agilon health Reports Third Quarter 2024 Results

Revenue increased 28% to $1.45 billion, Medicare Advantage membership increased 37% to 525,000, and total members on the agilon platform grew 39% to 657,000

Third quarter results were affected by lower-than-expected 2024 risk adjustment, negative prior year development mainly from risk adjustment and Part D, and higher current year medical expenses

Adjusted full year guidance reflects Q3 results and updated Q4 cost trends

agilon health, inc. (NYSE: AGL), the trusted partner empowering physicians to transform health care in our communities, today announced results for the third quarter ended September 30, 2024.

“Our full-risk model enables primary care physicians to deliver high-quality care to their senior patients. Our Q3 results show that our membership is growing across our 26 partnerships, and it also highlights why we are taking necessary actions to strengthen execution within our platform and proactively manage the challenging Medicare Advantage environment,” said Steve Sell, chief executive officer. “Against that backdrop, we have initiated steps with select partners to exit two unprofitable partnerships and other payor contracts by the end of 2024. While the overall Medicare Advantage environment will eventually realign, it is important that we take these actions in the interim to strengthen the run-rate for our business into 2025 and better position our platform and network for long-term success.”

Third Quarter 2024 Results:

• Compared to previous guidance, third quarter 2024 gross profit and medical margin was negatively impacted as a result of additional information received from payors in the third quarter. This included prior year development of $60 million primarily related to risk adjustment revenue and Part D medical expense; a reduction of estimated 2024 risk adjustment of $65 million; and higher current year medical expense of $25 million primarily in the third quarter.
• Total members on the agilon platform increased to 657,000 as of September 30, 2024, comprising 525,000 Medicare Advantage members and 132,000 ACO model beneficiaries. Medicare Advantage membership increased 37% year-over-year, with 4.8% growth in same-partner geographies.
• Total revenue of $1.45 billion in the third quarter 2024 increased 28% compared to $1.14 billion in the third quarter 2023. Year-over-year total revenue growth was primarily driven by membership growth in new markets and same geography growth.
• Gross profit was negative $64 million in the third quarter 2024 compared to positive $37 million in the third quarter 2023. Net loss was $118 million in the third quarter 2024 compared to a net loss of $31 million in the third quarter 2023. The year-over-year reduction in gross profit and higher net losses resulted from the factors discussed above.
• Medical margin was negative $58 million during the third quarter 2024, compared to $111 million for the same period 2023. The $169 million year-over-year medical margin reduction also resulted from the factors mentioned above.
• Adjusted EBITDA loss was $96 million in the third quarter 2024 compared to positive $6 million for the same period in 2023. The year-over-year change is attributable to the factors discussed above.

1. Membership metrics reflect end of period results.
2. agilon’s ACO model entities are not included within its consolidated financial results.
3. agilon’s ACO model entities contributed $12 million to Adjusted EBITDA during the third quarter 2024 and $18 million in third quarter 2023.

Capital Position and Balance Sheet:

agilon health’s balance sheet as of September 30, 2024 included cash, cash equivalents and marketable securities of $399 million and total debt of $35 million. At the end of the quarter agilon health had $113 million of cash associated with the Company’s unconsolidated ACO model entities.

Outlook for Fiscal Year 2024 ($M):

Guidance below includes results from the third quarter 2024 and updated cost trends for the fourth quarter 2024. Medical margin guidance below includes approximately $100 million of negative prior period development. Guidance for fiscal year 2024 does not reflect the impact of actions the Company is currently undertaking or plans to take before the close of the fiscal year.

1. Membership reflects management’s outlook for end of period.
2. agilon’s partnered ACO model entities are not consolidated within its financial results.
3. Adjusted EBITDA contribution from ACO model is expected to be approximately $38 million for fiscal year 2024.
4. Geography Entry Costs represent the corresponding expense included in the low-end and high-end of management’s outlook for adjusted EBITDA.

Outlook for Fourth Quarter 2024 ($M):

1. Membership reflects management’s outlook for end of period.
2. agilon’s partnered ACO model entities are not consolidated within its financial results.
3. Adjusted EBITDA contribution from ACO model is expected to be approximately $5 million for the fourth quarter 2024.
4. Geography Entry Costs represent the corresponding expense included in the low-end and high-end of management’s outlook for adjusted EBITDA.

