Astrana Health - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue grew 53% year over year to $620.4M; Adjusted EBITDA was $36.4M with a 6% margin, near the top of the prior Q1 guidance range of $32–$37M and within the $600–$650M revenue guide.
• Versus S&P Global consensus, revenue modestly missed ($620.4M vs $630.7M*), while S&P “Primary EPS” beat ($0.342* vs $0.207*). Note: S&P “Primary EPS” is a normalized measure that is not directly comparable to GAAP diluted EPS ($0.14) reported by the company.
• Management reiterated FY 2025 guidance (Revenue: $2.5–$2.7B; Adj. EBITDA: $170–$190M) and introduced Q2 2025 guidance (Revenue: $615–$655M; Adj. EBITDA: $45–$50M). Guidance includes ~$15M of integration/AI investments and excludes unclosed M&A contributions.
• Strategic execution: CHS integration is complete with >$10M identified G&A efficiencies; full‑risk continues to mix up (75% of capitation revenue; 38% of members), and the team remains on track to close Prospect in summer with expected ~$81M adjusted EBITDA and $12–$15M synergies.

Values with asterisk (*) in this report are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Revenue +53% YoY to $620.4M, driven by Care Partners +57% YoY; Q1 Adj. EBITDA of $36.4M landed near top of prior company guidance for the quarter.
• CHS integration complete; management identified and executed on >$10M of G&A efficiencies, with CHS on track to break even in 2025 and profitability in 2026.
• Risk progression continues: 75% of capitation revenue now from full‑risk and 38% of members in full‑risk contracts; management notes mid‑single‑digit blended utilization trend, on plan.

What Went Wrong

• Profitability compression: GAAP diluted EPS fell to $0.14 (vs $0.31 YoY); Adjusted EBITDA margin declined to 6% (from 10% YoY) on planned integration/tech investments and near‑term mix to lower‑margin cohorts (CHS, newly converted full‑risk).
• Medicaid trend ran above blended trend (flu‑driven ER/lab utilization), weighing on margins; management is not assuming Medicaid rate relief in 2025 guidance.
• S&P Global shows a revenue miss versus consensus in Q1; the S&P “Primary EPS” beat is not directly comparable to company GAAP EPS, adding complexity for headline comparisons.

Transcript

Operator (participant)

Good day, everyone, and welcome to today's Astrana Health first quarter 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 Chan Basho, Chief Financial Officer. The press release announcing Astrana Health's results for the first quarter ended March 31st 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 the results, the company has made a supplemental deck available on its website.

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 contain certain forward-looking statements within the meaning of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terms such as anticipate, believe, expect, future, plan, outlook, and will, and include, among other things, statements regarding the company's guidance for the year ending December 31st 2025, continued growth, acquisition strategy, ability to deliver sustainable long-term value, ability to respond to the changing environment, liquidity, operational focus, strategic growth plans, and acquisition integration efforts.

Although the company believes that the expectations reflected in its forward-looking statements are reasonable as of today, 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.

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

Brandon Sim (President and CEO)

Good afternoon, and thank you all for joining us today. We're pleased to report a strong start to the year with first-quarter 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.

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.

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 the first quarter. In the quarter, 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. CHS contributed $95 million in the quarter, which was in line with our expectations. Adjusted EBITDA in the first quarter reflected our continued success in growing membership and value-based arrangements while managing cost trend effectively.

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 break-even 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 and lab utilization, we are pleased to be on track with our full-year trend and profitability guidance. 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, and 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 break-even 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. 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. CHS's Q1 performance was in line with expectations, and as we continue to implement our care model and scale it, we anticipate CHS will reach break-even 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-$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. 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. Now, 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. 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. 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. With that, I will now hand it over to Chan to discuss our financials in more detail.

Chan Basho (CFO and COO)

Thanks, Brandon, and thank you all for joining today. Turning to our first-quarter 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.

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 billion-$2.7 billion and adjusted EBITDA of $170 million-$190 million. For second quarter 2025, we expect to generate between $615 million-$665 million of revenue, with adjusted EBITDA ranging between $45 million-$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.

Brandon Sim (President and CEO)

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.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we pull for your questions. Our first questions come from the line of Ryan Daniels with William Blair. Please proceed with your questions.

Ryan Daniels (Analyst)

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.

Brandon Sim (President and CEO)

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 margin over the next several years as we fully implement the care model. There is still opportunity to go and work to be done in terms of fully integrating and propagating the care model downstream, but we're very encouraged by the progress so far.

Ryan Daniels (Analyst)

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? 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 announcement. I want to get a feel for that too. Thanks.

Brandon Sim (President and CEO)

Sure, Ryan. Yeah, so 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 Healthcare 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, and 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 enablement platform. We're making the necessary upgrades to our data layers, to our technology platforms, and staffing up appropriately ahead of time.

That's part of why we hired some of the individuals that we did and added to our leadership team, 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.

