Good afternoon, and welcome to The Oncology Institute's Fourth Quarter and Year-End 2022 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'd 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 fourth quarter and year-end 2022 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. 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. A 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, Brad Hively; 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 Brad.

Thanks, Mark and thank you to everyone, joining us today. I'll start with a review of our 2022 performance and then Mihir will provide more detail around our 2022 financial results. We'll then touch on 2023. 2022 was our first full year as a public company. I'm pleased with the progress we made driving our growth strategy, with contributions from both organic and acquired growth. Despite facing certain headwinds during the year, including Medi-Cal preventing us from dispensing oral prescriptions to a portion of our California patients, a tight labor market and delays in acquired revenue, we surpassed the top end of our revised 2022 guidance for revenue, gross profit, and adjusted EBITDA, and achieved our revised guidance for covered lives. We also achieved our original guidance for gross profit, adjusted EBITDA, and covered lives. We ended the year strong, achieving record revenue in the fourth quarter, adding two new clinics including the acqui-hire of a clinic in Chino, California and a de novo opening in South Florida. This growth expands TOI's network of 101 specialty trained physicians and advanced practice providers to 62 clinics across five states. Annually, this growth represents a 17% increase in the number of clinics and providers. As mentioned on our third quarter call, we recently opened our 15th market, with our expansion into South Florida through the acquisition of two practices, Broward Oncology Associates and Hematology/Oncology Associates of Miami. We also announced a new de novo clinic in Plantation Florida which opened in December. Finally, we are pleased to announce the addition of ChenMed to our gain share partners in Florida. Our partnership with these groups helps to advance our goal of bringing value-based oncology care to Florida. I'll now provide some additional highlights from 2022. We completed $110 million strategic investment from Deerfield Management Company through secured senior convertible notes on August 9, 2022. We ended 2022 with $132 million in cash, cash equivalents and investments. We increased our market count to 15 at year-end from 10 in the prior year, including new markets in California, Florida and Texas. We remediated two of the previously disclosed material weaknesses surrounding controls over review of revenue and segregation of duties within the financial close and reporting process. For the remaining one material weakness, management has developed and continues to execute a remediation plan to address the previously disclosed material weakness around treatment of complex accounting transactions. We earned the AHRQ, the Agency for Healthcare Research and Quality certification as an accredited patient safety organization. We generated over $1.7 million in savings to patients through our dispensary co-pay assistance program. We added three new gain share contracts in Florida. We grew capitated membership by over 100,000 lives and we completed six practice acquisitions. Now I'll turn the call over to Mihir to provide additional detail on our fourth quarter and full year financial results.

Thanks Brad. Now turning to fourth quarter 2022 results. Consolidated revenue for Q4 2022 was $71 million, an increase of 36.6% compared to Q4 2021, and an increase of 9.9% compared to Q3 2022 [ph]. Gross profit in Q4 2022 was $16 million, an increase of 87.6% compared to Q4 2021. Net loss for Q4 2022 was $9.5 million, a decrease of $1 million compared to Q4 2021. Adjusted EBITDA was negative $4.9 million. Our adjusted EBITDA calculation includes provider start-up costs as well as consulting and legal fees associated with acquisitions. Further details on how we define adjusted EBITDA can be found in our 10-K. We have modified our adjusted EBITDA calculation to include Board of Directors' cash compensation. Now talking about the full year 2022. Consolidated revenue for the year ended December 31, 2022 was $252 million, an increase in 24.4% compared to prior year. Gross profit for the year ended December 31, 2022 was $52 million, an increase in 27.5% year-over-year. Net income for the year ended December 31, 2022 was $1.7 million, an increase of $12.6 million compared to the prior year. This was primarily due to increase in gross profit and the change in the fair value of warrants, earnout and conversion option derivative liabilities offset by goodwill and intangible asset impairment charges and increased operating expenses. Adjusted EBITDA was negative $24 million. SG&A expenses for the year ended December 31, 2022 were $119 million or 47.3% of revenue, compared with $83 million or 41.1% of revenue in prior year. During 2022, share-based compensation expense was $28 million or -- and SG&A related to transaction cost was $3 million. The remainder of the SG&A growth was due to headcount and other costs associated with operating as a public company and to support our revenue growth and expansion into new markets. At year-end, our cash and cash equivalent balance was $14 million and we had $118 million in investment. We expect this capital to be sufficient to support our operations and enhance our growth for 2023 and 2024. Now turning to 2023 guidance. For the full year 2023, we are guiding to a revenue range of $290 million to $320 million. This represents 15% to 27% growth over 2022. Our gross profit guidance ranged from $60 million to $70 million. And our adjusted EBITDA guidance range from negative $25 million to negative $28 million. We expect to end the year with 1.75 million to 2.4 million lives under capitation. I will now turn it back over to Brad for some summary remarks.

