Oncology Institute Q3 Earnings Call Highlights

Key Points

• Starling posted a second consecutive quarter of positive adjusted EBITDA, reaching $3.4 million versus a $3.5 million loss a year earlier. CFO-reported revenue rose 24.3% to $169.8 million, though the CEO cited a different figure of $159.8 million.
• Specialty pharmacy revenue grew 44% to $109.3 million, lifting its gross margin to 24.2%; management expects margins to normalize in the high teens as favorable, nonrecurring factors fade.
• Capitated revenue increased 39.5%, and the company launched a delegated contract covering about 40,000 Medicare Advantage lives in Oregon, while a planned Florida expansion is delayed. Updated 2026 guidance includes $4 million–$6 million in adjusted EBITDA and $5 million–$10 million in free cash flow.

Oncology Institute NASDAQ: STLN, referred to as Starling Oncology by executives during its earnings call, reported a second consecutive quarter of positive adjusted EBITDA as specialty pharmacy growth and stronger drug margins boosted third-quarter results.

Chief Financial Officer Rob Carter said third-quarter revenue rose 24.3% to $169.8 million from $136.6 million a year earlier. Chief Executive Officer Dan Virnich cited a different figure of $159.8 million in his opening remarks. The revenue components Carter provided totaled approximately $169.3 million, with a small portion not specified on the call.

Adjusted EBITDA was $3.4 million, compared with $0.2 million in the second quarter and a loss of $3.5 million a year earlier. Virnich said the result exceeded the company’s prior third-quarter guidance range.

Pharmacy Growth Drives Margin Improvement

Specialty pharmacy revenue increased 44% to $109.3 million, helped by a higher proportion of prescriptions filled for patients visiting Starling clinics. Carter said growth in treatment-planning visits, particularly among newly added capitated populations, also created more opportunities for pharmacy fills.

Pharmacy gross profit more than doubled to $26.4 million, and its gross margin rose to 24.2% from 16.9% a year earlier. Carter attributed the improvement to procurement and drug utilization management, as well as rebates and favorable drug-specific price movements that the company does not expect to recur.

Management expects pharmacy gross margins to normalize in the high teens in the fourth quarter and beyond. Carter also projected that 2027 drug-pricing changes under the Inflation Reduction Act would reduce specialty pharmacy revenue by less than 5% and gross margin by less than 50 basis points.

Overall gross profit rose to $30.7 million from $18.9 million, while gross margin increased to 18.1% from 13.9%.

Capitated Business Expands, but Florida Rollout Delayed

Capitated revenue rose 39.5% to $28.7 million. Fee-for-service revenue fell 21% to $31.3 million, although Carter said underlying visit volumes increased 9% year over year. Contract changes replacing certain drug billing arrangements and a more conservative reserve methodology accounted for approximately 40% of the fee-for-service revenue decline, he said.

The medical loss ratio on capitated business improved to 81% from 85.5% in the second quarter, but remained above 67.8% a year earlier. Carter expects some improvement in the fourth quarter, followed by a return to a range of 85% to 90% in 2027 as new covered lives are added.

On October 1, Starling began its first delegated capitation contract outside Florida, a statewide Oregon health plan arrangement covering approximately 40,000 Medicare Advantage lives. In Florida, the company continues to serve three anchor health plan partners across five counties but will not immediately expand statewide with them.

Virnich described the Florida delay as an operational and contract-timing issue unrelated to the company’s care model or savings performance. He said management would be cautious when forecasting future contract start dates.

The company continues to anticipate 100% capitated revenue growth in 2027 from 2026 and identified more than $1 billion in annualized spend among addressable pipeline opportunities. Virnich cautioned that only a portion of those opportunities would become effective in 2027. Carter said full 2027 guidance would be issued in the first quarter and would generally include only signed or imminent contracts.

Nexus Portal and Financial Outlook

Virnich said more than 300 network practices can access Starling Nexus, its utilization management portal. The company is seeing therapeutic pathway adherence on more than half of first-pass submissions and more than 90% formulary adherence on authorizations requiring substitution after initial review. Electronic prescribing access for practices choosing Starling as their pharmacy is now available through the portal.

For 2026, the company updated its outlook to:

• Revenue of $650 million to $660 million, including approximately $110 million in capitated revenue.
• Gross profit of $107 million to $110 million.
• Adjusted EBITDA of $4 million to $6 million and free cash flow of $5 million to $10 million.
• Fourth-quarter adjusted EBITDA of $3 million to $5 million.

Starling ended the quarter with $36.9 million in cash and cash equivalents. It reported $10.7 million in third-quarter free cash flow and $20.2 million for the first nine months, compared with a $26.9 million use of free cash flow in the prior-year period.

About Oncology Institute (NASDAQ:STLN)

The Oncology Institute is a value-based oncology care company focused on delivering comprehensive cancer treatment and related services through community-based care settings. Its model is designed to support patients throughout the cancer-care journey while coordinating treatment among oncologists, primary-care providers, specialists and other healthcare professionals.

The company provides medical oncology and hematology services, cancer screening and diagnosis, treatment planning, chemotherapy and other infusion therapies, supportive care, survivorship services and care-management programs.

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