Astrana Health, Inc. Price & Performance (ASTH)

Any among other things, statements regarding the company's guidance for the year ending 12/31/2025. Continued growth acquisition strategy, ability to deliver sustainable long term value, ability to respond to the changing environment, operational focus, strategic growth plans and acquisition integration efforts. Although the company believes that the expectations reflect in its forward looking statements are reasonable as of today, Those statements are subject to risks and uncertainties that could cause the actual results to differ materially from those projected. There can be no assurance that those expectations will provide to be correct. Information about the risks associated with the investing in a AstraZeneca's health is included in its filings with the Securities and Exchange Commission. Which we encourage you to review before making an investment decision. The company does not assume any obligation to update any forward looking [indiscernible] as a result of new information, future events, changes in market condition or otherwise except as required by law. Regarding the disclaimer language would also like you to refer to Slide two of the conference call presentation for further With that, I'll turn the call over to Astronics Health's President and Chief Executive Officer, Brandon Syn. Please go ahead, Brandon. Good afternoon, and thank you all for joining us today.

Our fourth quarter and full year results reinforce the strong momentum we continue to build as we scale the nation's leading patient centered payer agnostic healthcare platform.

We are proud of what Astrana has accomplished this year. Advancing our mission to deliver high quality, high value and accessible care to communities nationwide. In 2024, we expanded our footprint significantly while delivering strong financial performance across both the top and bottom lines. Our ability to execute and sustain rapid growth even amid a complex macroeconomic environment challenging reimbursement dynamics, and shifting utilization trends underscores the strength of our model and the discipline of our execution. Our success is built on the consistent execution of the four key pillars in the Strata playbook, quarter after quarter. First, are sustainably growing our membership and patients served expanding access to high quality care for more Americans. Second, we are deepening our alignment with patient outcomes through responsible risk progression in our value based contracts Third, we are delivering excellent patient outcomes and improving care quality while effectively managing costs and fourth, we are driving operational excellence across our organization through our proprietary care enablement platform. To bring our playbook to life, I'll begin by sharing a recent patient story. Then I'll highlight some of our financial results for the year which reflect our success in executing on these four strategic pillars, After that, I'll provide a review of our progress and provide key business updates before handing the call to Sean we'll go into more detail our financial performance and guidance outlook.

While today's call is focused on our financial performance, the true heart and soul of our business what drives everything that we do, is the impact So with that in mind, I'd like to share an anonymized patient vignette one of many illustrates the meaningful difference our technology enabled care model is making for our members and every day. Recently, of our dual eligible members, Amy, was identified as a patient requiring highly personalized support by the risk ratification model we built our homegrown care management tool. Named Pathways, This determination was made due to the complex set of health challenges that Amy faces. Including COPD, diabetes, hypertension, high cholesterol, and serious mental illness. To make things worse, upon checking in with her, our care management team discovered that previously unreported cataracts were significantly impacting her daily life.

And that the patient did not want to seek surgery to her fear of anesthesia. Our team stepped in with a personalized holistic care plan created in pathways which addressed not only in Amy's physical and mental health needs, but also tackled food and security and aimed to ease her anxiety about the cataract procedure.

Pathways also help the care team coordinate kept her engaged connected her to essential community resources, and even explored the possibility of her utilizing a service animal to help address her anxiety. Our utilization and care management teams worked closely with specialists in our care partners network to coordinate her cataract surgery in a comfortable outpatient setting. A key advantage of our fully integrated delegated care model They also worked to make sure that you could afford her medications, and adhere to the appropriate treatment plan. Amy's heartfelt words to our team I can see again Serve as a powerful reminder of the impact of our model. Allowing her to live in independence going forward. Amy's story is one of many that showcase how closing gaps and driving coordination in our complex healthcare system isn't just a moral imperative it also creates meaningful business value as we make investments in our patients' health today that prevent costly and unnecessary inpatient utilization later in their lives. I'll now segue into covering key highlights to our financial performance in 2024. In the fourth quarter, we delivered total revenue of $665,200,000 an 88.4% increase over the prior year period. And adjusted EBITDA of $35,000,000 reflecting 20.8% growth year over year.

For the full year of 2024, Astrana generated $2,030,000,000 of total revenue a 47% increase from the prior year. While adjusted EBITDA reached hundred and $70,400,000 up 16.2% year over year.

