Astrana Health, Inc.: Form 10-Q for the period ended Jun 30, 2025

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, 2024, filed with the SEC on March 14, 2025.

In this section, “we,” “our,” “ours,” and “us” refer to Astrana Health, Inc. (“Astrana”) and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”).

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. This model 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 cost-effectively provide coordinated outcomes-based medical care.

Through our risk-bearing organizations with more than 13,000 contracted physicians, we are responsible for coordinating care in value-based care arrangements for over 1.0 million patients as of June 30, 2025. 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.

Regulatory Trends

The One Big Beautiful Bill Act (the “OBBBA”), signed July 4, 2025, introduces Medicaid work-requirement pilots and tighter provider-tax rules beginning in 2026. While we are still evaluating the full downstream effects, we believe Astrana is well-positioned to navigate these changes and view these headwinds as manageable. Our diversified footprint, strong track record of Medicaid performance, and investment in care-enablement infrastructure provide meaningful insulation. We remain focused on maintaining continuity of care and supporting our state partners through this policy transition.

Recent Developments

Closing of the Acquisition of Certain Assets and Businesses of Prospect Medical Holdings, Inc. (“Prospect”) (such acquisition, the “Prospect Transaction”)

On July 1, 2025, we completed the previously announced Prospect Transaction. Concurrently with the closing, we entered into a letter agreement that, among other things, reduced the aggregate purchase price from $745.0 million to $707.9 million and removed certain working capital adjustments and related escrow.

The acquisition was financed using $707.3 million of proceeds from a five-year delayed draw term loan credit facility of up to $745.0 million pursuant to the Second Amended and Restated Credit Agreement dated as of February 26, 2025.

Prospect is a value-based, integrated care delivery network which coordinates the delivery of high-quality care, with a network of over 11,000 providers across Southern California, Texas, Arizona, and Rhode Island. Prospect enables providers to deliver payer-agnostic, patient-centered care across different lines of business. Prospect also operates a California Restricted

Knox-Keene-licensed health plan, a management services organization, a specialty pharmacy, and a fully-accredited acute care hospital. Following the acquisition, Astrana supports more than 20,000 providers and over 1.6 million patients.

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 as well as 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) 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, and stock-based compensation. We define Adjusted EBITDA margin as Adjusted EBITDA over total revenue.

Results of Operations

Condensed Consolidated Statements of Income

(In thousands)

(Unaudited)

48

49

50

Risk-Bearing Organizations and Patients

As of June 30, 2025 and 2024, we managed a total of 21 and 18 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 over 1.0 million and approximately 1.0 million as of June 30, 2025 and 2024, respectively.

Revenue

Total revenue for the three months ended June 30, 2025, was $654.8 million, as compared to $486.3 million for the three months ended June 30, 2024, an increase of $168.5 million, or 35%. The increase in revenue was primarily attributable to capitation revenue. Capitation revenue increased by $171.5 million primarily as a result of our recent acquisitions within our Care Partners segment, along with enrollees transitioning to full risk through our Restricted Knox-Keene plans.

Total revenue for the six months ended June 30, 2025, was $1.3 billion, as compared to $890.6 million for the six months ended June 30, 2024, an increase of $384.6 million or 43%. The increase in revenue was primarily attributable to capitation revenue. Capitation revenue increased by $389.6 million primarily as a result of our recent acquisitions within our Care Partners segment, along with enrollees transitioning to full risk through our Restricted Knox-Keene plans.

Cost of Services, Excluding Depreciation and Amortization

Expenses related to cost of services, excluding depreciation and amortization for the three months ended June 30, 2025, were $576.8 million, as compared to $412.8 million for the same period in 2024, an increase of $164.0 million or 40%. The overall increase was primarily due to increased participation in a value-based Medicare FFS model and medical costs associated with both professional and institutional risk of our Restricted Knox-Keene licensed health plans as a result of our recent acquisitions within our Care Partners segment which were commensurate to our increase in revenue.

Expenses related to cost of services, excluding depreciation and amortization for the six months ended June 30, 2025, were $1.1 billion, as compared to $743.2 million for the same period in 2024, an increase of $382.7 million or 51%. The overall increase was primarily due to increased participation in a value-based Medicare FFS model and medical costs associated with both professional and institutional risk of our Restricted Knox-Keene licensed health plans as a result of our recent acquisitions within our Care Partners segment which were commensurate to our increase in revenue.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2025, were $50.7 million, as compared to $36.0 million for the same period in 2024, an increase of $14.8 million or 41%. The increase was primarily due to increased general and administrative expenses to support operational growth such as stock-based compensation and transaction costs incurred for the Prospect transaction.

