ASTH

• Overall Financial Performance

  • Q2 2026 generated revenue of $973 million (up 49% YoY), adjusted EBITDA of $69 million (up 43% YoY), and a record adjusted diluted EPS of $0.80 (up 45% YoY).
  • H1 2026 free cash flow totaled $93 million, with 69% conversion of adjusted EBITDA to free cash flow. Net leverage declined to 2.26x on a trailing 12-month basis, meeting the 2.5x target 12 months ahead of schedule after the Prospect acquisition. $92 million of debt was retired in Q2.

• Core Strategic Priorities Execution

  • Responsible Growth: Growth is balanced between onboarding high-return new cohorts and maintaining profitability. The AI-native operating system has improved risk-adjusted returns for new cohorts, allowing the company to accelerate growth while exceeding profitability targets. New Medicare Advantage agreements were signed in Hawaii and Texas, with existing relationships expanded in California; new provider partnerships in the South and East Coast are expected to contribute to revenue in 2027. Disciplined tuck-in acquisitions continue to strengthen care delivery capabilities in expansion markets.
  • Prudent Full-Risk Expansion: The company's competitive advantage is reducing uncertainty for value-based care, not just assuming more risk. All full-risk cohorts that started in Q1 2026 are performing in line with underwriting expectations. The Texas delegated full-risk partnership is performing as expected after two quarters, with 3,000 new MA full-risk members added in the quarter.
  • Medical Cost Trend Management: AI extends clinician capacity to enable proactive care for all patients, rather than just high-risk individuals. Year-to-date overall medical cost trend is slightly better than the 5.2% full-year assumption. The company's flagship MSSP ACO ranked 7th out of 476 ACOs nationwide in net shared savings per beneficiary for the 2024 performance year, with its flagship ACO Reach entity ranking in the top 15% nationally.
  • Expanding Operating Leverage: AI-powered workflows in claims operations and referral management have cut handling time by more than 50%, creating capacity equal to ~60 full-time employees in the last 12 months. G&A as a percentage of revenue improved 210 basis points YoY in Q2, and the company expects full-year G&A to reach ~6% of revenue.

• Prospect Acquisition Integration

  • The one-year anniversary of the Prospect acquisition closed on July 1, 2026, with integration of Prospect onto Estrana's AI-native operating system complete. Gross provider retention remains above 99%, operating expense synergies are on track to hit the high end of the $12 million to $15 million annual target, and medical cost trend for the legacy Prospect business is slightly ahead of expectations.

• Full-year 2026 adjusted EBITDA guidance was raised to $255 to $280 million, from the prior range, reflecting broad-based outperformance across full-risk cohort maturation, Prospect synergies, and AI-driven operating leverage. The raise occurs despite the company reinvesting a mid-to-high single-digit million dollar portion of Q2 outperformance into new long-term growth opportunities.
• Full-year 2026 revenue guidance is reaffirmed at $3.8 to $4.1 billion, despite the one-time $15 million Q2 ACO REACH adjustment, as full-risk contract ramp-up offset the reduction.
• Full-year 2026 free cash flow guidance is reaffirmed at $105 to $132.5 million.
• Q3 2026 guidance calls for revenue of $1 billion to $1.03 billion and adjusted EBITDA of $72.5 million to $77.5 million.
• The guidance continues to assume zero contribution from HQAF and conservative Medicaid membership trends.
• Management reaffirmed its medium-term outlook of mid-to-high teens organic EBITDA growth, including for 2027. Expected Medicaid headwinds starting in 2027 are already accounted for in this outlook, and 2026 growth investments are consistent with this target range.

