Good day, everyone, and welcome to today's Astrana Health Second Quarter 2025 Earnings Call. Today's speakers will be Brandon Sim, President and Chief Executive Officer of Astrana Health; and Chandan Basho, Chief Operating and Financial Officer. The press release announcing Astrana Health, Inc.'s results for the second quarter ended March 31, 2025, is available at the Investors section of the company's website at www.astranahealth.com. The company will discuss certain non-GAAP measures during this call. Reconciliations to the most comparable GAAP measures are included in the press release. To provide some additional background on its results, the company has made a supplemental deck available on its website. A replay of this broadcast will also be made available at Astrana Health website after the conclusion of this call. Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein 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 31, 2025, continued growth, acquisition strategy, ability to deliver sustainable long-term value, ability to respond to the changing environment, liquidity, operational focus, strategic growth plans and acquisition integration efforts. Although the company believes that the expectations reflected in its forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ materially from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in 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 2 of the conference call presentation for further information. And with that, I'll turn the call over to Astrana Health President and Chief Executive Officer, Mr. Brandon Sim. Thank you, sir. Please go ahead.

Good afternoon, and thank you for joining us on Astrana Health's Second Quarter 2025 Earnings Call. We are pleased to report another quarter of strong financial results and disciplined execution as we advance our strategy to build the nation's leading patient-centered physician-focused healthcare platform. We have held a decades-long belief that the future of healthcare in America depends on building a high-performing network of entrepreneurial physicians and providers, empowering them with purpose-built clinical and technological capabilities and operating as a delegated pseudo-single payer that collaborates with all payer partners. That long-held conviction and the infrastructure we built around it have created a durable and unique moat, one which has only been amplified as short-term tactics like risk adjustment gamesmanship, contract arbitrage, and financial engineering disappear across the industry. For the second quarter of 2025, we delivered strong performance across the business with total revenues of $654.8 million and adjusted EBITDA of $48.1 million, both at the higher end of our guidance ranges. Revenue grew 35% year-over-year, driven primarily by continued growth in our Care Partners segment as our payer partners continue to turn to us for high-quality coordinated care for their members. We also made disciplined progress in transitioning our membership into more strategically aligned full risk arrangements. Approximately 78% of revenue now comes from full-risk contracts, up from 60% a year ago and 75% last quarter. Our adjusted EBITDA performance continues to reflect the balanced approach we've taken by responsibly growing our risk-bearing membership while also managing cost trends effectively. While we continue to invest in growth, integration, and technology, we sustained strong profitability and cash flow generation. We expect further EBITDA expansion in 2026 as our full risk cohorts mature and synergies from the Prospect acquisition ramp. Medical cost trends remained well controlled in the quarter, coming in slightly below our full-year expectation of 4.5% on a weighted basis. Both Medicare Advantage and commercial lines of business came in below 4.5%, while Medicaid ran slightly above, although improved sequentially from the first quarter as flu-related utilization declined. Based on our performance year-to-date and forward visibility, we are reaffirming our 4.5% trend outlook for the year and remain confident in our ability to continue delivering industry-leading outcomes. I'm often asked how Astrana can consistently deliver such differentiated cost trend results. The answer is simple. It's the power of our fully delegated well-coordinated care model, enabled by a proprietary technology platform and data infrastructure purpose-built for scale. Because we operate end-to-end as a single payer across hundreds of planned line of business combinations. We're able to build deep longitudinal relationships with patients, driving real behavior change and ultimately, better outcomes. And our delegated model gives us real-time visibility into utilization and claims, allowing for earlier, more coordinated interventions, not episodic reactive care. Shifting next to Prospect. On July 1st, we officially closed our Prospect Health acquisition and are now actively deploying the Astrana playbook to ensure a smooth and value-accretive integration. Prospect performed in line with our expectations in the second quarter. And over the coming months and quarters, our focus will be on standardizing workflows, accelerating technology integration, aligning clinical operations, and executing against the synergy targets we've previously outlined. I'm encouraged by the early progress already underway and look forward to the positive impact our combined organizations will continue to make for the over 1.6 million patients that we now collectively serve. Additionally, I wanted to reiterate a few transaction dynamics that we also announced last month. We acquired Prospect for $708 million, down from the $745 million we originally anticipated. This purchase price reduction, which in no way related to the performance of the business, as well as the substantial amount of balance sheet cash that we also received allowed us to close the acquisition at an approximately 2.7x net debt to pro forma adjusted EBITDA leverage ratio, compared to our original estimate of 3.4x, putting us in a materially better leverage position. With that said, however, we will continue to focus on deleveraging our balance sheet to below 2.5x over the coming 12 to 18 months and will remain laser-focused on ensuring a successful integration. With the close of Prospect and our confidence in its integration, we updated our full-year 2025 total revenue and adjusted EBITDA guidance upward to between $3.1 billion to $3.3 billion in revenue and between $215 million and $225 million in adjusted EBITDA. We are reiterating that guidance today, and Chand will provide additional color later in the call. Lastly, I'll provide some commentary on industry developments. First, on Medicaid, while new legislation introduces significant changes to funding and eligibility, we continue to view this as a manageable headwind. The full impact will depend on how states implement the new requirements, but we're actively engaging with our state and payer partners to preserve coverage and support continuity of care. Given our scale, diversified footprint, and extensive experience operating through policy transitions over three decades, while maintaining growth and profitability, we believe we're well positioned to navigate the uncertainty ahead. On health insurance exchanges, our exposure remains limited at under 5% of membership. While the marketplace faces pressure from elevated acuity and potential subsidy changes after 2025, the impact to Astrana has and would be manageable. Finally, on risk adjustment, we continue to see no negative impact from the continued phase-in of the v28 risk model. Astrana has always taken a principled approach to value-based care, focusing on improving outcomes and quality, not gaining reimbursement mechanics. Our Medicare Advantage RAF remains stable at approximately 1.02, around the same as a year ago despite the continued v28 phase-in, which will further widen our lead on those who are more overextended. As it relates to Part D risk, it's worth reiterating that we have minimal exposure with fewer than 2% of members carrying any amount of Part D risk. Looking ahead to 2026, we remain optimistic about Medicare Advantage, supported by a favorable final rate notice, increased scale from the Prospect acquisition, and a utilization environment that we're continuing to manage well. To conclude, I'm proud of the strong and consistent execution our team delivered this quarter. With that, I will now hand it over to Chand to discuss our financials in more detail.