Thank you, Mihir. 2022 was a pivotal year for TOI. During our first year as a publicly traded company, we invested to drive growth in our priority markets, expanded our gain share portfolio and provided creative and innovative solutions to our partners. We expanded into our 15th market and surpassed 100 physicians in APPs employed by the practice. We ended the year with a strong liquidity position and prioritized clinical outcomes by launching a patient safety organization. We expect 2023 to be another year of progress and growth. To ensure that success, our focus is aligned on three primary areas; first, refining and optimizing our model and expansion markets, including optimizing referral capture and transitioning gain share contracts to population risk agreements; second, growing our legacy markets by expanding service offerings in existing clinics and expanding to new counties; and finally, reducing cash burn by improving efficiency with new technology solutions, optimizing drug margins and taking a more sustainable approach to new market entry. In summary, we are very optimistic about 2023 and look forward to sharing our progress as we move through the year. And with that, I'll turn it back over to the operator to open it up for questions. Thank you.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Your first question comes from Brian Tanquilut with Jefferies. Please go ahead.

Hi. Good afternoon, guys. How are you doing?

Good. How are you doing?

Good. Good. I guess, Brad my first question since you alluded to the California issue, just wanted to hear if you could share any color with us on what's going on there and kind of like any cures or anything going on that will address that issue going forward?

Yes. So with respect to the California issue around the Medi-Cal drug prescribing. When California transitioned to a new vendor last year – first last year it essentially precluded us from prescribing drugs to a certain portion of our Medi-Cal patients because we operated as a medically integrated dispensary not as a pharmacy. And so as we've discussed on previous calls, if and when we become licensed as a pharmacy we would then be able to prescribe drugs to those patients. We have been endeavoring to become a pharmacy. It turns out though that our physician ownership in our practice is too high right now. So we need to wait until our physician ownership in our practice goes below a certain threshold. And then, we will apply to become a pharmacy and can reaccess those scripts. But until then, we can't access those fills. So that's the latest on that issue.

Got you. I understand. And then I guess as I think about the guidance for EBITDA for this year, relative to say, the budget that you laid out during the leaseback, just curious what has changed? And what are the moving parts? And how does that stack versus your expectations say, maybe at the beginning of Q4 heading into this year?

Yes, I think we have tried to put out guidance that we believe we can achieve. So, we're taking a conservative view to all four categories on guidance. There are certain realities that we haven't grown quite, as fast as we projected to grow, in some of our expansion markets. And so, we haven't had the revenue growth needed to scale and cover some of those fixed SG&A expenses, that we had expected, which is why you heard me talk about one of our priorities is optimizing our expansion markets. We have also seen a little bit of compression on IV drug margins, as we started the year. That is to a large extent, out of our control. And so we see a little bit of pressure on the buy-and-bill IV margins. That is partially due to reimbursement changes and partially just due to drug mix and things going on-patent or off-patent. So we've taken a conservative view on guidance. Obviously we hope to beat it. But that's why you see slightly lower EBITDA than I think we had originally predicted.

And Brad maybe just to clarify or to just check, what's in the guide, any assumptions embedded for unannounced acquisitions in there right now?

Mihir, you want to take that one?

Sure. Hi, Brian. So to your point, the guidance right now does not include any unannounced acquisitions that we might do in 2023. So that would be upside from where we are right now.

Got it. Okay. Awesome. All right. Thank you, guys.

Thank you, Brian.

Next question Sandy Draper with Guggenheim. Please go ahead.

Thanks very much. I guess first as a follow-up to that, so as you close the acquisitions from the fourth quarter that got pushed out. I guess, that's the first question.

So...

Yes go ahead.

Yes. We have not closed any acquisitions this -- in 2023, that we have not announced.

Okay. But the ones that were announced that you talked about in the third and fourth quarter that got delays that caused, the lower revenue last year, are those now close?

I see. No. Both of those we believe, are unlikely to close ever.

Okay. So they're not even in your -- so those are not in your -- I was just trying to make sure, if those were included. It sounds like they're not. It sounds like they've never happened.

