Astrana Health, Inc. Q1 FY2025 earnings call

Strategic Pillars - Sustainably growing membership to expand access to high-quality care.

• Strengthening alignment between patient outcomes and financial performance through risk progression in value-based arrangements.
• Improving care quality and patient outcomes while managing costs effectively.
• Driving operational excellence through the proprietary care enablement platform.

Integration and Acquisitions - CHS integration is complete with over $10 million in G&A efficiencies identified; CHS expected to reach breakeven in 2025 and profitability in 2026. - Prospect Health acquisition expected to close in summer, expanding provider network in Southern California and positioning to serve ~1.7 million members in value-based arrangements, contributing ~$81 million in adjusted EBITDA and $12-15 million in synergies. - Leadership team additions: Georgie Sam as Chief Data and Analytics Officer, Glenn Sebaca as Chief Accounting Officer, Rita Pugh as Chief People Officer. - Industry Developments: Encouraged by 2026 Medicare Advantage rate notice, Proposition 35 impact viewed as neutral to EBITDA, no negative impact from V-28, Part D risk exposure de minimis.

In the first quarter, Astrana Health generated total revenue of $620.4 million, a 53% increase compared to the prior year period. The Care Partners segment was the key driver, growing 57% year over year to $600 million. CHS contributed $95 million in the quarter. The Care Partners segment accounted for a significant portion of the total revenue, with its 57% growth year over year being a major contributor to the overall revenue increase.

Revenue - Full-year 2025 revenue guidance: $2.5 to $2.7 billion. - Second quarter 2025 revenue guidance: $615 million to $665 million. - Medium-term adjusted EBITDA guidance: At least $350 million in 2027. - Adjusted EBITDA for full-year 2025: $170 million to $190 million. - Second quarter 2025 adjusted EBITDA guidance: $45 million to $50 million.

Risks - Uncertainties in forward-looking statements due to risks and uncertainties that can cause actual results to differ materially from projections. - Impact of industry developments such as California's Proposition 35, V-28, and potential regulatory changes that could affect the business.

Q: Go into more detail on the CHS integration.

A: Integration is complete, staff are on the platform, $10 million in G&A efficiencies identified, and improvements in care margins expected as care model is fully implemented.

Q: Speak to the Prospect deal.

A: HSR approved, waiting for regulatory approvals in California, preparing integration activities like upgrading data layers and staffing up. Pro forma combined entity expected to have ~60% of revenue related to Medicare.

Q: Medicaid trend above average. Is it due to flu season?

A: Medicaid was above average due to large spike in ER and lab utilization, but trend is as expected for the year.

Q: Second quarter revenue guide light. What's driving it?

A: Some quarterly variances due to seasonality, full-risk member conversion weighted to back half of the year, and Medicaid renegotiations.

Q: Thoughts on Medicare Advantage rate update and 2027 guide.

A: Encouraged by rate notice, rate increase was favorable to assumptions, and confident in 2025 and 2027 guides.

Q: Thoughts on Prop 35 and California MCO tax.

A: Prop 35 impact viewed as net neutral to EBITDA, ongoing discussion at state level with federal policy implications.

Q: Performance of ACO REACH and RTA.

A: Absorbed RTA with offset via stop loss and other means, slight drag on revenue due to RTA.

Q: Role of Georgie Sam as Chief Data and Analytics Officer.

A: Ensuring data infrastructure is set up for large revenue and member numbers, and turbocharging AI applications for better insights.

Q: Stress on organization due to growth.

A: Stresses in managing rapid growth, integrating employees, and scaling systems, but team is focused on patients and delivering growth profitably.

Q: Earnings power of Prospect.

A: Prospect's audited financials and stub period show it will contribute ~$81 million in adjusted EBITDA, with all signs pointing to that number being solid.

Q: Medical trend in quarter and year.

A: Confident in full-year trend of 4.5% blended across lines of business, slight spike in Q1 due to flu, but trend is as expected.

Q: Impact of tariffs.

A: Part D risk exposure is de minimis, and model is resilient to potential tariff impacts.

Q: New member risk adjustment coding.

A: Newer cohorts have slightly lower RAF, but it's a normal dynamic contemplated in the guide, and risk adjustment strategy is confident.