Q1 2025 Astrana Health Inc Earnings Call

May 8, 2025

Operator: Good day, everyone, and welcome to today's Astrana Health Q1 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have an 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 Astrana Health, and Chandan Basho, Chief Operating Financial Officer. The press release announcing Astrana Health, Inc.'s results for Q1 ended 31 March 2025 is available at the investor 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 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.

Good day, everyone and welcome stays strong that helped the first quarter 2025 earnings call.

At this time all participants are in a listen only mode.

You will have an opportunity to ask questions. During the question and answer session and instructions will be will be provided at that time.

Bryan Hanson: Today's speakers will be Bryan Hanson, President and Chief Executive Officer, Shawn I hope.

Speaker Change: John Bhatia, Chief operating and financial Officer.

Press release announcing our strong health Inc. 's results for the first quarter ended March 31, 2025 is available at the investors section of the company's website at Www Dot <unk> Dot com.

Speaker Change: The company will discuss certain non-GAAP measures during this call reconciliations to the most comparable GAAP measures are included in the press release.

Speaker Change: To provide some additional background on as a result, the company has made a supplemental Jack available on its website.

Operator: A replay of the broadcast will also be available at Astrana Health's 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 31 December 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.

Speaker Change: A replay of this broadcast will also be available at <unk> website. After the conclusion of this call.

Speaker Change: 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.

Speaker Change: 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, 2025 continued growth acquisition strategy ability to deliver sustainable long term value.

Speaker Change: The ability to respond to the changing environment liquidity operational focus strategic growth plans and acquisition integration efforts.

Operator: Although the company believes that the expectations reflected in its forward-looking statements are reasonable as of today, these statements are subject to risks and uncertainties that can cause the actual results to differ materially from those projected. There can be no assurance that these 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.

Speaker Change: Although the company believes that the expectations reflected in its forward looking statements are reasonable as of today. These statements are subject to risks and uncertainties that can cause the actual results to differ materially from those projected.

Speaker Change: There can be no assurance that these expectations will prove to be correct information about the risks associated with investing in the strawn. A health has 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.

Speaker Change: Future events changes in market conditions, or otherwise, except as required by law.

Speaker Change: 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 <unk>, President and Chief Executive Officer Brandon.

Operator: With that, I'll turn the call over to Astrana Health's President and Chief Executive Officer, Brandon Sim. Please go ahead, Brandon.

Speaker Change: Please go ahead Brandon.

Brandon Sim: Good afternoon. Thank you all for joining us today. We are pleased to report a strong start to the year, with Q1 results that reflect the continued momentum behind our strategy to build the nation's leading patient-centered healthcare platform. At Astrana, our progress is rooted in disciplined execution across four strategic pillars. First, we are sustainably growing our membership to expand access to high-quality care for more Americans. Second, we are strengthening alignment between patient outcomes and financial performance through thoughtful risk progression in our value-based arrangements. Third, we are improving care quality and patient outcomes while managing costs effectively. Fourth, we are driving operational excellence through our proprietary care enablement platform, which supports clinical teams, enhances workflow efficiency, and scales our impact.

Speaker Change: Good afternoon, and thank you all for joining us today.

Speaker Change: We're pleased to report a strong start to the year.

Speaker Change: With first quarter results that reflect the continued momentum behind our strategy to build the nation's leading patient centered health care platform.

Speaker Change: And Australia, our progress is good at and disciplined execution across four strategic pillars.

Speaker Change: First we are sustainably growing our membership to expand access to high quality care for more Americans.

Speaker Change: Second we are strengthening alignment between patient outcomes and financial performance through thoughtful risk progression in our value based arrangements.

Speaker Change: Third we are improving care quality and patient outcomes, while managing cost effectively.

Speaker Change: And fourth.

Speaker Change: We are driving operational excellence through our proprietary care enablement platform, which supports clinical teams enhances workflow efficiency and scale our impact.

Brandon Sim: What continues to differentiate Astrana and what really drives our consistent performance across all market and policy environments is the combination of our physician-led clinical capabilities and our delegated model, which enables us to act as a single payer for our physicians. Our care delivery infrastructure integrates high-performing provider networks with direct care delivery capabilities in our clinics and with our care management teams, enabling us to manage care more proactively and more consistently. In parallel, our delegated payer-agnostic model allows us to build longitudinal patient relationships and gives us real-time visibility into utilization and claims, allowing for earlier interventions, more coordinated care over time rather than episodic interventions, and ultimately better outcomes. When paired with our proprietary technology platform, we're able to address regional differences in a consistent way, identify anomalies, and act on insights in real time.

Speaker Change: What continues to differentiate us trying to.

Speaker Change: What really drives our consistent performance across all market and policy environments.

Speaker Change: Is the combination of our physician led clinical capabilities and our delegated model, which enables us to act as a single payer for our physicians.

Speaker Change: Our care delivery infrastructure integrates high performing provider networks with direct care delivery capabilities in our clinics and with our care management teams, enabling us to managed care more proactively and more consistently.

Speaker Change: In parallel our delegated payer agnostic model allows us to build longitudinal patient relationships and it gives us real time visibility into utilization and claims allowing for earlier intervention more coordinated care over time, rather than episodic interventions and ultimately better outcomes.

Speaker Change: When paired with our proprietary technology platform.

Speaker Change: Well to address regional differences in a consistent way identify anomalies and act on insights in real time.

Brandon Sim: The result is greater stability and predictability in both medical cost trend and MLR performance, regardless of geography, policy environment, or economic cycle. With that, I'll share some financial highlights from Q1. In Q1, Astrana generated total revenue of $620.4 million, a 53% increase compared to the prior-year period, and delivered adjusted EBITDA of $36.4 million. Revenue growth was driven by our care partner segment, which grew 57% year-over-year to $600 million. DHS contributed $95 million in Q1, which was in line with our expectations. Adjusted EBITDA in Q1 reflected our continued success in growing membership and value-based arrangements while managing cost trend effectively.

Speaker Change: The result is greater stability and predictability in both medical cost trend and MLR performance, regardless of geography policy environment or economic cycle.

Speaker Change: With that I'll share some financial highlights from the first quarter.

Speaker Change: In the quarter, Australia generated total revenue of $620 4 million or 53% increase compared to the prior year period.

Speaker Change: And delivered adjusted EBITDA of $36 4 million.

Speaker Change: Revenue growth was driven by our care partners segment, which grew 57% year over year to $600 million.

Speaker Change: DHS contributed $95 million in the quarter, which was in line with our expectations.

Speaker Change: Adjusted EBITDA in the first quarter reflected our continued success in growing membership value based arrangements, while managing cost trend effectively.

Brandon Sim: Margins were moderated by planned ongoing investments in growth, integration, and technology, as well as by revenue growth in areas with lower near-term margin profiles, such as the CHS acquisition and newly converted full risk members, which was consistent with expectations. We expect this to improve in 2026, as previously guided, as CHS moves towards breakeven this year and as our full risk cohorts further mature. Medical cost trend in the quarter was in line with expectations in the mid-single digits, blended across all lines of business, with Medicaid trend above and Medicare and commercial trend below that blended average. Diving a little deeper here, despite a challenging flu season, which drove higher than normal ER and lab utilization, we are pleased to be on track with our full-year trend and profitability guidance.

Speaker Change: Margins were moderated by planned ongoing investments in growth integration and technology as.

Speaker Change: As well as by revenue growth and areas with lower near term margin profiles, such as the CHS acquisition.

Speaker Change: Newly converted full risk members.

Speaker Change: Which was consistent with expectations.

Speaker Change: We expect this to improve in 2026 as previously guided.

Speaker Change: As CHS moves towards breakeven this year and as our full risk cohorts further mature.

Speaker Change: Medical cost trend in the quarter was in line with expectations in the mid single digits blended across all lines of business.

Speaker Change: With Medicaid trend above and Medicare and commercial trend below that blended average.

Speaker Change: Diving a little deeper here.

Speaker Change: A challenging flu season, which drove higher than normal E R and lab utilization.

Speaker Change: We are pleased to be on track with our full year trend and profitability guidance.

Brandon Sim: Turning to growth, our care partner segment continues to expand, reaching 910,000 members as of Q1 2025. We're also making disciplined progress in transitioning our membership into more strategically aligned full risk arrangements. As of this quarter, approximately 38% of our members are now in full risk contracts, up from 5.5% a year ago. Those members now account for 75% of our capitated revenue. Turning to our emerging markets, Nevada and Texas, we are seeing encouraging progress in both growth and operational execution in those markets. In Nevada, we achieved breakeven in both our risk-bearing network and our Astrana Care clinics during Q1, right on track with expectations. Membership in our risk-bearing network grew 40%, and clinic visit volume increased by 35% year-over-year, reflecting strong momentum in Nevada.

Speaker Change: Turning to growth our care partners segment continues to expand reaching 910000 members as of Q1 2025.

Speaker Change: We're also making disciplined progress in transitioning our membership into more strategically aligned full risk arrangements.

Speaker Change: As of this quarter approximately 38% of our members are now in full risk contracts up from five 5% a year ago.

Speaker Change: And those members now account for 75% of our capitation revenue.

Speaker Change: Turning to our emerging markets, Nevada and Texas.

Speaker Change: We are seeing encouraging progress in both growth and operational execution in those markets.

Speaker Change: In Nevada, we achieved breakeven in both our risk bearing network and our restaurant of care clinics during Q1.

Speaker Change: Right on track with expectations.

Speaker Change: Membership in our risk bearing network grew 40%.

Speaker Change: Clinic visit volume increased by 35% year over year.

Speaker Change: <unk> strong momentum in Nevada.

