May 9, 2024 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___.

Commission File No. 001-37392

Astrana Health, Inc.

(Exact name of registrant as specified in its charter)


Delaware			95-4472349
(State or Other Jurisdiction			(I.R.S. Employer
of Incorporation or Organization)			Identification Number)

1668 S. Garfield Avenue, 2nd Floor, Alhambra, California 91801

(Address of principal executive offices and zip code)

(626) 282-0288

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, $0.001 par value per share

ASTH

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of April 29, 2024, there were 56,025,538 shares of common stock of the registrant, $0.001 par value per share, issued and outstanding, which includes 7,132,698 treasury shares that are owned by Allied Physicians of California, a Professional Medical Corporation d.b.a. Allied Pacific of California IPA (“APC”), a consolidated affiliate of Astrana Health, Inc. These shares are legally issued and outstanding but treated as treasury shares for accounting purposes.

Astrana Health, Inc.

INDEX TO FORM 10-Q FILING

TABLE OF CONTENTS


		PAGE
	Introductory Note	5
	Note About Forward-Looking Statements	5

	PART I FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	6
	Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	6
	Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2024 and 2023	9
	Condensed Consolidated Statements of Mezzanine and Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023	10
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	11
	Notes to Condensed Consolidated Financial Statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	52
Item 4.	Controls and Procedures	52

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	55

Glossary

The following abbreviations or acronyms that may be used in this document shall have the adjacent meanings set forth below:


AAMG						All-American Medical Group
ACO REACH						ACO Realizing Equity, Access, and Community Health
ADSC						Advanced Diagnostic and Surgical Center, Inc.
AHMC						AHMC Healthcare Inc.
AHMS						Advanced Health Management Systems, L.P.
AHM						Astrana Health Management, Inc. (f/k/a Network Medical Management Inc.)
AIPBP						All-Inclusive Population-Based Payments
APAACO						APA ACO, Inc.
APC						Allied Physicians of California, a Professional Medical Corporation
APC-LSMA						APC-LSMA Designated Shareholder Medical Corporation
Astrana						Astrana Health Inc. (f/k/a Apollo Medical Holdings, Inc.)
Astrana Medical						Astrana Health Medical Corporation (f/k/a AP-AMH Medical Corporation)
Astrana Care Partners Medical						Astrana Care Partners Medical Corporation (f/k/a AP - AMH 2 Medical Corporation)
CAIPA MSO						CAIPA MSO, LLC
CFC						Community Family Care Medical Group IPA, Inc.
CMS						Centers for Medicare & Medicaid Services
DMHC						California Department of Managed Health Care
DMG						Diagnostic Medical Group of Southern California
HSMSO						Health Source MSO Inc., a California corporation
IPA						Independent Practice Association
Jade						Jade Health Care Medical Group, Inc.
LMA						LaSalle Medical Associates
NGACO						Next Generation Accountable Care Organization
Prime Community Care						Primary Community Care of Central Valley, Inc.
PMIOC						Pacific Medical Imaging and Oncology Center, Inc.
Sun Labs						Sun Clinical Labs
VIE						Variable Interest Entity

INTRODUCTORY NOTE

Unless the context dictates otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us,” “our,” and similar words are references to Astrana Health, Inc., a Delaware corporation (“Astrana”), and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”).

The Centers for Medicare & Medicaid Services (“CMS”) have not reviewed any statements contained in this Report, including statements describing the participation of APA ACO, Inc. (“APAACO”) in the ACO Realizing Equity, Access, and Community Health Model (“ACO REACH Model”) and ApolloMed MSSP I, Inc. in the Medicare Shared Savings Program (“MSSP”).

Trade names and trademarks of Astrana and its subsidiaries referred to herein, and their respective logos, are our property. This Quarterly Report on Form 10-Q may contain additional trade names and/or trademarks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names and/or trademarks, if any, to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any statements about our business, financial condition, operating results, plans, objectives, expectations, and intentions; any projections of earnings, revenue, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), Adjusted EBITDA, or other financial items, such as our projected capitation from CMS, our forward-looking guidance and our future liquidity; any statements of any plans, strategies, and objectives of management for future operations, such as the material opportunities that we believe exist for our Company; any statements concerning proposed services, developments, mergers, or acquisitions; any statements with respect to dividends or stock repurchases and timing, methods, and payment of same; any statements regarding the outlook of the ACO REACH Model, the MSSP, or strategic transactions; any statements regarding management’s view of future expectations and prospects for us; any statements about prospective adoption of new accounting standards or effects of changes in accounting standards; our ability to maintain effective internal control over financial reporting and disclosure controls and procedures; any statements regarding potential changes to our tax structure; any statements regarding future economic conditions or performance; any statements of belief; any statements of assumptions underlying any of the foregoing; and other statements that are not historical facts. Forward-looking statements may be identified by the use of forward-looking terms, such as “anticipate,” “could,” “can,” “may,” “might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,” “believe,” “think,” “plan,” “envision,” “intend,” “continue,” “target,” “seek,” “contemplate,” “budgeted,” “will,” or “would,” and the negative of such terms, other variations on such terms or other similar or comparable words, phrases, or terminology. These forward-looking statements present our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and are subject to change.

Forward-looking statements involve risks and uncertainties, many of which are difficult to predict and are outside of our control, and are based on the current beliefs, expectations, and certain assumptions of management. Some or all of such beliefs, expectations, and assumptions may not materialize or may vary significantly from actual results. Such statements are qualified by important economic, competitive, governmental, and technological factors that could cause our business, strategy, or actual results or events to differ materially from those in our forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2024, including the risk factors discussed under the heading “Risk Factors” in Part I, Item 1A thereof. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to significant risks and uncertainties that could cause actual conditions, outcomes, and results to differ materially from those indicated by such statements. Any forward-looking statement made by the Company in this Form 10-Q speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ASTRANA HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


	March 31, 2024		December 31, 2023
	(Unaudited)
Assets

Current assets
Cash and cash equivalents	$	334,796	$	293,807
Investment in marketable securities	2,490		2,498
Receivables, net	120,106		76,780
Receivables, net – related parties	62,354		58,980
Income taxes receivable	—		10,657
Other receivables	1,783		1,335
Prepaid expenses and other current assets	17,281		17,450

Total current assets	538,810		461,507

Non-current assets
Land, property and equipment, net	7,985		7,171
Intangible assets, net	119,707		71,648
Goodwill	410,267		278,831
Income taxes receivable	15,943		15,943
Loans receivable, non-current	47,412		26,473
Investments in other entities – equity method	35,893		25,774
Investments in privately held entities	6,396		6,396
Restricted cash	645		345
Operating lease right-of-use assets	39,152		37,396
Other assets	4,067		1,877

Total non-current assets	687,467		471,854

Total assets(1)	$	1,226,277	$	933,361

Liabilities, mezzanine equity and equity

Current liabilities
Accounts payable and accrued expenses	146,473		59,949
Fiduciary accounts payable	7,792		7,737
Medical liabilities	136,494		106,657
Income taxes payable	5,522		—
Dividend payable	638		638


	March 31, 2024		December 31, 2023
	(Unaudited)
Finance lease liabilities	636		646
Operating lease liabilities	5,007		4,607
Current portion of long-term debt	20,750		19,500
Other liabilities	31,960		18,940

