The Oncology Institute, Inc. (TOI) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call demonstrates strong financial performance with improved MLR and profitability in Florida, positive growth in dispensary attachment rates, and significant free cash flow improvements. The Q&A reveals optimism about expanding health plan agreements and leveraging pharmacy networks. Although management was vague about specific health plans, the overall sentiment remains positive due to the company’s strategic growth and profitability in key markets. Despite the lack of market cap data, the positive financial and strategic developments suggest a likely stock price increase.
Key Financial Performance
Revenue Revenue for the first quarter was $147.4 million, up 41.2% year-over-year from $104.4 million in the prior year period. This growth was driven by strong capitated revenue growth and record performance from the Specialty Pharmacy business.
Specialty Pharmacy Revenue Specialty Pharmacy revenue was $87.5 million, representing 59.4% of total revenue and growing 77.6% year-over-year. This growth was driven by a 103% increase in the number of prescription fills and efforts to reduce avoidable leakage to outside pharmacies.
Capitated Revenue Capitated revenue grew 54% year-over-year to $26.9 million, driven by new market momentum and the continued ramp of delegated arrangements in Florida.
Fee-for-Service Revenue Fee-for-service revenue was $32.2 million, down approximately 10% year-over-year despite increasing visit volumes. This decline reflects the impact of mix driven by active drug formulary management, more conservative reserves against collections, and modest pricing pressure in the IV drug channel.
Gross Profit Gross profit for the first quarter was $23.3 million, up from $17.2 million in the first quarter of 2025, reflecting continued top-line expansion across both segments. However, overall gross margin declined to 15.8% from 16.5% due to a nonrecurring rebate recognized in the prior year and the lower margin profile of the delegated business.
Specialty Pharmacy Gross Profit Specialty Pharmacy gross profit was $16.8 million, growing 78.1% year-over-year from $9.4 million in the prior year period. Gross margin was essentially flat at 19.2% versus 19.1% a year ago, supported by TOI's procurement function and utilization management program.
Patient Services Gross Profit Patient services gross profit was $5.7 million compared to $6 million in the first quarter of 2025. Gross margin declined to 9.7% from 11.3%, primarily due to new ramping delegated contracts and a conservative fee-for-service reserve approach.
Adjusted EBITDA Adjusted EBITDA for the first quarter was a loss of $2.4 million, an improvement from a loss of $5.1 million a year ago. This improvement reflects the continued ramp of Florida delegated arrangements, growing Specialty Pharmacy platform, and cost discipline.
Operating Cash Flow Operating cash flow for the quarter was negative $2.3 million, an improvement from negative $5 million in the first quarter of 2025, reflecting reduced operating losses.
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Operating Highlights
Proprietary Provider Portal: TOI is preparing to launch a proprietary provider portal this summer. The portal aims to strengthen provider engagement, drive adherence to clinical pathways, and provide access to ancillary services like Part D dispensing, clinical trials, and care navigation.
Florida Market Expansion: TOI achieved profitability in Florida, reflecting the maturation of capitated relationships. Expansion is planned across 11 additional counties for Medicare Advantage members in Q3, increasing coverage to 25 counties and approximately 200,000 lives under delegated capitation arrangements.
Specialty Pharmacy Growth: Specialty Pharmacy revenue grew 78% year-over-year to $87.5 million, driven by increased patient volumes, optimized workflows, and reduced leakage to outside pharmacies. Gross margin was 19.2%, supported by drug pricing strategies and central clinical infrastructure.
AI-Enabled Operational Initiatives: TOI launched AI initiatives in revenue cycle management, prior authorization services, and patient call centers, achieving $2 million in operating expense savings for 2026. These initiatives improve cost efficiency and user experience.
Shift to Value-Based Care: Capitated revenue grew 54% year-over-year, now representing 45.6% of patient services revenue, up from 33% a year ago. This reflects a strategic shift towards value-based care models.
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Risk or Challenges
Fee-for-Service Revenue Decline: Fee-for-service revenue decreased by approximately 10% year-over-year, despite increasing visit volumes. This decline is attributed to active drug formulary management, conservative reserves against collections, and modest pricing pressure in the IV drug channel.
Gross Margin Decline in Patient Services: Patient services gross margin decreased from 11.3% to 9.7% year-over-year, primarily due to new ramping delegated contracts and conservative fee-for-service reserve approaches.