Brandon Sim: In Texas, we continue to transform the market to align with our single payer delegated model over time, and we remain on track with reaching profitability in late 2025. These results reinforce the portability and scalability of the Astrana model, and we're pleased to see performance in these markets tracking in line with our strategic plan. Now turning to acquisitions. In 2024, our focus was on expanding our footprint and deepening our presence in key communities across the country. In 2025, our priority shifts to executing on that growth to unlock greater value across the platform. Starting with CHS, integration onto the Astrana platform for CHS is now complete. As expected, we've identified and executed on over $10 million in G&A efficiencies as CHS has onboarded to our proprietary technology platform.

Speaker Change: And in Texas, we continue to transform the market to align with our single payer delegated model overtime.

Speaker Change: And we remain on track with reaching profitability in late 2025.

Speaker Change: These results reinforce the portability and scalability of the <unk> model.

Speaker Change: And we're pleased to see performance in these markets tracking in line with our strategic plan.

Speaker Change: Now turning to acquisitions.

Speaker Change: In 2024, our focus was on expanding our footprint.

Speaker Change: And deepening our presence in key communities across the country.

Speaker Change: 2025, our priority shifts to executing on that growth.

Speaker Change: To unlock greater value across the platform.

Speaker Change: Starting with CHS.

Speaker Change: Integration onto the <unk> platform for CHS is now complete.

Speaker Change: As expected, we've identified and executed on over $10 million in G&A efficiencies as CHS has on boarded to our proprietary technology platform.

Brandon Sim: CHS's Q1 performance was in line with expectations. As we continue to implement our care model and scale it, we anticipate CHS will reach breakeven profitability in 2025 and achieve profitability in 2026. We're also making measured progress in expanding our delegated activities in 2026 and beyond. As for our planned acquisition of Prospect Health, we remain highly confident in the opportunity ahead. The transaction will significantly expand our provider network in Southern California and will position us to serve approximately 1.7 million members in value-based arrangements. We continue to expect Prospect to contribute around $81 million in adjusted EBITDA and to deliver between $12 to 15 million in synergies, and we look forward to closing on the acquisition this summer. As we integrate and scale these acquisitions, it's equally important that we continue strengthening the foundation of our organization.

Speaker Change: Can you just as Q1 performance was in line with expectations.

Speaker Change: And as we continue to implement our care model and scale it.

Speaker Change: We anticipate DHS will reach breakeven profitability in 2025.

Speaker Change: And achieve profitability in 2026.

Speaker Change: We're also making measured progress in expanding our delegated activities in 2026 and beyond.

Speaker Change: As for our planned acquisition of prospect health.

Speaker Change: We remain highly confident in the opportunity ahead.

Speaker Change: The transaction will significantly expand our provider network in southern California.

Speaker Change: And will position us to serve approximately 1.7 million members in value based arrangements.

Speaker Change: We continue to expect prospect to contribute around $81 million and adjusted EBITDA.

Speaker Change: And to deliver between 12 to 15 million in synergies.

Speaker Change: And we look forward to closing on the acquisition this summer.

Speaker Change: As we integrate and scale. These acquisitions, it's equally important that we continue strengthening the foundation of our organization.

Brandon Sim: To that end, we've made several exciting additions to our leadership team this quarter. Georgie Sam has joined us as Chief Data and Analytics Officer to lead our enterprise-wide data analytics and AI strategy. Glenn Sobotka has come on board as Chief Accounting Officer, bringing deep experience to support our continued financial discipline and scalability. We're excited to have Rita Pew step up into the role of Chief People Officer, helping us further invest in the talent and culture that drives Astrana forward. I'd like to touch on several recent industry-wide developments. Starting with Medicare Advantage rates, we're encouraged by the 2026 Medicare Advantage rate notice, which we believe signals continued federal support for both the MA program and value-based care more broadly.

Speaker Change: To that end, we've made several exciting additions to our leadership team this quarter.

Speaker Change: Georgia, Sam has joined US as chief data and analytics officer to lead our enterprise wide data analytics and AI strategy.

Speaker Change: Glen Sabatka has come on board as Chief Accounting officer, bringing deep experience to support our continued financial discipline and scalability.

Speaker Change: And we're excited to have read up you step up into the role of Chief people officer, helping.

Speaker Change: Helping us further invest in the talent and culture that drives the startup forward.

Speaker Change: Now.

Speaker Change: I'd like to touch on several recent industry wide developments.

Speaker Change: Starting with Medicare advantage rates, we're encouraged by the 'twenty 'twenty six Medicare advantage rate notice, which we believe signals continued federal support for both the MMA program and value based care or broadly.

Brandon Sim: The final rates reinforce a stable reimbursement outlook and should serve as a tailwind for Astrana's current business, and even more so for the Proforma business once the Prospect acquisition is complete, given the combined scale of the Proforma platform. Turning to California's Proposition 35, this was not a headwind for Astrana in Q1. While we are still working through the broader implications of the legislation with our plan and provider partners, our current view is that the net impact will be neutral to EBITDA once resolved. With regards to V28, we have not seen a negative impact on our business. We have always taken a principled approach to value-based care, finding success by driving better patient outcomes and higher quality of care, not by exploiting reimbursement mechanics.

Speaker Change: The final rates reinforced a stable reimbursement outlook.

Speaker Change: And should serve as a tailwind for a strong his current business.

Speaker Change: And even more so for the pro forma business once the prospect acquisition is complete given the combined scale of the of the pro forma platform.

Speaker Change: Turning to California's proposition 35.

Speaker Change: This was not a headwind for Australia in Q1.

Speaker Change: While we are still working through the broader implications of the legislation with our plan and provider partners are.

Speaker Change: Our current view is that the net impact will be neutral to EBITDA once resolved.

Speaker Change: With regards to V 28.

Speaker Change: We have not seen a negative impact on our business.

Speaker Change: We have always taken a principled approach to value based care.

Speaker Change: Finding success by driving better patient outcomes and higher quality of care.

Speaker Change: Not by exploiting reimbursement mechanics.

Brandon Sim: We believe that this is the only way to build a durable company and to deliver on a differentiated care experience and improved outcomes for our patients. Similarly, our exposure to Part D risk remains de minimis, with less than 2% of our members with any exposure. That is entirely by design. We have always remained disciplined about taking on risk where we believe we can have a meaningful impact. We have avoided exposure where that control is limited. To close my prepared remarks, we believe that our ability to grow rapidly while delivering consistent, profitable results is a direct outcome of our proven care model, disciplined execution, and proprietary AI-enabled technology infrastructure built to scale. We are proud to continue demonstrating that value-based care can be both scalable and effective, driving strong performance while improving patient outcomes.

Speaker Change: We believe that this is the only way to build a durable company.

Speaker Change: And to deliver on a differentiated care experience improved outcomes for our patients.

Speaker Change: Similarly.

Speaker Change: Our exposure to part D risk remains de Minimis.

Speaker Change: With less than 2% of our members with any exposure.

Speaker Change: That is entirely by design.

Speaker Change: We have always remained disciplined about taking on risks, where we believe we can have a meaningful impact.

Speaker Change: We have avoided exposure where that control is limited.

Speaker Change: To close my prepared remarks, we believe that our ability to grow rapidly while delivering consistent profitable results is a direct outcome of our proven care model.

Speaker Change: Disciplined execution.

Speaker Change: The proprietary AI enabled technology infrastructure built to scale.

Speaker Change: We are proud to continue demonstrating the value based care can be both scalable and effective.

Speaker Change: Driving strong performance, while improving patient outcomes.

Brandon Sim: With that, I will now hand it over to Chann to discuss our financials in more detail.

Brandon Sim: With that, I will now hand it over to Chan to discuss our financials in more detail.

Speaker Change: With that I will now hand, it over to John to discuss our financials in more detail.

Chandan Basho: Thanks, Brandon, and thank you all for joining today. Turning to our Q1 results, I'm pleased to report that Astrana Health delivered a strong start to the year with performance in line with our expectations across all lines of business. Revenue for the quarter was $620.4 million, representing a year-over-year increase of 53%. This growth was driven primarily by strong organic growth in our core business and the acquisitions of CFC and CHS, supplemented by our continued ramp in new geographies. Adjusted EBITDA came in at $36.4 million. Net income attributable to Astrana for the quarter was $6.7 million, and EPS was $0.14 per share. Looking at the balance sheet, we closed the quarter with $260.9 million in cash and short-term investments.

Chan Basho: Thanks, Brandon, and thank you all for joining today. Turning to our Q1 results, I'm pleased to report that Astrana Health delivered a strong start to the year with performance in line with our expectations across all lines of business. Revenue for the quarter was $620.4 million, representing a year-over-year increase of 53%. This growth was driven primarily by strong organic growth in our core business and the acquisitions of CFC and CHS, supplemented by our continued ramp in new geographies. Adjusted EBITDA came in at $36.4 million. Net income attributable to Astrana for the quarter was $6.7 million, and EPS was $0.14 per share. Looking at the balance sheet, we closed the quarter with $260.9 million in cash and short-term investments.

John Bhatia: Thanks, Brandon and thank you all for joining today.

John Bhatia: Turning to our first quarter results I'm pleased to report that Australia health delivered a strong start to the year with performance in line with our expectations across all lines of business.

John Bhatia: Revenue for the quarter with 624 million.

John Bhatia: Representing a year over year increase of 53%.

John Bhatia: This growth was driven primarily by strong organic growth in our core business and the acquisitions of 50 and DHS supplemented by a continued ramp in new geographies.

John Bhatia: Adjusted EBITDA came in at $36 4 million net.

John Bhatia: Net income attributable to Australia for the quarter was $6 7 million and EPS was <unk> 14 per share.

John Bhatia: Looking at the balance sheet, we closed the quarter with $260 9 billion in cash and short term investments.

Chandan Basho: As we look ahead to closing the Prospect acquisition this summer, our expected pro forma net leverage will be approximately 3.4x, with the goal of delevering below 3x within 12 months post-close. For the quarter, we generated $13.6 million in free cash flow, which included a non-recurring debt issuance cost of $5 million related to the recent amendment of our credit agreement with Truist. Excluding this one-time financing cost, free cash flow was $18.6 million, representing 51% of adjusted EBITDA for the quarter. We remain confident in our ability to deliver within our previously stated full year guidance for revenue of $2.5 to $2.7 billion and adjusted EBITDA of $170 to $190 million.