Overall Q2 2026 total revenue was $973 million, up 49% year-over-year, driven by organic growth in the care partner segment, the Prospect acquisition, and ramp-up of full-risk contracts. A one-time $15 million revenue reduction was recorded related to CMS billing adjustments for the 2025 ACO REACH performance year. By line of business: 1) Value-based arrangements: Total 1.5 million members at quarter end, with 81% of capitation revenue and 42% of total membership coming from full-risk arrangements. 2) Medicare Advantage: Stable membership, with medical cost trend performing better than full-year expectations; inpatient admissions per 1,000 members remained flat year-over-year in H1 2026, and risk scores average ~1.0, below the MA industry average, leaving medium-term upside from more accurate coding. 3) Medicaid: Membership attrition is tracking towards the high end of expectations, but adverse selection remains in line with guidance. Medical cost trend is in line with full-year expectations. The company is transitioning tens of thousands of Medi-Cal (California Medicaid) members from professional risk to full-risk arrangements over 12 months aligned with state program changes. 4) Commercial: Only a single-digit percentage of total revenue; medical cost trend has run slightly above expectations this quarter, concentrated in outpatient specialties, but management expects to mitigate this through existing operational and clinical levers. 5) Management fee income: Grew substantially year-over-year in H1 2026, driven by the Prospect acquisition and new client wins, and represents a high-margin business that leverages the company's AI capabilities.

• Medicaid membership attrition is tracking towards the high end of the company's expected range, and ongoing industry-wide Medicaid disenrollment and program changes create ongoing uncertainty for membership levels and margins.
• Commercial medical cost trend has run slightly above expectations in Q2, concentrated in outpatient specialties, though management believes it can mitigate this through existing levers.
• Forward-looking statements about growth, profitability, and integration are subject to risks and uncertainties that could cause actual results to differ materially from projections, as detailed in the company's SEC filings.

Q: Year-to-date overall medical cost trend is tracking slightly better than the 5.2% full-year guidance assumption. Commercial trend is above expectations: what is driving this, and have any segment cost trend assumptions been revised? What is the outlook for Medicare Advantage (MA) membership growth, and can it offset Medicaid attrition? / A: Medicare Advantage and Original Medicare trend is better than expected, Medicaid trend is in line with guidance including expected adverse selection, and commercial is only slightly above expectations with no revisions to full-year guidance planned. The company's payer-agnostic model will naturally see a higher percentage of revenue come from Medicare (both MA and Original Medicare) going forward, as Medicaid program changes create headwinds, so MA growth will offset expected Medicaid attrition.

Q: What is driving the planned transition of tens of thousands of California Medi-Cal members from professional risk to full-risk arrangements, and what is the expected earnings impact? / A: The transition is driven by California Medicaid program changes and compressing industry margins, and aligns the company's financial incentives with the care delivery savings its model generates. The transitions are also favorable for health plan partners, and the company expects tens of thousands of members to convert over 12 months. No explicit earnings sizing has been provided, but the alignment is expected to improve long-term outcomes for both the company and its partners.

Q: The wide implied Q4 2026 adjusted EBITDA range (from $47 million to $67 million) suggests a large step down from Q3. Is there an unusual driver of this volatility, and does management reaffirm its 2027 mid-to-high teens EBITDA growth outlook including Medicaid headwinds? / A: The wide Q4 range is an artifact of the annual guidance range, not a reflection of unusual expected weakness. Q3 has historically been the strongest quarter of the year, driven by when MSSP program profitability is accrued, with a normal sequential step down to Q4. Management reaffirms the mid-to-high teens organic EBITDA growth outlook for 2027 and the medium term; expected Medicaid headwinds next year are already accounted for, and 2026 growth investments are consistent with this target.

Q: What is the nature of the 500,000 monthly automated AI-enabled member encounters, and what benefits do they deliver? What cost categories drive strong MA performance and higher commercial trend? / A: Automated encounters include voice outreach, scheduling, text messaging, medication reconciliation, care transition support, and app notifications. Beyond reducing G&A costs, AI enables frequent engagement for all patient risk groups, including patients in rural or underserved areas, without overburdening clinicians, which is expected to lower long-term medical cost trends. MA has delivered broad-based strong performance, especially stable inpatient admissions per 1,000 members, with only normal unit cost increases. Slightly higher commercial trend is concentrated in outpatient specialties, and management expects to address it within full-year guidance.