Seasonal Challenges in Q1: Q1 is seasonally the most challenging period due to deductible resets and annual drug cost increases, creating natural headwinds for financial performance.
Convertible Note Refinancing: The company has $85.9 million in senior secured convertible notes maturing in August 2027 and is in late-stage discussions for refinancing, which could pose financial risks if not successfully renegotiated.
Operational Complexity: The expansion of managed care footprint, delegated arrangements, and operational complexity increases the need for robust legal, compliance, and operational oversight, posing risks if not managed effectively.
Pricing Environment and Inflation Reduction Act: The evolving pricing environment, including the phase-in of the Inflation Reduction Act, could impact the Specialty Pharmacy business's margins and revenue.
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Guidance & Outlook
2026 Revenue and EBITDA Guidance: The company reaffirms its 2026 revenue guidance of $630 million to $650 million, with approximately $150 million of capitated revenue. Adjusted EBITDA is expected to range from $0 to positive $9 million.
Free Cash Flow Projections: The free cash flow outlook for 2026 has been updated to a positive range of $5 million to $15 million, reflecting improved economies of scale and favorable vendor renegotiations.
Capitation Growth in Florida: The company anticipates expanding existing plan partnerships across 11 additional counties for Medicare Advantage members in Q3 2026, increasing total MA lives under delegated capitation arrangements to approximately 200,000 across 25 counties. This expansion is expected to boost both capitated revenue and Part B pharmacy business.
New Clinic Openings: Seven new TOI clinics are expected to open in 2026 to support the expanded patient population and ensure high-quality coordinated care.
Provider Portal Launch: The proprietary provider portal is set to launch in summer 2026, aimed at enhancing provider engagement, adherence to clinical pathways, and access to ancillary services like Part D dispensing, clinical trials, and care navigation.
Specialty Pharmacy Expansion: Pharmacy access in Florida is expected to expand to delegated network members in the second half of 2026, broadening the ability to capture both Part B and D scripts.
AI-Enabled Operational Initiatives: The company remains on track to achieve $2 million in operating expense savings in 2026 through AI integration efforts in revenue cycle management, prior authorization services, and patient call centers.
Q2 2026 Adjusted EBITDA Guidance: Adjusted EBITDA for Q2 2026 is projected to range from a loss of $1 million to positive $1 million, with momentum expected to build through the remainder of the year.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you talk about your delegated risk arrangements in Florida, including coverage, medical expense trends, and profitability?
A:The company will be network adequate across 25 counties by July 1, coinciding with the expansion of multiple health plan agreements covering about 200,000 MA lives in a delegated capitation model. The MLR performance is slightly better than the target of 85%, and the Florida market is now profitable on a 4-wall EBITDA basis.
Q:What causes the significant delta in MLR performance compared to Evolent Health?
A:The company attributes its better MLR performance to its hybrid employed and network care delivery approach, tight control over care delivery and patient experience in employed clinics, and high engagement with network providers through its portal and pathway integration.
Q:Are you bearing risk for Part D in the delegated model, and can you push delegated lives through your specialty pharmacy?
A:The company only takes risk on Part B, while Part D is fee-for-service revenue with a margin of over 19%. This revenue flows through their pharmacies and dispensaries, benefiting both capitated and non-capitated members. Additionally, having a pharmacy in the network allows them to deliver Part B medications at their pricing, leveraging their scale.
Q:Are you talking to additional health plans in the Florida market beyond Elevance?
A:Yes, the company is in discussions with additional health plans in Florida and other markets for the delegated capitation model, with updates expected in the next earnings call.
Q:Can you provide additional color on dispensary growth and attachment rates?
A:Attachment rates have exceeded expectations due to workflow changes implemented last year, which continue to pay dividends. Improvement is expected quarter-over-quarter as workflows are refined and additional value-based lives come on the platform.
Q:What is the rollout plan for the proprietary network portal, and what financial benefits are expected?
A:The portal will be accessible to 100% of non-employed providers in the delegated contract network by Q3. It is expected to drive additional adherence to care pathways and formulary visibility. Financial benefits related to Part D fills are anticipated but not included in the current guidance due to timing and visibility uncertainties.
Q:How did the company achieve the target of 200,000 lives in Florida by July 1?
A:The company added an incremental 130,000 MA lives with major carriers in Florida, but specific health plans were not disclosed.