Chan Basho: As we look ahead to closing the Prospect acquisition this summer, our expected pro forma net leverage will be approximately 3.4x, with the goal of delevering below 3x within 12 months post-close. For the quarter, we generated $13.6 million in free cash flow, which included a non-recurring debt issuance cost of $5 million related to the recent amendment of our credit agreement with Truist. Excluding this one-time financing cost, free cash flow was $18.6 million, representing 51% of adjusted EBITDA for the quarter. We remain confident in our ability to deliver within our previously stated full year guidance for revenue of $2.5 to $2.7 billion and adjusted EBITDA of $170 to $190 million.

John Bhatia: As we look ahead to closing the prospect acquisition. This summer our expected pro forma net leverage will be approximately three four times with the goal of Delevering below three times within 12 months post close.

John Bhatia: For the quarter, we generated $13 6000.

John Bhatia: Free cash flow.

John Bhatia: Which included a nonrecurring debt issuance costs of $5 million related to the recent amendment of our credit agreement with trust.

John Bhatia: Excluding this onetime financing costs free cash flow was $18 6 million.

John Bhatia: Representing 51% of adjusted EBITDA for the quarter.

John Bhatia: We remain confident in our ability to deliver within our previously stated full year guidance.

John Bhatia: For revenue of 2.5 to $2 7 billion and adjusted EBITDA of $170 million to $190 million.

Chandan Basho: For Q2 2025, we expect to generate between $615 to $665 million of revenue with adjusted EBITDA ranging between $45 to $50 million. Finally, we want to reiterate our previously stated medium-term adjusted EBITDA guidance of at least $350 million in 2027. Despite the current environment, we remain confident in our ability to drive sustainable, profitable growth. With that, I'll turn it back to Brandon for closing remarks.

Chan Basho: For Q2 2025, we expect to generate between $615 to $665 million of revenue with adjusted EBITDA ranging between $45 to $50 million. Finally, we want to reiterate our previously stated medium-term adjusted EBITDA guidance of at least $350 million in 2027. Despite the current environment, we remain confident in our ability to drive sustainable, profitable growth. With that, I'll turn it back to Brandon for closing remarks.

John Bhatia: For second quarter 2025, we expect to generate between $615 million to $665 million of revenue with adjusted EBITDA ranging between $45 million to $50 million.

John Bhatia: Finally, we want to reiterate our previously stated medium term adjusted EBITDA guidance of at least $350 million in 2027.

John Bhatia: Despite the current environment, we remain confident in our ability to drive sustainable profitable growth.

Brendan: With that I'll turn it back to Brendan for closing remarks. Thank.

Brandon Sim: Thank you, Chann. Thank you everyone for your time today. In summary, we are proud of the progress we made in Q1, and we look forward to a strong rest of the year. We'll now open it up for Q&A.

Brandon Sim: Thank you, Chan, and thank you everyone for your time today. In summary, we are proud of the progress we made in Q1, and we look forward to a strong rest of the year. We'll now open it up for Q&A.

Speaker Change: Thank you John and thank you everyone for your time today.

Speaker Change: In summary, we are proud of the progress we made in Q1 and.

Speaker Change: And we look forward to a strong rest of the year.

We will now open it up for Q&A.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove yourself from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for your questions. Our first questions come from the line of Ryan Daniels with William Blair. Please proceed with your questions.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Confirmation tone will indicate your line is in the question queue you.

Speaker Change: You May press Star two if you would like to remove yourself from the queue.

Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Please while we poll for your questions.

Speaker Change: Okay.

Speaker Change: Our first questions come from the line of Ryan Daniels with William Blair. Please proceed with your questions.

Ryan Daniels: Yeah. Thank you for taking the questions and congrats on the strong start to the year. Hoping you could go into a little bit more detail on the CHS integration. It sounds like that's progressed pretty smoothly, but curious of any key integration activities or milestones that still remain and just wanted to hear overall thoughts on how that's progressing. I know you indicated it's trending towards that break-even level, but any more color there would be great to start.

Ryan Daniels: Thank you for taking the questions and congrats on the strong start to the year, hoping you could go into a little bit more detail on the CHS integration. It sounds like that's progressing pretty smoothly, but I'm curious of any key integration activities or milestones that still remain and I just wanted to hear overall thoughts on how that's progressing I know you indicated it's trending towards.

Ryan Daniels: That breakeven level, but any more color there would be great to start.

Brandon Sim: Hey, Ryan. Thank you for the question. I appreciate it. On CHS, as I commented earlier, we're happy to say that integration is now complete. What that means is, we have their staff onto our platform. We've deployed some of our technology platform into the provider groups. We've identified opportunities, over $10 million worth of G&A efficiencies by bringing on CHS. And we continue to expect improvements in care margins. Over the next several years as we fully implement the care model. There's still opportunity to go and work to be done in terms of fully integrating, you know, and propagating the care model downstream, but we're very encouraged by the progress so far.

Ryan Daniels: Hey, Ryan Thank you for the question.

Ryan Daniels: I appreciate it.

Speaker Change: P J.

Speaker Change: As I commented earlier, we're happy to say that integration is now complete what that means is we.

Speaker Change: We have their staff onto our platform.

Speaker Change: We've deployed some of our technology platform into the provider groups are.

Speaker Change: We've identified opportunities over $10 million worth of G&A efficiencies by bringing on C. H S. I mean.

Speaker Change: We continue to expect improvements in care margin.

Speaker Change: Over the next several years as we fully implement the care model. So there's still opportunity to go and work to be done in terms of fully integrating <unk> and.

Speaker Change: Propagating the care model downstream, but we're very encouraged by the progress so far.

Ryan Daniels: Okay, great. Can you speak a little bit to the Prospect deal? I know you got the Hart-Scott-Rodino expected to close during the summer. Are you active in any integration activities yet, or do you have to wait till the close of that deal? Secondarily, can you just remind us what your Medicare Advantage exposure will look like as a combined entity? You know, obviously you deployed capital before seeing the rate increases, that looks even more strategic and profitable probably today than it was at the time of the announcement. I wanna get a feel for that too. Thanks.

Speaker Change: Okay, Great and then can you speak a little bit to the prospect deal I know you've got the Hart Scott Rodino expected to close during the summer you active in any integration activities, yet or do you have to wait until the close of that deal and then secondarily can you just remind us what your Medicare advantage exposure will look like.

Speaker Change: The combined entity you know obviously you deployed capital before seeing the rate increases so that looks even more strategic and profitable probably today than it was at the time of the announcements I wanted to get a feel for that too. Thanks.

Brandon Sim: Sure, Ryan. Yeah. On Prospect, as you mentioned, we have passed HSR approval. There are several regulatory approvals that we are still waiting for, primarily related to the state of California, with the Department of Managed Health Care and the California Department of Public Health. There are some items that we're still working on, and until we have a full close, we do want to be mindful and compliant. We haven't been able to dig as far under the hood as we will once the acquisition closes. That being said, there are integration activities that we are doing in order to prepare for adding 600,000 members to our care enabling platform. We're making the necessary upgrades to our data layers, to our technology platforms, and staffing up appropriately ahead of time.

Speaker Change: Sure, Yes, so on prospect as.

Speaker Change: As you mentioned, we have past HSR approval. There are several regulatory approvals that we are still waiting for primarily related to the state of California.

Speaker Change: With the department of Health care, and the California Department of public health. So there are some items that were still working on and until we have a full close we do don't want to be mindful and compliant.

Speaker Change: And so we haven't been able to dig as far under the Hood as we will once the acquisition closes that being said there are integration activities that we are doing in order to prepare for.

Speaker Change: Adding 600000 members to our care, enabling platform. So we're making the necessary upgrades to our data layers to our technology platforms.

Speaker Change: Staffing up appropriately ahead of time, that's part of why we hired some of the individuals that we did.

Brandon Sim: That's part of why we hired some of the individuals that we did, and added to our leadership teams, among many others, at all levels of the company. That's something we're excited about. In terms of the pro forma numbers for the combined entity, these are estimates of course, but our anticipation today is that approximately 60% of the combined revenue of the businesses together will be related to Medicare. Prospect, as we had indicated before, will generate or generated $1.2 billion of revenue in 2024 full year. We're excited again for the opportunity to continue onboarding or to start onboarding Prospect into our platform and to serve those seniors once the deal closes.

Speaker Change: And added to our leadership team among many others at all levels of the company. So that's something we're excited about in terms of the pro forma numbers for.

Speaker Change: The combined entity. These are estimates of course, but our anticipation today is that approximately 60%.

Speaker Change: Of the combined revenue of the businesses together will be related to Medicare So.

Speaker Change: And prospect as we had indicated before will generate or generated $1 $2 billion of revenue in 2020 for full year.

Speaker Change: So we're excited again for the opportunity to continue onboarding or to start onboarding prospect into our platform and to.

Speaker Change: Serve those seniors once the deal closes.

Ryan Daniels: Okay, great. Then one final one and I'll hop off. You mentioned that Medicaid is trending above average trends, Medicare commercial below. On the Medicaid, is that solely due to the flu season and kinda more visits, ER and lab, or is it primarily due to redetermination and kind of the mismatch between acuity and rates, which should settle out kinda midyear or in October when all the states update their rates? Thanks, guys.

Speaker Change: Okay, Great and then one final one and I'll hop off you mentioned, the Medicaid is trending above average trends in Medicare and commercial below on the Medicaid is that solely due to the flu season and kind of more visits E. On lab or is it primarily due to redetermination and kind of the mis match between acuity in rates.

Speaker Change: Which should settle out kind of mid year or in October when all the states update their age thanks guys.