Total current liabilities	355,272		218,674

Non-current liabilities
Deferred tax liability	3,756		4,072
Finance lease liabilities, net of current portion	1,015		1,033
Operating lease liabilities, net of current portion	37,716		36,289
Long-term debt, net of current portion and deferred financing costs	368,448		258,939
Other long-term liabilities	7,652		3,586

Total non-current liabilities	418,587		303,919

Total liabilities(1)	773,859		522,593

Commitments and contingencies (Note 12)

Mezzanine equity
Noncontrolling interest in Allied Physicians of California, a Professional Medical Corporation ("APC")	(205,557)		(205,883)

Stockholders’ equity
Series A Preferred stock, $0.001 par value per share; 5,000,000 shares authorized (inclusive of all preferred stock, including Series B Preferred stock); 1,111,111 issued and zero outstanding	—		—
Series B Preferred stock, $0.001 par value per share; 5,000,000 shares authorized (inclusive of all preferred stock, including Series A Preferred stock); 555,555 issued and zero outstanding	—		—
Common stock, $0.001 par value per share; 100,000,000 shares authorized, 47,458,264 and 46,843,743 shares issued and outstanding, excluding 10,584,340 and 10,584,340 treasury shares, as of March 31, 2024 and December 31, 2023, respectively	48		47
Additional paid-in capital	395,473		371,037
Retained earnings	257,969		243,134
Total stockholders’ equity	653,490		614,218

Non-controlling interest	4,485		2,433

Total equity	657,975		616,651

Total liabilities, mezzanine equity and equity	$	1,226,277	$	933,361

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

(1)The Company’s condensed consolidated balance sheets include the assets and liabilities of its consolidated VIEs. The condensed consolidated balance sheets include total assets that can be used only to settle obligations of the Company’s consolidated VIEs totaling $717.5 million and $540.8 million as of March 31, 2024 and December 31, 2023, respectively, and total liabilities of the Company’s consolidated VIEs for which creditors do not have recourse to the general credit of the primary beneficiary of $179.6 million and $146.0 million as of March 31, 2024 and December 31, 2023, respectively. These VIE balances do not include $299.5 million of investment in affiliates and $110.1 million of amounts due to affiliates as of March 31, 2024, and $273.2 million of investment in affiliates and $107.3 million of amounts due to affiliates as of December 31, 2023, as these are eliminated upon consolidation and not presented within the condensed consolidated balance sheets. See Note 16 — “Variable Interest Entities (VIEs)” for further details.

ASTRANA HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

(UNAUDITED)


	Three Months Ended March 31,
		2024		2023

Revenue
Capitation, net		$	365,910	$	300,204
Risk pool settlements and incentives		17,377		13,462
Management fee income		4,078		9,896
Fee-for-service, net		15,937		12,062
Other revenue		1,054		1,620

Total revenue		404,356		337,244

Operating expenses
Cost of services, excluding depreciation and amortization		330,399		289,397
General and administrative expenses		38,722		21,182
Depreciation and amortization		5,096		4,292

Total expenses		374,217		314,871

Income from operations		30,139		22,373

Other income (expense)
Income from equity method investments		632		2,484
Interest expense		(7,585)		(3,269)
Interest income		3,996		3,009
Unrealized gain (loss) on investments		1,099		(6,392)
Other (loss) income		(4,277)		1,204

Total other expenses, net		(6,135)		(2,964)

Income before provision for income taxes		24,004		19,409

Provision for income taxes		7,142		6,921

Net income		16,862		12,488

Net income (loss) attributable to non-controlling interest		2,027		(644)

Net income attributable to Astrana Health, Inc.		$	14,835	$	13,132

Earnings per share – basic		$	0.31	$	0.28

Earnings per share – diluted		$	0.31	$	0.28

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ASTRANA HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS’ EQUITY

(IN THOUSANDS, EXCEPT SHARE DATA)

(UNAUDITED)


	Mezzanine Equity – Non-controlling Interest in APC							Retained Earnings
			Common Stock Outstanding			Additional Paid-in Capital				Non-controlling Interest	Stockholders’ Equity
			Shares	Amount
Balance at January 1, 2024	$	(205,883)	46,843,743	$	47	$	371,037	$	243,134		$	2,433	$	616,651
Net income	326		—	—		—		14,835			1,701		16,536
Purchase of non-controlling interest	—		—	—		—		—			(25)		(25)
Sale of non-controlling interest	—		—	—		—		—			150		150
Shares issued for vesting of restricted stock awards	—		5,149	—		(2,407)		—			—		(2,407)
Share-based compensation	—		—	—		5,748		—			—		5,748
Issuance of shares for business acquisition	—		631,712	1		21,951		—			—		21,952
Acquisition of non-controlling interest	—		(22,340)	—		(856)		—			321		(535)
Dividends	—		—	—		—		—			(95)		(95)
Balance at March 31, 2024	$	(205,557)	47,458,264	$	48	$	395,473	$	257,969		$	4,485	$	657,975


	Mezzanine Equity – Non-controlling Interest in APC							Retained Earnings
			Common Stock Outstanding			Additional Paid-in Capital				Non-controlling Interest		Stockholders’ Equity
			Shares	Amount
Balance at January 1, 2023	$	14,237	46,575,699	$	47	$	360,097	$	182,417	$	1,749	$	544,310
Net (loss) income	(1,729)		—	—		—		13,132		1,085		14,217
Shares issued for vesting of restricted stock awards	—		57,825	—		(109)		—		—		(109)
Shares issued for exercise of options and warrants	—		125,000	—		1,250		—		—		1,250
Purchase of treasury shares	—		(270,081)	—		(9,539)		—		—		(9,539)
Share-based compensation	—		—	—		3,445		—		—		3,445
Dividends	—		—	—		—		—		(120)		(120)
Transfer of common control entities	1,769		—	—		(2,447)		—		—		(2,447)
Balance at March 31, 2023	$	14,277	46,488,443	$	47	$	352,697	$	195,549	$	2,714	$	551,007

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ASTRANA HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)


	Three Months Ended March 31,
	2024		2023

Cash flows from operating activities
Net income	$	16,862	$	12,488
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,096		4,292
Amortization of debt issuance cost	458		237
Share-based compensation	5,748		3,445
Non-cash lease expense	3,155		2,013
Unrealized (gain) loss on investments	(1,099)		5,755
Income from equity method investments	(632)		(2,484)

Unrealized loss on interest rate swaps	—		637
Deferred tax	(7,248)		283
Other	6,795		—
Changes in operating assets and liabilities, net of business combinations:
Receivable, net	(26,128)		(26,373)
Receivable, net – related parties	(3,374)		(9,730)
Other receivables	(1,403)		(94)
Prepaid expenses and other current assets	(4,255)		(506)
Other assets	92		(23)
Accounts payable and accrued expenses	905		(4,517)
Fiduciary accounts payable	56		911
Medical liabilities	(808)		17,141
Income taxes payable/receivable	14,542		6,333
Operating lease liabilities	(3,083)		(2,088)
Other long-term liabilities	298		—
Net cash provided by operating activities	5,977		7,720

