Yahoo Finance Astrana Health, Inc. (NASDAQ:ASTH) Q1 2024 Earnings Call Transcript
Astrana Health, Inc. (NASDAQ:ASTH) Q1 2024 Earnings Call Transcript May 7, 2024
Astrana Health, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day everyone and welcome to today's Astrana Health First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Today's speaker would be Brandon Sim, President and Chief Executive Officer of Astrana Health; and Chan Basho, Chief Operating and Financial Officer. A press release announcing Astrana Health Inc.'s results for the first quarter ended March 31, 2024 is available at the Investors section of the company's website at www.astranahealth.com. The company will discuss certain non-GAAP measures during this call. Reconciliations to the most comparable GAAP measure are included in the press release. To provide some additional background on its results, the Company has made a supplemental deck available on its website.
A replay of this broadcast will also be made available at Astrana Health website after the conclusion of this call. Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein contains certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terms such as anticipate, believe, expect, future, plan, outlook and will and include among other things statements regarding the company's guidance for the year ending December 31, 2024, continued growth, acquisition strategy, ability to deliver sustainable long-term value, ability to respond to the changing environment, operational focus, strategic growth plans and merger integration efforts.
A healthcare professional wearing a health communications device discussing patient data with a colleague.
Although the company believes that the expectations reflected in its forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ dramatically from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in Astrana Health is included in its filings with the Securities and Exchange Commission, which we encourage you to review before making an investment decision. The company does not assume any obligation to update any forward-looking statements as a result of new information, future events changes in market conditions or otherwise, except as required by law.
Regarding the disclaimer language, I would also like to refer you to slide two of the conference call presentation for further information. With that, I'll turn the call over to Astrana Health President and Chief Executive Officer, Brandon Sim. Please go ahead, Brandon.
Brandon Sim: Thank you, operator. Good evening and thank you all for joining us today. We began 2024 with a strong first quarter here at Astrana Health because we expand our innovative care model and technology platform to empower entrepreneurial providers and improve health care and local communities throughout the country. We continue to deliver against our strategic roadmap and are proud to announce compelling, financial, operational and clinical results to start the year. I'll start by highlighting our financial performance for the first quarter of 2024. Total revenue at Astrana reached $404 million, a 20% increase compared to the prior year period. And adjusted EBITDA rose to $42.2 million, up 42% compared to the prior year period.
This resulted in an adjusted EBITDA margin of 10.4%. Both growth and profitability metrics were driven by robust membership growth across all our lines of business, coupled with ongoing success in managing the total cost of care for these members and value-based risk-bearing arrangements. We also continued investing in our teams, our technology platform and our new market entry operations. We believe these investments are critical towards our ongoing commitment to building a sustainable business even as we continue to expand rapidly. As a reminder, we've consistently talked about the four pillars of our business which we feel our platform is uniquely positioned to execute on. One, expanding our membership base across existing and new geographies, two, increasing the level of accountability and risk we are responsible for our value-based care contracts, three, empowering our providers to achieve superior patient outcomes and four, executing strategic acquisitions to further accelerate our growth trajectory.
On the first pillar, we experienced robust growth in membership in both core and new regions. We now manage approximately one million lives driven by robust organic growth and strategic acquisitions. Our membership grew organically by around 10% year-to-date a number that is net of Medicaid redetermination and does not include a new strategic acquisition. On the second pillar, we continue to take on greater responsibility for the total cost of care of our members, as we promised we would do as. Of April 1, our full-risk business makes up approximately 60% of total capitation revenue and we anticipate continuing to grow that percentage, while consistently delivering high-quality care as the year progresses. In addition, we also began taking on full risk delegation in the state of Nevada.
We believe that we are uniquely positioned to capture the embedded growth that this pillar represents because of the high level of visibility and consistency that our proprietary technology and clinical infrastructure affords us. I'd like to continue emphasizing the key aspect of our business that distinguishes Astrana Health from other providers and peers. We have always committed to serving all segments of our communities in value-based care arrangements, covering all payer types from original Medicare, Medicare Advantage, managed Medicaid to commercial. And we continue to forge ahead in our transition to risk and being truly accountable for our members whole health across those diverse business segments, even as others have shied away. The infrastructure, technology and team that we have built allows us to do as well results in our ability to serve a wider patient population, make our providers lives simpler and more efficient, diversify our business and better manage risk and support our payer partners across their entire business With regards to the third pillar of our business, Astrana is focused on providing high-quality care and access to all members.
We have noted continued outperformance compared to historical years in terms of Helios ACC and other quality-related outcomes. We also continue to focus on making sure members receive the right care in the right setting leading to our continued strong performance on clinical utilization metrics. Our bed days per thousand and admits per thousand improved in the first quarter when compared to previous periods. This improvement is consistent across all business segments with Medicare, Medicaid and commercial authorizations for inpatient and outpatient services, mirroring this trend. Moving on to the fourth pillar of the business strategic acquisitions. We successfully closed the second and final part of our community Family Care acquisition this quarter, as we had previously guided.