Thank you, Brandon, and thank you all for joining today. Turning to our second quarter results. I'm pleased to report that Astrana delivered another strong quarter of financial performance at the higher end of our expectations. Revenue for the quarter was $654.8 million, representing a year-over-year increase of 35%. This growth was primarily driven by strong organic growth in our core business, CHS, and the continued transition of our revenues into full-risk arrangements. Adjusted EBITDA came in at $48.1 million. Net income attributable to Astrana for the quarter was $9.4 million and EPS was $0.19 per share. Looking at the balance sheet, we closed the quarter with $342 million in cash and cash equivalents. As Brandon mentioned, pro forma net debt is approximately $700 million, and our pro forma net leverage ratio is currently 2.7x. Excluding a few notable timing-related items that benefited the quarter, free cash flow was approximately $20 million in the second quarter, representing 40% of adjusted EBITDA. We continue to expect full-year free cash flow conversion to be between 40% to 45% of adjusted EBITDA. This would correlate to $90 million to $100 million of free cash flow for the full year at the midpoint of our adjusted EBITDA guidance. This is based on an assumed full-year tax rate of approximately 35%. As Brandon mentioned, in conjunction with the close of Prospect, we updated our full-year 2025 guidance to a total revenue range of $3.1 billion to $3.3 billion and an adjusted EBITDA range of $215 million to $225 million, which we are reiterating again today. For the third quarter, we expect to generate revenue between $925 million to $965 million and adjusted EBITDA between $65 million to $70 million. As it relates to seasonality between the third and fourth quarters, we expect both quarters to be approximately similar in terms of adjusted EBITDA contribution. This represents a departure from our usual seasonal trends, primarily due to the impact of Prospect. Finally, we want to reiterate our previously stated medium-term adjusted EBITDA guidance of at least $350 million in 2027. Despite the dynamic operating environment, we remain confident in our ability to continue to execute and drive sustainable, profitable growth. With that, I'll turn it back to Brandon for closing remarks.