General and administrative expenses for the six months ended June 30, 2025, were $94.6 million, as compared to $74.7 million for the same period in 2024, an increase of $19.9 million or 27%. The increase was primarily due to increased general and administrative expenses to support operational growth such as stock-based compensation and transactions incurred for the Prospect Transaction.

Depreciation and Amortization

Depreciation and amortization expenses for the three months ended June 30, 2025, were $6.9 million, as compared to $7.4 million for the same period in 2024, a decrease of $0.5 million or 7%. 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, 2025, were $13.8 million, as compared to $12.5 million for the same period in 2024, an increase of $1.2 million or 10%. This amount includes depreciation of property and equipment and the amortization of intangible assets.

Interest Expense

Interest expense for the three months ended June 30, 2025 was $7.4 million as compared to $8.6 million for the same period in 2024, a decrease of $1.2 million or 14%. The decrease in interest expense was primarily due to a decrease in interest rates on our floating-rate debt. The interest rate for both the Revolver Loan and Term Loan was 6.08% as of June 30, 2025 and 7.43% as of June 30, 2024. In addition, there was a decrease in outstanding borrowings under the Second Amended and Restated Credit Facility. As of June 30, 2025, we borrowed $408.9 million on the Second Amended and Restated Credit Facility compared to $435.7 million borrowed under the facility as of June 30, 2024.

Interest expense for the six months ended June 30, 2025 was $14.7 million as compared to $16.2 million for the same period in 2024, a decrease of $1.5 million or 9%. The decrease in interest expense was primarily due to a decrease in interest rates on our floating-rate debt. The interest rate for the Revolver and Term Loan was 6.08% as of June 30, 2025 and 7.43% as of June 30, 2024. In addition, there was a decrease in outstanding borrowings under the Second Amended and Restated Credit Facility. As of June 30, 2025, we borrowed $408.9 million on the Second Amended and Restated Credit Facility compared to $435.7 million borrowed under the facility as of June 30, 2024.

Interest Income

Interest income for the three months ended June 30, 2025 was $2.3 million as compared to $3.5 million for the same period in 2024, a decrease of $1.2 million or 34%. Interest income reflects interest earned on cash held in bank accounts, money market and certificate of deposit accounts, and the interest from our loan receivables. The decrease in interest income was primarily due to a decrease in our cash held in interest bearing bank accounts.

Interest income for the six months ended June 30, 2025 was $4.6 million as compared to $7.5 million for the same period in 2024, a decrease of $2.9 million or 38%. Interest income reflects interest earned on cash held in bank accounts, money market and certificate of deposit accounts, and the interest from our loan receivables. The decrease in interest income was primarily due to a decrease in our cash held in interest bearing bank accounts.

Other Income (Loss)

Other income for the three months ended June 30, 2025 was $1.1 million as compared to $6.1 million for the same period in 2024, a decrease of $5.0 million or 81%. The decrease in other income was primarily due to recognizing a $5.3 million reimbursement in 2024 from Allied Pacific Holdings Investment Management, LLC for taxes associated with the restructuring transaction in December 2023 to spin-off the real estate business and investments (the “Excluded Assets spin-off “). No similar transaction occurred for the three months ended June 30, 2025.

Other loss for the six months ended June 30, 2025 was $3.9 million as compared to other income of $1.9 million for the same period in 2024, a decrease of $5.8 million or 313%. The increase in other loss was primarily due to debt issuance costs that were expensed in connection with the Second Amended and Restated Credit Facility.

Provision for Income Taxes

Provision for income taxes was $6.6 million for the three months ended June 30, 2025, as compared to $10.0 million for the same period in 2024, a decrease of $3.4 million. The decrease in provision for income taxes was primarily due to a decrease in pre-tax income.

Provision for income taxes was $10.0 million for the six months ended June 30, 2025, as compared to $17.2 million for the same period in 2024, a decrease of $7.2 million. The decrease in provision for income taxes was primarily due to a decrease in pre-tax income.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests for the three months ended June 30, 2025, was $0.8 million, as compared to $2.7 million for the same period in 2024, a decrease of $1.9 million. The decrease was primarily driven by a decrease in net income.

