# Astrana Health, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Astrana Health, Inc.](/companies/asth.md) (CIK 1083446)
- Form: 10-Q
- Filed: 2024-08-09
- Accepted by EDGAR: Aug 8, 2024, 18:55 ET
- Period: 2024-06-30
- Accession: 0000950170-24-094262
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1083446/000095017024094262/asth-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1083446/000095017024094262/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $486.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $890.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $30.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $60.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $8.6m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $16.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $10.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $17.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $19.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $34.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.40 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.71 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.40 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.72 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 47,978,491 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 47,795,082 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $29.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $3.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $1.9m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-06-30 | $325.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $570.3m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $1.25bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $309.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $773.8m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $425.0m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-06-30 | $17.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-06-30 | $678.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,806 characters.

*The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1, “Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q. In addition, reference is made to our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024.*

### Overview

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.

Through our risk bearing organizations with more than 10,000 contracted physicians, we are responsible for coordinating care in value-based care arrangements for approximately 1.0 million patients primarily in California as of June 30, 2024. These covered patients are comprised of managed care members whose health coverage is provided either through their employers, acquired directly from a health plan, or as a result of their eligibility for Medicaid or Medicare benefits. Our managed patients benefit from an integrated approach that places physicians at the center of patient care and utilizes sophisticated risk management techniques and clinical protocols to provide high-quality, cost-effective care.

### Recent Developments

#### Anthem Blue Cross Partnership

On July 15, 2024, the Company announced a new partnership with Anthem Blue Cross to improve access to high-quality healthcare for their shared members. This partnership underscores both organizations' commitment to increasing access to care by addressing social and health inequities in communities that they serve. In conjunction with the announcement of this partnership, Astrana and Anthem Blue Cross have opened their first collaborative care clinic in Whittier, California to exclusively serve Anthem Blue Cross and Allied Pacific IPA members with an HMO health insurance plan.

#### Elation Partnership and Convertible Promissory Note

On July 17, 2024, the Company announced its strategic partnership with Elation Health ("Elation"), a technology company whose electronic health record platform is used nationwide by more than 32,000 clinicians caring for over 15 million members. Together, the two organizations will aim to empower primary care providers via value-based arrangements, leveraging both Astrana and Elation’s technology platform and solutions. Astrana provided a $5.0 million secured convertible promissory note to a subsidiary of Elation which is intended to be used as an initial investment into the partnership. Interest shall accrue on the outstanding principal at an annual interest rate of 7.5%. The convertible promissory note will mature on July 17, 2029 or earlier in the event of a default as defined in the agreement. The Company has the option to convert the note at anytime on or before December 31, 2024 for 80% of the management service organization's equity interest.

#### Collaborative Health Systems, LLC Securities Purchase Agreement

On July 24, 2024, the Company and its affiliated professional entity entered into a definitive agreement to acquire all of the outstanding membership interest relating to Collaborative Health Systems, LLC (“CHS”), 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. CHS is a subsidiary of Centene Corporation that partners with independent providers in caring for over 129,000 Medicare members across 17 states. CHS provides comprehensive support for its physician partners by providing management services, risk contracting, and population health capabilities, including actionable data and other tools, to deliver care coordination and closure of gaps in care. CHS provides additional services to secure and deliver favorable value-based contracts with commercial and other health plans. CHS currently manages four REACH ACOs, six MSSP ACOs, three Independent Physician Associations, and a Care Transformation Organization. CHS additionally contracts with private payers to help its providers expand their participation in value-based care across lines of business such as Medicare Advantage. The Company intends to finance the acquisition with cash on hand. The transaction is expected to close during the fourth quarter of 2024, subject to customary closing conditions.

### Key Financial Measures and Indicators

#### Operating Revenues

Our revenue, which is recorded in the period in which services are rendered and earned, primarily consists of capitation revenue, risk pool settlements and incentives, management fee income, and fee-for-service (“FFS”) revenue. The form of billing and related risk of collection for such services may vary by type of revenue and the customer.

#### Operating Expenses

Our largest expenses consist of the cost of (i) patient care paid to contracted providers; (ii) information technology equipment and software; and (iii) hiring staff to provide management and administrative support services to our affiliated physician groups, as further described in the following sections. These services include claims processing, utilization management, contracting, accounting, credentialing, and administrative oversight.

#### Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and Adjusted EBITDA margin are supplemental performance measures of our operations for financial and operational decision-making, and are used 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.