Thanks, Chand. To wrap up, we are proud of our strong execution in Q2 and excited to welcome so many new physicians, providers, and teammates to Astrana. Our consistent, predictable, and resilient performance even in a volatile environment reflects the strength of our model and the moat that we've built, and we're confident that this foundation will continue to drive long-term value for our patients, providers, partners, and shareholders. With that, we'll now open it up for questions.

And the first question comes from the line of Michael Ha with Baird.

So with Prospect closing now more than a month ago, in line with your expectations and much better deal terms, congrats on that. So now that you have full visibility on their updated financials, it's reassuring to see 3Q, the guide and your full year guide unchanged, reflects, I guess, exactly roughly half of your expected deal accretion, $81 million annualized. But curious, how have their numbers been year-to-date over the first half of the year? Also, anything notable or different than you expected since closing on the deal? Are you more or less optimistic on synergies, possibly new synergy opportunities? And then just wanted to confirm you've now executed a number of large deals over the past couple of years. I wanted to hear your updated thoughts on capital deployment priorities going forward. Is M&A now officially moving down your priority list and now it's all about integrating all your new pieces? Or are you still looking at assets in the market?

Michael, this is Brandon. Thanks for the question. We're very excited to close on the Prospect deal, as you mentioned, on slightly better terms than before. We continue to see strong performance on the Prospect business. In the first half of the year, even though that won't be reported in our Q3 or Q4 financials, we did see continued strength in the Prospect business as expected when we were doing diligence on the Prospect assets. Going forward, we've embarked on our integration process. Sean, Dr. Kumar, and I have been meeting with key providers and provider groups. We've seen great retention on the provider side as well as on the member side, and we'll continue to work through integration over the first 12 to 18 months. We are continuing to reiterate the $12 million to $15 million synergy target over that 12 to 18-month period. But we do believe that over time, there may be upside to that number as we continue to integrate into the business and find opportunities. Going forward, we continue to be excited about the potential for Prospect in 2026, especially in light of the Medicare rate notice and other tailwinds for the business.

Thank you. I have a follow-up question regarding the upcoming changes from the One Big Beautiful Bill Act and the Medicaid Exchange marketplace. While you express confidence, could you outline your perspective on the worst-case scenario for both the Medicaid Exchange and traditional Medicaid? I understand you mentioned that the exchange contributes only 5% to your revenue, which suggests minimal risk, but Medicaid represents a larger 30% of your revenue, albeit with lower margins. Could you clarify how these factors might affect your EBITDA target of $350 million for 2027? Additionally, given our discussions with state actuaries, it seems there could be significant shifts in acuity as expansion members exit, which typically affects the revenue per member and usage rates. If this leads to a shift in the rate and acuity mismatch, are you considering this in light of your contracts coming up for renewal by 2027? Are you proactive in discussing adjustments with your payer partners to mitigate any risks for that year?

Sure. To address the second part of your question from before, we will hold off on large-scale mergers and acquisitions until we achieve our leverage targets of 2.5x or lower within the first 12 to 18 months. We believe there is a clear path to reach that goal and ultimately reduce it to around 2.0 over time, based on the growth of the EBITDA of the combined business and the cash flow generated by it. Therefore, there will be no significant capital deployment. However, if there are small opportunities that make sense for the business, we will review those individually. Regarding Medicaid, we believe the challenges posed by the One Big Beautiful Bill Act are manageable, as I noted earlier. There are several challenges to the Medicaid program that will phase in over a number of years, many starting in 2027. Nevertheless, we feel these challenges are manageable given our level of exposure. To give you an idea of the impact, the pro forma business is expected to generate about $3.6 billion in revenue in 2025, with approximately 28% of that coming from Medicaid. This amounts to around $1 billion of Medicaid revenue from both businesses this year. Even with a conservative estimate of a 20% to 25% decline in Medicaid enrollment, which is quite cautious, we are looking at a revenue headwind of $200 million to $250 million. The EBITDA margin we expect on that revenue is in the mid-single digits, which would translate to about $10 million to $15 million in EBITDA. In the broader context of the business, we see this as a manageable headwind and will strive to work with our state and payer partners to ensure the Medicaid program is well-positioned moving forward. Concerning the acuity mix shift you mentioned, we are still speculating on this since it has not yet come into effect. However, I would like to point out that we have different pricing in per member per month by acuity band. These are discussions we are currently having with our Medicaid payer partners.