Cash flows from investing activities
Payments for business acquisition, net of cash acquired	(50,649)		—
Proceeds from repayment of loans receivable – related parties	6		2,141
Purchase of marketable securities	(27)		(1,000)
Purchase of investment – equity method	—		(325)
Issuance of loans receivable	(20,000)		—
Purchases of property and equipment	(369)		(6,027)
Deposit for purchase of property	—		(8,824)
Net cash used in investing activities	(71,039)		(14,035)

Cash flows from financing activities
Dividends paid	(95)		(120)
Borrowings on long-term debt	110,000		1,617
Repayment of long-term debt	(3,500)		(153)
Payment of finance lease obligations	(179)		(154)
Proceeds from the exercise of stock options and warrants	—		1,250


	Three Months Ended March 31,
	2024		2023

Repurchase of treasury shares	—		(9,539)
Proceeds from sale of non-controlling interest	150		—
Purchase of non-controlling interest	(25)		—
Net cash provided by (used in) financing activities	106,351		(7,099)

Net increase (decrease) in cash and cash equivalents	41,289		(13,414)

Cash, cash equivalents, and restricted cash, beginning of period	294,152		288,027

Cash, cash equivalents, and restricted cash, end of period	$	335,441	$	274,613

Supplemental disclosures of cash flow information
Cash paid for income taxes	$	194	$	—
Cash paid for interest	$	6,430	$	2,991

Supplemental disclosures of non-cash investing and financing activities
Business acquisition in accounts payable and accrued liabilities	63,935		3,844
Right-of-use assets obtained in exchange for operating lease liabilities	4,910		—

Common stock issued in business combination	21,952		—
Purchase of investments - equity method in accounts payable and accrued liabilities and other liabilities	9,487		—
Draw on letter of credit through Revolver Loan	4,759		—

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total amounts of cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows (in thousands):


	March 31,
	2024		2023
Cash and cash equivalents	$	334,796	$	274,613
Restricted cash	645		—
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	335,441	$	274,613

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ASTRANA HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Description of Business

Overview

Unless the context dictates otherwise, references in these notes to the financial statements to the “Company,” “we,” “us,” “our,” and similar words are references to Astrana Health, Inc. (“Astrana”), formerly known as Apollo Medical Holdings, Inc., and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”).

Headquartered in Alhambra, California, Astrana is a leading provider-centric, technology-powered, risk-bearing healthcare company. Leveraging its proprietary end-to-end technology solutions, Astrana operates an integrated healthcare delivery platform that enables providers to successfully participate in value-based care arrangements, thus empowering them to deliver accessible, high-quality care to patients in a cost-effective manner. Together with Astrana’s affiliated physician groups and consolidated subsidiaries and VIEs, the Company provides value-based care enablement services and care delivery with its consolidated care partners to serve patients in California, Nevada, and Texas, the majority of whom are covered by private or public insurance provided through Medicare, Medicaid, and health maintenance organizations (“HMOs”), with a small portion of our revenue coming from non-insured patients. The Company provides care coordination services to each major constituent of the healthcare delivery system, including patients, families, primary care physicians, specialists, acute care hospitals, alternative sites of inpatient care, physician groups, and health plans. The Company’s physician network consists of primary care physicians, specialist physicians, physician and specialist extenders, and hospitalists.

Segments

The Company’s three reportable segments are Care Partners, Care Delivery and Care Enablement, which are described as follows:

Care Partners

The Care Partners segment is focused on building and managing high-quality and high-performance provider networks by partnering with, empowering, and investing in strong provider partners aligned on a shared vision for coordinated care delivery. By leveraging the Company’s unique care enablement platform and ability to recruit, empower, and incentivize physicians to effectively manage total cost of care, the Company is able to organize partnered providers into successful multi-payer risk-bearing organizations that take on varying levels of risk based on total cost of care across membership in all lines of business, including Medicare fee for service (“FFS”), Medicare Advantage, Medicaid, Commercial, and Exchange. Through the Company’s network of “independent practice associations” (“IPAs”), “accountable care organizations” (“ACOs”), and Restricted Knox-Keene licensed health plan, the Company’s healthcare delivery entities are responsible for coordinating and delivering high-quality care to the Company’s patients and ensuring continuity of care in Astrana’s ecosystem across age, stage of life, or life circumstance. Beginning in 2024, in addition to participating in the ACO REACH Model, the Company began participating in the Medicare Shared Savings Program (“MSSP”). The MSSP was created to promote accountability and improve coordination of care for Medicare beneficiaries.

Care Delivery

The Company’s Care Delivery segment is a patient-centric, data-driven care delivery organization focused on delivering high-quality and accessible care to all patients. The Company’s care delivery organization includes primary care, multi-specialty care, and ancillary care services. This segment includes the following:

•Primary care clinics, including post-acute care services;

•Multi-specialty care clinics and medical groups, including hospitalist, intensivist, and physician advisory services, cardiac care and diagnostic testing, and specialized care for women’s health; and

•Ancillary service providers, such as urgent care centers, outpatient imaging centers, ambulatory surgery centers, and full-service labs.

Care Enablement

The Company’s Care Enablement segment is an integrated, end-to-end clinical, operational, financial, and administrative platform powered by the Company’s proprietary technology suite that enhances the delivery of high-quality, value-based care to patients and leads to superior clinical and financial outcomes. The Company provides solutions to providers, including independent physicians, provider and medical groups, accountable care organizations, and payers, including health plans and other risk-bearing organizations. The Company’s platform meets providers and payers where they are, with a wide spectrum of solutions across the total cost of care risk spectrum, ranging from solutions for fee-for-service entities to hospital-shared risk-bearing entities, and across patient types, including Medicare, Medicaid, Commercial, and Exchange patients. This segment includes the Company’s wholly owned subsidiaries which operate as management services organizations (“MSOs”), which enter into long-term management and/or administrative services agreements with IPAs, ACOs, clinics, or independent providers. By leveraging the Company’s care enablement platform, providers and payers can improve their ability to deliver high-quality care to their patients and achieve better patient outcomes.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated balance sheet at December 31, 2023, has been derived from the Company’s audited condensed consolidated financial statements, but does not include all annual disclosures required by generally accepted accounting principles in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed consolidated financial statements as of March 31, 2024, and for the three months ended March 31, 2024 and 2023, have been prepared in accordance with U.S. GAAP for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and related notes to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 29, 2024. In the opinion of management, all material adjustments (consisting of normal recurring adjustments as well as intercompany accounts and transactions, which have been eliminated) considered necessary for a fair presentation have been made to make the condensed consolidated financial statements not misleading, as required by Regulation S-X, Rule 10-01. Operating results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024, or any future periods.

Principles of Consolidation

The condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, and the condensed consolidated statements of income for the three months ended March 31, 2024 and 2023, include Astrana’s wholly owned subsidiaries and consolidated variable interest entities (“VIEs”).

The unaudited condensed consolidated interim financial statements have been prepared under the assumption that users of the interim financial data have either read or have access to our audited condensed consolidated financial statements for the fiscal year ended December 31, 2023.

