Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Astrana Health Inc (ASTH, Financial) reported a 40% increase in revenue to $486.3 million compared to the same period last year.
- Adjusted EBITDA rose by 34% year over year to $47.9 million, demonstrating strong profitability growth.
- The company successfully integrated the Community Family Care acquisition, contributing to its robust organic growth.
- Astrana Health Inc (ASTH) expanded into new markets, including Arizona and Hawaii, through strategic partnerships.
- The acquisition of Collaborative Health Systems is expected to expand Astrana's footprint and enhance its value-based care capabilities.
Negative Points
- There was a slight uptick in inpatient utilization due to a surge in COVID-19 cases in California, which could impact cost trends.
- The intended acquisition of Collaborative Health Systems is expected to run at a $10 million loss on a standalone basis in 2024.
- Cash flow from operating activities declined by $4.3 million compared to the prior year period, primarily due to increased working capital needs.
- The company did not narrow down its EBITDA guidance range, indicating potential uncertainties in achieving higher profitability.
- Astrana Health Inc (ASTH) faces challenges in managing the integration of multiple new partnerships and acquisitions across different states.
Q & A Highlights
Q: Can you provide more color on the utilization trends experienced in Q2, especially regarding COVID-driven inpatient utilization in California?
A: Utilization trends were within expectations for the second half of the year, with a slight uptick due to seasonality and COVID cases in California. This has been factored into our guidance for the remainder of the year.
Q: Why did you not narrow down the EBITDA guidance range despite narrowing the revenue guidance range?
A: With recent transactions and our commitment to reinvest in the business, we are in a good place regarding profitability. We aim to use opportunities to reinvest in the business as they arise.
Q: Can you provide more specifics around the CHS margin ramp expectations and synergies, considering there are not many market overlaps between Astrana and CHS?
A: CHS is expected to lose around $10 million on a run rate basis in 2024. We anticipate breaking even by 2025 with synergies and achieving a profitable margin by 2026. The ramp includes moving some lives from partial risk to full risk.
Q: How are you managing through the pressures on Medicare cost ratios, and what medical trend percentage did you see in the quarter?
A: We are seeing stable utilization trends, with low to mid-single-digit cost trends relative to last year. Our care model, which doesn't rely heavily on risk coding, allows us to maintain stable medical loss ratios.
Q: With the CHS acquisition, do you expect to need more M&A to build provider density in new geographies, or can it be done organically?
A: It will be a combination of both. We are always in organic growth mode, and the CHS acquisition provides a great opportunity to expand the rate of organic growth in new markets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