And the next question comes from the line of Ryan Langston with TD Cowen.

On the 4.5% blended utilization, I appreciate the insights on sort of the trend by payer. But maybe if you could give us a sense on that number on sort of a geographic level, maybe in terms of California versus non-California markets?

Hey, Ryan, thanks for the question. We're not breaking out per geography trend at the moment since a vast majority of our revenue comes from California. However, what I will say is that in both the Care Delivery segment for Nevada, which we have been profitable in this quarter and same for the risk-bearing entity in Nevada. As for Texas, we are continuing to track towards run rate breakeven this year as previously guided. So not breaking out the detailed trend as much of the business is in California, it's going to look basically the same anyway, even if I did break it out, but we are continuing to see the right trends in our ex-California business.

Got it. And just last thing, when you talk about the RAF scores at 1.02, I think you said those are sort of flat year-over-year, which is good. But do you have that number? Like I don't know if Prospect actually affects that number or if that included Prospect or didn't include Prospect? I'm just trying to think how that might trend into 2026, even just directionally if you expect that to be flat or down or up?

Sure, Ryan. Those numbers, the 1.02 did not include Prospect since that was a Q2 number, but Prospect's RAP scores are in line with that. And again, we're not baking in increases in RAF going forward into '27, but we believe we are insulated and the gap between us and those who are more extended on RAF will continue to grow.

And the next question comes from the line of Craig Jones with Bank of America.

Great. So maybe to ask back on Medicaid. So, it's great to hear that's improving, the trend improving from Q1 to Q2, but you did have a mismatch last year of the rate versus trend as the rate was not high enough to match the trend. So how have the rates trended so far in 2025? And then how long do you think it may take to get that Medicaid back to where you think target margin should be?

Thanks for the question. Obviously, Medicaid is still in a very volatile place at the moment. We are sifting through how each state will handle the new legislation. At the moment, in California, where a lot of our Medicaid patients are, there has not yet been a rate update, although we have been, as I mentioned before, in active negotiations with the payers in terms of how to resolve some of the rate acuity mismatch. We haven't accounted for any of the resolution of those negotiations in our guidance or in our 2027 bridge. All I would say at this point is that a fairly conservative view has been baked in, and we look forward to concluding those negotiations to hopefully close that gap.

And the next question comes from the line of Jailendra Singh with Truist Securities.

Actually, first, I want to confirm your expected cost trend for '25 is still 4.5% with Prospect deal now closed. And related to that, considering your public exchange exposure, I want to double-click on your comments about the changes happening there. Are you expecting any kind of utilization or rush in the guidance of your second half as individuals, they might lose coverage and subsidies going away, so they might try to push for more utilization? Just any color there, what you're assuming in your guidance for second half?

Thanks for the question, Jailendra. First, on Prospect, we aren't commenting on specific prospect trend numbers at the moment, but I would say that we've actually baked in a higher trend for the second half Prospect business than the 4.5% that we assumed in the legacy Astrana business. So, on a blended basis, which we'll give more updates on in Q3, you will probably see a higher trend for the overall business, not a large amount higher, but slightly higher, and that is baked into the numbers already in terms of our projection for the second half and for 3Q guidance that we just gave. In terms of Exchange, it's possible that there will be some rush to utilize at the end of the year. Again, we're being fairly conservative here, and it's a small part of the revenue. So, we continue to believe that this is a manageable dynamic. If anything changes on that topic, we will certainly inform the markets.

Great. And then my follow-up, you called out that in this $12 million to $15 million synergy guidance, you clearly see some opportunity there that you might upsize that, you might beat those numbers. Can you talk about what levers you can pull to achieve kind of upside to that number? I mean, we have seen some reports around kind of headcount reductions at prospect. Just trying to understand, is that already helping you in terms of labor efficiencies, in terms of productivity? Just give us a little bit more flavor, upside drivers and what you're seeing right now from a synergies point of view.