Use of Estimates

The preparation of the condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include collectability of receivables, recoverability of long-lived and intangible assets, business combination and goodwill valuation and impairment, accrual of medical liabilities (incurred but not reported (“IBNR”) claims), determination of hospital shared-risk and health plan shared-risk revenue and receivables (including constraints, completion factors and historical margins), income tax-valuation allowance, share-based compensation, and right-of-use assets and lease liabilities. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ materially from those estimates and assumptions.

Business Combinations

The Company uses the acquisition method of accounting for all business combinations, which requires assets and liabilities of the acquiree to be recorded at fair value, to measure the fair value of the consideration transferred, including contingent consideration, to be determined on the acquisition date, and to account for acquisition-related costs separately from the business combination.

Reportable Segments

As of March 31, 2024, the Company operates in three reportable segments:

•Care Partners;

•Care Delivery; and

•Care Enablement.

Refer to Note 1 — “Description of Business” and Note 18 — “Segments” to the condensed consolidated financial statements for information on the Company’s segments.

Cash and Cash Equivalents

The Company’s cash and cash equivalents primarily consist of money market funds and certificates of deposit. The Company considers all highly liquid investments that are both readily convertible into known amounts of cash and mature within ninety days from their date of purchase to be cash equivalents.

The Company maintains its cash in deposit accounts with several banks, which at times may exceed the insured limits of the Federal Deposit Insurance Corporation (“FDIC”). The Company believes it is not exposed to any significant credit risk with respect to its cash and cash equivalents and restricted cash. As of March 31, 2024 and December 31, 2023, the Company’s deposit accounts with banks exceeded the FDIC’s insured limit by approximately $353.6 million and $318.9 million, respectively. The Company has not experienced any losses to date and performs ongoing evaluations of these financial institutions to limit the Company’s concentration of risk exposure.

Receivables, Receivables – Related Parties, Other Receivables and Loan Receivables

The Company’s receivables are comprised of accounts receivable, capitation and claims receivable, risk pool settlements, incentive receivables, management fee income, and other receivables. Accounts receivable are recorded and stated at the amount expected to be collected.

The Company’s receivables – related parties are comprised of risk pool settlements, management fee income, and other receivables. Receivables – related parties are recorded and stated at the amount expected to be collected.

The Company’s loan receivables consists of promissory notes that accrue interest per annum. As of March 31, 2024, promissory notes are expected to be collected by their maturity dates.

Capitation and claims receivables relate to each health plan’s capitation and are received by the Company in the month following the month of service. Risk pool settlements and incentive receivables mainly consist of the Company’s hospital shared-risk pool receivable, which is recorded quarterly based on reports received from the Company’s hospital partners and management’s estimate of the Company’s portion of the estimated risk pool surplus for open performance years. Settlement of risk pool surplus or deficits occurs approximately 18 months after the risk pool performance year is completed. Other receivables consist of receivables from fee-for-service (“FFS”) reimbursement for patient care, certain expense reimbursements, transportation reimbursements from the hospitals, and stop-loss insurance premium reimbursements.

The Company maintains reserves for potential credit losses on the receivables. Management reviews the composition of the Company’s receivables and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves. The Company also regularly analyzes the ultimate collectability of accounts receivable after certain stages of the collection cycle using a look-back analysis to determine the amount of receivables subsequently collected and adjustments are recorded when necessary. Reserves are recorded primarily on a specific identification basis.

Receivables are recorded when the Company is able to determine amounts receivable under applicable contracts and agreements based on information provided and collection is reasonably likely to occur. In regard to the credit loss standard, the Company continuously monitors its collections of receivables and our expectation is that the historical credit loss experienced across our receivable portfolio is materially similar to any current expected credit losses that would be estimated under the current expected credit losses (“CECL”) model.

Concentrations of Credit Risks

The Company disaggregates revenue from contracts by service type and payer type. This level of detail provides useful information pertaining to how the Company generates revenue by significant revenue stream and by type of direct contracts. The condensed consolidated statements of income present disaggregated revenue by service type. The following table presents disaggregated revenue generated by payer type for the three months ended March 31, 2024 and 2023 (in thousands):


	Three Months Ended March 31,
	2024		2023

Commercial	$	49,512	$	40,019
Medicare	246,564		216,310
Medicaid	81,263		67,339
Other third parties	27,017		13,576
Revenue	$	404,356	$	337,244

The Company had major payers that contributed the following percentages of net revenue:


	Three Months Ended March 31,
	2024		2023

Payer A	34.0	%	41.5	%
Payer B	13.5	%	*

*Less than 10% of total net revenues

The Company had major payers that contributed to the following percentages of receivables and receivables – related parties:


	As of March 31, 2024		As of December 31, 2023
Payer A	31.0	%	36.0	%
Payer C	33.0	%	41.0	%

Revenue Recognition

The Company receives payments from the following sources for services rendered:

•Commercial insurers;

•Federal government under the Medicare program administered by CMS;

•State governments under Medicaid and other programs;

•Other third-party payers (e.g., hospitals and IPAs); and

•Individual patients and clients.

Revenue primarily consists of the following:

•Capitation revenue;

•Risk pool settlements and incentives;

•Management fee revenue; and

•FFS revenue.

Revenue is recorded in the period in which services are rendered or the period in which the Company is obligated to provide services. The form of billing and related risk of collection for such services may vary by type of revenue and the customer.

Risk Pool Settlements and Incentives

Medicare Shared Savings Program Revenue

Beginning in 2024, Astrana participates in MSSP. The MSSP has multiple risk tracks, and Astrana is currently participating in the ENHANCED risk track. Under the MSSP Model, Astrana recruits a group of Participant and Preferred (in-network) Providers. Based on the Participant Providers that join our ACO, CMS grants us a pool of Traditional Medicare patients (beneficiaries) to manage (the “MSSP Aligned Beneficiaries”). The Company’s MSSP Aligned Beneficiaries will receive services from physicians and other medical service providers that are both in-network and out-of-network. CMS continues to pay participant and preferred providers on a fee-for-service basis for Medicare-covered services provided to MSSP Aligned Beneficiaries. The Company continues to bear risk on all Medicare expenditures (both in-network and out-of-network), excluding drug expenditures covered by Medicare Part D, based on a budgetary benchmark established with CMS. Astrana’s shared savings or losses in managing the Company’s beneficiaries are generally determined on an annual basis after reconciliation with CMS. Pursuant to Astrana’s risk-share agreement with CMS, the Company is eligible to receive the surplus (“shared savings”) or is liable for the deficit (“shared losses”) according to the budgetary benchmark established by CMS based on Astrana’s efficiency, or lack thereof, in managing the expenditures associated with the Company’s MSSP Aligned Beneficiaries. The Company estimates the shared service revenue by analyzing the activities during the relevant time period in contemplation of the agreed upon benchmarks, metrics, performance criteria, and attribution criteria based on those and any other contractually defined factors. Revenue is not recorded and is constrained until the shared service revenue can be reasonably estimated by the Company and to the extent that it is probable that a significant reversal will not occur once any uncertainty associated with the variable consideration is subsequently resolved.

