agilon health Reports Second Quarter 2022 Results

Rhea-AI Summary

Agilon Health (NYSE: AGL) reported significant financial growth for Q2 2022, with total revenue reaching $670 million, a 34% increase from Q2 2021. Year-to-date, revenue surged 45% to $1.32 billion. Medicare Advantage membership increased by 44%, totaling 261,200 members. The company's medical margin rose 49% to $82 million, reflecting a margin of 12.2% of revenue. Despite a net loss of $21 million, a notable improvement from a $299 million loss last year, Agilon reported an adjusted EBITDA of $7 million, up from negative $2 million.

Positive

• Total revenue of $670 million increased 34% compared to Q2 2021.
• Medicare Advantage membership grew 44% year-to-date, contributing to a total of 261,200 members.
• Medical margin increased 49% to $82 million, with a margin of 12.2% of revenue.
• Adjusted EBITDA improved to $7 million, compared to a negative $2 million last year.

Negative

• Net loss of $21 million in Q2 2022, although improved from $299 million in Q2 2021.

Revenue increased 45% and Medicare Advantage membership grew 44% year-to-date

Total members live on the agilon platform grew to 351,700, including 261,200 Medicare Advantage members and 90,500 Direct Contracting beneficiaries

Medical Margin increased 49% to $82 million during the second quarter, with profitability gains driven by agilon’s aligned partnership model benefiting physicians, patients and communities

AUSTIN, Texas--(BUSINESS WIRE)-- agilon health, inc. (NYSE: AGL), the trusted partner empowering physicians to transform health in our communities, announced results for the second quarter ended June 30, 2022.

Second Quarter 2022 Results:

• Total revenue of $670 million increased 34% during the second quarter compared to $499 million in the second quarter 2021. Normalized for the timing of a retroactive group contract in the prior year, revenue growth in the second quarter 2022 would have been 42%. For the six months ending June 30, total revenue of $1.32 billion increased 45% from 2021.
• Total members live on the agilon platform increased to 351,700 as of June 30, including 261,200 Medicare Advantage members and 90,500 Direct Contracting beneficiaries. Medicare Advantage membership increased 44%, with 13% growth in same geographies.
• Net loss of $21 million in the second quarter, compared to a net loss of $299 million in second quarter 2021. Net loss in the second quarter 2021 included $275 million in non-cash stock-based compensation expenses primarily related to agilon’s initial public offering in April 2021.
• Medical margin of $82 million increased 49% during the second quarter compared to $55 million in the second quarter 2021. Medical margin represented 12.2% of revenue during the second quarter 2022, compared to 11.1% in the prior year quarter.
• Adjusted EBITDA of positive $7 million in the second quarter compared to negative $2 million during the second quarter 2021.

“Our second quarter results further demonstrate the power of our aligned partnership model to deliver consistent gains in membership and profitability,” said Steve Sell, Chief Executive Officer. “Physician groups recognize they need a new business model for primary care, and our distinctive approach empowers PCPs to improve patient outcomes and transform healthcare in their local communities.”

Outlook for Third Quarter and Fiscal Year 2022:

	Quarter Ended September 30, 2022				Year Ended December 31, 2022
	Low		High		Low		High
Medicare Advantage Members1	263,000		266,000		265,000		270,000
Direct Contracting Members1	85,000		90,000		80,000		85,000
Total Members Live on Platform1	348,000		356,000		345,000		355,000
Total Revenues ($M)	$645		$655		$2,615		$2,635
Medical Margin ($M)	$65		$70		$292		$305
Adjusted EBITDA ($M)2	($5)		($2)		$0		$10

1	Membership reflects management’s outlook for end of period. agilon’s partnered Direct Contracting Entities (DCEs) are not consolidated within its financial results.
2	We have not reconciled guidance for Adjusted EBITDA to net income (loss), the most comparable GAAP measure, and have not provided forward-looking guidance for net income (loss) because of the uncertainty around certain items that may impact net income (loss), including stock-based compensation.