Net income attributable to non-controlling interests for the six months ended June 30, 2025, was $0.3 million, as compared to $4.7 million for the same period in 2024, a decrease of $4.4 million. The decrease was primarily driven by a decrease in net income.

Net Income Attributable to Astrana Health, Inc.

Our net income attributable to Astrana Health, Inc., for the three months ended June 30, 2025, was $9.4 million, as compared to $19.2 million for the same period in 2024, a decrease of $9.7 million.

Our net income attributable to Astrana Health, Inc., for the six months ended June 30, 2025, was $16.1 million, as compared to $34.0 million for the same period in 2024, a decrease of $17.9 million.

Adjusted EBITDA

Adjusted EBITDA for the three months ended June 30, 2025, was $48.1 million, as compared to $47.9 million for the same period in 2024, an increase of $0.2 million and was primarily due to similar utilization trends as the same period in 2024.

Adjusted EBITDA for the six months ended June 30, 2025, was $84.5 million, as compared to $90.2 million for the same period in 2024, a decrease of $5.7 million. The decrease was primarily due to a decrease in operating income as a result of higher utilization and an increase in general and administrative expenses.

See “Reconciliation of Net Income to EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin” below for additional information.

Segment Financial Performance

The Company currently has three reportable segments consisting of Care Partners, Care Delivery, and Care Enablement. We evaluate the performance of our 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 17 — “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, 2025 and 2024 (in thousands):

53

Care Partners Segment

Revenue for the three months ended June 30, 2025, was $631.4 million, as compared to $463.3 million for the three months ended June 30, 2024, an increase of $168.2 million. Operating income for the three months ended June 30, 2025 was $49.7 million, as compared to $40.3 million for the three months ended June 30, 2024, an increase in operating income of $9.4 million. The increase in revenue and operating income was primarily due to recent acquisitions within our Care Partners segment.

Revenue for the six months ended June 30, 2025, was $1,232.4 million, as compared to $845.6 million for the six months ended June 30, 2024, an increase of $386.8 million. Operating income for the six months ended June 30, 2025, was $93.9 million, as compared to $83.5 million for the six months ended June 30, 2024, an increase in operating income of $10.4 million. The increase in revenue and operating income was primarily due to recent acquisitions within our Care Partners segment.

Care Delivery Segment

Revenue for the three months ended June 30, 2025, was $38.4 million, as compared to $34.9 million for the three months ended June 30, 2024, an increase of $3.5 million. Operating income for the three months ended June 30, 2025, was $2.1 million, as compared to income of $1.8 million for the three months ended June 30, 2024, an increase in operating income of $0.3 million. The increase in revenue and operating income was primarily driven by an increased volume in patient visits and continued investments at our primary, multi-specialty, and ancillary Care Delivery entities.

Revenue for the six months ended June 30, 2025, was $71.8 million, as compared to $65.6 million for the six months ended June 30, 2024, an increase of $6.2 million. Operating loss for the six months ended June 30, 2025, was $1.0 million as compared to income of $1.6 million for the six months ended June 30, 2024, an increase in operating loss of $2.5 million. The increase in revenue was primarily driven by an increased volume in patient visits at our primary, multi-specialty, and ancillary Care Delivery entities. The increase in operating loss was due to an increase in expenses incurred related to our newer clinic locations that opened.

Care Enablement Segment

Revenue for the three months ended June 30, 2025, was $40.9 million, as compared to $36.2 million for three months ended June 30, 2024, an increase of $4.7 million. Operating income for the three months ended June 30, 2025 was $1.8 million, as compared to operating income of $6.9 million for the three months ended June 30, 2024. The increase in revenue was primarily due to managing more IPAs in our Care Partners segment. The decrease in operating income was due to higher costs as a result of an increase in the workforce that provides management and administrative services.

Revenue for the six months ended June 30, 2025, was $80.5 million, as compared to $69.4 million for six months ended June 30, 2024, an increase of $11.0 million. Operating income for the six months ended June 30, 2025, was $5.4 million as compared to operating income of $10.4 million for the six months ended June 30, 2024. The increase in revenue was primarily due to managing more IPAs in our Care Partners segment. The decrease in operating income was due to higher costs as a result of an increase in the workforce that provides management and administrative services.

Reconciliation of Net Income to EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

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, 2025 and 2024. We define Adjusted EBITDA margin as Adjusted EBITDA over total revenue.