Brandon Sim: Sure, Ryan. That's right. Medicaid was above the blended average as we had expected. There was a large spike in ER and lab utilization, as you had pointed out, and that did contribute to the excess utilization. We're not seeing any impact really from a determination at this point. It's really around utilization and that trend, even though above the blended average, is still as expected for the year. We're comfortable with that in Q1. We're gonna continue monitoring in Q2, but at this time, we're comfortable with the overall trend guidance we gave for the year, as well as what that translates into in terms of our adjusted EBITDA forecast for the year.

Speaker Change: Sure Ryan.

Speaker Change: Right.

Speaker Change: Medicaid was above the blended average as we had expected.

Speaker Change:

Speaker Change: There was a large spike in E R and lab.

Speaker Change: Utilization as you had pointed out and that did contribute to the excess utilization.

Speaker Change: We're not seeing much.

We're not seeing any impact really from from your determination at this point, it's really around utilization and that trend, even though above the blended average is still as expected for for the year. So we're we're comfortable with that in Q1, we're gonna continuing continue monitoring in Q2, but at this time, we're comfortable with the.

Speaker Change: Overall trend guidance, we gave for the year.

Speaker Change: As well as what that translates into in terms of our adjusted EBITDA forecast for the year.

Ryan Daniels: Great. Thank you.

Speaker Change: Great. Thank you.

Brandon Sim: Sure. Thanks.

Speaker Change: Sure. Thanks.

Operator: Thank you. Our next question has come from the line of Michael Ha with Baird. Please proceed with your questions.

Speaker Change: Thank you our next questions come from the line of Michael Hart with Baird. Please proceed with your questions.

Michael Ha: All right. Thank you. It looks like Q2 revenue guide, $615 million to $655 million, a bit light versus the street, actually at the low end of your guide would imply a sequential decline, which a bit surprising to me since I was expecting just continuing full risk member conversion, more organic MA growth to really help drive sequential improvement. I know exchange members may be some attrition there, still going through FTR checks, I wouldn't think that would be material enough to really fully offset the other positive drivers. I'm curious, what's driving the low end of your guide range? What would have to happen for that to play out? Also what would have to happen for the high end to play out as well?

Michael Hart: Alright. Thank you so it looks like second quarter revenue Guide 615, 655, a bit light versus the street and actually at the low end of your guide would imply a sequential decline, which a bit surprising to me since I was expecting just continuing full risk member conversion more organic Ma.

Michael Hart: That's really helped drive sequential improvement I know exchange members, maybe some attrition there are still going through FTR checks, but I wouldn't think that would be a material enough to really fully offset the other positive drivers. So I'm curious what's driving the low end of your guide range, what would have to happen for that to play out and also what.

Michael Hart: What has to happen for the high end to play out as well.

Brandon Sim: Hey, Michael. Thanks for the question. Some of these quarterly variances are simply just a seasonality thing. We're very confident in the overall guide for revenue. The guide is at the midpoint, $2.6 billion, is something we're very, very confident in. There's going to be additional or probably more of the full risk conversion is weighted towards the back half of the year, especially as we try to get through some of the Medicaid renegotiations that we discussed before, and the volatility in that sector right now. Again, I would say that we're very confident in the $2.5 to 2.7 guide that we put out for revenue at the beginning of the year.

Michael Hart: Hey, Michael Thanks for the question.

Michael Hart: Some of these are quarterly.

Michael Hart: Quarterly variances are simply just a seasonality thing I'm, we're very confident in the overall guide for revenue.

Michael Hart:

Michael Hart: The guide is.

Michael Hart: At the midpoint $2 6 billion is something we're very very confident and there's going to be additional well probably more of the forwards conversion is weighted towards the back half of the year, especially as we try to get through some of the Medicaid renegotiations that renegotiations that we discussed before.

Michael Hart: And the volatility in that sector right now, but again, we're very well.

Michael Hart: I would say that we're very confident in that.

Michael Hart: Two five to $2 seven guide that we put out for revenue at the beginning of the year.

Michael Ha: Okay. Thank you. With the 2026 final rate notice coming in so favorably, just curious, what rate assumption was embedded in your $350 million adjusted EBITDA 2027 target? Just trying to figure out how much better the new final rate notice is relative to that. When it comes as it relates to the Medicaid, 70% of your contracts are locked rates. just curiousPercentage of those contracts are up for renewal in 2025, 2026, 2027? Just trying to better visualize how the Medicaid economics can improve over the next, you know, 3 years and the magnitude of rate increase flow through. Thank you.

Michael Hart: Okay. Thank you and with 2006.

Michael Hart: I mean.

Michael Hart: So favorably.

Michael Hart: Curious what distribution.

Michael Hart: And your $350 million.

Michael Hart: Adjusted EBITDA.

Michael Hart: Seven targeted just trying to figure out how much better the new final rate notice is relative to that.

Michael Hart: Yeah.

Michael Hart: As it relates to the Medicaid 70% of your contracts that are locked rate.

Michael Hart: Percentage of those contracts are up for renewal in 'twenty five 'twenty six 'twenty seven.

Michael Hart: Better visualize.

Michael Hart: Medicaid economics can improve.

Speaker Change: Yes, three years, the magnitude of rate increases flow through thank you.

Brandon Sim: Hey, Michael. I'm sorry, you were a little choppy in the question. I think I caught the gist of it, but if I didn't, please let me know. I apologize. I think the question was how much of the rate increase did we assume in our 2027 medium-term guide of at least $3.50? You know, the answer there is that we did assume some rate pickup. I would say probably that the rate increase that we saw was favorable to our assumptions. At this moment, we're not ready to size exactly how many dollars that's worth in 27, given the dynamics of how the plans bid and how those dynamics play out in a couple years.

Speaker Change: Hey, Michael I'm, Sorry, you did you were a little choppy in the in that question I think I caught the gist of it but if I didn't. Please please let me know I apologize, but I think the question was how much of how much rate increase how much of the rate increase could we assume in our 2027 medium term guide of at least $3 50.

Speaker Change: And.

Speaker Change: You know the answer there is that we did assume some great pickup.

Speaker Change:

Speaker Change: I would say probably that the rate increase that we saw was.

Speaker Change: Favorable to our assumptions at this moment, we're not ready to size exactly how many dollars that's worth in 'twenty seven.

Speaker Change: Given the dynamics of how the planes bid.

Speaker Change: And.

Speaker Change: And how those dynamics play out in a couple of years, but we are encouraged by.

Brandon Sim: We are encouraged by the administration support for Medicare Advantage, and we continue to be confident in our, in both our 2025 and 2027 guides. I think the other question you asked was around the Medicaid contracts and what percentage of them are up for renewal. Is that right, Michael?

Speaker Change: The administration support for Medicare advantage, and we continue to be confident in our in both our 25% and 27 guidance.

Speaker Change: I think the other.

Speaker Change: Question, you asked was around the Medicaid contracts and what percentage of them are up four for four.

Speaker Change: For renewal is that right Michael.

Michael Ha: Yeah, sorry. I know 70% of your contracts are locked rates. Just trying to understand how many are up for renewal over the next three years. I wanna better visualize as those renewals happen, how it can improve your Medicaid book over time.

Speaker Change: Sorry that I know, 70% of your contracts are locked rates just trying to understand how many are up for renewal over the next three years I want to better visualize.

Speaker Change: Those renewals happen it can improve your Medicaid book overtime got it. Thank you.

Brandon Sim: Got it.

Michael Ha: Got it.

Michael Ha: Thank you.

Brandon Sim: Right. You're right. Most of our Medicaid contracts are fixed rate PMPM today. To answer your question, almost all of our Medicaid contracts at some point in the next three years will be up for renewal. Those are typically staggered over time intentionally, by plan, by county, even by state, I suppose, and by county. It will be a continuous, a fairly continuous set of renegotiations over the next two to three years.

Speaker Change: Almost all of our you're right most of our Medicaid contracts are fixed rate P. M. P M.

Speaker Change: Today and.

Speaker Change: To answer your question almost all of our Medicaid contracts at some point in the next three years will be up for renewal those are typically staggered over time.

Speaker Change: <unk>.

Speaker Change: By plan by County.

Speaker Change: And even by state I suppose I've been by County so.

Speaker Change: It will be a continuous a fairly continuous.

Speaker Change: Set of renegotiations over the next two to three years.

Operator: Thank you. Our next questions come from the line of Jack Slevin with Jefferies. Please proceed with your questions.

Thank you our next questions come from the line of Jack <unk> with Jefferies. Please proceed with your questions.

Jack Slevin: Hey, guys. Thanks for taking the question and nice work on the quarter. I think it's gonna be quite similar to Michael's commentary or to his question. Really just wanna maybe ask in a slightly different way. You gave the metrics on where utilization's trending right now. Your path has been quite different from many others in the industry. To me, the 26 rate update sort of flags as something that could be have an outsized impact relative to others that are undergoing different trends.

Jack <unk>: Hey, guys. Thanks for taking my question and nice work on the quarter.

Speaker Change: I think there's going to be quite similar to Michael's commentary or to his question but.

Jack <unk>: I really just wanted maybe asking in a slightly different way.

Speaker Change: You gave the metrics on where utilization is trending right now your path has been quite.

Speaker Change: Quite different from for many others in the industry and so to me the 26 rate update sort of.

Speaker Change: Flags or something that could be.

Speaker Change: Have an outsized impact relative to others that are undergoing different trends and so if it's trending below that 5% level right now.

Jack Slevin: If it's trending below that 5% level right now, I guess I just wanna think about sort of the confidence that we stay within that relevant range, in which case we'd be looking at a 2026 where at least on headline numbers and not assuming any mitigation of e28, you'd still be able to see rev trend outstripping cost trend. Maybe just some thoughts generally on sorta how you see things progressing or what your confidence is in sort of the improvement of that MA market that you've done a lot of work to get to higher levels of risk on over the past couple of years. Thanks.