Income Taxes

Federal and state income taxes are computed at currently enacted tax rates less tax credits using the asset and liability method. Deferred taxes are adjusted for both items that do not have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, changes in recognition of tax positions and any changes in the valuation allowance caused by a change in judgment about the realizability of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

The Company uses a recognition threshold of more-likely-than-not and a measurement attribute on all tax positions taken or expected to be taken in a tax return in order to be recognized in the condensed consolidated financial statements. Once the recognition threshold is met, the tax position is then measured to determine the actual amount of benefit to recognize in the condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for the Company’s annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

3. Business Combinations, Asset Acquisitions, and Goodwill

Advanced Health Management Systems, L.P. (“AHMS”)

On March 31, 2024, the Company, through its wholly owned subsidiary, purchased all of the outstanding general and limited partnership interests of Advanced Health Management Systems, L.P. (“AHMS”). AHMS is engaged in the business of providing management, consulting, administrative and other support services to entities that provide or arrange for the provision of professional healthcare services. In addition, one of AHMS’s wholly owned subsidiaries is a Restricted Knox-Keene licensed health plan with members in the Los Angeles, California area. Total consideration for the acquisition was $63.9 million. As the cash was not paid on the closing date, the purchase price was accrued and presented within accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet as of March 31, 2024.

Prime Community Care of Central Valley, Inc. (“PCCCV”)

On March 29, 2024, the Company, through its consolidated subsidiary, acquired certain assets of Prime Community Care of Central Valley, Inc., a California professional medical corporation (“PCCCV”). Total consideration of the acquisition was approximately $10.3 million, consisting of cash funded upon the close date and contingent considerations of $2.3 million (“PCCCV contingent considerations”). Refer to Note 19 - “Fair Value Measurements of Financial Instruments” for additional information on contingent considerations.

Community Family Care Medical Group IPA, Inc. (“CFC”)

On January 31, 2024, the Company, through its consolidated subsidiary, acquired certain assets of CFC. CFC is an IPA that manages the healthcare of members in the Los Angeles, California area. The group serves patients across Medicare, Medicaid, and Commercial payers. The total consideration for the purchase was $120.2 million, consisting of $91.0 million cash funded upon the close date, $22.0 million of the Company’s common stock, resulting in the issuance of 631,712 shares of common stock., and contingent considerations of $7.3 million (“CFC contingent considerations”). Refer to Note 19 - “Fair Value Measurements of Financial Instruments” for additional information on contingent considerations.

Advanced Diagnostic and Surgical Center, Inc. (“ADSC”)

On January 1, 2024, the Company acquired 95% of the equity interest of Advanced Diagnostic and Surgical Center, Inc. (“ADSC”). ADSC is a diagnostic and surgical center that also provides ambulatory surgery services. The total consideration consisted of cash funded upon close of the transaction and contingent considerations of $3.6 million (“ADSC contingent considerations”). Refer to Note 19 - “Fair Value Measurements of Financial Instruments” for additional information on contingent considerations.

The Company is still in the process of finalizing the purchase price allocation for these acquisitions, and therefore, the balances are subject to change as a result of any working capital or fair value adjustments, and seller indemnification obligations. The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed related to each acquisition at the acquisition date (in thousands):


	CFC		AHMS		Others *		Net Total
Total purchase consideration:
Cash paid	$	90,998	$	—	$	12,500	$	103,498
Cash payable	—		63,935		—		63,935
Contingent consideration	7,264		—		5,897		13,161
Common stock issued	21,952		—		—		21,952
	$	120,214	$	63,935	$	18,397	$	202,546

Assets:
Cash and cash equivalents	$	16,674	$	33,950	$	3,515	$	54,139
Investment in marketable securities	50		—		30		80
Receivables	5,351		11,847		—		17,198
Prepaid expenses and other current assets	—		36		11		47
Amounts due from affiliates	3,909		—		—		3,909
Land, property and equipment	—		—		823		823
Intangible assets	26,000		23,800		2,703		52,503
Goodwill	90,148		29,876		12,318		132,342
Restricted cash	—		300		—		300
Total identifiable assets acquired	$	142,132	$	99,809	$	19,400	$	261,341

Liabilities:
Accounts payable and accrued expenses	$	4,376	$	7,232	$	250	$	11,858
Medical liabilities	17,508		13,137		—		30,645
Amounts due to affiliates	—		7,241		54		7,295
Income taxes payable	34		1,604		—		1,638

Deferred tax liability	—		6,660		271		6,931

Noncontrolling interest	—		—		428		428
Total identified liabilities assumed	$	21,918	$	35,874	$	1,003	$	58,795

Total net identifiable assets acquired	$	120,214	$	63,935	$	18,397	$	202,546

* Others consist of estimated fair values of the assets acquired, net of cash acquired, related to ADSC and PCCCV.

Following the acquisition dates of CFC, AHMS, ADSC and PCCCV, the operating results have been included in our consolidated financial statements. For the period from the acquisition dates through March 31, 2024, total revenues and net income were $33.2 million and $5.1 million, respectively.

Unaudited Pro Forma Financial Information

The pro forma financial information in the table below presents the combined results of the Company and CFC, AHMS, ADSC and PCCCV as if the acquisitions had occurred on January 1, 2023. The pro forma information presented is shown for illustrative purposes only and is not necessarily indicative of future results of operations of the Company or results of operations of the Company that would have actually occurred had the transactions been in effect for the periods presented.


	Three Months Ended March 31,
(in thousands, except per share amounts)	2024		2023
Total revenue	$	493,006	$	382,462
Net income	$	16,661	$	20,324

Net income per share - basic	$	0.35	$	0.44
Net income per share - diluted	$	0.35	$	0.43

The acquisitions were accounted for under the acquisition method of accounting. The fair value of the consideration for the acquired companies was allocated to acquired tangible and intangible assets and liabilities based upon their fair values. The excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. Factors leading to goodwill being recognized are the Company’s expectation of synergies from combining operations of entities acquired and the Company, as well as the value of intangible assets that are not separately recognized, such as assembled workforce. The determination of the fair value of assets and liabilities acquired requires the Company to make estimates and use valuation techniques when market value is not readily available. The results of operations from the acquisitions have been included in the Company’s financial statements from the date of acquisition. Transaction costs associated with business acquisitions are expensed as they are incurred.

At the time of acquisition, the Company estimates the amount of the identifiable intangible assets based on a valuation and the facts and circumstances available at the time. The Company determines the final value of the identifiable intangible assets as soon as information is available, but not more than one year from the date of acquisition.

Goodwill is not deductible for tax purposes. The Company had no impairment of its goodwill or indefinite-lived intangible assets during the three months ended March 31, 2024 and 2023.