The Company has not reconciled guidance for medical margin to gross profit or adjusted EBITDA to net income (loss), the most comparable GAAP measures, and has not provided forward-looking guidance for net income (loss) in each case because of the uncertainty around certain items that may impact gross profit or net income (loss), including non-cash stock-based compensation.

Webcast and Conference Call:

agilon health will host a conference call to discuss third quarter 2024 results on Thursday, November 7, 2024 at 4:30 PM Eastern Time. The conference call can be accessed by dialing (833) 470-1428 for U.S. participants and +1 (404) 975-4839 for international participants and referencing participant code 520026. A simultaneous listen-only, live webcast can be accessed by visiting the “Events & Presentations” section of agilon’s Investor Relations website at https://investors.agilonhealth.com. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call.

About agilon health

agilon health is the trusted partner empowering physicians to transform health care in our communities. Through our partnerships and purpose-built platform, agilon is accelerating at scale how physician groups and health systems transition to a value-based Total Care Model for their senior patients. agilon provides the technology, people, capital, process, and access to a peer network of 2,800+ PCPs that allow its physician partners to maintain their independence and focus on the total health of their most vulnerable patients. Together, agilon and its physician partners are creating the healthcare system we need – one built on the value of care, not the volume of fees. The result: healthier communities and empowered doctors. agilon is the trusted partner in 30+ diverse communities and is here to help more of our nation's leading physician groups and health systems have a sustained, thriving future. For more information visit www.agilonhealth.com and connect with us on Instagram, LinkedIn and YouTube.

Forward-Looking Statements

Statements in this release that are not historical factual statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectation as identified by the use of words such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or the negative versions of these words or other comparable terms. Examples of forward-looking statements include, among other things: statements regarding our expectations related to operating and financial results, our ability to negotiate more favorable economic terms in our payor contracts, the value of and demand for our full-risk model for primary care physicians, the strengthening of our value proposition to physicians and payers, our ability to efficiently exit unprofitable markets, and our long-term opportunities and strategic growth plans and alignment with the macro environment, expected revenue, medical costs, net income and gross profit, total and average membership, Adjusted EBITDA, Medical Margin, geography entry costs and other financial projections and assumptions, including our fiscal year and third quarter 2024 guidance. Forward-looking statements reflect our current expectations and views about future events and are subject to risks and uncertainties that could significantly affect our future financial condition and results of operations. While forward-looking statements reflect our good faith belief and assumptions we believe to be reasonable based upon current information, we can give no assurance that our expectations or forecasts will be attained. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be outside our control. These risks and uncertainties that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, but are not limited to: our history of net losses and the expectation that our expenses will increase in the future; failure to identify and develop successful new geographies, physician partners and payors, or execute upon our growth initiatives; success in executing our operating strategies or achieving results consistent with our historical performance; medical expenses incurred on behalf of our members may exceed revenues we receive; our ability to secure contracts with Medicare Advantage payors; our ability to grow new physician partner relationships sufficient to recover startup costs; availability of additional capital, on acceptable terms or at all, to support our business in the future; significant reduction in our membership; transition to a Total Care Model may be challenging for physician partners; public health crises, such as COVID-19, could adversely affect us; inaccuracy in estimates of our members’ risk adjustment factors, medical services expense, incurred but not reported claims, and earnings pursuant to payor contracts; the impact of restrictive clauses or exclusivity provisions in some of our contracts with physician partners; our ability to hire and retain qualified personnel; our ability to realize the full value of our intangible assets; security breaches, cybersecurity attacks, loss of data and other disruptions to our information systems; our ability to protect the confidentiality of our know-how and other proprietary and internally developed information; reliance on our subsidiaries; Environmental, Social, and Governance issues; reliance on a limited number of key payors; the limited terms of contracts with our payors and our ability to renew them upon expiration; our ability to navigate the changing healthcare payor market reliance on our payors, physician partners and other providers to operate our business; our ability to obtain accurate and complete diagnosis data; reliance on third-party software, data, infrastructure and bandwidth; consolidation and competition in the healthcare industry; the impact of changes to, and dependence on, federal government healthcare programs; uncertain or adverse economic and macroeconomic conditions, including a downturn or decrease in government expenditures; regulation of the healthcare industry and our and our physician partners’ ability to comply with such laws and regulations; federal and state investigations, audits and enforcement actions; repayment obligations arising out of payor audits; negative publicity regarding the managed healthcare industry generally; our use, disclosure and processing of personally identifiable information, protected health information, and de-identified data; failure to obtain or maintain an insurance license, a certificate of authority or an equivalent authorization; lawsuits not covered by insurance; changes in tax laws and regulations, or changes in related judgments or assumptions; our indebtedness and our potential to incur more debt; dependence on our subsidiaries for cash to fund all of our operations and expenses; provisions in our governing documents; ability to achieve a return on your investment depends on appreciation in the price of our common stock; the material weakness in our internal control over financial reporting and our ability to remediate such material weakness; and risks related to other factors discussed in our filings with the Securities and Exchange Commission (the “SEC”), including the factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which can be found at the SEC’s website at www.sec.gov. Except as required by law, we do not undertake, and hereby disclaim, any obligation to update any forward-looking statements, which speak only as of the date on which they are made.