Membership Details

Total members live on the agilon platform increased to 351,700 as of June 30, 2022. Total members live on the platform include 261,200 Medicare Advantage members and 90,500 attributed Direct Contracting beneficiaries.

agilon’s Medicare Advantage membership increased 44% year-over-year, driven by contributions from new geographies and 13% growth within same geographies.

Average Medicare Advantage membership was 265,400 during the second quarter.

Balance Sheet and Capital Position

As of June 30, agilon health’s balance sheet reflected cash, cash equivalents and marketable securities of $954 million and total debt of $46 million. During the second quarter, we made investments in marketable securities totaling $286 million, primarily comprised of U.S. Treasuries and highly-rated U.S. corporate debt.

Webcast and Conference Call:

agilon health will host a conference call to discuss second quarter 2022 results on Thursday, August 4, 2022 at 5:00 PM Eastern Time. The conference call can be accessed by dialing (844) 200-6205 for U.S. participants and +1 (646) 904-5544 for international participants and referencing participant code 043762. A simultaneous 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 transition to a value-based Total Care Model for senior patients. agilon provides the technology, people, capital, process, and access to a peer network that allow physician groups 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 17 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 about agilon health, visit www.agilonhealth.com and connect with us on Twitter, Instagram, LinkedIn and YouTube.

Forward-Looking Statements

Statements in this release that are not historical facts 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 “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” "target," “forecast,” “plan,” “potential,” “estimate,” “could,” “would,” “should,” and other comparable and derivative terms or the negatives thereof. Examples of forward-looking statements include, among other things: (i) statements regarding timing, outcomes and other details relating to current, pending or contemplated new markets, new partnership structures, financing activities, dispositions, or other transactions discussed in this release; and (ii) statements regarding growth opportunities, ability to deliver sustainable long-term value, business environment, long term opportunities and strategic growth plan including without limitation with respect to expected revenue and net income, total and average membership, Adjusted EBITDA, and other financial projections and assumptions, as well as comparable statements included in other sections of this release. 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. Further, we cannot guarantee the accuracy of any such forward-looking statement contained in this release, and such forward-looking statements are subject to known and unknown risks and uncertainties that are difficult to predict. 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 our ability to achieve or maintain profitability in an environment of increasing expenses; our ability to identify and develop successful new geographies, physician partners and payors, or to execute upon our growth initiatives; our ability to execute our operation strategies or to achieve results consistent with our historical performance; our expectation that our expenses will increase in the future and the risk that medical expenses incurred on behalf of members may exceed the amount of medical revenues we receive; our ability to secure contracts with Medicare Advantage payors or to secure Medicare Advantage payments at favorable financial terms; our ability to recover startup costs incurred during the initial stages of development of our physician partner relationships and program initiatives; significant reductions in our membership; challenges for our physician partners in the transition to a Total Care Model; inaccuracies in the estimates and assumptions we use to project the size, revenue or medical expense amounts of our target markets; the spread of, and response to, the novel coronavirus, or COVID-19, and the inability to predict the ultimate impact on us; security breaches, loss of data or other disruptions to our data platforms; the impact of devoting significant attention and resources to the provision of certain transition services in connection with the disposition of our California operations; our subsidiaries’ lack of performance or ability to fund their operations, which could require us to fund such losses; our dependence on a limited number of key payors; the limited terms of our contracts with payors and that they may not be renewed upon their expiration; our reliance on our payors for membership attribution and assignment, data and reporting accuracy and claims payment; our dependence on physician partners and other providers to effectively manage the quality and cost of care and perform obligations under payor contracts; our dependence on physician partners to accurately, timely and sufficiently document their services and potential False Claims Act or other liability if any diagnosis information or encounter data are inaccurate or incorrect; reductions in reimbursement rates or methodology applied to derive reimbursement from, or discontinuation of, federal government healthcare programs, from which we derive substantially all of our total revenue; statutory or regulatory changes, administrative rulings, interpretations of policy and determinations by intermediaries and governmental funding restrictions, and their impact on government funding, program coverage and reimbursements; regulatory proposals directed at containing or lowering the cost of healthcare and our participation in such proposed models; the impact on our revenue of CMS modifying the methodology used to determine the revenue associated with MA members; the potential that we may incur future indebtedness; and risks related to other factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. 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.