(in thousands)

(1) Other, net for the three months ended June 30, 2025 relates to transaction costs for the Prospect Transaction, certain costs associated with the CHS transaction, non-cash changes related to the change in the fair value of our call option and Collar Agreement, and severance fees incurred.

(2) Other, net for the three months ended June 30, 2024 relates to non-cash changes 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.

(3) Other, net for the six months ended June 30, 2025 relates to debt issuance costs expensed in connection with our Second Amended and Restated Credit Facility, transaction costs for the Prospect Transaction, data transition costs for our recent acquisitions, certain costs associated with the CHS transaction, non-cash changes related to change in the fair value of our call option and Collar Agreement, and severance fees incurred.

(4) Other, net for 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 expense, interest income, income taxes, depreciation, and amortization, excluding income or loss from equity method investments, non-recurring and non-cash transactions, and stock-based compensation. 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, 2025, totaled $342.1 million, as compared to $290.8 million at December 31, 2024. Working capital totaled $269.4 million at June 30, 2025, as compared to $272.9 million at December 31, 2024, a decrease of $3.5 million.

We have historically financed our operations primarily through internally generated funds and borrowings on long-term debt. 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. In February 2025, we entered into the Second Amended and Restated Credit Agreement which amended and restated that certain amended credit agreement and provided for a five-year revolving credit facility of $300.0 million, a term loan of $250.0 million, and a delayed-draw term loan of $745.0 million, which were primarily used to refinance certain existing indebtedness and to fund the costs associated with the Prospect Transaction. 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):

Operating Activities

Cash provided by operating activities for the six months ended June 30, 2025, was $107.5 million, as compared to cash provided by operating activities of $29.2 million for the six months ended June 30, 2024. The increase in cash provided by operating activities was primarily driven by favorable changes in working capital, partially offset by lower adjusted net income. Working capital for the six months ended June 30, 2025, increased operating cash flow by $51.6 million, compared to a $36.1 million decrease in operating cash flow for the six months ended June 30, 2024. The change in working capital for the 2025 and 2024 periods included timing of claims payments related to our medical liabilities and a decrease in cash paid for income taxes. For the six months ended June 30, 2025, net income, exclusive of depreciation and amortization, amortization of debt issuance cost, share-based compensation, non-cash lease expense, deferred tax, and other was $56.0 million, compared to $65.3 million for the six months ended June 30, 2024.

Investing Activities

Cash used in investing activities during the six months ended June 30, 2025, was $3.5 million, primarily due to purchases of property and equipment of $4.5 million and issuance of loan of $1.1 million. The cash used in investing activities was partially offset by other investing activities of $2.1 million consisting of proceeds from repayment of loans, purchase of marketable securities, and distribution from investments - equity method. Cash used in investing activities during the six months ended June 30, 2024, was $151.0 million primarily 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 investment – equity method of $6.0 million, purchase of call options issued in conjunction with equity method investment of $3.9 million, purchases of property and equipment of $3.2 million, and other investing activities of $2.3 million consisting of purchase of investments, proceeds from repayment of loans, and purchase of marketable securities.

Financing Activities

Cash used in financing activities during the six months ended June 30, 2025, was $52.8 million, primarily due to repayments of debt of $431.4 million, payment of deferred financing costs of $17.2 million, tax payments from net share settlement of restricted stock awards and units of $5.1 million, dividend payments of $6.2 million, and other financing activities of $4.9 million consisting of proceeds from ESPP issuances, payment of finance lease obligations, repurchase of common stock, repurchase of treasury shares, purchase and sale of non-controlling interest, and payment of contingent liabilities. This was partially offset by borrowings of long-term debt of $412.0 million. 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. This was partially offset by repayment 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 other financing activities of $0.2 million consisting of payment of finance lease obligations and sale of non-controlling interest.

Credit Facility

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

Second Amended and Restated Credit Agreement

The Second Amended and Restated Credit Agreement provides for (a) a five-year revolving credit facility to the Company of $300.0 million, which includes a letter of credit sub-facility of up to $100.0 million and a swingline loan sub-facility of $25.0 million, (b) a five-year term loan A credit facility to the Company of $250.0 million, and (c) a five-year delayed draw term loan credit facility to the Company of $745.0 million, maturing on February 26, 2030, of which $707.3 million was drawn down in connection with closing the Prospect Transaction.