This acquisition marks the largest in Astrana’s history and serves as a successful example of a care enablement client, deepening its relationship with Astrana Health and moving into the care partner segment. The integration of CSC was seamless as we were already powering the CSC business, with our care enablement platform prior to the acquisition, showcasing the value and synergy of leveraging our care enablement tech-enabled services business. The completion of this transaction allows us to take on greater responsibility for the outcomes of the patients we serve, with CSC's full risk Medicaid, restricted Knox-Keene licensed. It also further strengthens our commitment to managing medical costs, and providing quality care in our communities.
Looking ahead, we expect to transition the majority of our Medicaid members to full-risk arrangements in the next six to 12 months. This quarter, we also completed the acquisition of Prime Community Care of Central Valley or PCCCV. A risk-bearing provider organization with over 150 primary care and multi-specialty care providers, which serve around 26,000 primarily Medicaid members in the Central Valley of California. Prior to this, our organic growth and partnership efforts in the Central Valley had been robust and PCCCV joining our care partners' business will be a further accelerant, for our efforts to deliver high-quality high-value care to communities in the Central Valley and also represents our entry into San Joaquin County. Over the next 12 months, we anticipate continuing our strategy in the region with PCCCV in the fold, taking greater accountability for total cost of care for these members and further integrating with our care enablement platform, in order to advance patient outcomes and empower community providers in the region.
And outside of California, we continue to see a rich pipeline of both organic and inorganic opportunities in both Texas and Nevada and beyond. We believe that the strong growth and consistent execution of our strategic road map demonstrate the uniqueness of our platform for care model and technology capabilities, are well established value-based infrastructure and long track record of managing total cost of care and patient outcomes, in value-based arrangements across all payer types, with confidence in the ongoing growth and profitability of our platform. To conclude my prepared remarks, I want to express my gratitude to our teammates, providers and partners for their belief in our vision to transform health care and local communities nationwide.
The rapid growth and positive outcomes of the business would not be possible without your passion, dedication and support. With that, I'll hand it over to Chan to review our financial results.
Chan Basho: Thank you, Brandon. Moving into this quarter's performance, we began 2024 with total revenue of $404 million, a 20% increase from $337 million in the prior year quarter. This was primarily driven by increased competition revenue resulting from organic membership growth in our core IPAs, as well as the addition of CFC IPA on January 31st 2024. Care partners' revenue increased 26% to $397 million during the period Along with the organic and strategic growth partners revenue increased due to the conversion and addition full-risk Membership. As of April first 2024, we expect our full risk business to account for approximately 60% of capitated revenues relative to 49% as of January first 2024. Adjusted EBITDA was $42.2 million, up 42% from $29.8 million in the prior year period.
In the first quarter of 2024, adjusted EBITDA excluded certain one-time items including a $4.7 million expense, related to a financial guaranty via a letter of credit that we provided two years ago, in support of two independently operated local provider led ACOs. Despite the removal of these ACOs from the CMS program. The shared losses for that year were recorded and we're working with those two providers to recoup the funds that were spent. As I mentioned, this is not a recurring item nor do we believe it reflects the operations of our ACO business. Net income attributable to a strong health was $14.8 million an increase of 13% from $13.1 million in the prior year quarter. Earnings per share on a diluted basis were $0.31 up 11% from $0.28 in the prior year.
Now turning to the balance sheet. Our financial position remains well capitalized with $335 million in cash and cash equivalents and total debt of $393 million as of Q1 2024. This compares to $294 million in cash and cash equivalents and total debt of $282 million at the end of 2023. We are steadfast in our ability to execute our growth strategy by expanding our membership through both organic means and strategic acquisitions as well as transitioning our contracts to full risk. Further, we remain confident that full year projections align with expectations given our diverse payer mix and ability to manage cost of care as a result we are reaffirming our full year guidance for revenue, adjusted EBITDA and earnings per share. Looking ahead to the coming quarters, the successful completion of the second part of the CFC acquisition is projected to contribute a single digit uplift in Q2 revenue relative to Q1.
This will be reflected in the full quarter's impact of CFC on our financials. Historically, Q3 has been our strongest quarter in terms of profitability, due to sweeps and ACO related payments. Our sustained participation in the ACO program has enhanced our capabilities around real-time data gathering and forecasting, due to the enhanced clarity, we are comfortable this year booking ACO earnings based on the quarter of their contribution. As a result, Q3 will be slightly lower in terms of EBITDA contribution percentage versus historical years. In closing, we're extremely pleased with our performance in the first quarter, which has set a positive tone for the remainder of the year. Our strong organic membership growth strategic acquisitions of CFC and PCCCV, ongoing transition to full risk arrangements and the stability and improvements of our utilization metrics represent strong momentum for our business.
We have confidence in our ability to continue our long track record of successful execution. We will continue in our commitment to deliver the utmost quality of care to focus on industry leading patient outcomes and to serve more communities across the country. Thank you for your time today. With that, operator, we'll turn to questions.
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