### Results of Operations

### Condensed Consolidated Statements of Income

(In thousands)

(Unaudited)

| Revenue | Three Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Capitation, net | $442,574 | $300,549 | $142,025 | 47% |
| Risk pool settlements and incentives | 18,408 | 20,121 | (1,713) | (9)% |
| Management fee income | 1,604 | 12,493 | (10,889) | (87)% |
| Fee-for-services, net | 19,959 | 13,262 | 6,697 | 50% |
| Other revenue | 3,720 | 1,784 | 1,936 | 109% |
| Total revenue | 486,265 | 348,209 | 138,056 | 40% |
| **Operating expenses** |  |  |  |  |
| Cost of services, excluding depreciation and amortization | 412,805 | 292,876 | 119,929 | 41% |
| General and administrative expenses | 35,953 | 24,056 | 11,897 | 49% |
| Depreciation and amortization | 7,441 | 4,248 | 3,193 | 75% |
| Total expenses | 456,199 | 321,180 | 135,019 | 42% |
| **Income from operations** | 30,066 | 27,029 | 3,037 | 11% |
| **Other income** |  |  |  |  |
| Income from equity method investments | 902 | 2,723 | (1,821) | (67)% |
| Interest expense | (8,587) | (3,632) | (4,955) | 136% |
| Interest income | 3,513 | 3,327 | 186 | 6% |
| Unrealized (loss) gain on investments | (123) | 859 | (982) | (114)% |
| Other income | 6,126 | 1,185 | 4,941 | 417% |
| Total other income, net | 1,831 | 4,462 | (2,631) | (59)% |
| **Income before provision for income taxes** | 31,897 | 31,491 | 406 | 1% |
| Provision for income taxes | 10,031 | 14,009 | (3,978) | (28)% |
| **Net income** | 21,866 | 17,482 | 4,384 | 25% |
| Net income attributable to non-controlling interest | 2,695 | 4,312 | (1,617) | (38)% |
| **Net income attributable to Astrana Health, Inc.** | $19,171 | $13,170 | $6,001 | 46% |

47

| Revenue | Six Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Capitation, net | $808,484 | $600,753 | $207,731 | 35% |
| Risk pool settlements and incentives | 35,785 | 33,583 | 2,202 | 7% |
| Management fee income | 5,682 | 22,389 | (16,707) | (75)% |
| Fee-for-services, net | 35,896 | 25,324 | 10,572 | 42% |
| Other revenue | 4,774 | 3,404 | 1,370 | 40% |
| Total revenue | 890,621 | 685,453 | 205,168 | 30% |
| **Operating expenses** |  |  |  |  |
| Cost of services, excluding depreciation and amortization | 743,204 | 582,273 | 160,931 | 28% |
| General and administrative expenses | 74,675 | 45,236 | 29,439 | 65% |
| Depreciation and amortization | 12,537 | 8,541 | 3,996 | 47% |
| Total expenses | 830,416 | 636,050 | 194,366 | 31% |
| **Income from operations** | 60,205 | 49,403 | 10,802 | 22% |
| **Other (expense) income** |  |  |  |  |
| Income from equity method investments | 1,534 | 5,207 | (3,673) | (71)% |
| Interest expense | (16,172) | (6,901) | (9,271) | 134% |
| Interest income | 7,509 | 6,335 | 1,174 | 19% |
| Unrealized gain (loss) on investments | 976 | (5,533) | 6,509 | (118)% |
| Other income | 1,849 | 2,389 | (540) | (23)% |
| Total other (expense) income, net | (4,304) | 1,497 | (5,801) | (388)% |
| **Income before provision for income taxes** | 55,901 | 50,900 | 5,001 | 10% |
| Provision for income taxes | 17,173 | 20,930 | (3,757) | (18)% |
| **Net income** | 38,728 | 29,970 | 8,758 | 29% |
| Net income (loss) attributable to non-controlling interest | 4,722 | 3,668 | 1,054 | 29% |
| **Net income attributable to Astrana Health, Inc.** | $34,006 | $26,302 | $7,704 | 29% |

### Risk Bearing Organizations and Patients

As of June 30, 2024 and 2023, we managed a total of 18 and 15 independent risk bearing organizations including both affiliated and non-affiliated, respectively. The total number of patients for whom we managed the delivery of healthcare services was approximately 1.0 million and 1.3 million as of June 30, 2024 and 2023, respectively.