Ryan Daniels (Analyst)

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

Brandon Sim (President and CEO)

Sure, Ryan. That's right. Medicaid was above the blended average, as we had expected. There was a large spike in and lab utilization, as you had pointed out, and that did contribute to the excess utilization. We're not seeing much—we're not seeing any impact, really, from redetermination 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 are comfortable with that in Q1. We are going to continue monitoring in Q2, but at this time, we are 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.

Ryan Daniels (Analyst)

Great. Thank you.

Brandon Sim (President and CEO)

Sure. Thanks.

Operator (participant)

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

Michael Ha (Senior Equity Research Analyst)

Hi, thank you. So it looks like second quarter revenue guide, $615 million-$655 million, a bit light versus the street. And actually, at the low end of your guide, it would imply a sequential decline, which is 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, maybe some attrition there, still going through FTR checks, but I wouldn't think that would be 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 would have to happen for the high end to play out as well?

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 billion-$2.7 billion guide that we put out for revenue at the beginning of the year.

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 curious, what percentage 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 three years and the magnitude of rate increase flow-through. Thank you.

Brandon Sim (President and CEO)

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 $350? 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 2027, given the dynamics of how the plans bid and how those dynamics play out in a couple of years. We are encouraged by the administration's support for Medicare Advantage, and we continue to be confident 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?

Michael Ha (Senior Equity Research Analyst)

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 want to better visualize, as those renewals happen, how it can improve your Medicaid book over time.

Brandon Sim (President and CEO)

Got it.

Michael Ha (Senior Equity Research Analyst)

Thank you.

Brandon Sim (President and CEO)

Right. Almost all of our—you're right. Most of our Medicaid contracts are fixed rate PMPM today. And 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, and even by state, I suppose, and by county. So it will be a fairly continuous set of renegotiations over the next two to three years.

Operator (participant)

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

Jack Slevin (Health Services Equity Research)

Hey, guys. Thanks for taking my question and nice work on the quarter. I think this is going to be quite similar to Michael's commentary or to his question, but really just want to maybe ask it 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 2026 rate update sort of flags as something that could have an outsized impact relative to others that are undergoing different trends.

If it's trending below that 5% level right now, I guess I just want to think about sort of the confidence that we stay within that relevant range, in which case we'd be looking at a 26 where, at least on headline numbers and not assuming any mitigation of V28, you'd still be able to see rev trend outstripping cost trend. Maybe just some thoughts generally on sort of 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.

Brandon Sim (President and CEO)

Thanks for the question. Yeah, I hear you and Michael on the question. I think at the moment, 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 want to be premature at this moment by sizing up the impact. We are encouraged, certainly, 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. That being said, at the moment, the guide is at least through 2015, 2027.

We're very confident in that given 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.

Jack Slevin (Health Services Equity Research)

Okay. Got it. Appreciate that, Brian. That's really helpful. 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—we do not 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 just want to get a general sort of temperature check 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 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 will be lower, but 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.

Brandon Sim (President and CEO)

Yeah. 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 is 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 do not 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.

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 2025 and 2027 guides for Medicaid, and we'll keep you all updated, certainly, as we find out more.

Jack Slevin (Health Services Equity Research)

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

Operator (participant)

Thank you. Our next questions come from the line of Jalendra Singh with Truist Securities. Please proceed with your questions.

Jailendra Singh (Managing Director)

Thank you, and thanks for taking my questions. Apologies if I missed this, but one of your peers on the ACO REACH site 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 March 31st which lowered the RTA and likely created some modest drag for the industry. Did you guys book that in Q1, or will that be in Q2, and is it in your outlook now?

Brandon Sim (President and CEO)

Hey, Jalendra. 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.

You are seeing the slight drag on revenue, Jalendra, especially due to the RAF coming in 1.0097, just under the 1.01, which may be what you're alluding to.

Jailendra Singh (Managing Director)

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

Brandon Sim (President and CEO)

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. So 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 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.

It is going to 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 going to be very much a near-term goal for the next six 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. 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.

Jailendra Singh (Managing Director)

Great. Thanks, guys.

Operator (participant)

Thank you. Our next questions come from the line of Ryan Langston with TD Cowen. Please proceed with your questions.

Ryan Langston (Director and Senior Analyst)

Hey, thanks. Kind of on top of the guidance questions, if I take the first quarter and the guided second quarter 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 kind of $15 million investments that you called out being more front-loaded? Or maybe you just kind of walk us through the details of the cadence of those expectations.

Brandon Sim (President and CEO)

Hey, Ryan. How are you? Thanks so much for the question. Yeah, 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, and there are 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.

Ryan Langston (Director and Senior Analyst)

Got it. And then just finally, can you tell me what MSSP 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 (President and CEO)

Hey, Ryan. We booked zero in terms of MSSP in regards to the 2025 performance year. 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 million-$6 million for 2025 dates of service.

That's great. Thank you.

Operator (participant)

Thank you. Our next questions come from the line of Brooks O'Neill with Lake Street Capital Markets. Please proceed with your questions.

