Oncology Institute Sales Jump 22 Percent

Oncology Institute (TOI -13.41%), a provider specializing in value-based outpatient cancer care and pharmacy services, reported its second quarter 2025 earnings on August 13, 2025. The company delivered strong GAAP revenue growth of 21.5% year-over-year, with the top line (GAAP revenue) rising 5.7% above Wall Street estimates due to its fast-growing pharmacy segment and new value-based contracting wins. Revenue (GAAP) reached $119.8 million, up 21.5% year over year and surpassing the $113.3 million GAAP consensus estimate. However, net loss persisted, and the company’s earnings per share (GAAP) of $(0.15) came in below the expected $(0.12). The period showed meaningful progress in cost management and operational performance, though the bottom line remains negative and ongoing cash usage requires close monitoring.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Key Success Factors

The Oncology Institute specializes in outpatient oncology care, pharmacy dispensing, and clinical services, aiming to deliver more affordable and coordinated cancer care under value-based contracts. Value-based care means payers provide a fixed or capitated payment per patient, putting the responsibility on the provider to manage costs while achieving quality outcomes. Nearly half of the company’s revenue in 2024 came from risk-bearing (value-based) contracts, rather than traditional fee-for-service arrangements.

In Q1 and Q2 2025, the company prioritized rapid growth in its pharmacy segment, with Retail Pharmacy and Dispensary revenue reaching $49.3 million and $62.6 million, respectively, new contract wins in value-based care, and efficiency in cost structure by managing selling, general, and administrative (SG&A) expenses. Success for the business depends on expanding its value-based patient population, increasing pharmacy fills, launching new contracts in attractive geographies, and leveraging technology to keep costs in check. Regulatory compliance and effective contract pricing are also essential, given the complex nature of health care reimbursement and oversight.

Quarter Highlights: Growth Drivers, Segment Momentum, and Progress

During the quarter, revenue was propelled by standout performance in the pharmacy, or "dispensary," offering. This segment saw sales grow over 40% year-over-year, hitting $62.6 million in revenue and contributing over $11 million in gross profit. Company leadership specifically credited this growth to fill records and new contract wins, stating, “Retail Pharmacy and Dispensary set fill records, contributing $62.6 million revenue and over $11 million in gross profit in Q2.”

Patient services revenue grew 10% year-over-year to $55.9 million, helped by referral management and expansion in new markets. However, not all areas showed gains. Clinical trials and "other" revenue (GAAP) declined to $1.3 million, reflecting the company’s decision to outsource this business line. A non-cash write-off of $2.4 million related to this transition slightly weighed on gross profit and adjusted EBITDA -- a measure that strips out certain non-recurring or non-operating items for a clearer view of operating trends.

The company’s key value-based care model saw more than 50,000 new "capitated lives" added. Capitated contracts pay the company a set fee to deliver care and manage costs for each patient covered under these arrangements. The overall population under value-based contracts stood at 1.9 million at quarter-end, slightly below the 2.0 million mark from the prior year (Q2 2024), owing to roll-off of older contracts. Importantly, new contracts in Florida and Nevada brought in higher reimbursement per member, suggesting an improving revenue mix. The number of markets served increased to 20 from 14 in Q2 2024, signaling a push into new geographies, though the total clinic count declined to 80 from 87.

Gross profit rose notably faster than revenue, up 34.4% year over year at $17.5 million. Management attributed this to "exceptional performance in our pharmacy business." SG&A expense (GAAP) fell in both absolute dollars and as a share of sales, to $26.9 million from $27.9 million in the second quarter of fiscal year 2025 versus fiscal year 2024. Adjusted EBITDA, a non-GAAP metric, improved by 53.1% compared to Q2 2024, reducing the Adjusted EBITDA loss to $4.1 million from $8.7 million. Six-month free cash flow (non-GAAP) was negative $14.6 million for the six months ended June 30, 2025, a significant improvement on the negative $31.8 million posted the previous year.

Compliance complexity remains a risk. A few one-time items did affect results, most notably the $2.4 million write-off tied to clinical trials. Leadership turnover and new executive hires for technology and clinical operations, including a new Chief Administrative Officer overseeing technology and AI strategy, were announced as part of long-term efforts to drive efficiency and future growth.

Looking Ahead: Guidance and Key Metrics to Monitor

Management reaffirmed its full-year 2025 outlook, projecting revenue of $460 to $480 million, gross profit between $73 and $82 million, adjusted EBITDA loss between $8 and $17 million (non-GAAP), and free cash flow (non-GAAP) negative $12 to $21 million. For Q3 2025, adjusted EBITDA is expected to be a loss in the range of $2.5 to $3.5 million. The company stated, “expects Adjusted EBITDA (non-GAAP) of approximately $(2.5) to $(3.5) million in Q3 2025” Leadership indicated it anticipates positive adjusted EBITDA (non-GAAP) as it exits 2025 but did not provide guidance for net income or a return to overall profitability. Company commentary emphasized that guidance does not yet include any new value-based contracts in the pipeline, leaving room for potential upside if wins materialize.

Key items for investors and observers in the coming quarters will include the trajectory of net and operating losses, and any changes to the value-based population or contract mix. Monitoring growth in pharmacy revenue and performance, as well as further geographic expansion, will help gauge whether current trends can be sustained. The company closed the quarter with $30.3 million in cash and equivalents and $75 million in debt, resulting in negative stockholders’ equity as ongoing losses continue to affect the balance sheet. Management remains committed to holding SG&A expenses flat, but market performance and execution of recently won contracts will be critical to hitting financial goals.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.