The Oncology Institute, Inc. (NASDAQ:TOI) Q4 2022 Earnings Call Transcript

Mihir Shah: 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.

Brian Tanquilut: Got it. Okay. Awesome. All right. Thank you, guys.

Brad Hively: Thank you, Brian.

Operator: Next question Sandy Draper with Guggenheim. Please go ahead.

Sandy Draper: 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.

Brad Hively: So…

Mihir Shah: Yes go ahead.

Brad Hively: Yes. We have not closed any acquisitions this — in 2023, that we have not announced.

Sandy Draper: 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?

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

Sandy Draper: 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.

Brad Hively: 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.

Sandy Draper: 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?

Brad Hively: 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.

Sandy Draper: 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.