The change in the carrying value of goodwill for the three months ended March 31, 2024 was as follows (in thousands):


	Amount

Balance, January 1, 2024	$	278,831
Acquisitions	132,342
Adjustments	(906)
Balance, March 31, 2024	$	410,267

4. Intangible Assets, Net

At March 31, 2024, the Company’s intangible assets, net, consisted of the following (in thousands):


	Useful Life (Years)	Gross March 31, 2024		Accumulated Amortization		Net March 31, 2024
Indefinite lived assets:
Trademarks	N/A	$	2,150	$	—	$	2,150
Licenses	N/A	1,900		—		1,900
Amortized intangible assets:
Network relationships	11-21	155,978		(107,137)		48,841
Management contracts	15	22,832		(17,002)		5,830
Member relationships	7-14	69,381		(9,154)		60,227
Patient management platform	5	2,060		(2,060)		—
Tradename/trademarks	20	1,011		(320)		691
Developed technology	6	107		(39)		68
		$	255,419	$	(135,712)	$	119,707

At December 31, 2023, the Company’s intangible assets, net, consisted of the following (in thousands):


	Useful Life (Years)	Gross December 31, 2023		Accumulated Amortization		Net December 31, 2023
Indefinite lived assets:
Trademarks	N/A	$	2,150	$	—	$	2,150
Amortized intangible assets:
Network relationships	11-21	150,679		(104,859)		45,820
Management contracts	15	22,832		(16,662)		6,170
Member relationships	10-14	24,077		(7,345)		16,732
Patient management platform	5	2,060		(2,060)		—
Tradename/trademarks	20	1,011		(308)		703
Developed technology	6	107		(34)		73
		$	202,916	$	(131,268)	$	71,648

For the three months ended March 31, 2024 and 2023, the Company recognized amortization expenses of $4.4 million and $3.0 million, respectively, in depreciation and amortization on the accompanying condensed consolidated statements of income. The Company determined that there was no impairment of its finite-lived intangible or long-lived assets during the three months ended March 31, 2024 and 2023.

Future amortization expense is estimated to be as follows for the following years ending December 31 (in thousands):


	Amount

2024 (excluding the three months ended March 31, 2024)	$	20,144
2025	22,373
2026	18,178
2027	14,746
2028	12,085
Thereafter	28,131

Total	$	115,657

5. Investments in Other Entities

Equity Method

For the three months ended March 31, 2024 and 2023, the Company’s equity method investment balance consisted of the following (in thousands):


	% of Ownership	December 31, 2023		Initial Investment		Allocation of Net Income		Distribution		March 31, 2024
LaSalle Medical Associates – IPA line of business	25%	$	9,866	$	—	$	359	$	—	$	10,225
Pacific Medical Imaging & Oncology Center, Inc.	40%	1,691		—		27		—		1,718
CAIPA MSO, LLC	30%	13,660		—		186		—		13,846
I Health, Inc.	25%	—		9,487		—		—		9,487
Other *	25%	557		—		60		—		617
		$	25,774	$	9,487	$	632	$	—	$	35,893


	% of Ownership	December 31, 2022		Initial Investment		Allocation of Net Income (Loss)		Distribution		March 31, 2023
LaSalle Medical Associates – IPA line of business	25%	$	5,684	$	—	$	2,165	$	—	$	7,849
Pacific Medical Imaging & Oncology Center, Inc.	40%	1,878		—		8		—		1,886
531 W. College, LLC **	50%	17,281		—		(90)		—		17,191
One MSO, LLC **	50%	2,718		—		115		—		2,833
CAIPA MSO, LLC	30%	12,738		—		249		—		12,987
Other *	25%	—		325		37		—		362
		$	40,299	$	325	$	2,484	$	—	$	43,108

* Other consists of smaller equity method investments.

** Investment were solely for the benefit of APC and its shareholders.

I Health, Inc.

On March 31, 2024, a wholly owned subsidiary of the Company acquired a 25% equity interest in I Health, Inc. (“I Health”), a management service organization. The Company accounts for its investment in I Health under the equity method of accounting as the Company has the ability to exercise significant influence, but not control over I Health’s operations. The purchase agreement includes a call option that allows the Company to purchase an additional 25% equity interest on each of the first, second and third anniversary of the purchase (“I Health Call Option”). The cash consideration was not paid on the closing date,

and was accrued and presented within accounts payable and accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

There was no impairment loss recorded related to equity method investments for the three months ended March 31, 2024 and 2023.

6. Loans Receivable

Loans receivable

IntraCare

In July 2023, the Company entered into a five-year convertible promissory note with IntraCare as the borrower. The principal on the note is $25.0 million, with interest on the outstanding principal amount and unpaid interest at a rate per annum equal to 8.81%, compounded annually. In the event that the convertible promissory note remains outstanding on or after the maturity date of July 27, 2028, the outstanding principal balance and any unpaid accrued interest shall, upon the election of the Company, convert into IntraCare preferred shares.

BASS Medical Group

On January 29, 2024, the Company provided BASS Medical Group (“BASS”) with a $20.0 million senior secured promissory note (“BASS secured promissory note”). The promissory note is secured by certain assets of BASS. BASS secured promissory note matures on January 11, 2031, and has an interest rate per annum equal to 8.21% compounded annually. The principal on the note, including unpaid interest, are due and payable on the maturity date.

The Company assessed the outstanding loans receivable under the CECL model by assessing the party’s ability to pay by reviewing their interest payment history quarterly, financial history annually, and reassessing any identified insolvency risk.

7. Accounts Payable and Accrued Expenses

The Company’s accounts payable and accrued expenses consisted of the following (in thousands):


	March 31, 2024		December 31, 2023
Accounts payable and other accruals	$	84,867	$	9,075
Capitation payable	10,225		4,503
Subcontractor IPA payable	2,529		2,529
Professional fees	5,293		4,407
Due to related parties	11,679		9,271
Contract liabilities	3,017		744
Accrued compensation	12,410		20,098
Other provider payable	16,453		9,322
Total accounts payable and accrued expenses	$	146,473	$	59,949

8. Medical Liabilities

The Company’s medical liabilities consisted of the following (in thousands):


	March 31, 2024		March 31, 2023
Medical liabilities, beginning of period	$	106,657	$	81,255
Acquired (see Note 3)	30,645		—
Components of medical care costs related to claims incurred:
Current period	235,237		223,713
Prior periods	(1,419)		(8,950)
Total medical care costs	233,818		214,763
Payments for medical care costs related to claims incurred:
Current period	(136,286)		(136,743)
Prior periods	(97,837)		(61,736)
Total paid	(234,123)		(198,479)
Adjustments	(503)		857

Medical liabilities, end of period	$	136,494	$	98,396

9. Credit Facility, Bank Loans, and Lines of Credit

The Company’s debt balance consisted of the following (in thousands):


	March 31, 2024		December 31, 2023

Term Loan	$	296,500	$	280,000
Revolver Loan	94,759		—
Promissory Note Payable	2,000		2,000
Total debt	393,259		282,000

Less: Current portion of debt	(20,750)		(19,500)
Less: Unamortized financing costs	(4,061)		(3,561)

Long-term debt	$	368,448	$	258,939

The estimated fair value of our long-term debt was determined using Level 2 inputs primarily related to comparable market prices. As of March 31, 2024, and December 31, 2023, the carrying value was not materially different from fair value, as the interest rates on the Company’s debt approximated rates currently available to the Company.

The following are the future commitments of the Company’s debt for the years ending December 31 (in thousands):


	Amount
2024 (excluding the three months ended March 31, 2024)	$	17,000
2025	16,875
2026	117,259
2027	24,375
2028	217,750


Total	$	393,259

Amended Credit Facility

Amended Credit Agreement

On June 16, 2021, the Company entered into an amended and restated credit agreement (as subsequently amended as described below, the “Amended Credit Agreement”) with Truist Bank, in its capacity as administrative agent for the lenders, issuing bank, swingline lender and lender, and the banks and other financial institutions from time to time party thereto, to, among other things, to amend and restate that certain credit agreement, dated September 11, 2019, by and among the Company, Truist Bank, and certain lenders thereto, in its entirety. The Amended Credit Agreement provides for a five-year revolving credit facility (the “Amended Credit Facility”) to the Company of $400.0 million (“Revolver Loan”), which includes a letter of credit sub-facility of up to $25.0 million (which was amended to $50.0 million, as described below) and a swingline loan sub-facility of $25.0 million and which expires on June 16, 2026. As of March 31, 2024, the Company borrowed $94.8 million on the Revolver Loan.

