# Astrana Health, Inc. (ASTH) — Financial Analysis

**Exchange:** Nasdaq  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-06-17  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/asth/thesis · /memo/asth

## Financial Snapshot

---
source: coverage-next-full
step: 04
title: Financial Quality & Adversarial Sweep
ticker: ASTH
company: Astrana Health, Inc.
date: 2026-06-17
---

### Step 04 — Financial Quality & Adversarial Sweep: Astrana Health (ASTH)

#### 1. Financial Statement Quality

##### Key Statement Adjustments

**a) GAAP vs. Non-GAAP Divergence (significant)**

| Metric | FY2025 GAAP | FY2025 Non-GAAP | Delta | Source |
|--------|------------|----------------|-------|--------|
| Net income (total) | $24,076K | $108,581K | +$84,505K | SBC + M&A + D&A addbacks |
| EPS (diluted, attributed to ASTH) | $0.46 | $2.20 | +$1.74 | Adj. net income / shares |
| EBITDA | $123,126K | $205,424K | +$82,298K | Adj. items below |

**Primary non-GAAP adjustments in FY2025:**
- SBC: $38,601K — *significant* relative to GAAP net income of $24M; exceeds GAAP earnings by 60%+
- Transaction/integration costs (Prospect): $25,862K
- Legal matter (CFC HP arbitration): $13,000K
- Debt issuance/refinancing costs
- D&A (primarily intangible amortization from acquisitions): $45,749K

**Assessment:** The GAAP vs. non-GAAP gap is widening as M&A activity intensifies. SBC alone exceeding GAAP net income is a quality concern, though common in healthcare management companies. Intangible amortization from Prospect ($17.3M in H2 2025) is real economic cost given goodwill/intangible risk but management argues it's non-cash.

**b) Goodwill Quality**

| FY | Goodwill ($000s) | Total Assets | Goodwill as % of Assets |
|----|-----------------|-------------|------------------------|
| FY2023 | $163,093 | $920,052 | 17.7% |
| FY2024 | $419,253 | $1,354,894 | 30.9% |
| FY2025 | $865,305 | $2,218,661 | 39.0% |

Goodwill nearly doubled in FY2025 from Prospect (acquired at ~$865M gross goodwill). This represents ~39% of total assets — elevated but within range for a serial acquiror in physician management. The risk: if Prospect underperforms financially, impairment charges could be material. Given the material weakness in acquisition accounting noted in the FY2025 10-K, there is some uncertainty about the precise purchase price allocation. [S2]

**c) Revenue Recognition Quality**

Capitation revenue is recognized ratably over the contract period (monthly PMPM). Risk pool settlements are recognized when determined (i.e., when payer performance periods close), which introduces timing variability. Management fee income is recognized as services are provided. No revenue concerns identified — these are straightforward methods appropriate to the industry.

**d) Minority Non-Controlling Interests**

The company consolidates numerous IPAs, RBOs, and VIEs through voting rights or economic arrangements. Minority interest (NCI) net income of $1.6M in FY2025 is small relative to the full enterprise but the NCI balance sheet amount warrants monitoring. IPA partners with minority stakes could create valuation complexity if buy-out provisions are triggered. [S2]

##### Financial Quality Score: MEDIUM

Rationale: Strong cash conversion (FCF > GAAP earnings), contractual revenue, and improving FCF trend are positive. Weakened by: high GAAP-vs-non-GAAP gap (SBC dominates), elevated goodwill after rapid M&A, material weakness in acquisition accounting, and MCR compression.

#### 2. Balance Sheet Stress Analysis

##### Debt Covenant Analysis

**Credit Agreement (as of Feb 2025 — Second Amended and Restated):**
- $300M Revolving Credit Facility (5-year, matures Feb 2030)
- $250M Term Loan A (5-year, matures Feb 2030)
- $745M Delayed Draw Term Loan A (drawn $707.3M for Prospect)
- Total drawn: $1,052M

**Financial covenants (typical for this structure — not explicitly disclosed in 10-K excerpts reviewed):**
- Maximum Net Total Leverage Ratio: likely ≤5.0x (standard for leveraged healthcare deals)
- At Dec 31, 2025: Net Leverage = (~$1,052M gross debt - $429M cash) / $205M Adj. EBITDA ≈ 3.0x — comfortable

**Interest rate risk:** Term loans at floating rate (SOFR + spread); $200M hedged with interest rate swap at 3.179% fixed. Remaining ~$800M+ at variable rate. A 100bp rise in rates → ~$8M incremental annual interest expense. At current SOFR (~4.3–5%), total interest runs ~$50–60M per year — already material relative to GAAP operating income of $78M. [S2]

##### Working Capital Dynamics

| Item | Dec 31, 2025 | Dec 31, 2024 |
|------|-------------|-------------|
| Current assets | $863,313K | $638,496K |
| Current liabilities | $615,273K | $365,608K |
| Working capital | $248,040K | $272,888K |

Working capital declined $25M despite revenue growth — primarily driven by the mix-in of Prospect's capitation-heavy operations (higher medical cost payables in current period). Claims payable timing is a normal feature of capitation businesses.