Growth was driven primarily by our Care Partners segment, which grew 52% year over year to $1,950,000,000 These strong results were achieved even as we made significant strategic investments in our growth initiatives and integration capabilities, which caused an approximately $13,000,000 drag With that, let's take a deeper dive into the four pillars of the Astrana playbook.

We continue to make significant headway in our first pillar, sustainable membership growth.

In 2024, we saw 55% membership growth in our Care Partners segment driven primarily by the conversion of CFC from our care enablement client Business to our Care Partners business the acquisition of CHS and our organic growth efforts. We also made significant progress in the second pillar of our strategy, responsible risk progression in our value based contracts. By the end of twenty twenty four, approximately 73% of our total capitation revenue came from full risk arrangements. We anticipate this percentage will continue to grow Year over year, in the short to medium term. We have taken a disciplined approach to inpatient care management as we transition more of our membership from shared risk to full risk arrangements.

As a result, inpatient utilization in our full risk business has remained flat to slightly down On a mix and seasonality adjusted basis, Reflecting our disciplined approach to care coordination, and cost management, Turning to the third pillar, we remain focused on driving quality and patient outcomes while managing cost Astrana. We are proud of the meaningful work we have done improving care quality across our membership. In 2024, approximately three quarters of our senior members received an annual wellness visit. Based on the insights from these visits, patients were proactively referred into the appropriate care management and disease management programs supported by our clinical teams and care partners network, to help manage chronic conditions more effectively, As in Amy's story earlier, we continue to leverage our care platform to increase gap closures across membership yielding improvements in closure rates and star ratings across key metrics including but not limited to blood pressure control, and hemoglobin A1c.

And further underscoring our commitment to quality, eight of Astrana's affiliate provider groups were recognized with the highest elite five star status in all categories the 2024 Standards of Excellence survey, by America's physician groups.

Moving on to Medical Cost Trends. Like the rest of the industry, we experienced some utilization headwinds in 2024 but we're able to mitigate much of their impact. In aggregate, across all lines of business, we ended 2024 with a 5.3% utilization Astrana. Approximately half national blended average trend across Medicare, Medicaid and commercial. We avoided double digit expense trends in all of our lines of business maintaining a low single digit trend Medicare, a mid single digit trend in commercial and a high single digit trend in Medicaid. These results reflect our continued commitment to providing members with high quality care While leveraging technology driven care management, disease management, care coordination programs that now serve over million members nationwide.

Closing with our fourth pillar, we continue to expand our proprietary Care Enablement platform to better serve physicians and providers while driving operational excellence, across the organization. Late last year, we began a care enablement partnership with Provider Health Link or PHL, a provider network in Georgia. We will support PHL in serving and we expect the group to be successfully onboarded onto our platform in the first half of twenty twenty five.

Additionally, we have made significant investments in automation and AI driven enhancements within our platform to improve efficiency and scalability We plan to continue these investments in 2025 as we position ourselves for sustained growth and M and A integration activity.

We anticipate realizing approximately $10,000,000 in operational efficiencies from these investments by early twenty twenty six, I'll conclude my prepared remarks by highlighting our recent organic growth in M and A activity. Which took place against the backdrop of a more cautious approach for many of our peers. While we were relatively less aggressive in M and A activity during 2022 and 2023, we shifted to a more strategic and assertive approach 2024 for several key reasons.

First, based on our analysis of publicly available data, Our expectations for Medicare Advantage rates were more favorable than the industry average. And early indications suggests that outlook is materializing. Second, to our long standing care model, and disciplined execution, we believed we were less exposed to sector wide headwinds such as risk adjustment changes, and utilization trends. This positioned us to scale rapidly given our uniquely profitable financial profile. Finally, our proprietary and flexible technology platform allows us to scale, and integrate large scale acquisitions more efficiently. After carefully evaluating hundreds of deals, over the past several years, we announced two acquisitions we believe are most strategically aligned with Astrana's mission.

First, we announced Collaborative Health Systems or CHI We anticipate integration for CHS will be substantially completed by Q2 of twenty twenty five. In the fourth quarter of twenty twenty four, CHS delivered approximately $170,000,000 of revenue aligning with our expectations. Looking ahead, we expect CHS to contribute approximately $350,000,000 to $400,000,000 of revenue for the full year of 2025 and approach breakeven late in the year with profitability coming in 2026. We also announced our plans to acquire Prospect Health, a move that aligns strategically and operationally with Estrada.