Speaker Change: I just wanted to think about sort of the confidence that we stay within that relevant range.

Speaker Change: In which case, we'd be looking at a 26, where at least on headline numbers and not assuming any mitigation of the 28 you'd still be able to see.

Speaker Change: <unk> trend out stripping cost trend, maybe just some thoughts generally on sort of how you see things progressing or what's your confidence is in in sort of the improvement of that I may market that that you've done a lot of work to get to higher levels of risk on over the past couple of years. Thanks.

Brandon Sim: Thanks for the question. Yeah, I hear you and Michael on the question. I think at the moment we're not. It's still early on. We play an active role in how the plans bid, but we don't have ultimate control, obviously, over that process. I don't wanna be premature at this moment by sizing up the impact. We are encouraged, certainly, very, very much so by the rate notice in 2026. It's something that we predicted and partially was part of our strategy to increase not only risk on the existing members that we have, but also to grow our senior membership via inorganic and organic means in 2024. All of this was partially expected by us, and we're very encouraged by the fact that it happened.

Speaker Change: Thanks for the question, Yeah, I hear you and Michael on the question I think.

Speaker Change: At the moment, we're not it's still early on we have played an active role in how the planes.

Speaker Change: But we don't have ultimate control, obviously over that process.

Speaker Change: So I don't want to be premature at this moment by size.

Speaker Change: Sizing up the impact.

Speaker Change: We are encouraged certainly very very much though by the rate notice in 2026, it's something that we predicted and partially was part of our strategy to increase not only risk on the existing members that we have but also to grow our senior membership.

Speaker Change: Via inorganic and organic means in 2024, so all of this is.

Speaker Change: Was partially expected by us and we're very encouraged by the fact that it happened that being said at the moment. The guide is at least do 15027, and we're very confident in that.

Brandon Sim: That being said, at the moment, the guide is at least $215 2027. We're very confident in that, you know, given the Prospect, the pending Prospect Health close. I'm not sure that we have an exact EBITDA improvement number for you at this moment, but we are very encouraged by the rate update, and we think that we will be able to take advantage of it, given our renewed scope.

Speaker Change: You know given given the prospect of pending prospect health close.

Speaker Change: And.

Speaker Change: I'm not sure that we have an exact.

EBITDA improvement number for you at this moment, but we are very encouraged by by the rate update and when do you think that.

Speaker Change: We will be able to take advantage of it.

Speaker Change: Given a renewed scope.

Jack Slevin: Okay, got it. Appreciate that, Brandon. It's really helpful. Just my follow-up here. The commentary on Prop 35 was really helpful. I guess that to me adds a layer of complexity to a broader discussion on the California MCO tax. It sounds like OMB, you know, like, we don't have a lot of details, but it sounds like OMB may be taking a look at the MCO provider taxes and the structure of the one in California and New York. I guess I just wanted to get a general sorta temperature check on what you're hearing or what you guys are trying to get smart on right now as it relates to that.

Speaker Change: Okay got it I appreciate that Brad that's really helpful. And then just my follow up here. The commentary on prop 35 was really helpful. I guess that to me adds a layer of complexity to a broader discussion on the California M. C O tax.

Speaker Change: It sounds like.

Speaker Change: Oh N B you know like we don't have a lot of details, but it sounds like it wont be may be taking a look at at the MTO provider taxes and the structure of the one in California, and New York I guess I just wanted to get a general sort of temperature check on <unk>.

Speaker Change: On what you're hearing or what you guys are trying to get smart on right now as it relates to that I guess my understanding is not all the dollars have flowed through from the government yet on that provider tax and a lot of that was being sort of held to decide by California to push through it whether it would be in rate increases or other.

Jack Slevin: I guess my understanding is not all the dollars have flowed through from the government yet on that provider tax, and a lot of that was being sort of held to the side by California to push through, whether it be in rate increases or other things, for a longer period of time. Maybe the immediate risk on that front would be lower. Would just love to get your thoughts either on that sort of moving piece specifically or sort of how you guys are thinking about attacking the problem. Thanks.

Speaker Change: Things for a longer period of time, so maybe the immediate risk on that front would be lower but would just love to get your thoughts either on that sort of moving piece, specifically your or sort of how you guys are thinking about attacking the problem. Thanks.

Speaker Change: Yeah.

Brandon Sim: This is still an ongoing situation, to be honest. As far as our best understanding of the situation, which I think you were very accurate on, those dollars have not flowed through to us. Almost all of those dollars have not flowed through to us at this point in time. There is an ongoing discussion at the state level as to when and how those funds will be used from the managed care organization tax. There's obviously a federal policy portion of this as well, where depending on how the budget reconciliation goes, by the way, there are promising signs, although I don't want to be overly optimistic so early, that Medicaid will be protected or at least somewhat protected in the budget reconciliation process in a bipartisan effort.

Speaker Change: Yeah. This is still a an ongoing situation to be honest.

Speaker Change: As far as our best understanding of the situation, which I think you were very accurate on those dollars have not flowed through to us.

Speaker Change: Almost all of the dollars have not flowed through to us at this point in time.

Speaker Change: And there is an ongoing.

Speaker Change: Discussion at the state level as to.

Speaker Change: When and how those funds will be used from the managed care organization tax and Theres, obviously a federal.

Speaker Change: Policy.

Speaker Change: A portion of this as well where.

Speaker Change: Depending on how the budget reconciliation goes.

Speaker Change: And by the way there are promising signs of I don't want to be overly optimistic so early that Medicaid will be protected or at least somewhat protected in.

Speaker Change: The budget reconciliation process and a bipartisan effort.

Brandon Sim: That being said, there are a lot of variables, and our only certainty is that we believe the situation will be. At the moment, we're anticipating it to be net neutral to us in terms of adjusted EBITDA impact. If there are increased rates, that would be great. We would flow a lot of those through to our providers. If not, we are prepared to absorb that without an adjusted EBITDA impact. Even with the lack of clarity, we continue to be confident in the 25 and 27 guides for Medicaid, and we'll keep you all updated certainly as we find out more.

Speaker Change: But that being said.

Speaker Change: There are a lot of variables and are only certainty is that we believe the situation will be.

Speaker Change: At the moment, we're anticipating it to be net neutral to us in terms of adjusted EBITDA impact.

Speaker Change: If there are increased rates.

Speaker Change: That would be great we would.

Speaker Change: So a lot of those through to our providers.

Speaker Change: And if not we are prepared to absorb that without an adjusted EBITDA impact so even with the lack of clarity we continue to be confident in the 25% and 27 guidance for Medicaid and we'll keep.

Speaker Change: You all updated certainly as we found out find out more.

Ryan Langston: Got it. Appreciate all the color as always, and nice work again to you and the team.

Jack Slevin: Got it. Appreciate all the color as always, and nice work again to you and the team.

Speaker Change: Got it I appreciate all the color as always and nice work to again to you and the team.

Operator: Thank you. Our next question has come from the line of Jailendra Singh with Truist Securities. Please proceed with your questions.

Speaker Change: Thank you our next questions come from the line of Joe <unk> with <unk> Securities. Please proceed with your questions.

Jailendra Singh: Thank you, and thanks for taking my questions. Apologies if I missed this. One of your peers on the ACO REACH side saw decent results in Q1. Just curious, how did the company perform from a profitability perspective there? We also saw there was some retro trend adjustment update through 31 March, which lowered the RTA, likely create some modest drag for the industry. Did you guys book that in Q1, or will that be in Q2, and it's in your outlook now?

Speaker Change: Thank you and thanks for taking my questions.

Speaker Change: Apologies if I missed this but one of your peers on the ACO of each site saw a decent results in Q1, just curious how did the company performed from a profitability perspective. We also saw at the analyst day some of the retro trend. It just meant update through March 30th plus which lowered the IPA Lucky creates a modest drag for the industry did you guys.

Speaker Change: Looked at in Q1, or Q2 and outlook now.

David Brown: Hey, Jailendra. How are you? Thanks so much for the question. In terms of overall ACO, we did absorb the RTA and it was overall offset via stop loss and other puts and takes.

Chan Basho: Hey, Jailendra. How are you? Thanks so much for the question. In terms of overall ACO, we did absorb the RTA and it was overall offset via stop loss and other puts and takes.

Speaker Change: Thank you Linda how are you.

Speaker Change: Thanks, so much for the question.

Speaker Change: In terms of overall ACO.

Speaker Change: We did absorb the RTA and it was overall offset the.

Speaker Change: Uh huh.

Speaker Change: Stop loss and other puts and takes.

Brandon Sim: You are seeing the slight drag on revenue, Jailendra Singh, especially due to the RTA coming in 1.0097, just under the 1.01, which may be what you're alluding to.

Speaker Change: But you are seeing a slight drag on revenue Jill Andre, especially due to the RTA coming in one point or 197, just under the 101, which maybe what youre alluding to.

Jailendra Singh: Okay. My follow-up, congrats and best wishes to the new leadership team members. Can you share some thoughts on Georgie's role as Chief Data and Analytics Officer? What are some of the focus areas you guys have identified as near term and even long-term opportunities?

Speaker Change: Okay, and then my follow up congrats and best wishes for the new leadership team members could you share some thoughts on <unk> role as chief data and analytics officer, what does somebody focused areas you guys have identified as near term and even long term opportunities.

Brandon Sim: Yeah, of course. We're very excited to have him on board. He has a long and storied career helping healthcare organizations better utilize data to improve quality measures, to get to better stars, and to be proactive about insights for physicians and for our care teams. Very excited to have him. In the near term, he's going to be ensuring that we have the data infrastructure or continuing to ensure rather that we have the data infrastructure set up to properly ingest, you know, over $1 billion of revenue, 600,000 members across all lines of business, multiple counties, full risk members, partial risk members, the whole gamut from the pending Prospect Health acquisition.

Speaker Change: Yeah of course, we're very excited to have him on board.

Speaker Change: He has long in a.