#### 3. Adversarial Research Sweep

##### Known Controversies, Litigation, and Investigations

**a) CFC HP Arbitration (Material Item)**
The FY2025 10-K discloses a $13.0M loss contingency recognized in Q3 2025 related to a legal matter described as "CFC HP" — likely a contracted payer or care-partner dispute involving care management obligations. The arbitration appears to be related to California Family Care / Health Plan contracting disputes. This was partially driving Q3 2025 operating income compression and was a one-time item per management.

**b) Material Weakness in Internal Controls (Active Risk)**
As disclosed March 2, 2026 alongside Q4 2025 results:
- Material weakness in internal controls over financial reporting
- Specifically related to acquisition and purchase accounting processes for the Prospect acquisition
- Management stated no material misstatement and no restatements required
- The 10-K was filed late (Form 12b-25 extension)
- This is a genuine credibility risk until remediation is confirmed by auditors in FY2026 10-K

**c) SEC/Regulatory Scrutiny (No Active Investigations Found)**
No evidence of SEC enforcement actions or DOJ/OIG investigations involving Astrana Health as of 2026. The VBC industry broadly faces CMS scrutiny for upcoding/improper risk adjustment, but no ASTH-specific action found.

**d) Prior Entity History**
Astrana's predecessor entity (APA/Apollo Medical Holdings) was a smaller California IPA operator. No major legacy litigation identified from the prior entity that is material to current operations.

**e) Prospect Medical Holdings Legacy Issues**
Prospect Medical Holdings, the company from which Astrana acquired assets, had a troubled history:
- Prospect faced significant financial distress, creditor disputes, and state regulatory issues prior to the ASTH acquisition
- ASTH specifically carved out certain liabilities (hence "Excluded Assets" structure)
- The acquisition structure was designed to ring-fence Prospect's legacy issues
- However, the operational integration complexity (hospital, multi-state medical groups, pharmacy) introduces execution risk that is hard to isolate from balance sheet risk

**f) Short Seller / Bearish Research**
No major short-seller campaigns against ASTH identified. Short interest is modest (~3.9% of float) and declining. The main bear case is macro/operational (margin compression, leverage) rather than fraud allegations.

##### Financial Quality Red Flags

| Flag | Severity | Disposition |
|------|---------|-------------|
| SBC > GAAP net income | MEDIUM | Structural feature of growth healthcare companies; monitor for dilution |
| Goodwill = 39% of assets | MEDIUM | Acquisition-driven; impairment risk if Prospect underperforms |
| Material weakness (acquisition accounting) | MEDIUM-HIGH | Active; management says no restatement; monitor for FY2026 |
| MCR rising (89.3% FY2025 vs 86.7% FY2024) | HIGH | Key operational risk; Prospect integration the primary driver |
| High leverage (~3x net debt/Adj.EBITDA) | MEDIUM | Within covenant; management targeting <2.5x in 12–18 months |

#### 4. Cash Flow Quality

##### Operating Cash Flow vs. Net Income Reconciliation

| | FY2025 | FY2024 |
|--|--------|--------|
| Net income (total) | $24,076 | $49,932 |
| + D&A | $45,749 | $27,927 |
| + SBC | $38,601 | $34,536 |
| + Working capital changes | ~$6,171 | ~($60,197) |
| = Operating CF | $114,597 | $52,198 |
| Less CapEx | ~($10,106) | ~($8,031) |
| = Free Cash Flow | ~$104,491 | ~$44,167 |

**FCF quality: HIGH** — FCF substantially exceeds GAAP net income, driven by non-cash SBC and D&A. CapEx is very low (~0.3% of revenue) — consistent with an asset-light managed care model. Operating CF improvement in FY2025 was partly timing-driven (claims payment lags post-Prospect close).

#### Source Index
[S1] ASTH XBRL summary (retrieved 2026-06-17)
[S2] ASTH 10-K FY2025 — Balance sheet, MD&A, notes (filed 2026-03-12)
[S3] StockAnalysis.com financial summary
[S4] Consensus / analyst data (retrieved 2026-06-17)
[S5] ASTH 10-K FY2024 — Comparison period data

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/ASTH/fundamental

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