With over three decades of experience serving communities in Southern California, Prospect operates a payer agnostic line of business agnostic risk bearing business. Just like our Care Partners business, Importantly, Prospect's delegated operational model aligns very closely with our own. Presenting a compelling opportunity to drive operating leverage through our technology platform. We also see significant potential enhance care quality and access particularly in California, where Prospect's network is highly complementary drivers. Especially in Orange County, which is geographically adjacent to our Los Angeles headquarters. Tom will provide more detailed updates on prospects later in this call. In closing, we are proud of the impact we've made and our disciplined execution against our playbook throughout 2024. We remain excited about the opportunities ahead and we look forward to continuing to drive long term value for patients, physicians, payers and shareholders.

With that, I'll hand it over to Sean. Thank you, Brandon, and thanks everyone for joining us today. I'll dive into our 2024 financials in more detail. We delivered another year of strong performance. Generating $2,030,000,000 in total revenue for 2024. An increase of 47% from $1,390,000,000 reported in 2023. This growth was fueled by gains across all three of our core business segments. Collectively, adjusted EBITDA reached $170,400,000 reflecting a 16.2% rise from 146,600,000.0 in the previous year.

As Brandon discussed, new market and integration costs related to Astrana's strategic growth efforts resulted in approximately $13,000,000 of drag to profitability in 2024. As for utilization, we experienced a mid single digit total expense trend which included a 2% to 3% change in unit cost, and a 3% to 4% utilization trend in aggregate.

With variations across lines of business. We closed the year with a solid liquidity position. Ending with $288,500,000 in cash and cash equivalents. This reflects our strategic initiatives including the acquisition of CFC, CHS, as well as the buyout of the remaining equity interest in GMG. On the debt side, total debt including lease liabilities stood at $471,800,000 compared to 475,800,000.0 in the prior quarter. Our strong liquidity profile continues to support our commitment to long term sustainable growth. In 2024, we announced the acquisition of the physician assets along with the businesses and assets of Prospect Health Systems.

We remain enthusiastic about the potential for the Prospect acquisition to significantly expand our provider network and enhance our ability to offer high quality accessible care to our members. On 01/11/2025, the non physician assets within Prospect Health System filed for bankruptcy under Chapter 11. We're working closely with the prospect team to ensure this filing does not impact our close timing. We still expect this transaction to close in Q2 twenty twenty five. Prospect has been performing in line with our expected since the transaction was announced. We have received their fiscal year 2024 audited financials. For the calendar year 2024, Prospect generated $1,200,000,000 in revenue and $94,000,000 in adjusted EBITDA. It gives us financial flexibility ahead of the Prospect acquisition we have successfully replaced our previously committed three sixty four bridge with a new upsize credit agreement supported by an expanded and highly supportive lender group. This new facility includes a $300,000,000 revolver a $250,000,000 term loan A and a $745,000,000 delayed draw of TLA for Prospect.

We were able to secure a reduction in pricing extended maturity date through 2029 and enhanced financial covenants. Giving us as well as strengthening our capital structure As we have previously discussed, our best estimate of pro form a net leverage based on 2024 financials for prospect and Astrana is approximately 3.4 times at close.

We remain committed to delever below the three times range within nine months post I'll wrap things up here by sharing our guidance for the full year 2025 guidance for the first quarter of twenty twenty five and for the medium term. For the full year of 2025, we expect revenues to be in the range of $2,500,000,000 to $2,700,000,000 with adjusted EBITDA projected between $170,000,000 and $190,000,000 For the first quarter of twenty twenty five, we expect to generate between $600,000,000 and $650,000,000 of revenue.

Adjusted EBITDA ranging between $32,000,000 to $37,000,000 Finally, we want to reiterate our previously stated medium term adjusted EBITDA guidance of at least $350,000,000 in 2027. Despite the current environment, we remain confident our ability to drive sustainable profitable I want to share several assumptions that we are making in providing 2025 guidance.

On the cost trend, we are expecting mid single digit cost Astrana. Similar to 2024. [indiscernible]