Astrana Health(ASTH) - 2025 Q1 - Quarterly Report

Part I Financial Information Condensed Consolidated Financial Statements Astrana Health's Q1 2025 revenue increased 53% to $620.4 million, primarily from acquisitions, but net income declined 55% to $6.7 million Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $1.33 billion, slightly down from year-end 2024, while total liabilities decreased to $813.6 million, increasing total equity Key Balance Sheet Items ($ in thousands) | Balance Sheet Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $258,517 | $288,455 | | Receivables, net | $241,078 | $225,733 | | Goodwill | $416,386 | $419,253 | | Total assets | $1,331,256 | $1,354,894 | | Liabilities & Equity | | | | Medical liabilities | $204,101 | $209,039 | | Long-term debt, net | $403,894 | $425,299 | | Total liabilities | $813,550 | $840,726 | | Total equity | $750,439 | $716,726 | Condensed Consolidated Statements of Income Q1 2025 total revenue increased 53% to $620.4 million, driven by capitation, but operating income fell 32% to $20.6 million, and net income decreased 55% to $6.7 million Q1 2025 vs. Q1 2024 Performance ($ in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenue | $620,390 | $404,356 | | Capitation, net | $583,963 | $365,910 | | Income from operations | $20,583 | $30,139 | | Net income attributable to Astrana Health, Inc. | $6,692 | $14,835 | | Earnings per share – diluted | $0.14 | $0.31 | Condensed Consolidated Statements of Cash Flows Q1 2025 operating cash flow increased to $16.6 million, investing cash outflow decreased to $2.4 million, and financing activities used $44.2 million, resulting in a net cash decrease of $29.9 million Cash Flow Summary ($ in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $16,627 | $5,977 | | Net cash used in investing activities | $(2,394) | $(71,039) | | Net cash (used in) provided by financing activities | $(44,170) | $106,351 | | Net (decrease) increase in cash | $(29,937) | $41,289 | Notes to Condensed Consolidated Financial Statements The notes detail business structure, accounting policies, and key financial events, including recent acquisitions, debt refinancing, related-party transactions, and the use of VIEs across three segments - The company operates through three reportable segments: Care Partners (provider networks), Care Delivery (clinics and ancillary services), and Care Enablement (technology and MSO services)[46][47] - In February 2025, the company entered into a Second Amended and Restated Credit Agreement, establishing a $300M Revolver Loan, a $250M Term Loan, and a $745M Delayed Draw Term Loan, primarily to refinance existing debt and fund the pending Prospect acquisition[97] - Due to corporate practice of medicine laws, the company utilizes Variable Interest Entities (VIEs), such as affiliated IPAs and medical groups, which are consolidated into its financial statements[156][157] Management's Discussion and Analysis (MD&A) Management attributes Q1 2025 revenue growth to acquisitions, but higher costs led to declines in operating income and net income, with Adjusted EBITDA falling to $36.4 million Results of Operations Q1 2025 total revenue grew 53% to $620.4 million, driven by capitation, but cost of services rose 66%, leading to a 32% drop in operating income to $20.6 million and a 55% fall in net income to $6.7 million - The 53% increase in total revenue was primarily driven by acquisitions within the Care Partners segment and more enrollees transitioning to full-risk plans[203] - Cost of services increased by 66%, driven by higher medical costs associated with new acquisitions and increased participation in a value-based Medicare FFS model[204] - General and administrative expenses rose 13% to $43.9 million, mainly due to increased costs like stock-based compensation to support operational growth[205] Segment Financial Performance In Q1 2025, Care Partners revenue grew 57% to $601.0 million, Care Delivery revenue increased 9% to $33.4 million with a wider loss, and Care Enablement revenue rose 19% to $39.6 million with flat operating income Segment Performance ($ in thousands) | Segment | Revenue Q1 2025 | Revenue Q1 2024 | % Change | Operating Income Q1 2025 | Operating Income Q1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Care Partners | $600,951 | $382,318 | 57% | $44,215 | $43,196 | 2% | | Care Delivery | $33,388 | $30,719 | 9% | $(3,108) | $(238) | * | | Care Enablement | $39,562 | $33,274 | 19% | $3,535 | $3,504 | 1% | Non-GAAP Financial Measures Adjusted EBITDA decreased to $36.4 million in Q1 2025 from $42.2 million in Q1 2024, with the margin declining from 10% to 6%, primarily due to lower operating income and higher expenses Reconciliation of Net Income to Adjusted EBITDA ($ in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $6,221 | $16,862 | | EBITDA | $21,449 | $32,689 | | Adjusted EBITDA | $36,386 | $42,245 | | Total revenue | $620,390 | $404,356 | | Adjusted EBITDA margin | 6% | 10% | Liquidity and Capital Resources As of March 31, 2025, the company held $260.9 million in cash and equivalents, with liquidity enhanced by a February 2025 debt refinancing establishing over $1.2 billion in new credit facilities to support operations and acquisitions - Cash, cash equivalents, and marketable securities totaled $260.9 million at March 31, 2025[226] - In February 2025, the company entered into a new credit agreement providing a $300M revolver, $250M term loan, and a $745M delayed-draw term loan[227] Cash Flow Summary Q1 2025 vs Q1 2024 ($ in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $16,627 | $5,977 | | Net cash used in investing activities | $(2,394) | $(71,039) | | Net cash (used in) provided by financing activities | $(44,170) | $106,351 | Quantitative and Qualitative Disclosures about Market Risk The company faces interest rate risk on $412.0 million of variable-rate debt, mitigated by an interest rate collar on the Revolver Loan with a 5.00% cap and 2.34% floor - The company is exposed to interest rate risk on $412.0 million of variable-rate debt ($250.0M Term Loan and $162.0M Revolver Loan)[238] - An interest rate collar agreement is used to manage risk on the Revolver Loan, with a SOFR cap of 5.00% and a floor of 2.34%[238] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[240] - No changes were identified in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[241] Part II Other Information Legal Proceedings The company is involved in various legal proceedings, but management does not expect them to have a material adverse effect on its financial condition or operations - The company is party to various lawsuits and claims in the normal course of business, but management does not expect them to have a material adverse effect[243] Risk Factors No material changes to risk factors were reported from those disclosed in the company's 2024 Annual Report on Form 10-K - The company states there have been no material changes in its risk factors from those disclosed in its 2024 Annual Report on Form 10-K[245] Share Repurchases and Use of Proceeds In Q1 2025, the company repurchased 444,777 shares, including 300,000 from an affiliate for $10.6 million, with $40.5 million remaining for future repurchases - As of March 31, 2025, $40.5 million remained available for repurchase under the company's share repurchase plan[248] - In Q1 2025, the company repurchased 300,000 shares from its affiliate, Allied Physicians of California (APC), for approximately $10.6 million[253]