### Revenue

Our total revenue for the three months ended June 30, 2024, was $486.3 million, as compared to $348.2 million for the three months ended June 30, 2023, an increase of $138.1 million, or 40%. The increase in revenue was primarily attributable to capitation revenue. Capitation revenue increased by $142.0 million primarily as a result of our recent acquisitions within our Care Partners segment, including the acquisition of CFC IPA assets that closed on January 31, 2024 and Restricted Knox-Keene licensed health plan acquired on March 31, 2024 and May 1, 2023, along with enrollees transitioning to full risk through the Company's Restricted Knox-Keene plans.

Our total revenue for the six months ended June 30, 2024, was $890.6 million, as compared to $685.5 million for the six months ended June 30, 2023, an increase of $205.2 million, or 30%. The increase in revenue was primarily attributable to capitation revenue. Capitation revenue increased by $207.7 million primarily as a result of our recent acquisitions within our Care Partners segment, including the acquisition of CFC IPA assets that closed on January 31, 2024 and Restricted Knox-Keene licensed health plan acquired on March 31, 2024, along with enrollees transitioning to full risk through the Company's Restricted Knox-Keene plans.

### Cost of Services, Excluding Depreciation and Amortization

Expenses related to cost of services for the three months ended June 30, 2024 were $412.8 million, as compared to $292.9 million for the same period in 2023, an increase of $119.9 million. The increase in cost of service was primarily attributable our recent acquisitions within our Care Partners segment along with enrollees transitioning to full risk through the Company's Restricted Knox-Keene plans.

Expenses related to cost of services for the six months ended June 30, 2024 were $743.2 million, as compared to $582.3 million for the same period in 2023, an increase of $160.9 million. The increase in cost of service was primarily attributable our recent acquisitions within our Care Partners segment along with enrollees transitioning to full risk through the Company's Restricted Knox-Keene plans.

### General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2024 were $36.0 million, as compared to $24.1 million for the same period in 2023, an increase of $11.9 million. The increase was primarily due to increased general and administrative expenses to support operational growth.

General and administrative expenses for the six months ended June 30, 2024 were $74.7 million, as compared to $45.2 million for the same period in 2023, an increase of $29.4 million. The increase was primarily due to increased general and administrative expenses to support operational growth.

### Depreciation and Amortization

Depreciation and amortization expenses for the three months ended June 30, 2024 were $7.4 million, as compared to $4.2 million for the same period in 2023. This amount includes depreciation of property and equipment and the amortization of intangible assets.

Depreciation and amortization expenses for the six months ended June 30, 2024 were $12.5 million, as compared to $8.5 million for the same period in 2023. This amount includes depreciation of property and equipment and the amortization of intangible assets.

### Income From Equity Method Investments

Income from equity method investments for the three months ended June 30, 2024 was $0.9 million, as compared to income from equity method investments of $2.7 million for the same period in 2023, a decrease of $1.8 million. The decrease was primarily due to APC’s equity method investment in LMA. For the three months ended June 30, 2024 and 2023, APC recognized income from this investment of $0.8 million and $2.7 million, respectively.

Income from equity method investments for the six months ended June 30, 2024 was $1.5 million, as compared to income from equity method investments of $5.2 million for the same period in 2023, a decrease of $3.7 million. The decrease was primarily due to APC’s equity method investment in LMA. For the six months ended June 30, 2024 and 2023, APC recognized income from this investment of $1.1 million and $4.9 million, respectively.

### Interest Expense

Interest expense for the three months ended June 30, 2024 was $8.6 million, as compared to $3.6 million for the same period in 2023, an increase of $5.0 million. The increase in interest expense was due to greater amounts borrowed on the Amended Credit Facility. As of June 30, 2024, the Company borrowed $435.7 million on the Amended Credit Facility compared to $210.0 million as of June 30, 2023.

Interest expense for the six months ended June 30, 2024 was $16.2 million, as compared to $6.9 million for the same period in 2023, an increase of $9.3 million. The increase in interest expense was due to greater amounts borrowed on the Amended Credit Facility. As of June 30, 2024, the Company borrowed $435.7 million on the Amended Credit Facility compared to $210.0 million as of June 30, 2023.

### Interest Income

Interest income for the three months ended June 30, 2024 was $3.5 million compared to $3.3 million for the three months ended June 30, 2023. Interest income reflects interest earned on cash held in bank accounts, money market and certificate of deposit accounts, and the interest from notes receivable.