See Note 8 — “Credit Facility and Bank Loans” to our condensed consolidated financial statements under Item 1 in this quarterly report on Form 10-Q for additional information on our debt obligations.

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, 2024.

Off-Balance Sheet Arrangements

As of June 30, 2025, 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.

Interest Rate Risk

Borrowings under the Term Loan and Revolver Loan provided for under our Second Amended and Restated Credit Agreement, as of June 30, 2025, were $246.9 million and $162.0 million, respectively. The Term Loan and Revolver Loan bear interest at an annual rate equal to either, at our option, (a) the rate for term SOFR published by the CME Group Benchmark Administration Limited two days prior to the first day of the applicable interest period, plus a spread of 1.25% to 2.50%, as determined on a quarterly basis based on the Company’s leverage ratio, or (b) a base rate, plus a spread of 0.25% to 1.50%, as determined on a quarterly basis based on the Company’s leverage ratio. Borrowings under the Promissory Note Payable with I Health, as of June 30, 2025, were $9.9 million. The promissory note has an interest rate of 4.3% per annum on the principal amount. We have entered into a collar agreement for our Revolver Loan to effectively convert our floating-rate debt to a fixed-rate basis. The interest rate collar sets a cap of 5.00% and a floor of 2.34% for the SOFR portion of the interest rate. The principal objective of the collar agreement is to eliminate or reduce the variability of the cash flows in interest payments associated with our 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 our interest expense for the three months ended June 30, 2025, by $1.2 million, or decreased our interest expense by $0.8 million.

Evaluation of Disclosure Controls and Procedures

We maintain “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 our management, including our 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, 2025, 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, 2025.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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, 2024, filed with the SEC on March 14, 2025. 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, other than those set forth below. 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 our 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.

The “One Big Beautiful Bill Act” could adversely affect our business and results of operations.

The “One Big Beautiful Bill Act” (H.R. 1) (“OBBBA”), enacted on July 4, 2025, makes significant changes to the Medicaid, Medicare, and Health Insurance Marketplace federal healthcare programs. Changes include new requirements states must meet to maintain federal support for the Medicaid programs, as well as stricter criteria beneficiaries must meet to qualify for and maintain enrollment in federal healthcare programs. The effect of these changes could result in reductions in our patient population and managed care enrollees that we serve across our federal healthcare program lines of business due to, among other things, more stringent eligibility requirements such as the imposition of work or community service requirements, and copayments on many services, limitation of Medicaid eligibility to certain lawfully present individuals, and the effect of immigration enforcement actions which may discourage beneficiaries from applying or reapplying for federal healthcare benefits. Loss of Medicaid benefits may also result in higher volume of uncompensated emergency admissions of uninsured individuals at Foothill Regional Medical Center (“FRMC”) which we acquired in the Prospect Transaction. These risks could have a material adverse effect on our business, results of operations, financial condition or cash flows.

In addition, Medicaid provider tax reform has been targeted by the current administration to reduce federal Medicaid spending, including restricting states from using provider taxes to help finance coverage of undocumented immigrants and cutting provider taxes and capping state-directed payments. Such restriction and cuts could potentially adversely impact FRMC revenues received from affected programs as hospital and physician payment rates could be reduced, forcing hospital services to be reduced or closed.

We could incur additional costs and expenses resulting from the July 7, 2025 bankruptcy of certain Prospect asset seller entities and the effect of the Prospect letter agreement dated July 1, 2025.

On July 7, 2025, those entities related to Prospect that sold assets to us in the Prospect Transaction (the “Prospect PhysicianCo Entities”) filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, the effect of which could result in their breach or noncompliance with certain contractual obligations under the asset sale transaction, including the payment of claims owed to creditors of the Prospect PhysicianCo Entities or the maintenance of minimum levels of risk-based capital at closing. Although the asset sale transaction may shield us from liabilities of the Prospect PhysicianCo Entities to third parties, it may nevertheless be necessary for us to absorb the costs of such breach or noncompliance to protect its ongoing business interests or relationships. In such event, we would have limited to no recourse against the Prospect PhysicianCo Entities due to their bankruptcy filing, the elimination of the escrow account to cover, among other things, non-assumed liabilities of the Prospect PhysicianCo Entities, and the elimination of recourse (with certain exceptions) against the Prospect PhysicianCo Entities, as set forth in our letter agreement with Prospect dated July 1, 2025.