0001193125-25-274359
SEC filingProspect acquisition drove 100% revenue growth; net income fell 98% on higher costs and a $13M loss contingency.
For the three months ended September 30, 2025, total revenue reached $956.0 million, a 100% increase from $478.7 million in the prior-year period. The primary driver was the acquisition of Prospect Medical Holdings on July 1, 2025, which contributed approximately $308.0 million of revenue. Organic capitation revenue also grew $166.5 million due to prior-year acquisitions and member transitions to full-risk Knox-Keene plans. Cost of services, excluding depreciation and amortization, rose 112% to $858.9 million, largely reflecting the medical costs of Prospect ($272.3 million) and higher value-based Medicare FFS volumes. General and administrative expenses increased 65% to $62.4 million, including $14.3 million from Prospect and transaction costs. Depreciation and amortization rose 115% to $15.6 million, with $8.6 million attributable to Prospect. Interest expense doubled to $17.7 million as borrowings increased to $1,064.2 million from $432.0 million. Net income attributable to Astrana Health, Inc. plunged 98% to $0.4 million, weighed by the $13.0 million loss contingency and higher interest. Adjusted EBITDA, a key non-GAAP metric, grew 51.6% to $68.5 million, demonstrating underlying operating scale.
The Care Partners segment (risk-bearing organizations) delivered revenue of $897.7 million (+97%), driven by $272.8 million from Prospect and organic growth. However, operating income fell 35% to $25.3 million due to a $13.0 million loss contingency recorded in Q3 2025. Care Delivery revenue soared 150% to $86.9 million, with $49.1 million from Prospect, though operating loss remained modest at -$1.0 million (narrowing from -$1.4 million) as higher visit volumes were offset by clinic investments. Care Enablement revenue jumped 113% to $87.3 million, including $42.4 million from managing Prospect's IPAs. Its operating income surged 271% to $23.4 million, reflecting strong margin expansion from the added scale. Overall, revenue mix shifted heavily toward Care Partners (94% of total), while Care Enablement emerged as the highest-margin segment at 26.8% operating margin.
Management did not provide forward guidance but noted that the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, is expected to reduce near-term federal and state income tax payables without a material impact on tax expense. The Company is still evaluating downstream effects but believes it is well-positioned due to its diversified footprint, Medicaid track record, and care-enablement infrastructure. The $674.9 million Prospect acquisition closed on July 1, 2025, and its results are consolidated from that date, providing a strong revenue base. Management views the liquidity position ($463.4 million in cash and marketable securities) as sufficient for at least the next 12 months. Key strategic priorities appear to be integrating Prospect, managing medical costs, and navigating regulatory changes.
As of September 30, 2025, Astrana Health held $462.2 million in cash and equivalents, up from $288.5 million at year-end 2024, driven by the $707.3 million debt draw for the Prospect acquisition. Total debt surged to $1.06 billion (gross) from $438.1 million, with a net leverage ratio covenant of 5.00x through March 2027. Shareholders' equity grew to $775.5 million, bolstered by retained earnings and stock compensation, though the mezzanine deficit (noncontrolling interest in APC) widened to $234.4 million.
The company disclosed standby letters of credit totaling $28.1 million ($26.0M under the credit facility and $2.1M for affiliated IPAs) and surety bonds of $46.4 million as of September 30, 2025. No material non-cancelable purchase commitments were reported beyond debt maturities and operating leases.
During the nine months, Astrana repurchased 300,000 shares from APC for $10.6 million. Dividends paid totaled $6.3 million, including APC shareholder distributions. Net debt increased by $626.1 million, primarily from the Prospect acquisition financing ($707.3M draw, partially offset by $483.3M repayments). Capital expenditures were $7.0 million (0.3% of revenue). The company also paid $24.2 million in debt financing costs, with $19.2 million deferred.
Segment data (Note 17) for Q3 2025 shows Care Partners as the dominant segment with $897.7M revenue (97% YoY growth) but operating margin compressed to 2.8% from 8.5% due to acquisition-related costs and higher claims. Care Delivery revenue grew 150% to $86.9M, though it remained unprofitable. Care Enablement achieved $87.3M revenue and a 26.8% margin. All operations are U.S.-based, with no geographic breakdown provided.
Operating cash flow (CFO) of $117.5M significantly exceeded net income of $17.5M, indicating strong cash conversion. Key non-cash add-backs included $29.3M depreciation/amortization, $27.2M share-based compensation, and $4.9M deferred tax benefit. The largest driver was a $36.1M favorable swing in working capital (vs. a $34.1M use in the prior period), suggesting improved collections or timing of payables.
Capital expenditures of $7.0M were modest relative to CFO, yielding a low capex intensity of 6.0% of CFO. However, heavy acquisition spending ($548.6M) drove negative free cash flow of $430.5M. Financing activities provided $595.7M, primarily from $1.1B in debt borrowings offset by $483.3M in repayments and $19.2M in deferred financing costs.
Dividends paid of $6.3M were covered by CFO, but not by free cash flow. No share repurchases were reported. Cash paid for interest rose to $30.2M from $23.2M, reflecting higher debt levels. Cash paid for income taxes fell sharply to $4.7M from $38.3M, a notable anomaly that boosted CFO.
Overall, cash flow quality is high from operations, but the company is relying heavily on debt to fund acquisitions, resulting in negative free cash flow and increased leverage.