Astrana Health, Inc. Reports Third Quarter 2024 Results

About this update from Astrana Health Inc.

Company to Host Conference Call on Thursday, November 7, 2024 , at 2:30 p.m. PT / 5:30 p.m. ET ALHAMBRA, Calif. , Nov. 7, 2024 /PRNewswire/ -- Astrana Health, Inc. ("Astrana," and together with its subsidiaries and affiliated entities, the "Company") (NASDAQ: ASTH), a leading provider-centric, technology-powered healthcare company enabling providers to deliver accessible, high-quality, and high-value care to all, today announced its consolidated financial results for the third quarter ended September 30, 2024 . "Astrana's strong third quarter continues to reflect the outcomes we are driving with the Astrana care model and value-based care enablement platform. We continued to see strong organic and inorganic growth across our businesses while delivering high-quality care and managing costs effectively in the quarter. We are confident in our platform's ability to continue improving access, quality, and coordination of care for around 1.1 million patients in local communities nationwide," said President and CEO of Astrana, Brandon K. Sim . Financial Highlights for three months ended September 30, 2024 : All comparisons are to the three months ended September 30, 2023 unless otherwise stated. Total revenue of $478.7 million , up 37% from $348.2 million Care Partners revenue of $455.8 million , up 42% from $320.9 million Net income attributable to Astrana of $16.1 million , down 27% from $22.1 million Earnings per share - diluted ("EPS - diluted") of $0.33 , down 30% from $0.47 Adjusted EBITDA of $45.2 million , down 13% from $52.0 million Financial Highlights for the nine months ended September 30, 2024 : All comparisons are to the nine months ended September 30, 2023 unless otherwise stated. Total revenue of $1,369.3 million , up 32% from $1,033.6 million Care Partners revenue of $1,301.4 million , up 36% from $957.3 million Net income attributable to Astrana of $50.1 million , up 4% from $48.4 million Earnings per share - diluted ("EPS - diluted") of $1.04 , up 1% from $1.03 Adjusted EBITDA of $135.3 million , up 15% from $117.6 million Recent Operating Highlights On October 4, 2024 , the Company closed the acquisition of all of the outstanding membership interest in Collaborative Health Systems, LLC ("CHS") and all of the outstanding equity interests in Golden Triangle Physician Alliance and Heritage Physician Networks for an aggregate purchase price of $37.5 million , subject to customary adjustments, plus earnout payments in an aggregate amount of up to $21.5 million . Segment Results for three months ended September 30, 2024 : Three Months Ended September 30, 2024 (in thousands) CarePartners CareDelivery CareEnablement Other IntersegmentElimination CorporateCosts ConsolidatedTotal Total revenues $ 455,760 $ 34,728 $ 40,930 $ — $ (52,708) $ — $ 478,710 % change vs. prior year quarter 42 % 20 % 11 % Cost of services 369,835 29,114 19,604 — (13,335) — 405,218 General and administrative(1) 47,139 6,971 15,012 — (39,370) 15,315 45,067 Total expenses 416,974 36,085 34,616 — (52,705) 15,315 450,285 Income (loss) from operations $ 38,786 $ (1,357) $ 6,314 $ — $ (3) (2) $ (15,315) $ 28,425 % change vs. prior year quarter (4) % 31 % (2) % (1) Balance includes general and administrative expenses and depreciation and amortization. (2) Income from operations for the intersegment elimination represents rental income from segments renting from other segments. Rental income is presented within other income which is not presented in the table. 2024 Guidance: As we adjust our full-year outlook to incorporate CHS's financial contribution, we are raising our revenue guidance and narrowing our net income attributable to Astrana, Adjusted EBITDA, and EPS guidance for the year ending December 31, 2024 . ($ in millions, except per share amounts) 2024 Guidance Range Low High Total revenue $ 1,950 $ 2,030 Net income attributable to Astrana Health, Inc. $ 52 $ 58 Adjusted EBITDA $ 165 $ 175 EPS – diluted $ 1.06 $ 1.19 See "Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA" and "Use of Non-GAAP Financial Measures" below for additional information. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. See "Forward-Looking Statements" below for additional information. Conference Call and Webcast Information: Astrana will host a conference call at 2:30 p.m. PT / 5:30 p.m. ET today ( Thursday, November 7, 2024 ), during which management will discuss the results of the third quarter ended September 30, 2024 . To participate in the conference call, please use the following dial-in numbers about 5 minutes prior to the scheduled conference call time: U.S. & Canada (Toll-Free): +1 (888) 272-8703International (Toll): +1 (713) 481-1320 The conference call can also be accessed via webcast at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=qeu83NWd An accompanying slide presentation will be available in PDF format on the "IR Calendar" page of the Company's website ( https://ir.astranahealth.com/news-events/ir-calendar ) after issuance of the earnings release and will be furnished as an exhibit to Astrana's current report on Form 8-K to be filed with the SEC , accessible at www.sec.gov . Those who are unable to attend the live conference call