Astrana Health, Inc. Q2 FY2025 earnings call

• Strong financial results with total revenues of $654.8 million and adjusted EBITDA of $48.1 million, both at the higher end of guidance ranges.
• Transitioned membership into more strategically aligned full risk arrangements, with 78% of revenue now from full risk contracts.
• Closed the Prospect Health acquisition on July 1st and is actively deploying the Astrana playbook for integration.
• Medical cost trends remained well controlled, with both Medicare Advantage and commercial lines below 4.5% and Medicaid slightly above but improved sequentially.
• Reaffirmed 4.5% trend outlook for the year and remains confident in industry-leading outcomes.
• Addressed industry developments including Medicaid policy changes, health insurance exchanges, and risk adjustment, stating Astrana is well-positioned to navigate uncertainties.

For the second quarter of 2025, Astrana Health reported total revenues of $654.8 million and adjusted EBITDA of $48.1 million. Revenue grew 35% year-over-year, driven primarily by growth in the Care Partners segment. Approximately 78% of revenue now comes from full risk contracts, up from 60% a year ago and 75% last quarter. Medical cost trends were well controlled, coming in slightly below the full year expectation of 4.5% on a weighted basis.

• Reaffirmed full year 2025 total revenue guidance of $3.1 billion to $3.3 billion and adjusted EBITDA guidance of $215 million to $225 million.
• Reiterated medium-term adjusted EBITDA guidance of at least $350 million in 2027.
• Expected further EBITDA expansion in 2026 as full risk cohorts mature and synergies from the Prospect integration ramp.
• Third quarter revenue expected to be between $925 million to $965 million and adjusted EBITDA between $65 million to $70 million, with both third and fourth quarters expected to be approximately similar in adjusted EBITDA contribution due to Prospect.

• Medicaid policy changes pose a manageable headwind, but full impact depends on state implementation; Astrana is engaging with state and payer partners to preserve coverage.
• Health insurance exchanges have limited exposure (under 5% of membership), but face pressure from elevated acuity and potential subsidy changes after 2025.
• Potential enrollment drops in Medicaid for undocumented individuals, which is baked into conservative scenario analysis.
• Risk adjustment phase-in of v28 model, but Astrana sees no negative impact and RAF scores remain stable.

Q: With Prospect closing, how have their year-to-date numbers been and any notable differences since closing? Also, thoughts on capital deployment priorities?

A: Prospect has strong performance, integration is ongoing, and capital deployment will pause until leverage targets are met with opportunistic small items considered.

Q: On 4.5% blended utilization, any geographic breakdown?

A: Vast majority of revenue is from California; ex-California business is tracking towards breakeven.

Q: On RAF scores at 1.02, how does Prospect impact this?

A: RAF scores for Prospect are in line, and Astrana is insulated with the gap vs others continuing to grow.

Q: On Medicaid rates and trend mismatch, how have rates trended in 2025?

A: Rates in California are still in negotiation, with a conservative view baked in.

Q: On Exchange utilization rush, any assumptions?

A: Exchange has limited exposure, and a conservative view is baked in.

Q: On synergies upside, what levers are there?

A: Synergies driven by operational G&A improvements, clinical process consolidation, and payer valuation of increased care coordination.

Q: On California Exchange and Medicaid legislation, impact?

A: California Exchange has less fraud, and Medicaid legislation on undocumented individuals is baked into conservative enrollment drop assumptions.

Q: On data collection robustness and prior period adjustments?

A: Astrana's model with delegated operations leads to stability, and risk adjustment is accurate with audits regularly performed.

Q: On performance outside California, update on claims delegation?

A: Progress with payer partners towards delegated contracts in states like Texas and Nevada, with path to profitability on track.