Our platform support costs, which include regionally-based support personnel and other operating costs to support our geographies, are expected to decrease over time as a percentage of revenue as our physician partners add members and our revenue grows. Our operating expenses at the enterprise level include resources and technology to support payor contracting, clinical program development, quality, data management, finance, and legal and compliance functions.

Certain of our operations are not consolidated for the period presented because we do not have the ability to control certain activities due to another party’s control of the entities’ board of directors. Although revenues of the unconsolidated operations are not recorded as revenues by us, income (loss) from equity method investments is nonetheless a significant portion of our overall earnings. See Note 14 to the Condensed Consolidated Financial Statements in the Quarterly Report on Form 10-Q for the period ending September 30, 2024 for additional discussion on our equity method investments.

In addition to providing results that are determined in accordance with GAAP, we present Medical Margin and Adjusted EBITDA, which are non-GAAP financial measures.

We define Medical Margin as medical services revenue after medical services expense is deducted. Medical services expense represents costs incurred for medical services provided to our members. As our platform matures over time, we expect Medical Margin to increase in absolute dollars. However, Medical Margin per member per month (PMPM) may vary as the percentage of new members brought onto our platform fluctuates. New membership added to the platform is typically dilutive to Medical Margin PMPM. We believe this metric provides insight into the economics of our capitation arrangements as it includes all medical services expense directly associated with our members’ care.

We define Adjusted EBITDA as net income (loss) adjusted to exclude: (i) income (loss) from discontinued operations, net of income taxes, (ii) interest expense, (iii) income tax expense (benefit), (iv) depreciation and amortization, (v) stock-based compensation expense, (vi) severance and related costs, and (vii) certain other items that are not considered by us in the evaluation of ongoing operating performance. We reflect our share of Adjusted EBITDA for equity method investments by applying our actual ownership percentage for the period to the applicable reconciling items on an entity-by-entity basis.

Gross profit is the most directly comparable GAAP measure to Medical Margin. Net income (loss) is the most directly comparable GAAP measure to Adjusted EBITDA.

We believe Medical Margin and Adjusted EBITDA help identify underlying trends in our business and facilitate evaluation of period-to-period operating performance of our operations by eliminating items that are variable in nature and not considered by us in the evaluation of ongoing operating performance, allowing comparison of our recurring core business operating results over multiple periods. We also believe Medical Margin and Adjusted EBITDA provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics we use for financial and operational decision-making. We believe Medical Margin and Adjusted EBITDA or similarly titled non-GAAP measures are widely used by investors, securities analysts, ratings agencies, and other parties in evaluating companies in our industry as a measure of financial performance. Other companies may calculate Medical Margin and Adjusted EBITDA or similarly titled non-GAAP measures differently from the way we calculate these metrics. As a result, our presentation of Medical Margin and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, limiting their usefulness as comparative measures.

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