Interest income for the six months ended June 30, 2024 was $7.5 million compared to $6.3 million for the six months ended June 30, 2023. Interest income reflects interest earned on cash held in bank accounts, money market and certificate of deposit accounts, and the interest from notes receivable.

### Unrealized (Loss) Gain on Investments

Unrealized loss for the three months ended June 30, 2024 was $0.1 million, as compared to unrealized gain of $0.9 million for the same period in 2023, a decrease in unrealized gain of $1.0 million. The decrease in unrealized gain on investments was primarily driven by changes in the fair value of equity securities.

Unrealized gain for the six months ended June 30, 2024 was $1.0 million, as compared to unrealized loss of $5.5 million for the same period in 2023, an increase in unrealized gain of $6.5 million. The increase in unrealized gain on investments was primarily driven by changes in the fair value of equity securities.

### Other Income

Other income for the three months ended June 30, 2024 was $6.1 million, as compared to other income of $1.2 million for the same period in 2023, an increase of $4.9 million. The increase in other income was primarily driven by the receipt of $5.3 million from Allied Pacific Holdings Investment Management, LLC reimbursing the Company for taxes associated with the Excluded Assets spin-off completed during December 2023.

Other income for the six months ended June 30, 2024 was $1.9 million, as compared to other income of $2.4 million for the same period in 2023, a decrease of $0.5 million. The decrease in other income was primarily due to a decrease in rental income as a result of the Excluded Assets spin-off.

### Provision for Income Taxes

Provision for income taxes was $10.0 million for the three months ended June 30, 2024, as compared to a provision for income taxes of $14.0 million for the same period in 2023, a decrease of $4.0 million. The decrease in provision for income taxes was due to tax restructuring that resulted in a lower tax rate.

Provision for income taxes was $17.2 million for the six months ended June 30, 2024, as compared to a provision for income taxes of $20.9 million for the same period in 2023, a decrease of $3.8 million. The decrease in provision for income taxes was due to tax restructuring that resulted in a lower tax rate.

### Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests for the three months ended June 30, 2024 was $2.7 million, as compared to net income attributable to non-controlling interests for the three months ended June 30, 2023 of $4.3 million, a decrease in net income attributable to non-controlling interest of $1.6 million. The decrease was primarily driven by a decrease in rental income for the Excluded Assets as a result of the spin-off.

Net income attributable to non-controlling interests for the six months ended June 30, 2024 was $4.7 million, as compared to net income attributable to non-controlling interests for the six months ended June 30, 2023 of $3.7 million, an increase in net income attributable to non-controlling interest of $1.1 million. The increase was primarily driven by a decrease in unrealized loss resulting from the change in the fair value of equity securities held by APC.

### Net Income Attributable to Astrana Health, Inc.

Our net income attributable to Astrana Health, Inc. for the three months ended June 30, 2024 was $19.2 million, as compared to $13.2 million for the same period in 2023, an increase of $6.0 million.

Our net income attributable to Astrana Health, Inc. for the six months ended June 30, 2024 was $34.0 million, as compared to $26.3 million for the same period in 2023, an increase of $7.7 million.

### Segment Financial Performance

The Company currently has three reportable segments consisting of Care Partners, Care Delivery and Care Enablement. The Company evaluates the performance of its operating segments based on segment revenue growth as well as operating income. Management uses revenue growth and total segment operating income as a measure of the performance of operating businesses separate from non-operating factors. For more information about our segments, see Note 18 — “Segments” to our condensed consolidated financial statements under Item 1 in this Quarterly Report on Form 10-Q for additional information.

The following table sets forth our revenue and operating income by segment for the three and six months ended June 30, 2024 and 2023 (in thousands):

| Segment Revenue | Three Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Care Partners | $463,277 | $321,776 | $141,501 | 44% |
| Care Delivery | $34,857 | $26,369 | $8,488 | 32% |
| Care Enablement | $36,172 | $34,975 | $1,197 | 3% |

| Segment Operating Income | Three Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Care Partners | $40,323 | $27,829 | $12,494 | 45% |
| Care Delivery | $1,825 | $569 | $1,256 | 221% |
| Care Enablement | $6,918 | $7,638 | $(720) | (9)% |

| Segment Revenue | Six Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Care Partners | $845,595 | $636,413 | $209,182 | 33% |
| Care Delivery | $65,576 | $50,860 | $14,716 | 29% |
| Care Enablement | $69,446 | $65,541 | $3,905 | 6% |

