Astrana Health Inc.

Good day everyone and welcome to today's Astana Health second quarter 2025 earnings call. At this time all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question and answer session and instructions will be provided at that time. Today's speakers will be Brandon Sim, President and Chief Executive Officer of Astana Health and Sean Basho, Chief Operating and Financial Officer. The press release announcing Astana Health Inc's results for the second quarter ended June 30th, 2025 is available at the Investor section of the company's website at .astranahealth.com. The company will discuss certain non-GAAP measures during this call. Reconciliation to the most comparable GAAP measures 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 Astana 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 meeting 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 31st, 2025, continued growth acquisition strategy, ability to deliver sustainable long-term value, ability to respond to the changing environment, liquidity, operational focus, strategic growth plans, and acquisition integration efforts. 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 materially from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in Astana 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 marketing 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. And with that, I'll turn the call over to Astana Health's President and Chief Executive Officer, Mr. Brandon Sim. Thank you, sir. Please go ahead.

Good afternoon, and thank you for joining us on Astana Health's second quarter 2025 earnings call. We are pleased to report another quarter of strong financial results and disciplined execution as we advance our strategy to build the nation's leading, patient-centered, physician-focused healthcare platform. We have held a decades-long belief that the future of healthcare in America depends on building a high-performing network of entrepreneurial physicians and providers, empowering them with purpose-built clinical and technological capabilities, and operating as a delegated, pseudo-single payer that collaborates with all payer partners. That long-held conviction and the infrastructure we've built around it has created a durable and unique moat, one which has only been amplified as short-term tactics like risk adjustment gamesmanship, contract arbitrage, and financial engineering disappear across the industry. For the second quarter of 2025, we delivered strong performance across the business, with total revenues of $654.8 million and adjusted EBITDA of $48.1 million, both at the higher end of our guidance ranges. Revenue grew 35% year over year, driven primarily by continued growth in our care partner segment as our payer partners continue to turn to us for high-quality, coordinated care for their members. We also made disciplined progress in transitioning our membership into more strategically aligned full-risk arrangements. Approximately 78% of revenue now comes from full-risk contracts, up from 60% a year ago and 75% last quarter. Our adjusted EBITDA performance continues to reflect the balanced approach we've taken by responsibly growing our risk-bearing membership while also managing cost trends effectively. While we continue to invest in growth, integration, and technology, we've sustained strong profitability in cash flow generation. We expect further EBITDA expansion in 2026 as our full-risk cohorts mature and synergies from the prospect integration ramp. Medical cost trends remained well controlled in the quarter, coming in slightly below our full-year expectation of .5% on a weighted basis. Both Medicare Advantage and Commercial Lines of Business came in below 4.5%, while Medicaid ran slightly above, although improved sequentially from the first quarter as flu-related utilization declined. Based on our performance -to-date and forward visibility, we are reaffirming our .5% trend outlook for the year and remain confident in our ability to continue delivering industry-leading outcomes. I'm often asked how Estrana can consistently deliver such differentiated cost trend results. The answer is simple. It's the power of our fully delegated, well-coordinated care model, enabled by a proprietary technology platform and data infrastructure purpose-built for scale. Because we operate -to-end as a single payer across hundreds of planned -of-business combinations, we're able to build deep longitudinal relationships with patients, driving real behavior change and ultimately better outcomes. And our delegated model gives us real-time visibility into utilization and claims, allowing from earlier, more coordinated interventions, not episodic, reactive care. Shifting next to prospect. On July 1st, we officially closed our prospect health acquisition and are now actively deploying the Estrana playbook to ensure a smooth and value-accretive integration. Prospect performed in line with our expectations in the second quarter, and over the coming months and quarters, our focus will be on standardizing workflows, accelerating technology integration, aligning clinical operations, and executing against the synergy targets we've previously outlined. I'm encouraged by the early progress already underway and look forward to the positive impact our combined organizations will continue to make for the over 1.6 million patients that we now collectively serve. Additionally, I wanted to reiterate a few transaction dynamics that we also announced last month. We acquired prospect for $708 million, down from the $745 million we originally anticipated. This purchase price reduction, which in no way related to the performance of the business, as well as the substantial amount of balance sheet cash that we also received, allowed us to close the acquisition at an approximately 2.7 times net debt to perform adjusted EBITDA leverage ratio, compared to our original estimate of 3.4 times, putting us in a materially better leverage position. With that said, however, we will continue to focus on deleveraging our balance sheet to below 2.5 times over the coming 12 to 18 months, and will remain laser-focused on ensuring a successful integration. With the close of prospect and our confidence in its integration, we updated our full year 2025 total revenue and adjusted EBITDA guidance upward to between $3.1 to $3.3 billion in revenue, and between $215 and $225 million in adjusted EBITDA. We are reiterating that guidance today, and Chon will provide additional color later in the call.

Lastly,