American Oncology Network, Inc.

Q1 2024 Earnings Conference Call


spk02: Good morning and welcome to the American Oncology Network's first quarter 2024 earnings conference call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Dave Gold, Chief Financial Officer at AON. Thank you. You may begin.
spk01: Good morning, everyone, and thank you for joining us to discuss American Oncology Network's first quarter of 2024 results. Before we begin, we would like to remind you that this conference call may include forward-looking statements. These statements, which are subject to various risks, uncertainties, and assumptions, could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in yesterday's press release, as well as our filings with the SEC, which can be found on our website at We undertake no obligation to revise or update any forward-looking statements or or information, except as required by law. During our call today, we will also reference certain non-GAAP financial information, such as adjusted EBITDA, which is derived from the closest GAAP measure net income. We use these non-GAAP measures as we believe it supplements nearest GAAP measure, and we believe it is useful for our investors. This presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in yesterday's press release and in our SEC filings. Joining me on the call today is our CEO, Todd Schoeners. Following our prepared remarks, we'll open the call for your questions.
spk00: Thank you, Dave. Good morning, everyone. Thank you for joining us on our first quarter 2024 earnings call. I'm pleased with our financial and operational performance as a momentum from the prior year has carried over into 2024. Diving in, we continue to make great progress executing our growth plan and strategic priorities with the completion of two practice acquisitions during the first quarter and the announcement of two additional practice acquisitions so far in the second quarter. In the first quarter, we added 17 new providers to the AM platform and a total of 40 year-to-date. Aon has a differentiated offering to physicians, providing operational autonomy, purchasing scale, integrated pharmacy and lab, centralized back office, robust tech platform, and aligned economic incentives. It is designed so that our practices and markets with a significant number of oncologists remain competitive, and our practices and markets with limited capacity can operate like larger practices and gain the benefit of scale. Consistent with our growth strategy, we expanded our presence during the quarter in our existing markets of Texas with the addition of Woodlands Cancer Institute and Maryland with the onboarding of Bay Hematology Oncology. In addition, in early April, we announced network growth with strategic expansions in Hawaii and Georgia. The practices that we acquired in the quarter have been able to immediately benefit from our integrated care platform that provides numerous novel advantages to patients and providers. Our key differentiators include our integrated in-house clinical services like specialty pharmacy and lab, as well as our centralized operations and technology platform, which drive better practice economics, reduce administrative burden, and allow physicians to focus on what is most important, delivering high-quality patient care. This straightforward but differentiated value proposition helps to fuel our M&A pipeline and support our longer-term growth strategy. Notably, on April 1st, we announced another key enhancement to our service offering with the launch of Meaningful Insights Biotech Analytics, or MEBA, an innovative healthcare technology company servicing the pharmaceutical industry and our network by optimizing and personalizing healthcare treatments. MEBA curates and applies advanced artificial intelligence technologies to extract meaningful insights, accelerating advances in cancer care and patient outcomes. I'm very excited about the opportunity and impact this platform will have in the oncology and broader healthcare space. And we see it as a way to further support and improve the utilization of our ancillary services and the expansion of our clinical platform. Lastly, I'd like to highlight our strong engagement scores across all of our stakeholders. As an organization, we demonstrated best-in-class net promoter scores of 75% or greater from our physicians, team members, and most impressively, over 90% from our patients. I'm extremely grateful to our team and all the great work they do to create the best outcomes for our patients every day. Since our founding, we've been disrupting the existing community oncology landscape in a cost-effective and scalable way by growing our integrated care platform. We demonstrated our highly successful strategy by growing the business from our inception in 2018 to almost $1.3 billion in 2023. Today, we partner with over 240 providers spanning 21 states plus the District of Columbia to ensure the delivery of high-quality, cutting-edge cancer care to patients across the United States. We are excited to continue our momentum in 2024, maximizing our growth, improving efficiencies, and continue to execute our robust pipeline of opportunities. Finally, I'd like to thank Dave for his contributions to Aon over the last several years. Dave has been instrumental in helping to set up strong finance functions and help us become a public company. As recently announced, Dave will step down from Aon this month with Dave Asher becoming our interim CFO. And with that, I'll turn the call over to Dave Gould to provide more financial detail on our first quarter results.
spk01: Thanks, Todd, and thank you to everyone for joining us on the call today. I've truly enjoyed my time at Aon and would like to thank Todd and the rest of the Aon team for all the support over the last several years. So now let's dive into our quarterly results. Revenue was $364.3 million for the first quarter of 2024, as compared to $303.7 million for the year-ago period, an increase of $60.6 million, or 20%. The overall increase was primarily attributable to an increase in revenue per encounter of 12.8%, driving $59.7 million of the revenue increase, and a 6.2% increase in patient encounters between comparable periods, driving $18.7 million of the revenue increase. During the first quarter, cost of revenue increased $76.4 million to $354.9 million, as compared to $278.5 million in the year-ago period. The increase was primarily driven by drug and medical supply costs due to increased patient encounters and increased cost per encounter. Patient encounter volume growth increased cost of revenue by $14.9 million, while a cost per encounter drove a $42.8 million increase. The increase in cost of patient encounters was driven by a combination of higher drug and supply costs, as well as drug and service mix patients required. Cost of revenue also includes equity-based compensation of $13.3 million. Net loss before non-controlling interest was $24.9 million for the quarter of 2024 as compared to net loss before non-controlling interest of $1.5 million for the first quarter of 2023. Adjusted EBITDA was $2 million for the first quarter of 2024 as compared to $4 million for the year-ago period, a decrease of $2 million. Moving on to our balance sheet and liquidity, at the end of the first quarter, we had a total liquidity of $132.7 million. comprised of cash and cash equivalents of 74.9 million, short-term marketable securities of 30.1 million, 26.7 million of incremental borrowing capacity under the PNC loan facility, and 1 million of incremental borrowing capacity under the PNC line of credit. We also had 81.3 million outstanding under the PNC loan facility bearing interest at 7.1%, and the PNC line of credit was undrawn. I'll now turn back over to Todd for closing remarks.
spk00: Thank you, Dave. I'm proud of the progress we've made during this quarter with our continued expansion in existing markets, as well as with the exciting launch of MEVA, which uses data to drive more accurate and personalized treatment plans for our patients. Today, we are better positioned to deliver high quality and affordable care to more patients in their communities, and we will continue to make investments in our industry-leading platform of services to position us for ongoing future success. As the only true national oncology platform, we are excited to be the destination of choice for community oncology practices, enabling them to successfully grow and better treat patients in their community. With that, I'll turn it over to the operator to open the line for any questions.
spk02: Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. Confirmation tone will indicate that your line is in the question queue. And you may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we pull for questions. Thank you. I would like to turn the floor back to Todd Schoenhurst for any closing comments.
spk00: Thank you, Camilla. We are excited about the opportunities ahead of us and are committed to delivering value to our patients, partners, and shareholders. We look forward to updating you on our second quarter results on our next earnings call. Thank you for your time today.
spk02: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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