• Revenue: $486.3 million, a 40% increase year-over-year.
• Adjusted EBITDA: $47.9 million, a 34% increase year-over-year.
• Adjusted EBITDA Margin: Approximately 10%.
• Net Income: $19.2 million, a 46% increase from the prior year quarter.
• Earnings Per Share (EPS): $0.40, up 43% from $0.28 in the prior year period.
• Cash and Cash Equivalents: $325 million.
• Total Debt: $446 million.
• Cash Flow from Operating Activities: $29.2 million for the first half of 2024.
• Revenue Guidance: Raised to a range of $1.75 billion to $1.85 billion for the year.
• EPS Guidance: Revised to a range of $1.12 to $1.36 per share.

• Warning! GuruFocus has detected 7 Warning Signs with ASTH.

Release Date: August 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Astrana Health Inc (NASDAQ:ASTH) reported a 40% increase in revenue to $486.3 million compared to the same period last year.
• Adjusted EBITDA rose by 34% year over year to $47.9 million, demonstrating strong profitability growth.
• The company successfully integrated the Community Family Care acquisition, contributing to its robust organic growth.
• Astrana Health Inc (NASDAQ:ASTH) expanded into new markets, including Arizona and Hawaii, through strategic partnerships.
• The acquisition of Collaborative Health Systems is expected to expand Astrana's footprint and enhance its value-based care capabilities.

Negative Points

• There was a slight uptick in inpatient utilization due to a surge in COVID-19 cases in California, which could impact cost trends.
• The intended acquisition of Collaborative Health Systems is expected to run at a $10 million loss on a standalone basis in 2024.
• Cash flow from operating activities declined by $4.3 million compared to the prior year period, primarily due to increased working capital needs.
• The company did not narrow down its EBITDA guidance range, indicating potential uncertainties in achieving higher profitability.
• Astrana Health Inc (NASDAQ:ASTH) faces challenges in managing the integration of multiple new partnerships and acquisitions across different states.

Q & A Highlights

Q: Can you provide more color on the utilization trends experienced in Q2, especially regarding COVID-driven inpatient utilization in California? A: Utilization trends were within expectations for the second half of the year, with a slight uptick due to seasonality and COVID cases in California. This has been factored into our guidance for the remainder of the year.

Q: Why did you not narrow down the EBITDA guidance range despite narrowing the revenue guidance range? A: With recent transactions and our commitment to reinvest in the business, we are in a good place regarding profitability. We aim to use opportunities to reinvest in the business as they arise.

Q: Can you provide more specifics around the CHS margin ramp expectations and synergies, considering there are not many market overlaps between Astrana and CHS? A: CHS is expected to lose around $10 million on a run rate basis in 2024. We anticipate breaking even by 2025 with synergies and achieving a profitable margin by 2026. The ramp includes moving some lives from partial risk to full risk.

Q: How are you managing through the pressures on Medicare cost ratios, and what medical trend percentage did you see in the quarter? A: We are seeing stable utilization trends, with low to mid-single-digit cost trends relative to last year. Our care model, which doesn't rely heavily on risk coding, allows us to maintain stable medical loss ratios.

Q: With the CHS acquisition, do you expect to need more M&A to build provider density in new geographies, or can it be done organically? A: It will be a combination of both. We are always in organic growth mode, and the CHS acquisition provides a great opportunity to expand the rate of organic growth in new markets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.