agilon health, inc.
Consolidated Balance Sheets
In thousands, except per share data
		June 30, 2022				December 31, 2021
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	668,574			$	1,040,039
Restricted cash and equivalents			15,085				14,781
Marketable securities			285,590				—
Receivables, net			607,632				293,407
Prepaid expenses and other current assets, net			24,528				18,968
Total current assets			1,601,409				1,367,195
Property and equipment, net			15,808				9,161
Intangible assets, net			62,505				55,398
Goodwill			41,540				41,540
Other assets, net			119,260				112,958
Total assets		$	1,840,522			$	1,586,252
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Medical claims and related payables		$	458,038			$	239,014
Accounts payable and accrued expenses			142,048				112,946
Current portion of long-term debt			5,000				5,000
Total current liabilities			605,086				356,960
Long-term debt, net of current portion			40,943				43,401
Other liabilities			91,122				94,295
Total liabilities			737,151				494,656
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $0.01 par value: 2,000,000 shares authorized; 408,204 and 400,095 shares issued and outstanding, respectively			4,082				4,001
Additional paid-in capital			2,076,329				2,045,572
Accumulated deficit			(977,096	)			(957,677	)
Accumulated other comprehensive income (loss)			513				—
Total agilon health, inc. stockholders' equity (deficit)			1,103,828				1,091,896
Noncontrolling interests			(457	)			(300	)
Total stockholders’ equity (deficit)			1,103,371				1,091,596
Total liabilities and stockholders’ equity (deficit)		$	1,840,522			$	1,586,252

agilon health, inc.
Consolidated Statements of Operations
In thousands, except per share data
(unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
			2022				2021				2022				2021
Revenues:
Medical services revenue		$	669,184			$	497,678			$	1,321,607			$	910,090
Other operating revenue			950				1,278				1,972				1,970
Total revenues			670,134				498,956				1,323,579				912,060
Expenses:
Medical services expense			587,140				442,483				1,153,348				802,837
Other medical expenses			49,080				33,694				93,853				57,355
General and administrative (including noncash stock-based compensation expense of $6,553, $274,548, $10,523, and $276,020, respectively)			51,924				317,561				91,758				355,338
Depreciation and amortization			3,042				3,581				6,415				7,008
Total expenses			691,186				797,319				1,345,374				1,222,538
Income (loss) from operations			(21,052	)			(298,363	)			(21,795	)			(310,478	)
Other income (expense):
Other income (expense), net			6,997				2,967				9,266				4,303
Gain (loss) on lease terminations			(5,458	)			—				(5,458	)			—
Interest expense			(945	)			(1,498	)			(1,816	)			(4,439	)
Income (loss) before income taxes			(20,458	)			(296,894	)			(19,803	)			(310,614	)
Income tax benefit (expense)			(580	)			(435	)			(509	)			(451	)
Income (loss) from continuing operations			(21,038	)			(297,329	)			(20,312	)			(311,065	)
Discontinued operations:
Income (loss) before income taxes			321				(1,547	)			750				(2,898	)
Income tax benefit (expense)			(14	)			(65	)			(14	)			(129	)
Total discontinued operations			307				(1,612	)			736				(3,027	)
Net income (loss)			(20,731	)			(298,941	)			(19,576	)			(314,092	)
Noncontrolling interests’ share in (earnings) loss			82				96				157				169
Net income (loss) attributable to common shares		$	(20,649	)		$	(298,845	)		$	(19,419	)		$	(313,923	)
Net income (loss) per common share, basic and diluted
Continuing operations		$	(0.05	)		$	(0.79	)		$	(0.05	)		$	(0.88	)
Discontinued operations		$	—			$	—			$	—			$	(0.01	)
Weighted average shares outstanding, basic and diluted			407,339				377,445				404,666				351,695