A significant portion of the synergies will result not only from improvements in operational general and administrative efficiency, which we expect as we integrate into a unified data infrastructure and incorporate Prospect into our technology systems, but also from the advantages gained for our patients and communities through the consolidation and streamlining of our clinical processes. This will enhance our ability to coordinate care for our members. Over time, we aspire for our payer partners to recognize the value of the enhanced care coordination and higher quality services we provide on a consolidated basis. For instance, we have already engaged with all of Prospect's payer customers, who have expressed enthusiasm about our combined scale and the stability we bring to the new entity, along with our ability to serve their beneficiaries while managing costs effectively, particularly in the current volatile cost environment noted by some during this session. These aspects will drive our operational improvements. On the general and administrative side, our proprietary data infrastructure and in-house technology platform provide us with the flexibility and speed to adjust our scale and integrate in a more efficient and adaptable manner. This will allow us to adopt AI technologies more swiftly than if we were dependent on a collection of outside vendors. These factors are expected to contribute significantly over time, aiming for a financial impact in the range of $12 million to $15 million, with the potential for even greater upside.

And the next question comes from the line of Jack Slevin with Jefferies.

I just want to ask on what you've really seen in your markets more specifically from the managed care companies, most notably in the MA space on bids for 2026. I know we've gotten sort of a smattering of commentary across the public sphere, but would love to hear sort of if it looks like those in California, especially are sort of playing things a little more cool, which I would say is the general tenor in the public space. But just any commentary you have on that would be helpful.

Thanks for the question. I think it's a bit too early to comment on bids or plan design at this time. We do plan to provide more information as the year goes on. However, many are keeping their cards close to their chests right now. Overall, we remain very optimistic about Medicare Advantage. We believe that our ecosystem and the long-term relationships we build with patients, even before they qualify for Medicare Advantage, will continue to benefit us, which is reflected in our trend numbers and the ongoing profitability and growth of the business, particularly as we approach 2026 when rates improve. Given the combined scale of Prospect, which also derives a significant portion of its revenue from Medicare Advantage, we anticipate that margins in that area will gradually improve. Unfortunately, it is still a bit early to discuss bids, but we will address that topic in the coming quarters.

Okay. Got it. That's helpful. And then maybe just one more piece in a separate area. I guess, probably too much focus being put on the Exchange business, but humor me here. California is a very different exchange market than the rest of the country. And so I think some of the dynamics that some folks might be extrapolating don't necessarily apply. I'd just be curious to get your take, Brandon, on given the stability in membership you see there, what, I guess, do you think is happening at the market level heading into next year, assuming these subsidies do expire? Is there a big pullback in membership? Or is that not necessarily the same thing that you might see in some other markets? And does it seem like the plans that are active in Southern California or California broadly have bid things up in a manner that there wouldn't be a big hit even if you do see a loss of membership? Just curious to think about things at a little bit of a higher level there.

Sure. Speaking broadly, California is quite a unique market and is considered an expansion state. Anecdotally, there has been some fraud identified in non-expansion states, with many individuals potentially unaware that they are enrolled in exchange plans, as well as a number of members with zero medical loss ratios. Efforts to reduce fraud, waste, and abuse in the exchange products are supportive, but they may increase the perceived risk of the overall pool. We’ve observed significant changes in zero-sum risk pool givebacks and in the adjustments related to accruals and anticipated accruals, particularly after discovering some instances of fraud. California operates as a state-based exchange, which we believe experiences significantly less fraud, and we do not see many members with zero medical loss ratios. Most participants are genuinely qualified members using the exchange. Therefore, we don’t anticipate a severe impact in this area. However, if the subsidies are eliminated and depending on state funding responses, we expect some challenges. Still, with less than 5% of our members and revenue being affected, we view this as a manageable situation. Given our business diversity and the states we operate within, we believe this headwind is manageable in light of the overall strength of the business.

Congrats on the quarter and getting Prospect across the finish line.

And the next question comes from the line of Ryan Daniels with William Blair.

This is Matthew Mardula on for Ryan Daniels. And given your exposure to Medicaid in California, how do you anticipate the recent state legislation that passed at the end of June, prohibiting new enrollment of undocumented individuals in Medicaid? And how will that impact your Medicaid book going forward? Are you expecting any material effects on enrollment trends or revenue from this change out in the future?