51

| Segment Operating Income (Loss) | Six Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Care Partners | $83,519 | $50,150 | $33,369 | 67% |
| Care Delivery | $1,587 | $(397) | $1,984 | (500)% |
| Care Enablement | $10,422 | $13,383 | $(2,961) | (22)% |

### Care Partners Segment

Revenue for the three months ended June 30, 2024 was $463.3 million, as compared to $321.8 million for the three months ended June 30, 2023, an increase of $141.5 million, or 44%. Operating income for the three months ended June 30, 2024 was $40.3 million, as compared to $27.8 million for the three months ended June 30, 2023, an increase in operating income of $12.5 million, or 45%. The increase in revenue and operating income was primarily as a result of our recent acquisitions within our Care Partners segment, including the acquisition of CFC IPA assets that closed on January 31, 2024 and Restricted Knox-Keene licensed health plan acquired on March 31, 2024 and May 1, 2023, along with enrollees transitioning to full risk through the Company's Restricted Knox-Keene plans.

Revenue for the six months ended June 30, 2024 was $845.6 million, as compared to $636.4 million for the six months ended June 30, 2023, an increase of $209.2 million, or 33%. Operating income for the six months ended June 30, 2024 was $83.5 million, as compared to $50.2 million for the six months ended June 30, 2023, an increase in operating income of $33.4 million, or 67%. The increase in revenue and operating income was primarily as a result of our recent acquisitions within our Care Partners segment, including the acquisition of CFC IPA assets that closed on January 31, 2024 and Restricted Knox-Keene licensed health plan acquired on March 31, 2024 and May 1, 2023, along with enrollees transitioning to full risk through the Company's Restricted Knox-Keene plans.

### Care Delivery Segment

Revenue for the three months ended June 30, 2024 was $34.9 million, as compared to $26.4 million for the three months ended June 30, 2023, an increase of $8.5 million. Operating income for the three months ended June 30, 2024 was $1.8 million, as compared to a $0.6 million for the three months ended June 30, 2023, an increase in operating income of $1.3 million. The increase in revenue and operating income was primarily driven by increased volume in patient visits at our primary, multi-specialty, and ancillary care delivery entities.

Revenue for the six months ended June 30, 2024 was $65.6 million, as compared to $50.9 million for the six months ended June 30, 2023, an increase of $14.7 million. Operating income for the six months ended June 30, 2024 was $1.6 million, as compared to a loss of $0.4 million for the six months ended June 30, 2023, an increase in operating income of $2.0 million. The increase in revenue and operating income was primarily driven by increased volume in patient visits at our primary, multi-specialty, and ancillary care delivery entities.

### Care Enablement Segment

Revenue for the three months ended June 30, 2024 was $36.2 million, as compared to $35.0 million for the three months ended June 30, 2023, an increase of $1.2 million. Operating income for the three months ended June 30, 2024 was $6.9 million, as compared to operating income of $7.6 million for the three months ended June 30, 2023, a decrease in operating income of $0.7 million. The increase in revenue was primarily due to managing more IPAs and the decrease in operating income was due to more expenses incurred to support the growth in Care Enablement operations.

Revenue for the six months ended June 30, 2024 was $69.4 million, as compared to $65.5 million for the six months ended June 30, 2023, an increase of $3.9 million. Operating income for the six months ended June 30, 2024 was $10.4 million, as compared to operating income of $13.4 million for the six months ended June 30, 2023, a decrease in operating income of $3.0 million. The increase in revenue was primarily due to managing more IPAs and the decrease in operating income was due to more expenses incurred to support the growth in Care Enablement operations.

### 2024 Guidance

Taking all of Astrana's recent growth initiatives and capital allocation strategy into account, the Company is updating its revenue, net income attributable to Astrana, and EPS – diluted guidance for 2024 while reiterating guidance for Adjusted EBITDA for the year ending December 31, 2024.

*($ in millions, except per share amounts)*

|  | 2024 Guidance Range Low | High |
| --- | ---: | ---: |
| Total revenue | $1,750 | $1,850 |
| Net income attributable to Astrana Health, Inc. | $54 | $66 |
| Adjusted EBITDA | $165 | $185 |
| EPS – diluted | $1.12 | $1.36 |

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 “Note about Forward-Looking Statements” for additional information.

### Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA

*(in thousands)*

|  | 2024 Guidance Range Low | High |
| --- | ---: | ---: |
| Net income | $62,500 | $75,500 |
| Interest expense | 18,000 | 18,000 |
| Provision for income taxes | 28,000 | 35,000 |
| Depreciation and amortization | 28,500 | 28,500 |
| **EBITDA** | 137,000 | 157,000 |
| Income from equity method investments | (5,000) | (5,000) |
| Other, net | 6,000 | 6,000 |
| Stock-based compensation | 27,000 | 27,000 |
| **Adjusted EBITDA** | $165,000 | $185,000 |

53

### 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 six months ended June 30, 2024 and 2023. The Company defines Adjusted EBITDA margin as Adjusted EBITDA over total revenue.

*(in thousands)*

|  | Three Months Ended June 30, 2024 |  | 2023 |  | Six Months Ended June 30, 2024 |  | 2023 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net income | $21,866 |  | $17,482 |  | $38,728 |  | $29,970 |  |
| Interest expense | 8,587 |  | 3,632 |  | 16,172 |  | 6,901 |  |
| Interest income | (3,513) |  | (3,327) |  | (7,509) |  | (6,335) |  |
| Provision for income taxes | 10,031 |  | 14,009 |  | 17,173 |  | 20,930 |  |
| Depreciation and amortization | 7,441 |  | 4,248 |  | 12,537 |  | 8,541 |  |
| **EBITDA** | 44,412 |  | 36,044 |  | 77,101 |  | 60,007 |  |
| Income from equity method investments | (902) |  | (297) |  | (1,534) |  | (546) |  |
| Other, net | (2,983) | (1) | (1,618) | (2) | 1,457 | (3) | (216) | (2) |
| Stock-based compensation | 7,390 |  | 4,213 |  | 13,138 |  | 7,658 |  |
| APC excluded asset costs | — |  | (2,570) |  | — |  | (1,304) |  |
| **Adjusted EBITDA** | $47,917 |  | $35,772 |  | $90,162 |  | $65,599 |  |
| **Total revenue** | $486,265 |  | $348,209 |  | $890,621 |  | $685,453 |  |
| **Adjusted EBITDA margin** | 10% |  | 10% |  | 10% |  | 10% |  |

(1) Other, net for the three months ended June 30, 2024 relates to non-cash changes related to change in the fair value of the Company’s Collar Agreement, 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.

(2) Other, net for the three and six months ended June 30, 2023 relates to non-cash changes in the fair value of our financing obligation to purchase the remaining equity interests in one of our investments, 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 six months ended June 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, 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.

#### Use of Non-GAAP Financial Measures

This Quarterly Report on Form 10-Q contains the non-GAAP financial measures EBITDA, Adjusted EBITDA and Adjusted EBITDA margin, 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 Form 10-Q 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.

### Liquidity and Capital Resources

Cash, cash equivalents, and investment in marketable securities at June 30, 2024 totaled $327.7 million as compared to $296.3 million at December 31, 2023. Working capital totaled $260.5 million at June 30, 2024, as compared to $242.8 million at December 31, 2023, an increase of $17.7 million.

We have historically financed our operations primarily through internally generated funds. We generate cash primarily from capitation contracts, risk pool settlements and incentives, fees for medical management services provided to our affiliated physician groups, and FFS reimbursements. We generally invest cash in money market accounts and certificates of deposit, which are classified as cash and cash equivalents. We also have the Amended Credit Agreement, which provides for a five-year revolving credit facility of $400.0 million and a term loan of up to $300.0 million and expires June 2026 and November 2028, respectively. In addition, we have a current shelf registration statement filed with the SEC under which we may issue common stock, preferred stock, debt securities and other securities that may be offered in one or more offerings on terms to be determined at the time of the offering. We believe we have sufficient liquidity to fund our operations through at least the next 12 months and the foreseeable future.

### Cash Flow Activities

Our cash flows are summarized as follows (in thousands):

|  | Six Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net cash provided by operating activities | $29,165 | $33,522 | $(4,357) | (13)% |
| Net cash used in investing activities | (150,964) | (19,221) | (131,743) | \* |
| Net cash provided by (used in) financing activities | 153,603 | (8,062) | 161,665 | \* |
| Net increase in cash and cash equivalents and restricted cash | $31,804 | $6,239 | $25,565 | 410% |