agilon health, inc.
Condensed Consolidated Statements of Cash Flows
In thousands
(unaudited)
		Six Months Ended June 30,
			2022				2021
Cash flows from operating activities:
Net income (loss)		$	(19,576	)		$	(314,092	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			6,415				7,095
Stock-based compensation expense			10,523				276,020
Loss on debt extinguishment			—				1,590
Loss (income) from equity method investments			(7,787	)			(2,532	)
Other non-cash items			3,497				2,011
Changes in operating assets and liabilities			(76,568	)			(50,211	)
Net cash provided by (used in) operating activities			(83,496	)			(80,119	)
Cash flows from investing activities:
Purchase of property and equipment, net			(8,504	)			(646	)
Purchase of intangible assets			(12,168	)			(4,018	)
Investment in loans receivable and other			(4,510	)			(70,307	)
Investments in marketable securities			(285,077	)			—
Proceeds from repayment of loans receivable and other			4,279				1,277
Proceeds from sale of business and property, net of cash divested			500				(2,644	)
Net cash provided by (used in) investing activities			(305,480	)			(76,338	)
Cash flows from financing activities:
Proceeds from initial public offering			—				1,170,942
Proceeds from other equity issuances, net			20,315				551
Proceeds from the issuance of long-term debt			—				100,000
Repayments of long-term debt			(2,500	)			(118,648	)
Equity and debt issuance costs and other			—				(9,768	)
Net cash provided by (used in) financing activities			17,815				1,143,077
Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents			(371,161	)			986,620
Cash, cash equivalents and restricted cash and equivalents from continuing operations, beginning of period			1,054,820				135,178
Cash, cash equivalents and restricted cash and equivalents from discontinued operations, beginning of period			—				3,917
Cash, cash equivalents and restricted cash and equivalents, beginning of period			1,054,820				139,095
Cash, cash equivalents and restricted cash and equivalents, end of period		$	683,659			$	1,125,715

agilon health, inc.
Key Operating Metrics
In thousands
(unaudited)
MEDICAL MARGIN
		Three Months Ended June 30,								Six Months Ended June 30,
			2022				2021				2022				2021
Medical services revenue		$	669,184			$	497,678			$	1,321,607			$	910,090
Medical services expense			(587,140	)			(442,483	)			(1,153,348	)			(802,837	)
Medical margin		$	82,044			$	55,195			$	168,259			$	107,253

Medical margin represents the amount earned from medical services revenue after medical services expenses are 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.

GENERAL AND ADMINISTRATIVE COSTS, INCLUDING PLATFORM SUPPORT COSTS
		Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022				2021
Platform support costs		$	36,291		$	30,667		$	70,104			$	59,075
Geography entry costs(1)			6,618			6,785			10,422				10,007
Severance and related costs			256			3,788			1,958				4,242
Management fees(2)			—			58			—				433
Stock-based compensation expense			6,553			274,548			10,523				276,020
Other(3)			2,206			1,715			(1,249	)			5,561
General and administrative		$	51,924		$	317,561		$	91,758			$	355,338

(1)		Represents direct geography entry costs, including investments to develop and expand our platform and costs in geographies that are in implementation and are not yet generating revenue.
(2)		Represents management fees and other expenses paid to Clayton Dubilier & Rice, LLC (“CD&R”) prior to our IPO. In connection with our initial public offering, we terminated our consulting agreement with CD&R, effective April 16, 2021. We were not charged a fee in connection with the termination of this agreement.
(3)		Includes changes in non-cash accruals for unasserted claims and contingent liabilities.

