The Oncology Institute anticipates Q4 adjusted EBITDA positivity as pharmacy revenue grows 41%

Earnings Call Insights: The Oncology Institute, Inc. (TOI) (TOI) Q2 2025

MANAGEMENT VIEW

* CEO Daniel Virnich reported continued "strong momentum" into the second quarter, highlighting year-over-year revenue growth of more than 20% and second quarter revenue of $120 million. He noted, "Our value-based contract pipeline remains equally strong with contracts effective in Q2, adding over 50,000 capitated lives in Nevada and California."
* Virnich pointed to new and expanded capitation contracts, including an expanded relationship with Silver Summit Health Plan in Nevada and a verbal agreement to expand with an Elevance health plan in Florida. The Florida expansion will "add over 40,000 additional Medicare Advantage lives, more than doubling our current relationship with this payer and bringing our total Medicare Advantage lives under capitation in the Florida market across all payers to over 100,000."
* Virnich announced that Kristin England joined as Chief Administrative Officer in July, overseeing central business operations and technology strategy, including AI enablement in revenue cycle management, prior authorization, and the call center. He also shared that Anne McGeorge was elected as the new Chair of the Board following Richard Barish's retirement.
* CFO Robert Carter stated, "Consolidated revenue of $119.8 million increased 21.5% compared to Q2 of 2024," and pharmacy revenue of $62.6 million "increased 41% compared to Q2 of last year and 27% sequentially and now represents 52% of total revenue."

OUTLOOK

* Carter reiterated the full year 2025 outlook: "Specifically, we expect revenue of $460 million to $480 million. Given the growth we've seen in the first half of the year, we believe that we will reach the high end of that range. Adjusted EBITDA of a loss of $17 million to a loss of $8 million."
* Carter projected, "In Q3, we expect adjusted EBITDA of negative $2.5 million to negative $3.5 million. And as Dan noted, we are on track to share positive results in Q4."
* Management expects quarterly revenue to "continue to increase sequentially in Q3 and Q4" driven by new risk contracts, especially the Florida delegated network deal, and ongoing pharmacy business growth.

FINANCIAL RESULTS

* The company reported gross profit of $17.5 million, a 34% increase year-over-year, and gross margin of 14.6%, which rose by 140 basis points compared to the previous year. SG&A in Q2 was $26.9 million, down from $27.9 million in the prior year period, including a $2.4 million one-time write-off related to outsourcing the clinical trials business. Normalizing for this item, SG&A would have decreased 12% year-over-year.
* Adjusted EBITDA was negative $4.1 million, improved from negative $8.7 million in Q2 2024. Free cash flow for the first half of 2025 was negative $14.6 million, a 54.1% reduction year-over-year.
* Pharmacy revenue now makes up more than half of total revenue, supported by "improved drug margins, a temporary use of cash and an increase to our rebate AR as payment of rebates vary by manufacturer," according to Carter.
* Loss from operations was $11.2 million, narrowing from $16.4 million in Q2 2024. Cash and cash equivalents at quarter end were $30.3 million.

Q&A

* David Michael Larsen, BTIG: Asked about dispensing gross margin drivers. Carter responded, "Q2 of last year was the worst impact from the EARP clawback... dispensary margin in Q2 of 2024 was... artificially low. Even normalizing for that, though, you're looking at double-digit growth year-over-year."
* Larsen: Inquired about drug pricing reform impacts. Virnich replied, "We continue to believe that it's going to be net positive for TOI... reduction in pricing on our capitated business is obviously favorable for capitated margins and for our patients."
* Yuan Zhi, B. Riley: Asked about managing oncology costs amid industry trends. Virnich stated, "2025 was no surprise in the sense that we saw another year of huge increases in drug cost trend... but internally, when we look at our drug cost trend, it's been stable."
* Robert Michael LeBoyer, NOBLE: Sought details on patient growth and contract mix, including Florida expansion. Virnich said, "Florida will end the year for TOI with right around 100,000 Medicare Advantage lives for Medicare Advantage that we're taking risk on... If you look at the total number of lives that TOI has under risk right now, we're right around 1.9 million."
* Larsen: Clarified the fully delegated risk arrangement. Virnich explained, "When we say fully delegated, what we are saying specifically is we are taking risk for Part B for oncology, medical and radiation oncology spend, but the delegation part... refers to TOI is now given authority by our payer partner for 3 services: utilization management... network design... and claims adjudication."

SENTIMENT ANALYSIS

* Analysts maintained a positive to slightly positive tone, frequently offering congratulations and focusing on margin drivers, cost management, and contract expansion. Larsen described the quarter as "very good," and Zhi and LeBoyer both congratulated the company.
* Management’s tone was confident and forward-looking during prepared remarks, emphasizing progress and momentum. In Q&A, executives remained composed and provided detailed answers, even when clarifying technical aspects of contracts and cost drivers, with statements such as "We are confident..." and "We are on track..."
* Compared to the previous quarter, both analysts and management sustained a positive tone, but management expressed greater certainty regarding reaching profitability in Q4 and highlighted a broader scale of contract wins and operational leverage.

QUARTER-OVER-QUARTER COMPARISON

* Revenue growth accelerated to 21.5% year-over-year in Q2 from 10.3% in Q1, and pharmacy revenue growth strengthened from 24.2% in Q1 to 41% in Q2.
* Management reiterated the full-year guidance and increased confidence in hitting the higher end, whereas last quarter the tone was more cautious, with no mention of likely outperforming the guidance range.
* The expansion in Florida and brokerage of new contracts was a shift from the Q1 focus on initial contract launches. The addition of AI initiatives and leadership changes was new this quarter.
* Analysts continued to focus on margin progression, pharmacy growth, contract structure, and risk exposure, with a growing emphasis on execution in new markets.

RISKS AND CONCERNS

* Management highlighted temporary margin pressures from new capitation contracts, stating, "when a new capitation contract begins... we tend to experience lower margin as TOI generates value... through discrete and active management of patient populations, which includes utilization management, formulary and steerage activities, which take time to operationalize and mature."
* Carter noted that pharmacy AR has increased due to revenue growth, which could impact cash flow timing but was described as a "positive indicator."
* Analysts probed drug pricing and risk concentration in certain medications, but Virnich responded, "we see no situation where we have a single drug that is placing substantial risk on TOI's portfolio."

FINAL TAKEAWAY

The Oncology Institute delivered strong revenue and margin improvements in Q2 2025, driven by robust pharmacy growth, expanding value-based contracts, and disciplined cost control. Management reaffirmed full-year guidance and signaled confidence in reaching adjusted EBITDA profitability in Q4. Key strategic advances included further penetration in Florida, a strengthened leadership team, and the integration of AI to drive operational efficiencies and future margin gains.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/toi/earnings/transcripts]

MORE ON THE ONCOLOGY INSTITUTE

* The Oncology Institute, Inc. (TOI) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4813378-the-oncology-institute-inc-toi-q2-2025-earnings-call-transcript]
* Seeking Alpha’s Quant Rating on The Oncology Institute [https://seekingalpha.com/symbol/TOI/ratings/quant-ratings]
* Historical earnings data for The Oncology Institute [https://seekingalpha.com/symbol/TOI/earnings]
* Financial information for The Oncology Institute [https://seekingalpha.com/symbol/TOI/income-statement]