\* Percentage change of over 500%

#### Operating Activities

Cash provided by operating activities for the six months ended June 30, 2024 was $29.2 million, as compared to cash provided by operating activities of $33.5 million for the six months ended June 30, 2023. The decrease in cash provided by operating activities was primarily driven by changes in working capital and partially offset by adjusted net income. Working capital for the six months ended June 30, 2024, decreased operating cash flow by $36.1 million, compared to a $12.9 million decrease in operating cash flow for the six months ended June 30, 2023. The change in working capital for the six months ended June 30, 2024 was mainly driven by an increase in receivables, net, including amounts with related parties, other receivables primarily due to timing of our receivables including risk pool settlements that occur approximately 18 months after the risk pool performance year is completed, a decrease in income taxes payable as a result of timing of income tax payments, and increases in accounts payable and accrued expenses and medical liabilities due to timing of payments. For the six months ended June 30, 2024, net income, exclusive of depreciation and amortization, amortization of debt issuance cost, share-based compensation, non-cash lease expense, unrealized gains or losses, income from equity method investments, deferred tax and other was $65.3 million compared to $46.5 million for the six months ended June 30, 2023.

#### Investing Activities

Cash used in investing activities during the six months ended June 30, 2024, was $151.0 million, due to payments for business and asset acquisitions, net of cash acquired of $114.6 million, issuances of loans of $21.0 million, purchase of an equity method investment of $6.0 million, purchase of a call option issued in conjunction with an equity method investment of $3.9 million, purchases of property and equipment of $3.2 million, purchase of a privately held investment of $2.5 million, and purchases of marketable securities of $0.1 million. The cash used in investing activities was partially offset by proceeds from repayment of loans of $0.3 million. Cash used in investing activities during the six months ended June 30, 2023 was $19.2 million, primarily due to purchases of property and equipment of $17.4 million, purchases of marketable securities of $2.0 million, purchase of a privately held investment of $2.0 million, and purchase of an equity method investment of $0.3 million. The cash used in investing activities was partially offset by proceeds from repayment of a loan receivable of $2.1 million and payments for business and asset acquisitions, net of cash acquired of $0.4 million.

#### Financing Activities

Cash provided by financing activities during the six months ended June 30, 2024, was $153.6 million, primarily due to borrowings on long-term debt totaling $170.3 million and proceeds from sale of non-controlling interest of $0.2 million. This was partially offset by repayments of debt of $11.0 million, tax payments from net share settlement of restricted stock of $3.6 million, dividend payments of $1.9 million, and repayment of finance lease obligations of $0.4 million. Cash used in financing activities during the six months ended June 30, 2023 was $8.1 million, primarily due to repurchase of treasury stock of $9.5 million, dividend payments of $0.8 million, repayment of debt of $0.3 million, a repayment of finance lease obligations of $0.3 million, and purchase of non-controlling interest of $0.1 million. This was partially offset by borrowings from bank loans totaling $1.7 million and proceeds from the exercise of options of $1.3 million.

### Credit Facilities

The Company’s debt balance consisted of the following (in thousands):

|  | June 30, 2024 |
| --- | ---: |
| Term Loan | $289,000 |
| Revolver Loan | 146,732 |
| Promissory Note Payable | 10,320 |
| Total debt | 446,052 |
| Less: Current portion of debt | (17,000) |
| Less: Unamortized financing costs | (4,046) |
| Long-term debt | $425,006 |

The following are the future commitments of the Company’s debt for the years ending December 31 (in thousands) below:

|  | Amount |
| --- | ---: |
| 2024 (excluding the six months ended June 30, 2024) | $9,500 |
| 2025 | 16,875 |
| 2026 | 169,232 |
| 2027 | 32,695 |
| 2028 | 217,750 |
| Total | $446,052 |

### Amended Credit Agreement

The Amended Credit Agreement provides for a five-year revolving credit facility to the Company of $400.0 million, which includes a letter of credit sub-facility of up to $50.0 million and a swingline loan sub-facility of $25.0 million, which expires on June 16, 2026. On November 3, 2023, the Company entered into the third amendment to the Amended Credit Agreement, which provided a new term loan to the Company in an aggregate amount of up to $300.0 million. This increased the Company’s facility under the Amended Credit Agreement to $700.0 million, including the existing $400.0 million revolver. Refer to Note 9 — “Credit Facility, Bank Loans, and Lines of Credit” to our condensed consolidated financial statements under Item 1 in this quarterly report on Form 10-Q for additional information.

### Promissory Note Payable

In May 2021, For Your Benefit, Inc. entered into a promissory note agreement with Chinese Community Health Care Association. The principal on the promissory note is $2.0 million with a maturity date of May 9, 2024. Refer to Note 9 — “Credit Facility, Bank Loans, and Lines of Credit” to our condensed consolidated financial statements under Item 1 in this quarterly report on Form 10-Q for additional information.