may access the recording at the above webcast link, which will be made available shortly after the conclusion of the call. Note About Consolidated Entities The Company consolidates entities in which it has a controlling financial interest. The Company consolidates subsidiaries in which it holds, directly or indirectly, more than 50% of the voting rights, and variable interest entities ("VIEs") in which the Company is the primary beneficiary. Noncontrolling interests represent third party equity ownership interests in the Company's consolidated entities (including certain VIEs). The amount of net income attributable to noncontrolling interests is disclosed in the Company's consolidated statements of income. Note About Stockholders ' Equity, Certain Treasury Stock and Earnings Per Share As of the date of this press release, 41,048 holdback shares have not been issued to certain former shareholders of the Company's subsidiary, Astrana Health Management, Inc. ("AHM"), formerly known as Network Medical Management, Inc. , who were AHM shareholders at the time of closing of the merger, as they have yet to submit properly completed letters of transmittal to Astrana in order to receive their pro rata portion of Astrana's common stock and warrants as contemplated under that certain Agreement and Plan of Merger, dated December 21, 2016 , among Astrana, AHM, Apollo Acquisition Corp. ("Merger Subsidiary") and Kenneth Sim , M.D., as amended, pursuant to which Merger Subsidiary merged with and into AHM, with AHM as the surviving corporation. Pending such receipt, such former AHM shareholders have the right to receive, without interest, their pro rata share of dividends or distributions with a record date after the effectiveness of the merger. The Company's consolidated financial statements have treated such shares of common stock as outstanding, given the receipt of the letter of transmittal is considered perfunctory and Astrana is legally obligated to issue these shares in connection with the merger. Shares of Astrana's common stock owned by Allied Physicians of California , a Professional Medical Corporation ("APC"), a VIE of the Company, are legally issued and outstanding but excluded from shares of common stock outstanding in the Company's consolidated financial statements, as such shares are treated as treasury shares for accounting purposes. Such shares, therefore, are not included in the number of shares of common stock outstanding used to calculate the Company's earnings per share. About Astrana Health , Inc. Astrana is a leading physician-centric, technology-powered, risk-bearing healthcare management company. Leveraging its proprietary population health management and healthcare delivery platform, Astrana operates an integrated, value-based healthcare model, which aims to empower the providers in its network to deliver the highest quality of care to its patients in a cost-effective manner. Together with our affiliated physician groups and consolidated entities, we provide coordinated outcomes-based medical care in a cost-effective manner. Headquartered in Alhambra, California , Astrana serves over 12,000 providers and approximately 1.1 million patients in value-based care arrangements. Its subsidiaries and affiliates include management services organizations (MSOs), a network of risk-bearing organizations ("RBOs") that encompasses independent practice associations ("IPAs"), accountable care organizations ("ACOs"), and state-specific entities such as Restricted Knox-Keene licensed health plans in California , and care delivery entities across primary, multi-specialty, and ancillary care. For more information, please visit www.astranahealth.com . Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements about the Company's guidance for the year ending December 31, 2024 , ability to meet operational goals, ability to meet expectations in deployment of care coordination and management capabilities, ability to decrease cost of care while improving quality and outcomes, ability to deliver sustainable revenue and EBITDA growth as well as long-term value, ability to respond to the changing environment, and successful implementation of strategic growth plans, acquisition strategy, and merger integration efforts. Forward-looking statements reflect current views with respect to future events and financial performance and therefore cannot be guaranteed. Such statements are based on the current expectations and certain assumptions of the Company's management, and some or all of such expectations and assumptions may not materialize or may vary significantly from actual results. Actual results may also vary materially from forward-looking statements due to risks, uncertainties and other factors, known and unknown, including the risk factors described from time to time in the Company's reports filed or furnished with the Securities and Exchange Commission , including, without limitation the risk factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 , and any subsequent quarterly reports on Form 10-Q. FOR MORE INFORMATION, PLEASE CONTACT: Investor Relations(626) 943-6491 [email protected] ASTRANA HEALTH , INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) September 30 ,2024 December 31 ,2023 (Unaudited) Assets Current