Speaker Change: Storied career, helping health care organizations.

Speaker Change: You better utilize data to improve quality measures to get to better stars are meant to be proactive about insights for physicians and for a guarantee so very excited to have them.

Speaker Change: In the near term he is going to be ensuring that we have the data infrastructure, we're continuing to enjoy a rather that we have the data infrastructure setup to properly ingest.

Speaker Change: You know over $1 billion of revenue 600000 members across all lines of business multiple counties for risk member was partial risk members the whole gamut from the from the pending prospect.

Speaker Change: Acquisition.

Brandon Sim: It is gonna be a large lift to ensure that all the data pipelines are flowing appropriately into our data lake, into our unified data model, and then downstream into the applications that our care managers, clinicians, and ultimately the physicians use. I think that's gonna be his very, very much his near-term goal for the next, you know, 6 months as we head towards the close here. In the future, I think there are a lot of exciting opportunities that we've already been investing in that he will turbocharge in terms of AI applications. Summarizations of discharge notes, risk stratification, automation of workflow processes, both for our delegated services as well as for physicians in the office, better integration with our data sources and real-time insights at the point of care and more.

Speaker Change: It is going to be a large left to ensure that all of the data pipelines are flowing appropriately into our data lake into a unified data model and then downstream into the applications that our care managers clinicians and ultimately the physicians use so I think that's going to be very very much as near term goal for the next.

Speaker Change: Six six months as we head towards the close here and in the future I think there are a lot of exciting opportunities that we've already been investing in that he will turbocharge in terms of.

Speaker Change: AI applications, so summarization of discharge notes risk ratification automation of workflow processes, both for our delegated services as well as for physicians in the office better integration with.

Speaker Change: With our data sources in real time insights at the point of care and more so Georgia is really excited I think to be joining us we're excited to have them.

Brandon Sim: Georgie's really excited, I think to be joining us. We're excited to have him. It just continues to reflect the investments that we're making in data engineering and AI.

Speaker Change: And it just continues to reflect the investments that we're making in data engineering and AI.

Jailendra Singh: Great. Thanks, guys.

Speaker Change: Great. Thanks, guys.

Operator: Thank you. Our next question's come from the line of Ryan Langston with TD Cowen. Please proceed with your questions.

Speaker Change: Thank you our next questions come from the line of Ryan Langston with TD Cowen. Please proceed with your questions.

Ryan Langston: Hey, thanks. Kind of on top of the guidance questions, if I take the Q1 and the guided Q2 EBITDA, it looks like the full year looks like it's slightly back half weighted, which is a little bit different than 2024, I believe. I guess, is this from expected improvements in CHS as we move through the year, or are those kinda $15 million investments that you called out being more front-loaded? Or maybe you just kinda walk us through the details of the cadence of those expectations.

Ryan Langston: Hey, thanks.

Ryan Langston: On top of the guidance questions, if I take the first quarter and the guidance second quarter EBITDA it looks like the full year.

Ryan Langston: It looks like it's slightly back half weighted which is a little bit different in 2024, I believe I guess, it's just from expected improvements and CHS as we move through the year or are those kind of $15 million investments.

Ryan Langston: Called out being more front loaded or maybe you could kind of walk us through the details of the cadence of those expectations.

David Brown: Hey, Ryan, how are you? Thanks so much for the question. As we think about our guide for this year and what you saw last year, in 2024, you saw Q4 was skewed due to CHS, there's other factors that contributed to the 2024 EBITDA. If you look at this year, flu impacted us. As we think about the rest of the year, we're very confident in terms of our guide based on our expectations. Quarterly cadence for 2025 is very much in line with what we're seeing. What you'll really see is you'll see a larger percentage of our profitability coming in the back half of the year.

Chan Basho: Hey, Ryan, how are you? Thanks so much for the question. As we think about our guide for this year and what you saw last year, in 2024, you saw Q4 was skewed due to CHS, there's other factors that contributed to the 2024 EBITDA. If you look at this year, flu impacted us. As we think about the rest of the year, we're very confident in terms of our guide based on our expectations. Quarterly cadence for 2025 is very much in line with what we're seeing. What you'll really see is you'll see a larger percentage of our profitability coming in the back half of the year.

Brian: Hey, Brian how are you.

Brian: Thanks. Thanks, so much for the question, yes, as we think about our guide for this year and what you saw last year in 2024.

Brian: You saw Q4 was <unk>.

Speaker Change: Skewed due to CHS.

And there's there's other factors that contributed to the 2024.

Speaker Change: EBITDA, if if you look at this year.

Speaker Change: <unk> impacted us.

Speaker Change: As we think about the rest of the year, where we're.

Speaker Change: We're very confident in terms of our guide based on our expectations, our quarterly cadence for 25.

Speaker Change: It is very much in line with what we're seeing.

Speaker Change: And what you'll really see is youll see a larger percentage of our profitability coming in the back half of the year.

David Larsen: Got it. Just finally, can you tell me, what MSSP shared savings, if any, you booked Q1? I think it was $5 million Q4, and I am pretty sure it was $5 million embedded in this year's full year guide. Just looking, if you booked anything in Q1. Thanks.

Ryan Langston: Got it. Just finally, can you tell me, what MSSP shared savings, if any, you booked Q1? I think it was $5 million Q4, and I am pretty sure it was $5 million embedded in this year's full year guide. Just looking, if you booked anything in Q1. Thanks.

Speaker Change: Got it and then just finally can you tell me what MSP shared savings if any you booked this quarter I think it was $5 million last quarter and I'm pretty sure. It was 5 million embedded in this year's full year guide. So just looking if you booked anything in the first quarter. Thanks.

Brandon Sim: Hey, Ryan. So we booked 0 in terms of MSSP in regards to the 2025 performance year. You know, as you will see in the latter half of the year as we gain more insight in terms of 2025 MSSP, we'll be booking something at that point. Yeah, you're correct. In Q4 2024, we accrued $5 million for 2024 dates of service, and we guided to that $5 to $6 million for 2025 dates of service.

Speaker Change: Hey, Brian.

Speaker Change: So we booked a zero in terms of SSP in regards to the 2025 performance here and.

Speaker Change: As you will see.

Speaker Change: In the latter half of the year as we gain more insight in terms of 2025, MSP, we'll we'll be booking something at that point and yes. You are correct in 2020 in Q4 2025, we accrued $5 million for our Q4 2024, we accrued five.

Speaker Change: $5 million for 2004 dates of service and we guided to that $5 million to $6 million for 25 data service.

David Larsen: That's great. Thank you.

Ryan Langston: That's great. Thank you.

Speaker Change: That's great. Thank you.

Operator: Thank you. Our next question has come from the line of Brooks O'Neil with Lake Street Capital Markets. Please proceed with your questions.

Speaker Change: Thank you our next questions come from the line of Brooks O'neil with Lake Street Capital markets. Please proceed with your questions.

Brooks O'Neil: Thank you very much. Good evening, guys. I'm just curious, you know, realistically, you've grown the organization at a far above average rate over the past couple of years. I give you tremendous credit for taking those opportunities. Could you give us a sort of a broad assessment of any stresses you feel for the organization right now and, you know, how you feel about the addition of Prospect into any parts of the organization that are feeling stresses now?

Brooks O'neil: Thank you very much good evening guys I'm, just curious you know realistically you're growing the organization that are far above average rate over the past couple of years I give you tremendous credit for for taking.

Brooks O'neil: Those opportunities, but could you give us a sort of a broad assessment of any stresses you feel for the organization right now and.

Brooks O'neil: No.

Brooks O'neil: How you.

Brooks O'neil: Deal about.

Speaker Change: The addition of prospect into any parts of the organization that are feeling stress is now.

Brandon Sim: Hey, Brooks. Good evening. Thanks for the question. I appreciate it. Yeah, as with any rapidly growing organization, you know, over 50% growth, year-over-year for this quarter, last year was over, you know, it was around 40% for the whole year in terms of growth. There are stresses, of course. When I joined this organization, we had fewer than 300 teammates, and we're over 2,000 today. We'll probably be close to 3,000, if not more, you know, pending or accounting pro forma pending acquisitions.

Brooks O'neil: Hey, Brooks good evening. Thanks for the question I appreciate it.

Speaker Change: Yes, as with any rapidly growing organization.

Brooks O'neil: 50% growth.

Brooks O'neil: Year over year for this quarter last year was over it was around 40% for the whole year in terms of growth.

Brooks O'neil: There are stresses of course, there are when I joined this organization, we had fewer than 300 teammates and.

Brooks O'neil: And we're over 2000 today, we'll probably be close to 3000, if not more.

Brooks O'neil: Pending.

Brooks O'neil: Or accounting pro forma pending acquisition. So I think there's certainly a lot of stress in terms of ensuring that we're managing.

Brandon Sim: I think there's certainly a lot of stress in terms of ensuring that we're managing employees in many dozen states at this point in time, making sure that we're able to integrate those employees into our cultural fabric, making sure that our systems are scalable, yet also customizable for each local market that we enter. Over 15 markets at this point in time, in many, many states relative to the one, you know, when I joined this business many years ago. Certainly a lot of stresses due to that. It's a dynamic environment, to use a kind word at the moment.

Brooks O'neil: Employees in May.

Brooks O'neil: And then he doesn't states at this point in time, making sure that we're able to.

Brooks O'neil: Integrate those employees into our cultural fabric, making sure that our systems are scalable.

Brooks O'neil: Yet also customizable for each local market that we enter over 15 markets at this point in time.

Brooks O'neil: In many many states relative to the one you know when when I joined this business many years ago. So.

Brooks O'neil: Certainly a lot of stress is due to that.

Brooks O'neil: The dynamic environment.

Brooks O'neil: To use the kind of work at the moment.

Brooks O'Neil: Right.