Thanks for the question. We have assessed our exposure to the undocumented immigrant population and believe there is some risk. Earlier, we estimated a potential enrollment drop of 20% to 25%. However, we think the actual impact may be in the high single-digit to low teens percentage range. It's difficult to verify that, but we are factoring this in conservatively regarding the potential drop in enrollment or slowed growth as enrollments are frozen or costs are passed onto members to maintain their enrollment. This assumption is already incorporated into the scenario analysis I mentioned earlier.

Great. Just one quick follow-up. Do you have any updates on the hospital and pharmacy units that Prospect has? I understand the hospital has a significant Medicaid exposure, so are there any plans or strategies to address that? I would appreciate any insights into those two units.

Yes. Regarding the pharmacy, we still view it as a valuable asset for our company. As noted in the industry, there are significant costs involved, particularly with Part B, that we believe we can manage now that we have this capability in-house. We see potential for synergy here, and we are just starting to explore this opportunity. We believe it could enhance the quality of care and expedite the delivery of medications to our patients. On the hospital front, we are primarily using it as a care delivery site for our prospective members within a value-based integrated framework. Consequently, we are likely less vulnerable to trends in fee-for-service Medicaid or its reimbursement rates, as a significant portion of its revenue and profits stem from these integrated value-based models. Nonetheless, we are actively reviewing our portfolio of assets. If there are any changes concerning our non-core businesses, we will definitely communicate that to the market.

And the next question comes from the line of Andrew Mok with Barclays.

There's been a lot of discussion around value-based care recontracting across the industry. Would love to hear your view on whether you think you need to make meaningful changes here? And can you help frame how the tone from payers has evolved in recent months in response to emerging pressure?

Certainly. One of the main distinctions between us and other companies in the field is our consistent and collaborative approach with our payer partners. When challenges arise, we have not sought to end contracts or withdraw from regions where we committed to supporting payers. This fosters recognition among payers, especially given our current scale, of the essential role we play in the communities we serve. They see the positive outcomes we achieve for their beneficiaries and understand that we offer a more cost-effective solution. Without our involvement in managing care and assuming both operating and clinical costs, Managed Care Organizations may face higher medical loss ratios than what they pay us. They are starting to appreciate the value we bring. We have consistently supported them without trying to terminate agreements during tough times, and we will continue to stand by them regardless of circumstances, which has led to amicable discussions. As mentioned earlier, we have engaged with all the payer partners associated with Prospect, many of whom overlap with those of the legacy Astrana business, and those discussions are progressing well. While differences are expected as everyone navigates a challenging environment, we believe that our partnership-focused approach will lead to mutually agreeable solutions moving forward.

Got it. Maybe just a quick follow-up on the acquisition and deal flow. It looks like the add-backs to EBITDA increased from about $30 million pre-deal to $55 million post-deal. Can you provide a little bit more detail on the drivers of the increase and help us understand the nonrecurring portion within that? And would love to just hear your thoughts on the pace of synergies we could expect for the balance of the year.

Thanks for the question. A vast majority of the add-backs are related to one-time transaction fees, associated with the transaction. It was a fairly large transaction. So legal fees, M&A advisory fees, accounting fees, etc., are related to the transaction itself. I will note that on a GAAP net income and EPS basis, we continue to be profitable. On a cash flow basis, we continue to be profitable even including some of these dynamics, which we believe is unique in our industry. And then on the timing of synergies, as I mentioned before, $12 million to $15 million of synergies over the first year, 1.5 years, 12 to 18 months is what we've currently guided to and reiterated this quarter. We certainly will be racing towards hopefully the higher end of that range and the shorter end of that range, but we'll provide more updates as we get a little further into the integration process here.

And the next question comes from the line of Matthew Gillmor with KeyBanc Capital Markets.

I know it's been a month, but congrats on the Prospect close nonetheless. Chand had mentioned there were some timing issues that benefited cash flow in the quarter, if I heard that correctly. Can you just give us some details on what those were? And should we expect those to normalize as we move into the third quarter?