assets Cash and cash equivalents $ 347,994 $ 293,807 Investment in marketable securities 2,354 2,498 Receivables, net 132,237 76,780 Receivables, net – related parties 76,568 58,980 Income taxes receivable 16,211 10,657 Other receivables 1,120 1,335 Prepaid expenses and other current assets 20,506 17,450 Total current assets 596,990 461,507 Non-current assets Land, property and equipment, net 12,172 7,171 Intangible assets, net 109,108 71,648 Goodwill 409,711 278,831 Income taxes receivable 15,943 15,943 Loans receivable, non-current 55,284 26,473 Investments in other entities – equity method 34,629 25,774 Investments in privately held entities 8,896 6,396 Restricted cash 646 345 Operating lease right-of-use assets 33,119 37,396 Other assets 8,878 1,877 Total non-current assets 688,386 471,854 Total assets (1) $ 1,285,376 $ 933,361 Liabilities, mezzanine equity and equity Current liabilities Accounts payable and accrued expenses $ 94,811 $ 59,949 Fiduciary accounts payable 6,041 7,737 Medical liabilities 160,279 106,657 Dividend payable 638 638 Finance lease liabilities 554 646 Operating lease liabilities 5,241 4,607 Current portion of long-term debt 15,000 19,500 Other liabilities 30,364 18,940 Total current liabilities 312,928 218,674 Non-current liabilities Deferred tax liability 2,857 4,072 Finance lease liabilities, net of current portion 743 1,033 Operating lease liabilities, net of current portion 31,162 36,289 Long-term debt, net of current portion and deferred financing costs 423,119 258,939 Other long-term liabilities 7,460 3,586 Total non-current liabilities 465,341 303,919 Total liabilities (1) 778,269 522,593 Commitments and contingencies Mezzanine equity Noncontrolling interest in Allied Physicians of California , a Professional Medical Corporation ("APC") (202,512) (205,883) Stockholders' equity Preferred stock, $0.001 par value per share; 5,000,000 shares authorized as of September 30, 2024 and December 31, 2023 Series A Preferred stock, zero authorized and issued and zero outstanding as of September 30, 2024 and 1,111,111 authorized and issued and zero outstanding as of December 31, 2023 — — Series B Preferred stock, zero authorized and issued and zero outstanding as of September 30, 2024 and 555,555 authorized and issued and zero outstanding as of December 31, 2023 — — Common stock, $0.001 par value per share; 100,000,000 shares authorized, 47,780,523 and 46,843,743 shares issued and outstanding, excluding 10,598,749and 10,584,340 treasury shares, as of September 30, 2024 and December 31, 2023 , respectively 48 47 Additional paid-in capital 411,334 371,037 Retained earnings 293,234 243,134 Total stockholders' equity 704,616 614,218 Non-controlling interest 5,003 2,433 Total equity 709,619 616,651 Total liabilities, mezzanine equity and equity $ 1,285,376 $ 933,361 (1) The Company's condensed consolidated balance sheets include the assets and liabilities of its consolidated VIEs. The condensed consolidated balance sheets include total assets that can be used only to settle obligations of the Company's consolidated VIEs totaling $701.1 million and $540.8 million as of September 30, 2024 and December 31, 2023 , respectively, and total liabilities of the Company's consolidated VIEs for which creditors do not have recourse to the general credit of the primary beneficiary of $194.1 million and $146.0 million as of September 30, 2024 and December 31, 2023 , respectively. These VIE balances do not include $413.3 million of investment in affiliates and $76.3 million of amounts due to affiliates as of September 30, 2024 , and $273.2 million of investment in affiliates and $107.3 million of amounts due to affiliates as of December 31, 2023 , as these are eliminated upon consolidation and not presented within the condensed consolidated balance sheets. ASTRANA HEALTH , INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended September 30 , Nine Months Ended September 30 , 2024 2023 2024 2023 Revenue Capitation, net $ 431,401 $ 305,678 $ 1,239,885 $ 906,430 Risk pool settlements and incentives 21,779 15,022 57,564 48,605 Management fee income 2,747 9,898 8,429 32,287 Fee-for-service, net 18,692 15,892 54,588 41,216 Other revenue 4,091 1,683 8,865 5,087 Total revenue 478,710 348,173 1,369,331 1,033,625 Operating expenses Cost of services, excluding depreciation and amortization 405,218 275,375 1,148,422 857,648 General and administrative expenses 37,803 29,410 112,478 74,648 Depreciation and amortization 7,264 4,305 19,801 12,846 Total expenses 450,285 309,090 1,280,701 945,142 Income from operations 28,425 39,083 88,630 88,483 Other income (expense) Income (loss) from equity method investments 1,353 (2,104) 2,887 3,104 Interest expense (8,856) (3,779) (25,028) (10,680) Interest income 3,778 3,281 11,287 9,617 Unrealized (loss) gain on investments (561) (342) 415 (5,875) Other income 2,673 1,876 4,522 4,265 Total other (expense) income, net (1,613) (1,068) (5,917) 431 Income before provision for income taxes 26,812 38,015 82,713 88,914 Provision for income taxes 7,831 10,042 25,004 30,971 Net income 18,981 27,973 57,709 57,943 Net income attributable to non-controlling interest 2,887 5,914 7,609 9,582 Net income attributable to Astrana Health, Inc. $ 16,094 $ 22,059 $ 50,100 $ 48,361 Earnings per share – basic $ 0.34 $ 0.47 $ 1.05 $ 1.04 Earnings per share – diluted $ 0.33 $ 0.47 $ 1.04 $ 1.03 EBITDA Set forth below are reconciliations of Net Income to EBITDA and Adjusted EBITDA as well as the reconciliation to Adjusted EBITDA margin for the three and nine months ended September 30, 2024 and 2023. The Company defines Adjusted EBITDA margin as Adjusted EBITDA over total revenue. Three Months Ended September 30 , Nine Months Ended September 30 , (in thousands) 2024 2023 2024 2023 Net income $ 18,981 $ 27,973 $ 57,709 $ 57,943 Interest expense 8,856 3,779 25,028 10,680 Interest income (3,778) (3,281) (11,287) (9,617) Provision for income taxes 7,831 10,042 25,004 30,971 Depreciation and amortization 7,264 4,305 19,801 12,846 EBITDA 39,154 42,818 116,255 102,823 (Income) loss from equity method investments (1,353) 2,016 (2,887) (3,160) Other, net 1,206 (1) 1,723 (2) 2,663 (3) 1,507 (2) Stock-based compensation 6,163 5,706 19,301 13,364 APC excluded asset costs — (289) — 3,039 Adjusted EBITDA $ 45,170 $ 51,974 $ 135,332 $ 117,573 Total revenue $ 478,710 $ 348,173 $ 1,369,331 $ 1,033,625 Adjusted EBITDA margin 9 % 15 % 10 % 11 % (1) Other, net for the three months ended September 30, 2024 relates to non-cash changes related to change in the fair value of our financing obligation to purchase the remaining equity interests in one of our investments, non-cash changes related to change in the fair value of the Company's Collar Agreement, non-cash gain on debt extinguishment related to one of our promissory note payables, and transaction costs incurred for our investments and tax restructuring fees. (2) Other, net for the three and nine months ended September 30, 2023 relates to transaction costs incurred for our investments and tax restructuring fees and non-cash changes related to change in the fair value of our financing obligation to purchase the remaining equity interests, changes in the fair value of our contingent liabilities, and changes in the fair value of the Company's Collar Agreement. (3) Other, net for the nine months ended September 30, 2024 relates to financial guarantee via a letter of credit that we provided almost three years ago in support of two local provider-led ACOs, non-cash changes related to change in the fair value of our financing obligation to purchase the remaining equity interests in one of our investments, non-cash changes related to change in the fair value of the Company's Collar Agreement, non-cash gain on debt extinguishment related to one of our promissory note payables, transaction costs incurred for our investments and tax restructuring fees, and reimbursement from a related party of the Company for taxes associated with the Excluded Assets spin-off. Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA 2024 Guidance Range (in thousands) Low High Net income $ 59,340 $ 66,240 Interest expense 18,750 18,750 Provision for income taxes 26,660 29,760 Depreciation and amortization 27,500 27,500 EBITDA 132,250 142,250 Income from equity method investments (4,250) (4,250) Other, net 5,000 5,000 Stock-based compensation 32,000 32,000 Adjusted EBITDA $ 165,000 $ 175,000 Use of Non-GAAP Financial Measures This press release contains the non-GAAP financial measures EBITDA and Adjusted EBITDA, of which the most directly comparable financial measure presented in accordance with U.S. generally accepted accounting principles ("GAAP") is net income. These measures are not in accordance with, or alternatives to GAAP, and may be calculated differently from similar non-GAAP financial measures used by other companies. The Company uses Adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-making, and as a supplemental means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization, excluding income or loss from equity method investments, non-recurring and non-cash transactions, stock-based compensation, and APC excluded assets costs. The Company defines Adjusted EBITDA margin as Adjusted EBITDA over total revenue. The Company believes the presentation of these non-GAAP financial measures provides investors with relevant and useful information, as it allows investors to evaluate the operating performance of the business activities without having to account for differences recognized because of non-core or non-recurring financial information. When GAAP financial measures are viewed in conjunction with non-GAAP financial measures, investors are provided with a more meaningful understanding of the Company's ongoing operating performance. In addition, these non-GAAP financial measures are among those indicators the Company uses as a basis for evaluating operational performance, allocating resources, and planning and forecasting future periods. Non-GAAP financial measures are not intended to be considered in isolation, or as a substitute for, GAAP financial measures. Other companies may calculate both EBITDA and Adjusted EBITDA differently, limiting the usefulness of these measures for comparative purposes. To the extent this release contains historical or future non-GAAP financial measures, the Company has provided corresponding GAAP financial measures for comparative purposes. The reconciliation between certain GAAP and non-GAAP measures is provided above. 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