Q:What explains the $20 million free cash flow improvement despite unchanged adjusted EBITDA and gross margin guidance?
A:The improvement is due to negotiations with key suppliers, particularly on the drug side, leveraging the company's growth and scale.
Q:Are fully owned clinics ready to enter all 25 counties in Florida under the delegated model?
A:The company is preparing to have clinics in place to adhere to their ratio of employed clinics and MSO providers in the additional counties by the time they go live with the additional lives.
Q:Can the Specialty Pharmacy dispense drugs outside of oncology?
A:No, the Specialty Pharmacy focuses exclusively on oncology-specific medications, including oncolytics and medications supporting chemotherapy pathways.
Q:Can you elaborate on the CMS enhancing oncology model and the $2 million Medicare savings?
A:The savings were achieved in periods 2 and 3 of the enhancing oncology model, an episodic total cost of care risk model. The savings stem from adherence to value-based therapeutics and the high-value cancer care program designed for Part A avoidance. Specific MLR performance or total risk pool numbers were not provided.
Q:How will the portal change provider actions and save money?
A:The portal will centralize utilization management efforts, streamline prior authorizations, and drive adherence to care pathways and formulary. It also encourages engagement in ancillary services like pharmacy and clinical trials.
Q:What are the long-term AI opportunities beyond 2026, and are they included in the 2028 targets?
A:The 2028 targets do not include additional AI efficiencies beyond the initial $2 million forecast for 2026. Current AI use cases include call center, RCM, and prior authorization, with potential expansion into care navigation and other areas. The company sees substantial opportunities to drive additional operational efficiencies.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the health plans contributing to the additional 130,000 MA lives in Florida. Additionally, they did not provide MLR performance or total risk pool numbers for the CMS enhancing oncology model cohort, citing a lack of immediate data.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Florida life
MLR
Specialty Pharmacy
TOI
arrangement
benefit scale
capitation
care
commitment
contract
cost
drug
expansion
fill
footprint
improvement
loss period
margin
market
member
mix
model
momentum
optimization
outlook
partnership
patient
pharmacy
phase
platform
point
portal
pricing
profitability
provider
quality
ramp
service
state
term
update
value
TOI Transcript
The Oncology Institute, Inc. (TOI) Q1 2026 Earnings Call Transcript
Positive5-8
The earnings call demonstrates strong financial performance with improved MLR and profitability in Florida, positive growth in dispensary attachment rates, and significant free cash flow improvements. The Q&A reveals optimism about expanding health plan agreements and leveraging pharmacy networks. Although management was vague about specific health plans, the overall sentiment remains positive due to the company’s strategic growth and profitability in key markets. Despite the lack of market cap data, the positive financial and strategic developments suggest a likely stock price increase.
The Oncology Institute, Inc. (TOI) Q4 2025 Earnings Call Transcript
Positive3-13
The earnings call summary indicates a positive financial performance with increased revenue, adjusted EBITDA, and free cash flow. The company has raised its revenue and EBITDA guidance for 2025, suggesting confidence in future performance. Although there are risks and uncertainties highlighted, the overall outlook remains positive with expected profitability and cash flow positivity. The strategic initiatives, including AI enablement, are likely to drive future efficiencies. Despite the absence of a market cap, the positive financial metrics and guidance suggest a stock price increase in the 2% to 8% range.
The Oncology Institute, Inc. (TOI) Q3 2025 Earnings Call Transcript
Positive11-13
The earnings call summary and Q&A session indicate positive sentiment: strong revenue growth expectations, improved gross margins, sustainable profitability, and positive free cash flow by Q4 2025. The pharmacy business is expanding, and new contracts are expected to boost growth. Despite some unclear responses, the overall outlook is optimistic, with AI initiatives and strategic expansions. The positive impact of external changes like lower drug costs further supports this view. However, the negative cash flow and reserve adjustments are minor concerns, leading to a positive, but not strong positive, sentiment.
The Oncology Institute, Inc. (TOI) Q2 2025 Earnings Call Transcript
Positive8-13
The earnings call highlights strong financial performance with increased pharmacy revenue and improved gross margins. The Q&A section reveals positive insights on drug pricing reforms and growth in patient lives, despite some vague responses from management. Overall, the company's strategic initiatives and financial metrics suggest a positive outlook, likely boosting the stock price by 2% to 8% over the next two weeks.
TOI Report
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