Yes. We think for different reasons, both of those are likely not to happen. Never, say never. That can always come back, but our view right now is that they're probably not likely to happen.

Okay. Got it. And then maybe a different -- I appreciate the comment here around the EBITDA and why it's a little lower. But, what's a little bit interesting to me is, actually relative to my model, you finished stronger gross margin in 2022 and your guide is for a little bit of improvement in gross margin in 2023. And so I'm just trying to -- it's not a lot but at midpoint it's like 50 to 70 basis points. What are the drivers there? And then I just want to make sure the incremental costs you're talking about are any of those in cost of goods? Are they all below cost of goods and down below in SG&A?

Yeah, I can start. Mihir you -- please fill in if I miss anything. The compression of IV drug margins on the buy and bill that's in cost of goods sold. So that's reflected in our gross profit guidance. We have chosen several areas to invest in that hit our SG&A including most importantly our technology department and our clinical research department. So we're investing in both of those departments which is adding some to our SG&A. We're also -- we hope to get better scaling. Some of our SG&A is variable and does scale up with the number of patients we treat. So obviously we focus on trying to get that lower and lower every year as a percent of revenue. And so we think there are some opportunities to get better scaling out of our SG&A but there's also some fixed SG&A within technology and clinical research that we've chosen to invest in for the future.

Great. That's helpful. And then that sort of leads me into my final question. And maybe still too early. I know you hired a new head of your clinical trials division or clinical research. Any updates? I guess it's been maybe six months or maybe it's only three I can't remember, but maybe too early, but any updates on sort of changes that are being made and how that's going? Thanks.

Yeah, sure. We've been spending a lot of time focused on clinical research. We think it's a real differentiator of TOI's business model. Also we think there's a lot of untapped potential even though we are very advanced much further along than most community oncology practices. With respect to clinical research, we've seen examples of community practices out there that are further along than we are. And so we endeavor to be the best. And so we've set really high targets and goals for our clinical research department. Some of the things that we have done we've rebranded the entire division. We used to call it ICRI innovative clinical research. We rebranded that TOI clinical research, which we think is more understandable from a patient perspective. And we've also changed a lot of our processes and protocols around patient identification so that we can start talking to patients earlier about clinical trials that they may be eligible for. We have very aggressive growth targets. So we will see -- we expect a lot of growth throughout 2023. We started the year strong so that feels good. But those are some of the things that we're doing around TOI clinical research.

Great. Thanks.

[Operator Instructions] Your next question comes from Gary Taylor with Cowen & Company. Please go ahead.

Hi, guys. A couple of questions. One just on the 2023 revenue guidance. How much of that pickup year-over-year $40 million to $70 million pickup is already sort of in the bag if you will because of the acquisitions that have closed and you just get the pickup to the true or the annual run rate in 2023?

Yeah. I mean we exited 2022 with -- if you look at our fourth quarter revenue about $284 [ph] run rate. So that's a significant portion of the way there already just with our exit run rate. Fourth quarter is a little bit stronger. There's a bit of seasonality so it's not a perfect annualization, but that gives you a sense.

Okay. I didn't know if the deals were in there for the full -- all the deals were in there for the full fourth quarter or not. But that's helpful. On your new gain share contracts so the three in Florida was one of those with ChenMed or all those with ChenMed, or what are different payers are providing?

Just one of those was with ChenMed, yeah.

And is that like single county kind of a pilot? I mean, obviously there are multiple counties, multiple states. So is there -- what's the outlook that that relationship could get larger?

Yeah. I mean, we have a lot of optimism for that relationship. We've started partnering with them in Central Florida. And we hope to expand that to many other locations but the initial focus is Central Florida. And then, we'll follow that on with other places for example South Florida and elsewhere where we have market overlap with ChenMed.

And then the $59 million of non-current investments, I presume, just because you've got plenty of liquidity and maybe more than you'll put to use right away made more sense to do something that would earn a little more. Can you tell us what that's in?

Do you want to trade or...

Yes. Yes. I can take that. So it's mostly in the T-bills, but the way that GAAP accounting allows us to recognize it, it needs to be in non-current. But most of it is available for our operations and acquisition use.

Okay. Thank you.

Thank you.

Thank you. I would like to turn the floor over to Brad Hively for closing remarks.

Okay. Well thank you everybody for joining our call today. We look forward to following up with you in the coming weeks. And we're very excited about TOI's path ahead. And we look forward to updating you on our progress on the next earnings call. Thank you. And have a good evening.

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