On December 20, 2022, an amendment was made to the Amended Credit Agreement, in which all amounts borrowed under the Amended Credit Agreement as of the effective date were automatically converted from London Interbank Offer Rate (“LIBOR”) Loans to Secured Overnight Financing Rate (“SOFR”) Loans with an initial interest period of one month on and as of the amendment effective date. Amounts borrowed under the Revolver Loan bear interest at an annual rate equal to either, at the Company’s option, (a) the Term SOFR Reference Rate (as defined in the Amended Credit Agreement), adjusted for any Term SOFR Adjustment (as defined in the Amended Credit Agreement) plus a spread ranging from 1.25% to 2.50%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the Amended Credit Agreement), or (b) a base rate, plus a spread ranging from 0.25% to 1.50%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio. As of March 31, 2024, the interest rate on the Revolver Loan was 7.42%.

On September 8, 2023, a Second Amendment to the Amended Credit Agreement was entered into, which, among other things, increased the letter of credit sub-facility from $25.0 million to $50.0 million.

On November 3, 2023, the Company entered into a Third Amendment to the Amended Credit Agreement (“Third Amendment”) with Truist Bank and the other financial institutions party thereto. The Third Amendment provided a new term loan to the Company in an aggregate amount of up to $300.0 million, with $180.0 million funded at the closing of the Third Amendment, and $120.0 million available to be drawn by the Company as delayed draw loans during the six months subsequent to the closing of the Third Amendment (collectively, the “Term Loan”). The Term Loan matures on November 3, 2028 (or such earlier date on which it is terminated in accordance with the provisions of the Amended Credit Agreement) and amortizes quarterly at 5% per annum for each of the first two years, 7.5% per annum for years three and four, and 10% per annum for year five. As of March 31, 2024, the Company borrowed $296.5 million on the Term Loan. The Term Loan bears interest at an annual rate equal to either, at the Company’s option, (a) the Term SOFR Reference Rate, adjusted for any Term SOFR Adjustment, plus a spread from 1.50% to 2.75%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio, or (b) a base rate, plus a spread of 0.50% to 1.75%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio. As of March 31, 2024, the interest rate on the Term Loan was 7.68%.

The Amended Credit Agreement requires the Company to comply with two key financial ratios, each calculated on a consolidated basis. The Company must maintain a maximum consolidated total net leverage ratio of not greater than 3.75 to 1.00 as of the last day of each fiscal quarter, provided that for any fiscal quarter during which the Company or certain subsidiaries consummate a permitted acquisition or investment, the aggregate purchase price is greater than $75.0 million, the

maximum consolidated total net leverage ratio may temporarily increase by 0.25 to 1.00 to 4.00 to 1.00. The Company must maintain a minimum consolidated interest coverage ratio of not less than 3.25 to 1.00 as of the last day of each fiscal quarter.

Under the Amended Credit Agreement, the terms and conditions of the Guaranty and Security Agreement (the “Guaranty and Security Agreement”) between the Company, Astrana Health Management, Inc. (“AHM”) and Truist Bank remain in effect. Pursuant to the Guaranty and Security Agreement, the Company and AHM have granted the lenders under the Amended Credit Agreement a security interest in substantially all of their assets to secure obligations under the Amended Credit Agreement, including, without limitation, all stock and other equity issued by their subsidiaries (including AHM) and all rights with respect to the $545.0 million loan from the Company to Astrana Medical.

Promissory Note Payable

FYB Promissory Note Agreement with CCHCA

In May 2021, For Your Benefit, Inc. entered into a promissory note agreement with Chinese Community Health Care Association. The principal on the promissory note is $2.0 million, with a maturity date of May 9, 2024. The interest rate is the prime rate plus 1.0%. The prime rate is updated annually on the effective date of the note and published by the Wall Street Journal.

Deferred Financing Costs

At March 31, 2024, and December 31, 2023, the unamortized deferred financing cost was $5.7 million and $6.1 million, respectively. As of March 31, 2024 and December 31, 2023, $1.6 million and $2.6 million, respectively, of unamortized deferred financing costs was recognized in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets and consisted of unamortized deferred financing costs related to unborrowed amounts available on the Revolver Loan. As of March 31, 2024, and December 31, 2023, $4.1 million and $3.6 million, respectively, of unamortized deferred financing costs was recorded as a direct reduction against the amounts borrowed on the Term Loan and Revolver.

Effective Interest Rate

The Company’s average effective interest rate on its total debt during the three months ended March 31, 2024 and 2023, was 6.51% and 5.69%, respectively. Interest expense in the condensed consolidated statements of income included amortization of deferred debt issuance costs for the three months ended March 31, 2024 and 2023 of $0.5 million and $0.2 million, respectively.

Lines of Credit

APC Business Loan

On September 10, 2019, the APC Business Loan Agreement with Preferred Bank (the “APC Business Loan Agreement”) was amended to, among other things, decrease loan availability to $4.1 million, limit the purpose of the indebtedness under the APC Business Loan Agreement to the issuance of standby letters of credit, and include as a permitted lien, the security interest in all of its assets that APC granted to AHM under a Security Agreement dated on or about September 11, 2019, securing APC’s obligations to AHM under their management services agreement dated as of July 1, 1999, as amended.

Standby Letters of Credit

The Company established irrevocable standby letters of credit with Truist Bank under the Amended Credit Agreement for a total of $31.8 million for the benefit of CMS and certain health plans. Unless the institution provides notification that the standby letters of credit will be terminated prior to the expiration date, the letters will be automatically extended without amendment for additional one-year periods from the present or any future expiration date.

Certain IPAs consolidated by the Company established irrevocable standby letters of credit with Preferred Bank under the APC Business Loan Agreement for a total of $3.9 million for the benefit of certain health plans as of March 31, 2024. The standby letters of credit are automatically extended without amendment for additional one-year periods from the present or any future expiration date, unless notified by the institution in advance of the expiration date that the letter will be terminated.

10. Mezzanine and Stockholders’ Equity

Mezzanine Equity

APC

As the redemption feature of the APC shares is not solely within the control of APC, the equity of APC does not qualify as permanent equity and has been classified as non-controlling interests in APC as mezzanine or temporary equity. APC’s shares were not redeemable, and it was not probable that the shares would become redeemable as of March 31, 2024 and December 31, 2023.

Stockholders’ Equity

As of March 31, 2024, 41,048 holdback shares have not been issued to certain former AHM shareholders who were AHM shareholders at the time of closing of the 2017 merger of Astrana with AHM, as they have yet to submit properly completed letters of transmittal to Astrana in order to receive their pro rata portion of Astrana common stock as contemplated under the 2017 merger agreement. Pending such receipt, such former AHM shareholders have the right to receive, without interest, their pro rata share of dividends or distributions with a record date after the effectiveness of the 2017 Merger. The condensed consolidated financial statements have treated such shares of common stock as outstanding, given the receipt of the letter of transmittal is considered perfunctory and the Company is legally obligated to issue these shares in connection with the 2017 merger.