On April 1, 2024, the Company received $8.3 million as a promissory note with a maturity date of March 31, 2027. I Health may accelerate the maturity date if the Company does not exercise the I Health Call Options. Refer to Note 9 — “Credit Facility, Bank Loans, and Lines of Credit” to our condensed consolidated financial statements under Item 1 in this quarterly report on Form 10-Q for additional information.

### Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires our management to make judgments, assumptions, and estimates that affect the amounts of revenue, expenses, income, assets and liabilities reported in our condensed consolidated financial statements and accompanying notes. Actual results and the timing of recognition of such amounts could differ from those judgments, assumptions, and estimates. In addition, judgments, assumptions, and estimates routinely require adjustment based on changing circumstances and the receipt of new or better information. Understanding our accounting policies and the extent to which our management uses judgment, assumptions, and estimates in applying these policies, therefore, is integral to understanding our financial statements. Critical accounting policies and estimates are defined as those that reflect significant judgments and uncertainties, potentially resulting in materially different results under different assumptions and conditions. We summarize our most significant accounting policies in relation to the accompanying condensed consolidated financial statements in Note 2 — “Basis of Presentation and Summary of Significant Accounting Policies” thereto. Please also refer to the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

### Off-Balance Sheet Arrangements

As of June 30, 2024, we had no off-balance sheet arrangements that are or have been reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

## Market risk

As filed, 2,449 characters.

### Interest Rate Risk

Borrowings under the Term Loan provided for under our Amended Credit Agreement, as of June 30, 2024, were $289.0 million. The Term Loan bears interest at an annual rate equal to either, at the Company’s option, (a) the Term SOFR Reference Rate (as defined in the Amended Credit Agreement), adjusted for any Term SOFR Adjustment (as defined in the Amended Credit Agreement), plus a spread from 1.50% to 2.75%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio, or (b) a base rate, plus a spread of 0.50% to 1.75%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio. As of June 30, 2024, the Company had borrowed $146.7 million under the Revolver Loan. The Revolver Loan bears interest at an annual rate equal to either, at the Company’s option, (a) the Term SOFR Reference Rate (as defined in the Amended Credit Agreement), adjusted for any Term SOFR Adjustment (as defined in the Amended Credit Agreement) plus a spread ranging from 1.25% to 2.50%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the Amended Credit Agreement), or (b) a base rate, plus a spread ranging from 0.25% to 1.50%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio. Borrowings under the Promissory Note Payable with Chinese Community Health Care Association, as of June 30, 2024, was $2.0 million. The interest rate is defined as the prime rate plus 1.0%. The prime rate is updated annually on the effective date of the note and published by the *Wall Street Journal*. Borrowings under the Promissory Note Payable with I Health, as of June 30, 2024, was $8.3 million. The promissory note has an interest rate of 4.30% per annum on the principal amount. The Company has entered into a collar agreement for its Revolver Loan to effectively convert its floating-rate debt to a fixed-rate basis. The principal objective of the collar agreement is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. A hypothetical 1% change in our interest rates for our outstanding borrowings would have increased or decreased our interest expense for the three months ended June 30, 2024, by $4.5 million.

## Controls and procedures

As filed, 1,798 characters.

### Evaluation of Disclosure Controls and Procedures

The Company maintains “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Exchange Act, designed to ensure that information required to be disclosed by a company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives.

As of June 30, 2024, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial and Operating Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial and Operating Officer, concluded that our disclosure controls and procedures were effective as of June 30, 2024.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 1,459 characters.

Our business, financial condition, and operating results are affected by a number of factors, whether currently known or unknown, including risks specific to us or the healthcare industry, as well as risks that affect businesses in general. In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024. The risks disclosed in such Annual Report could materially adversely affect our business, financial condition, cash flows, or results of operations and thus our stock price. We believe there have been no material changes in our risk factors from those disclosed in the Annual Report. However, additional risks and uncertainties not currently known or which we currently deem to be immaterial may also materially adversely affect our business, financial condition, or results of operations.

Because of such risk factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. In addition, the disclosure of any risk factor should not be interpreted to imply that the risk has not already materialized.

Filed Aug 9, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-094262. Last ingested by Listed: Oct 30, 2026, 13:39 ET. No prices; not investment advice.