The Oncology Institute (TOI -0.24%) reported fiscal second quarter ended June 30, 2025, earnings on August 13, 2025, posting 21.5% year-over-year revenue growth to $119.8 million. Pharmacy revenue increased 41% year over year, and over 50,000 new capitated lives were added. Management reiterated full-year revenue guidance of $460 million to $480 million for fiscal year 2025, expects positive adjusted EBITDA (non-GAAP) in the fourth quarter, and highlighted meaningful scale expansion within Florida, Nevada, and California. Key insights below detail pharmacy margin expansion, the strategic shift to fully delegated risk models beyond California, and operating leverage gains from technology integration.
Pharmacy margins accelerate as The Oncology Institute’s scale grows
Pharmacy revenue accounted for 52% of total revenue in the fiscal second quarter ended June 30, 2025, with year-over-year growth of 41% in pharmacy revenue, and the company anticipates another pharmacy location will open in Florida in the second half of the year. Technological investments and increased patient volumes have contributed to improved procurement efficiency and drug margin expansion, as discussed on the earnings call, focusing on oral specialty (Part D) drugs where margin improvements are most actionable.
"That actually has a lot to do with the way in which we're procuring drugs at this point. Our scale at this point is providing new opportunities for us, including incremental rebates, as well as some other pricing considerations that's just yielding better rebates and margin overall."
-- Rob Carter, Chief Financial Officer
Improved pharmacy scale materially enhances purchasing leverage, driving durable gross margin growth while steadily reducing prescription leakage and positioning the company to offset industry-wide drug cost inflation.
The Oncology Institute expands delegated risk model outside California
During the quarter, new and expanded capitation contracts across Nevada, California, and Florida contributed to over 100,000 Medicare Advantage lives under capitation in Florida by year-end. The company’s delegated model provides operational control over utilization management, network design, and claims adjudication, increasing its influence on cost containment and care coordination compared to legacy risk-sharing structures.
"So our growth in 2025 is primarily occurring outside of California. It's primarily Medicare Advantage, but then we also just, as we discussed, started a new Medicaid risk contract outside of California. Because of the nature of utilization outside of California being much higher, across product lines, these are at higher utilization, therefore, higher PMPMs still generating substantial savings for our payer partners. So you would expect on a per-member basis higher revenue contribution."
-- Daniel Virnich, Chief Executive Officer
The expansion of delegated risk contracts into higher-utilization geographies provides both higher per-member revenue and stronger long-term alignment with managed care partners, bolstering topline scale and increasing the company’s strategic bargaining power.
SG&A leverage and AI integration fuel profitability path
Selling, general, and administrative (SG&A) expense declined to $26.9 million from $27.9 million in the prior year, including a one-time write-off, a 12% year-over-year reduction in SG&A (normalized for a one-time item) and a 580 basis point drop as a percent of revenue year over year, despite high double-digit year-over-year revenue growth of 21.5%. Management is launching artificial intelligence (AI) pilots in revenue cycle management, prior authorization, and call center operations in the third quarter to further reduce operating expenses as a share of revenue and accelerate adjusted EBITDA improvement.
"SG&A represented 22% of total revenue, a 580 basis point reduction year over year. We think there's further leverage in the model with increased scale, as well as the adoption of AI enablement we noted on our first quarter call. We are planning to launch AI pilots around prior auth, patient advocacy, and a next-gen call center in the third quarter and we'll keep you posted on their progress."
-- Rob Carter, Chief Financial Officer
Effective expense controls and rapid adoption of automation are driving substantial operating leverage, underpinning the company’s confidence in achieving positive quarterly adjusted EBITDA (non-GAAP) by the fourth quarter and creating a competitive advantage in scalable cancer care delivery.
Looking Ahead
Full-year 2025 revenue guidance remains $460 million to $480 million, with management forecasting results near the high end of the full-year revenue guidance range. Adjusted EBITDA (non-GAAP) is expected to range from a loss of $17 million to $8 million for fiscal year 2025, with positive adjusted EBITDA (non-GAAP) targeted for the fourth quarter. Sequential revenue and gross margin increases are anticipated in the third and fourth quarters, driven by the scaling of new risk contracts, pharmacy growth, and the operational maturation of major delegated network contracts in Florida.