Treasury Stock

As of March 31, 2024, and December 31, 2023, APC owned 7,132,698 shares of Astrana’s common stock. While such shares of Astrana’s common stock are legally issued and outstanding, they are treated as treasury shares for accounting purposes and excluded from shares of common stock outstanding in the condensed consolidated financial statements. APC’s ownership in Astrana was 13.04% and 13.22% as of March 31, 2024, and December 31, 2023, respectively.

As of March 31, 2024, and December 31, 2023, the Company had previously repurchased 3,451,642 shares of its common stock. These are included as treasury stock.

As of both March 31, 2024, and December 31, 2023, the total treasury stock, including the Company’s stock held by APC, was 10,584,340.

Dividends

During the three months ended March 31, 2024 and 2023, certain consolidated subsidiaries of the Company paid distributions of $0.1 million and $0.1 million, respectively, to the shareholders who own the non-controlling interests in the entities.

11. Stock-Based Compensation

The following table summarizes the stock-based compensation expense recognized under all of the Company’s stock plans for the three months ended March 31, 2024 and 2023, and associated with the issuance of restricted shares of common stock and vesting of stock options that are included in general and administrative expenses in the accompanying condensed consolidated statements of income (in thousands):


	Three Months Ended March 31,
	2024		2023
Stock options	$	349	$	566
Restricted stock	5,399		2,879
Total stock-based compensation expense	$	5,748	$	3,445

Unrecognized compensation expense related to total share-based payments outstanding as of March 31, 2024, was $42.4 million.

Options

The Company’s outstanding stock options consisted of the following:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Options outstanding at January 1, 2024	504,241	$	34.03	2.1	$	4.7
Options granted	—	—		—	—
Options exercised	—	—		—	—
Options forfeited	(7,271)	50.56		—	—

Options outstanding at March 31, 2024	496,970	$	33.79	1.61	$	8.4

Options exercisable at March 31, 2024	459,140	$	28.04	1.41	$	8.4

During the three months ended March 31, 2024, no options were exercised. During the three months ended March 31, 2023, options were exercised for 125,000 shares of the Company’s common stock, resulting in proceeds of $1.3 million.

Restricted Stock

The Company grants restricted stock to officers and employees, which is earned based on service conditions. The grant date fair value of the restricted stock is the grant date’s closing market price of the Company’s common stock. During the three months ended March 31, 2024, the Company granted 296,428 shares of restricted stock with performance-based conditions and 255,781 shares of restricted stock without performance-based conditions. During the three months ended March 31, 2024, the weighted average grant date fair value of restricted stock with and without performance-based conditions was $43.88 and $40.65, respectively.

Employee Stock Purchase Plan (“ESPP”)

The Company’s ESPP is a shareholder-approved plan that allows eligible employees to contribute a portion of their eligible earnings toward the semi-annual purchase of the Company’s common stock at a discounted price equal to 85% up to 90% of the fair market values of the stock on the exercise date, subject to a maximum number of shares that can be purchased during any single offering period as well as an annual maximum dollar amount of shares during any single calendar year. A maximum of 5,000,000 shares were authorized for issuance at the time the Plan was approved. For the three months ended March 31, 2024, there are no shares purchased by employees.

12. Commitments and Contingencies

Regulatory Matters

Laws and regulations governing the Medicare program and healthcare generally are complex and subject to interpretation. The Company believes it complies with all applicable laws and regulations and is unaware of any pending or threatened investigations involving allegations of potential wrongdoing. While no regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action, including fines, penalties, and exclusion from the Medicare and Medi-Cal programs.

As a risk-bearing organization, the Company is required to follow regulations of the Department of Managed Health Care (“DMHC”). The Company must comply with a minimum working capital requirement, tangible net equity (“TNE”)

requirement, cash-to-claims ratio, and claims payment requirements prescribed by the DMHC. TNE is defined as net assets less intangibles, less non-allowable assets (which include amounts due from affiliates), plus subordinated obligations.

Many of the Company’s payer and provider contracts are complex in nature and may be subject to differing interpretations regarding amounts due for the provision of medical services. Such differing interpretations may not come to light until a substantial period of time has passed following contract implementation. Liabilities for claims disputes are recorded when the loss is probable and can be estimated. Any adjustments to reserves are reflected in current operations.

Standby Letters of Credit

The Company established irrevocable standby letters of credit with Truist Bank for a total of $31.8 million for the benefit of CMS and certain health plans as of March 31, 2024 (see Note 9 — “Credit Facility, Bank Loans, and Lines of Credit — Standby Letters of Credit”).

Certain IPAs consolidated by the Company established irrevocable standby letters of credit with Preferred Bank for a total of $3.9 million for the benefit of certain health plans as of March 31, 2024 (see Note 9 — “Credit Facility, Bank Loans, and Lines of Credit — Standby Letters of Credit”).

Litigation

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of its business. The resolution of any claim or litigation is subject to inherent uncertainty and could have a material adverse effect on the Company’s financial condition, cash flows, or results of operations.

Liability Insurance

The Company believes that its insurance coverage is appropriate based upon the Company’s claims experience and the nature and risks of the Company’s business. In addition to the known incidents that have resulted in the assertion of claims, the Company cannot be certain that its insurance coverage will be adequate to cover liabilities arising out of claims asserted against the Company, the Company’s affiliated professional organizations or the Company’s affiliated hospitalists in the future where the outcomes of such claims are unfavorable. The Company believes that the ultimate resolution of all pending claims, including liabilities in excess of the Company’s insurance coverage, will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows; however, there can be no assurance that future claims will not have such a material adverse effect on the Company’s business. Contracted physicians are required to obtain their own insurance coverage.

Although the Company currently maintains liability insurance policies on a claims-made basis which are intended to cover malpractice liability and certain other claims, the coverage must be renewed annually, and may not continue to be available to the Company in future years at acceptable costs and on favorable terms.

13. Related-Party Transactions

Equity Method Investments

During the three months ended March 31, 2023, AHM recognized approximately $5.0 million in management fees from LMA. On August 31, 2023, the management service agreement between LMA’s IPA and AHM was terminated. LMA is accounted for under the equity method based on the 25% equity ownership interest held by APC in LMA’s IPA line of business (see Note 5 — “Investments in Other Entities - Equity Method”).

During the three months ended March 31, 2024 and 2023, APC paid approximately $0.8 million and $0.6 million, respectively, to PMIOC for provider services. APC and PMIOC have an Ancillary Service Contract together whereby PMIOC provides covered services on behalf of APC to enrollees of the plans of APC. PMIOC is accounted for under the equity method based on the 40% equity ownership interest held by APC (see Note 5 — “Investments in Other Entities — Equity Method”).

During the three months ended March 31, 2024 and 2023, the Company paid approximately $0.2 million and $0.2 million, respectively, to James Song, M.D., a Professional Corporation (“Song PC”) for provider services. Song PC is accounted for

Form: 10-Q

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