Brandon Sim: We are trying to navigate that, and I'm really proud of the team for, despite the rapid growth, being able to hold it together, continue to focus on our patients, which is the most important thing, and continue to deliver growth while being profitable at the same time. We're really gonna be focused, Brooks, this year on integration. We spent a lot of time integrating CHS, ensuring that the G&A synergies that we thought existed were came to fruition, and we're gonna focus on much of the same thing for the next six to nine months as we get closer to the Prospect close year.

Brooks O'neil: We are trying to navigate that and I'm really proud of the team for.

Brooks O'neil: Despite the rapid growth being able to hold it together continue to focus on our patients which is the most important thing and continue to deliver growth while being profitable at the same time, we're really going to be focused Brooks. This year on integration. We spent a lot of time integrating CHS, ensuring that the G&A synergies that we thought existed.

Brooks O'neil: Or came to fruition and we're going to focus on much of the same thing for the next six to nine months.

Brooks O'neil: As we get closer to the prospect close here.

Brooks O'Neil: Great. I appreciate all that color. Last thing I was curious about, obviously you're having, big growth in the amount of fully capitated lives or globally capitated lives. I'd just love to hear any thoughts you have about the experience you've had as that number's gone up. Is the behavior consistent with your expectations, or are you seeing anything different than what you thought you'd see as the organization goes in that direction?

Speaker Change: Great I appreciate all that color last thing I was curious about obviously, you're having a big growth in the amount of fully capped potatoes larger globally cap with data lives and then I'd just love to hear any thoughts you have about the experience you've had is that number has gone up.

Brooks O'neil: It is the behavior.

Brooks O'neil: Consistent with your expectations or are you seeing anything different than what you thought you'd see is the organization goes in that direction.

Brandon Sim: Thanks, Brooks. Yeah. We're seeing things in line, you know. You know, for the full risk cohorts, we're not gonna see the profitability pick up necessarily day one, but we are seeing those cohorts progress nicely as they move into full risk. We've invested in the infrastructure, most importantly, to make that happen. The inpatient case managers, the admin discharge transfer feeds, all of that being piped into our care management applications that are, you know, a couple of hundred, now 300 to 400 clinical staff we're using to manage the populations in close to real time. Those cohorts are progressing nicely, we believe. We're continuing to be encouraged by that strategy of moving more members into full risk while growing prudently into other markets.

Brooks O'neil: Thank you Brooks.

Brooks O'neil: Seeing things in line.

Brooks O'neil: For the full risk cohorts.

Brooks O'neil: You can see as I guided before we're not going to see the profitability pick up necessarily day, one but.

Brooks O'neil: But we are seeing those cohorts progressed nicely as they move into full risk.

Brooks O'neil: We've invested in the infrastructure, most importantly to make that happen. So the inpatient case managers to admit discharge transfer feeds all of that being piped into our care management applications that are you know.

Brooks O'neil: A couple of hundred.

Brooks O'neil: Now three to 400 clinical staff, we're using to manage the populations.

Brooks O'neil: Close to real time, so those cohorts are progressing nicely, we believe and.

Brooks O'neil: We're continued to be encouraged by that strategy of moving more members into full risk while growing prudently into other markets.

Brandon Sim: I think the interesting thing is that Prospect has been doing much of the same process in terms of moving.

Brandon Sim: I think the interesting thing is that Prospect has been doing much of the same process in terms of moving into these full risk arrangements, and we think we're gonna be able to turbocharge that when the two organizations are together in terms of the infrastructure we have to manage the total continuum of care for these patients.

Brooks O'neil: The interesting thing is that prospect has been doing much of the same process in terms of moving members into these full risk arrangements and we think we're gonna be able to turbocharge that when the two organizations are together in terms of the infrastructure, we have to manage the total continuum of care for these patients.

Brooks O'Neil: Mm-hmm.

Brandon Sim: -into these full risk arrangements, and we think we're gonna be able to turbocharge that when the two organizations are together in terms of the infrastructure we have to manage the total continuum of care for these patients.

Brooks O'Neil: Great. Thank you very much. I'm looking forward to seeing that happen.

Brooks O'neil: Great. Thank you very much I'm looking forward to seeing that happen.

Brandon Sim: Thank you, Brooks.

Operator: Thank you. Our next question has come from David Larsen with BTIG. Please proceed with your questions.

Speaker Change: Thank you Brooks.

Operator: Thank you. Our next question has come from David Larsen with BTIG. Please proceed with your questions.

Speaker Change: Our next questions come from David Larsen with <unk>. Please proceed with your questions.

David Larsen: Hi. I've received a couple of questions about the Prospect Medical transaction, mainly from debt investors. My sense from them is there may be some concern about the transaction and the EBITDA in particular from Prospect Medical. I think you talked about $94 million of EBITDA from Prospect. Can you maybe just give us a little more comfort around the earnings power of Prospect, how due diligence has that been? How much EBITDA will Prospect add to your book when the deal actually closes? Thanks very much.

David Larsen: Hi, I've received a couple of questions about the prospect medical transaction, mainly from debt investors and my sense from them is there may be some concern I guess about.

Speaker Change: The the transaction and the EBITDA in particular from prospect Medical I think you had talked about $94 million of EBITDA from prospect.

Speaker Change: Can you, maybe just I guess give us a little more comfort around the earnings power of prospect, how how due diligence has that been.

Speaker Change: How much EBITDA will prospect add to your book when when the deal actually closes thanks very much.

Brandon Sim: Hey, Dave. Thanks for the question. The audited financials, for their fiscal year, which ends in Q3, plus the stub period that we had, announced to the public last year, was well above the $81 million of adjusted EBITDA that we anticipated to bring on that we announced at the close. We remain very confident in the 81 number. I'm not sure what the creditors are alluding to necessarily, but we have been looking at admit, discharge, transfer data. We've been looking at inpatient data. They also are in a delegated model, we're looking at prior auth and claims as well. Of course, we can't see contractual details yet to ensure that we stay compliant with, you know, on a pre-closing basis.

Dave: Hey, Dave Thanks for the question.

Dave: So the audited financials.

Dave: For their fiscal year, which ends in Q3, plus the stub period that we had.

Dave: Announced to the public last year was.

Dave: Well above the $81 million of adjusted EBITDA that we anticipated to bring on that we announced that the close we remain very confident in the 81 number.

Dave: And.

Dave: I'm not sure what the debtors are alluding to necessarily or the creditors necessarily but.

Dave: <unk>.

Dave: We we have been looking at.

Dave: Detroit transfer data, we've been looking at in patient data.

Dave: We also are in a delegated model. So we're looking at prior Roth and claims as well.

Dave: Of course, we can't see contractual details yet.

Dave: To ensure that we stay compliant with.

Dave: On a pre closing basis, but all signs point to.

Brandon Sim: All signs point to that 81 number being a solid number of which we can work with if and once we close the deal. We genuinely look forward to showing you all the Q1 post-close and helping dispel some of those concerns.

Dave: That 81 number being a solid number of which we can work with if and once we close the deal so.

Dave: We look forward to we genuinely genuinely look forward.

Dave: Two showing you all the first quarter post close and helping dispel some of those concerns.

David Larsen: Great. Thanks very much. Can you just please remind me what was the medical trend in the quarter? What is the projection for the year? What is your visibility on that? One of your peers said that they typically have about 60% of claims by the end of each quarter. There's a lot of IBNR that goes into any medical trend estimate for the quarter. Just thoughts around that and what sort of the key drivers are, in particular oncology and oncology costs. Any thoughts there would be helpful. Thank you.

Speaker Change: Great. Thanks, very much and then can you just please remind me what was the medical trend in the quarter. What is the projection for the year and then what is your visibility on that one of your peers said that they typically have about 60% of claims by the end of each quarter. So there's a lot of IV and all of that goes into any medical trend estimate for the <unk>.

Dave: Quarter just.

Dave: Thoughts around that and what sort of the key drivers are in particular oncology and oncology costs any thoughts there would be helpful. Thank you.

Brandon Sim: Sure thing. We, as I mentioned in the prepared remarks, we remain confident in the full-year trend, which we had previously guided to of 4.5% blended across all the lines of business. We came in slightly higher than that this quarter because of the flu. That was entirely contemplated for in our 4.5% full year guidance. We anticipate being able to meet that comfortably in the next three quarters to come. We are not seeing any spikes necessarily in oncology, as you mentioned. In Q1 the areas that we did see were mostly related to emergency room usage and especially laboratory usage. That's something we're gonna keep an eye on.

Dave: Sure thing.

Dave: As I mentioned in the prepared remarks.

Dave: We remain confident in the full year trend, which we had previously guided to of four 5% blended across all the lines of business.

Dave: We came in slightly higher than that this quarter because of the flu that was entirely contemplated for in our four 5% full year guidance.

Dave: And we anticipate.

Dave: Being able to meet that.

Dave:

Dave: Comfortably in the next three quarters to come.

Dave: We are not seeing any spike necessarily in.

Dave: Oncology as you mentioned.

Dave: Q1, the areas that we did see were mostly related to emergency room usage, and especially laboratory usage. So that's something we're going to keep an eye on but because of our ability to see claims.

Brandon Sim: Because of our ability to see claims, and prior auths and inpatient data, the latter two on a more real-time basis, we feel confident in the 4.5% trend for the year at this moment.

Dave: And pro rata and in patient data.

Dave: The latter two on a more real time basis.

Dave: We feel confident in the four 5% trend for the year at this moment.

David Larsen: Last quick one. Tariffs, any impact potentially to your business, raising COGS or from your customers? Just any thoughts on tariffs, 25% on pharma potentially? Thanks.

Speaker Change: Last quick one tariffs any any impact potentially to your business reason Cogs are from your customers just any thoughts on tariffs, 25% farmout potential. Thanks.

Brandon Sim: Thanks, Dave. As I mentioned in the prepared remarks, you know, we're not taking much Part D risk at all. Less than 2% of our members have even a bit of Part D risk at all to them. The rest have zero exposure to that. You know, of course, there are minor secondary or maybe even tertiary type effects if there are increased costs on, you know, goods, medical equipment, et cetera, that our physicians would use. For the most part of our 12,000 plus providers, these are partnered physicians that we are enabling and helping them earn far above the average primary care provider in their region.