Brooks O'Neil (Senior Research Analyst)

Thank you very much. Good evening, guys. I'm just curious. 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 sort of a broad assessment of any stresses you feel for the organization right now and how you feel about the addition of Prospect into any parts of the organization that are feeling stresses now?

Brandon Sim (President and CEO)

Hey, Brooks. Good evening. Thanks for the question. I appreciate it. Yeah, as with any rapidly growing organization, over 50% growth year-over-year for this quarter. Last year 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, accounting for a pending acquisition.

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 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. 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 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 came to fruition. We're going to 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 (Senior Research Analyst)

Right. 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?

Brandon Sim (President and CEO)

Thanks, Brooks. Yeah, we're seeing things in line. For the full-risk cohorts, we're not going to see the, as I guided before, we're not going to see the profitability pickup 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 a couple of hundred, now 300 or 400 clinical staff we're using to manage the populations in close to real time. Those cohorts are progressing nicely, we believe, and we're continuing to be encouraged by that strategy of moving more members into full risk while growing prudently into other markets.

I think the interesting thing is that Prospect Health has been doing much of the same process in terms of moving members into these full-risk arrangements. We think we're going to 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 (Senior Research Analyst)

Great. Thank you very much. I'm looking forward to seeing that happen.

Brandon Sim (President and CEO)

Thank you, Brooks.

Operator (participant)

Thanks. Thank you. Our next questions come from David Larson with BTIG. Please proceed with your questions.

David Larsen (Analyst and Managing Director)

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, I guess, about the transaction and the EBITDA in particular from Prospect Medical. I think you had talked about $94 million of EBITDA from Prospect. Can you maybe just, I guess, 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.

Brandon Sim (President and CEO)

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 debtors are alluding to or the creditors necessarily, but we have been looking at admin discharge transfer data. We've been looking at inpatient data. They also are in a delegated model, so we're looking at prior auths and claims as well. Of course, we can't see contractual details yet to ensure that we stay compliant on a pre-closing basis. 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, genuinely look forward to showing you all the first quarter post-close and helping dispel some of those concerns.

David Larsen (Analyst and Managing Director)

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 is 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.

Brandon Sim (President and CEO)

Sure thing. As I mentioned in the preparatory marks, 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 is something we are going to keep an eye on. 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.

David Larsen (Analyst and Managing Director)

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.

Brandon Sim (President and CEO)

Thanks, Dave. As I mentioned in the preparatory marks, 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. Of course, there are minor secondary or maybe even tertiary type effects if there are increased costs on goods, medical equipment, etc., 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. 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.

David Larsen (Analyst and Managing Director)

Thanks very much. I'll hop back on the queue.

Brandon Sim (President and CEO)

Thank you.

Operator (participant)

Thank you. Our next questions come from the line of Matthew Dale Gillmor with KeyBank Capital Markets. Please proceed with your questions.

Zach Hunt (Analyst)

Hey, good afternoon. This is Zach Hunt for Matt. Our preparator talked about some unexpected variability with some new member risk adjustment coding. I wanted to confirm you guys have not seen any of these issues along those lines. If you could maybe speak to your process as well, I would appreciate it. Thank you.

Brandon Sim (President and CEO)

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, our newer cohorts or net newer cohorts have slightly lower RAF than our overall book. They do. 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. From a go-forward basis, we feel confident in our risk adjustment strategy.

We've always, as I mentioned before, documented accurately. The V28 headwinds that I suspect some may be facing, we don't believe to apply to us as much or if at all.

Zach Hunt (Analyst)

Great. Thank you.

Operator (participant)

Thank you. Our next questions come from the line of Jean Manheimer with Freedom Capital Markets. Please proceed with your questions.

Jean Mannheimer (Managing Director and Senior Research Analyst)

Oh, thanks. Good afternoon. I thought you dropped me. Good job on the quarter. I just have one quick one. On CHS, you called out that you're tracking the break-even 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.

Brandon Sim (President and CEO)

Hey, Jean. Thanks for the question. We would never drop you. We remember that you were there from the beginning, Jean. Thank you. Do not worry. Yeah, no, we would never. Thank you for the question, Jean. Thanks for hopping on. In terms of CHS, we are expecting to be break-even this year, run rate break-even this year. As we had previously guided, we expect that we will 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, over the long term, we do believe that we can operate that business at enterprise margins, which would be in the high single digits EBITDA margin % for Medicare Advantage and probably lower for Medicaid and ACO membership.

Jean Mannheimer (Managing Director and Senior Research Analyst)

Okay. Okay. Excellent. Thanks very much.

Brandon Sim (President and CEO)

Thanks, Jean.

Operator (participant)

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

Thomas Walsh (Equity Research Associate)

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.

Brandon Sim (President and CEO)

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.

Thomas Walsh (Equity Research Associate)

Got it. Okay. I guess following up on the acceleration in 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 (President and CEO)

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.

Thomas Walsh (Equity Research Associate)

Great. Thanks for the color.

Brandon Sim (President and CEO)

Thanks.

Operator (participant)

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.