Yes. To clarify, our cash flow for this quarter was significantly higher than what was discussed. This increase was largely due to the ACO REACH payments and income taxes. Both of these factors are expected to normalize in the fourth quarter. Overall, we remain very confident in our full-year guidance in the range of $90 million to $100 million.

Great. And then I wanted to follow up on the performance outside of California. Brandon, you and I have talked in the past about the importance of getting delegated for claims in states like Texas. And I just want to see if there was any update in terms of your ability to get claims delegation in that market and how you're feeling about the performance in Texas through the first half of the year.

Yes, we are seeing continued progress and openness from some of our payer partners regarding fully delegated contracts. We expect contracts to start transitioning in this manner in Q1 of 2026 in Texas, and a couple will also begin in Nevada, alongside some that are already in place there. We are making strides toward establishing the delegated environment that we have in California. Additionally, our path towards profitability remains on track in both states as we anticipate.

And the next question comes from the line of David Larsen with BTIG.

Congratulations on the good quarter. Can you maybe just talk a little bit about the robustness of your data collection? There have been some value-based care organizations that had all kinds of adjustments this quarter. Some plans did as well. There were unfavorable prior period adjustments. There were risk score adjustments to the revenue. I guess, like number one, in terms of coding for each member, making sure that you're getting the right proper revenue for each member, can you maybe just talk about that process in evaluations? And then number two, the completeness of the data, what is the risk of an unfavorable prior period development sort of charge as we progress through the year?

Thanks for the question, Dave. Our business model is completely different from the rest of the industry. And so I think our results are completely different, which is what you're seeing as we continue to have stability, predictability, and growth in our numbers even at what others have been calling a uniquely difficult time for the industry. As a reminder, we operate as a single payer. We're delegated in almost all of our business. What that means is that we, across all of our payers and across all of our lines of business, perform credentialing, we perform prior ops, we pay claims. We handle grievances and appeals. We handle care management and care coordination and quality and risk adjustment. But most importantly, two of those items, us and claims means that we have the ability to better project costs and have real-time visibility into the health and status of our patients. That also means that it makes it easier for our actuarial team to model what that looks like. And again, we can do that across all payer types and all lines of business. So, what that results in is that you aren't seeing the same massive negative prior period developments that perhaps have been reported by others in the value-based care space because we act as both the provider and that single or pseudo single payer entity in terms of processing claims. In fact, on that book of business, we would actually receive the ops and the claims before our payer partners would. We would actually process that first and then forward that across to our payer partners afterwards once those are adjudicated by our systems. And again, we've built our data infrastructure and technology layer fully in-house. Of course, we rely on infrastructural vendors like Amazon and whatnot. But the rest of the stack is completely built in-house. So, we have that flexibility. We have the unified data architecture that, frankly, no one else does across the industry. And that allows us to operate at a pace and with results that the rest of the industry can't match. In tough times, you'll continue to see us extend our lead over the industry because of that dynamic and because of the business model in which we operate.

Okay. And then just in terms of the accuracy of the coding and the revenue that you're receiving per member, just if you could just touch on that briefly, that would be great.

Right. We have our in-house RAF modeling program, as well as an NCQA certified HEDIS program. We review all of the charts internally. We obviously submit those records to the plan and ultimately to CMS, and we do audits regularly on that data. So, we believe that our risk adjustment is very accurate. There are probably some opportunities in terms of risk adjustment that I've talked about before. But again, at 1.02, and consistency in risk adjustment even as v28 continues to phase in, we feel very comfortable with our risk adjustment practices.

Okay. And what was the percent trend in the quarter? Sorry, last question, percent trend in the quarter?

Overall, for the legacy Astrana business, which is what was reported in Q2, it was just under 4.5% with MA and commercial slightly below, Medicaid slightly above. Medicaid came in sequentially better than Q1, and we are reiterating the 4.5% trend for the full year.

There are no further questions at this time. I now would like to turn the floor back over to you, Brandon Sim, for any closing remarks.

Thank you all for continuing to follow our story. We look forward to connecting with many of you at upcoming conferences in the months ahead. And in the meantime, please don't hesitate to reach out to us or our Investor Relations team with any further questions. Thank you again, and see you all soon.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.