Dave: Thanks.

Dave: As I mentioned in the prepared remarks.

Dave: We're not taking much part D risk at all less than 2% of our members have even if even a bit of part D risk at all to them the rest of zero exposure to that.

Dave: You know of course.

Dave: There are minor secondary or maybe even tertiary type effects if.

Dave: If there are increased costs on.

Dave: Yeah good.

Dave: Medical equipment et cetera that are physicians would use but for.

Dave: For the most part of our 12000 plus providers. These are partnered physicians that we are enabling and helping them earn far above the average primary care provider.

Brandon Sim: We believe that our model is going to be very resilient, and at least in the first, second, third probably plus degree, not impacted by potential tariffs at this time.

Dave: In their region and so we believe that our model is going to be very resilient.

Brandon Sim: We believe that our model is going to be very resilient, and at least in the first, second, third probably plus degree, not impacted by potential tariffs at this time.

Dave: And.

Dave: At least in the first second and third probably plus degree not impacted by potential terrorists at this time.

David Larsen: Thanks very much. I'll hop back in the queue.

Dave: Thanks, very much I'll hop back in the queue.

Brandon Sim: Thank you.

Dave: Thank you.

Operator: Thank you. Our next question has come from the line of Matthew Gillmor with KeyBanc Capital Markets. Please proceed with your questions.

Speaker Change: Thank you our next questions come from the line of Matthew Gilmore with Keybanc capital markets. Please proceed with your questions.

Zachary Weiner: Hey, good afternoon. This is Zach on for Matt. A large payer talked about some unexpected variability with some new member risk adjustment coding. Wanted to confirm you guys haven't seen any of these issues along those lines, and if you could maybe speak to your process as well, I'd appreciate it. Thank you.

Dave: Hey, good afternoon. This is Eric on for Matt.

Speaker Change: <unk> talked about some unexpected variability with the new member risk adjustment coding. So wanted to confirm you guys haven't seen any of these issues along those lines and if you could maybe speak to your process as well I appreciate it. Thank you.

Brandon Sim: Hey, thanks for the question. Typically, new members absolutely do come in at a slightly lower RAF depending on what was coded for them the prior year. I can understand why some would have that dynamic. I think we've been prudent to balance the new membership, ensuring that we're taking full risk on that membership once members are appropriately documented for in terms of their chronic conditions and once we're able to appropriately manage those chronic conditions from a cost perspective and a trend perspective. Overall, yes, do our newer cohorts or net newer cohorts have slightly lower RAF than our overall book? They do, but that's a normal dynamic that we've been dealing with for over 30 years. It's something that has already been contemplated in our guide for the year.

Speaker Change: Hey, Thanks for the question.

Speaker Change: Typically new members absolutely do come in at a slightly lower RAF depending on.

Speaker Change: What was coded for them in the prior year. So I can understand why someone would have that dynamic.

Speaker Change: I think we've been prudent to balance the new membership.

Speaker Change:

Ensuring that we're taking full risk on that membership once members are appropriately.

Speaker Change: Documented for in terms of their chronic conditions and once we're able to appropriately manage those chronic conditions from a cost perspective, and a trend perspective. So overall, yes, Jordan. Your cohorts are net your cohorts have slightly lower rather than our overall book they do but that's a normal dynamic that we've been dealing with for.

Speaker Change: Over 30 years, it's something that has already been contemplated.

Speaker Change: In our in our guide for the year.

Brandon Sim: From a go-forward basis, we feel confident in our risk adjustment strategy. We've always, as I mentioned before, documented accurately and the V28 headwinds that I suspect some may be facing, we don't believe to apply to us as much or if at all.

Speaker Change: From a go forward basis, we feel confident in our risk adjustment strategy.

Speaker Change: We've always as I mentioned before documented accurately and the V 28 headwinds that I suspect some may be facing.

Speaker Change: Are we don't believe to apply to us as much or if at all.

Speaker Change: Yeah.

Zachary Weiner: Great. Thank you.

Speaker Change: Great. Thank you.

Operator: Thank you. Our next question has come from the line of Gene Mannheimer with Freedom Capital Markets. Please proceed with your questions.

Speaker Change: Thank you. Our next question is come from the line of Jean Manheimer with Freedom Capital markets. Please proceed with your questions.

Gene Mannheimer: Oh, thanks. Good afternoon. I thought you dropped me. Good job on the quarter. I just have one quick one. On CHS, you know, you called out that you're tracking the breakeven exiting 2025. I'm just curious how long before you can get that asset, say, back to your corporate margin, how long would that take? Thank you.

Speaker Change: Oh. Thanks, Good afternoon, I thought you dropped me good good job on the quarter I just have one quick one on CHS.

Speaker Change: You you called out that you're tracking to breakeven exiting 2025, I'm just curious how long before you can get that asset.

Speaker Change: Say back to your corporate margin, how long would that take thank you.

Brandon Sim: Hey, Gene. Thanks for the question. We would never drop you. We remember that you were there from the beginning, Gene. Thank you. Don't worry.

Speaker Change: Hey gene. Thanks for the question, we would never drop you will remember that you were there from the beginning gene. Thank you.

Gene Mannheimer: Only kidding.

Speaker Change: So I'm worried by that.

Brandon Sim: Yeah. No, we would never. Thank you for the question, Gene. Thanks for hopping on. In terms of CHS, we're expecting to be breakeven this year. Our run rate breakeven this year as we previously guided, we expect that we'll be profitable in 2026. I think we had guided or yes, we had guided to at least $10 million of profitability in 2027. At least in the near term till 2027, that is kind of the ramp up that we expect for CHS. In terms of enterprise margins, you know, over the long term, we do believe that we can operate that business at enterprise margins, which would be, you know, in the high single digits EBITDA margin percents for Medicare Advantage and probably lower for, you know, Medicaid and ACO membership.

Speaker Change: Yeah, No we wouldn't we would never think.

Speaker Change: For the question Jean Thanks for hopping on in terms of the CHS.

Speaker Change: We will be we're expecting to be breakeven this year, our run rate breakeven. This year as we previously guided we expect that we will be profitable in 2006, I think we had guided or yes, we had guided to at least $10 million of profitability in 2027, so at least in the near term until 'twenty seven.

Speaker Change: That is kind of the ramp up the ramp up that we expect for CHS in terms of enterprise margins.

Speaker Change: You know over the long term, we do believe that we can.

Speaker Change: Operate that business at enterprise margins, which would be.

Speaker Change: In the high single digits, EBITDA margin percents for Medicare advantage, and probably lower for <unk>.

Speaker Change: Medicaid in ACO membership.

Gene Mannheimer: Okay. Okay, excellent. Thanks very much.

Speaker Change: Okay.

Speaker Change: Excellent thanks very much.

Brandon Sim: Thanks, Gene.

Speaker Change: Thanks Gene.

Operator: Thank you. Our next question has come from the line of Andrew Mok with Barclays. Please proceed with your questions.

Thank you our next questions come from the line of Andrew Mok with Barclays. Please proceed with your questions.

Thomas Walsh: Hi, this is Thomas Walsh on for Andrew. Group Medicare Advantage has come under some pressure across the industry. I was hoping you could share what your group MA mix is and how it's performed relative to individual. More generally, if you've seen any changes in patient behavior this quarter.

Thomas Walsh: Hi, This is Thomas Walsh on for Andrew Group.

Speaker Change: Group Medicare advantage has come under some pressure across the industry and I was hoping you could share what your group and Nymex is and how it's performed relative to individual.

Speaker Change: More generally if you've seen any changes in patient behavior of this quarter.

David Brown: Hey, how are you? In terms of our overall group versus individual mix, we're mostly individual and we haven't really seen any change in terms of mix shift.

David A. Brown: Hey, how are you? In terms of our overall group versus individual mix, we're mostly individual and we haven't really seen any change in terms of mix shift.

Speaker Change: Hey, how are you.

Speaker Change: In terms of our overall group versus individual mix.

Speaker Change: Sure.

Speaker Change: We're mostly individual and.

Speaker Change: We haven't really seen.

Speaker Change: Any change in terms of.

Speaker Change: Mix shift.

Speaker Change: Shift.

Thomas Walsh: Got it. Okay. I guess following up on the acceleration in ER and lab utilization in the Medicaid book, did you see a consistent acceleration through the end of the quarter or more of a spike which reverted?

Speaker Change: Got it Okay, and I guess following up on the acceleration in E R and lab utilization in the Medicaid book did you see a consistent acceleration through the end of the quarter or more of a spike which reverted.

Brandon Sim: Yeah, we did see a spike, particularly in January and a little bit into February. I would say that trends are as expected, especially now that we're here in May. A lot of this spike was contemplated in our guidance, when we first gave it back at the beginning of the year here.

Speaker Change: Yes, we did see a spike, particularly.

Speaker Change: January and a little bit into February.

Speaker Change: I would say that trends are as.

Speaker Change: As expected.

Speaker Change: Especially now that we're here in May.

Speaker Change: And a lot of this spike was contemplated in our guidance.

Speaker Change: When we first gave it back at.

Speaker Change: At the beginning of the year here.

Thomas Walsh: Great. Thanks for the color.

Speaker Change: Great. Thanks for the color.

Brandon Sim: Thanks.

Speaker Change: Thanks.

Operator: Thank you. We have reached the end of our question and answer session. With that, I would like to bring the call to a close. We appreciate your participation today. You may disconnect your lines at this time. Enjoy the rest of your day.

Speaker Change: Thank you we have reached the end of our question and answer session and with that I would like to bring the call to a close we appreciate your participation today may disconnect. Your lines at this time enjoy the rest of your day.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

Q1 2025 Astrana Health Inc Earnings Call

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