. We really believe we're just starting to scratch the surface on the use cases and capabilities of agentic AI in our business model, which is just very well suited to integration in a number of different aspects. So that savings and efficiency generate over time is going to expand. We're also seeing some tremendous results in terms of metrics that impact patient care and deliver, frankly, better, more error-free patient care as it relates to things like prior authorization, turnaround time, call center responsiveness and key call center KPIs, et cetera. So it's really exciting. It's on track and sort of our 2026 estimates in terms of savings impact are on track and haven't changed.

Okay. Great. Maybe last one for me, and then I'll hop back in the queue. I appreciate you laying out the building blocks for the guidance. I guess as we're thinking about next year, as we distill the pieces you gave us, we have $150 million of capitated revenue. And then using the $27 million per month for pharmacy with modest growth, you get to like $330 million and change for dispensary, which leaves about $150 million of change -- or $150 million in change for fee-for-service revenue, which, based on where you finished 2025, implies effectively like flat to low single-digit fee-for-service growth. And I know in the past, you've talked about this segment growing in line with the market, call it, high single digits. So maybe just help us unpack the assumptions in the fee-for-service revenue outlook.

Yes. Matt, it's Rob. So I think the dynamic that you're seeing here is really about the sheer volume of capitated lives that are coming under management. With that and especially in markets like Florida, there's going to be some minor cannibalization of fee-for-service volumes. And so that's a little bit of the impact that you see there. Beyond that, we do expect to continue to see organic growth from our own practice efforts. A lot of the growth that we saw in 2025 was driven by ramping new markets like Florida and Oregon. And so as Florida and Oregon continue to mature, some of that organic growth is going to erode slightly. But the main area of focus continues to be the capitated revenue line as well as the attachment from pharmacy, and we're very excited about the growth there.

The next question is a follow-up from David Larsen with BTIG.

Can you talk a little bit about your expectations for SG&A in 2026? It looks like for the year, as a percentage of revenue, it improved by 642 basis points. Just any thoughts on how SG&A should trend in '26 as a percentage of revenue? Should we see another significant improvement there?

You will see improvement, not to that degree. As we talked about in the script, there is some investments going on for growth. The level of risk that we're taking at this point as measured by lives under management, which is represented by that significant percent growth in the capitated revenue line, requires some growth. But yes, you'll continue to see the scale there. That's something that Dan and I are keenly focused on and aware of, and you'll continue to see our discipline in that area.

And free cash flow is expected to be positive in '26?

Exiting and second half of the year, yes.

Okay. And then the fee-for-service revenue... [Technical Difficulty]

Dave, are you still there? I think we might have lost audio on Dave.

Okay. The next question comes from Yuan Zhi with B. Riley.

So for your $150 million revenue guidance for the capitated contract, can you talk about the underlying assumptions there? So right now, you are in 5 markets in Florida. Are you expanding to expand further? And how the delegated model there will contribute to this growth -- meaningful growth in 2026?

Yes. So as we commented on the script, we've got about $50 million of run rate revenue coming from our Florida-based delegated contracts. So beyond that, we have a healthy pipeline within existing markets. And so the simple answer is no, we don't need to expand beyond the markets we're in to hit that number. We are opportunistic about growth. And so if the right opportunity comes for that expansion, then we'll obviously take a very serious look at that.

[Operator Instructions] The next question is a follow-up question from Matthew Shea with Needham & Company.

I wanted to maybe take a step back and just ask a bit of a higher-level question. With the Medicare Advantage rate notice for 2027, we effectively saw the whole value-based care sell off, yourselves included, although to a lesser extent. Maybe just speak to TOI's positioning in a potentially lower rate environment. Obviously, payers have already been struggling with oncology trends. So I would expect demand would only accelerate in a time when margins are tighter, but would love to kind of get your thoughts on that topic.

Yes, absolutely. Thanks, Matt. That's actually a very important question and something that we continue to try to drive clarity with our investors on, which is the MA rate cycle and sort of pressure that you've seen health plans and full risk, medical groups that are getting a percent of premium face is actually a tailwind for TOI. Our top line Medicare Advantage reimbursement is not a percent of total premium. It's not impacted by risk adjustment. In fact, pressure on the top line for payers generally causes them to reach out more proactively when it comes to seeking opportunities to provide great care for their patients and good access while also driving improvement in utilization. And so from that perspective, that actually helps our growth. So we tend to get lumped into some of those macro issues with payers, but I just want to make it very clear that, that is actually probably a good thing for TOI.

Okay. And then maybe just a quick follow-up on that. We get a lot of investor questions about this. It's just like the converse side of that. Demand is higher, but what happens to margins? And I know you just alluded to this about how pricing is effectively independent of rate cycles. But if the pie is shrinking, there's a thesis out there that it does hit providers somewhere. Maybe just speak to how you can protect contract terms in a potentially lower rate environment. So as we see that higher demand for your offerings come on that we don't need to be concerned about, any contract structures loosening or any contracts going underwater, if you will?

Yes, absolutely. I think at this point in time, it's really important to keep in mind that we've got a very unique care model in terms of our combination of both employed and network providers in markets where we're taking population level Part B capitation. That's both good for patients because it means better access because of our employed clinic model, high-level ancillary services in the community. But it also means we've got much stronger control over the practice patterns of the physicians since a good chunk of them are employed by us, and we own the network of contracted providers. That means we're able to control care delivery and price contracts more competitively, we believe, than anybody else in the market at this point in time. So from that perspective, we are truly the best alternative for a payer, both from a pricing perspective as well as just a care delivery and coordination perspective.

Thank you. At this time, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.