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 functions.

agilon health, inc.
Non-GAAP Financial Measures
In thousands
(unaudited)
NETWORK CONTRIBUTION
		Three Months Ended June 30,								Six Months Ended June 30,
			2022				2021				2022				2021
Income (loss) from operations		$	(21,052	)		$	(298,363	)		$	(21,795	)		$	(310,478	)
Other operating revenue			(950	)			(1,278	)			(1,972	)			(1,970	)
Other medical expenses			49,080				33,694				93,853				57,355
Other medical expenses—live geographies(1)			(45,523	)			(30,901	)			(90,116	)			(52,817	)
General and administrative			51,924				317,561				91,758				355,338
Depreciation and amortization			3,042				3,581				6,415				7,008
Network contribution		$	36,521			$	24,294			$	78,143			$	54,436

(1)

Represents physician compensation expense related to surplus sharing and other direct medical expenses incurred to improve care for our members in our live geographies. Excludes costs in geographies that are in implementation and are not yet generating revenue. For the three months ended June 30, 2022 and 2021, costs incurred in implementing geographies were $3.6 million and $2.8 million, respectively. For the six months ended June 30, 2022 and 2021, costs incurred in implementing geographies were $3.7 million and $4.5 million, respectively.

ADJUSTED EBITDA
		Three Months Ended June 30,								Six Months Ended June 30,
			2022				2021				2022				2021
Net income (loss)		$	(20,731	)		$	(298,941	)		$	(19,576	)		$	(314,092	)
(Income) loss from discontinued operations, net of income taxes			(307	)			1,612				(736	)			3,027
Interest expense			945				1,498				1,816				4,439
Income tax expense (benefit)			580				435				509				451
Depreciation and amortization			3,042				3,581				6,415				7,008
(Gain) loss on lease terminations			5,458				—				5,458				—
Geography entry costs(1)			10,175				9,578				14,159				14,545
Severance and related costs(2)			256				3,788				1,958				4,242
Management fees(3)			—				58				—				433
Stock-based compensation expense			6,553				274,548				10,523				276,020
EBITDA adjustments related to equity method investments			492				652				1,663				652
Other(4)			1,033				1,517				(2,664	)			5,363
Adjusted EBITDA		$	7,496			$	(1,674	)		$	19,525			$	2,088

(1)		Represents direct geography entry costs, including investments to develop and expand our platform and costs in geographies that are in implementation and are not yet generating revenue. For the three months ended June 30, 2022 and 2021, (i) $3.6 million and $2.8 million, respectively, are included in other medical expenses and (ii) $6.6 million and $6.8 million, respectively, are included in general and administrative expenses. For the six months ended June 30, 2022 and 2021, (i) $3.7 million and $4.5 million, respectively, are included in other medical expenses and (ii) $10.4 million and $10.0 million, respectively, are included in general and administrative expenses.
(2)		For the three and six months ended June 30, 2022, includes taxes and related costs on stock option exercises for departed executives of $0.2 million and $1.4 million, respectively.
(3)		Represents management fees and other expenses paid to CD&R prior to our IPO. In connection with our initial public offering, we terminated our consulting agreement with CD&R, effective April 16, 2021. We were not charged a fee in connection with the termination of this agreement.
(4)		Includes changes in non-cash accruals for unasserted claims, contingent liabilities, and unrealized (gain) loss on short-term investments.

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

We define network contribution as medical services revenue less the sum of: (i) medical services expense and (ii) other medical expenses excluding costs incurred in implementing geographies. Other medical expenses consist of physician compensation expense related to surplus sharing and other direct medical expenses incurred to improve care for our members. We believe this metric provides insight into the economics of our Total Care Model as it includes all medical services expense associated with our members’ care as well as partner compensation and additional medical costs we incur as part of our aligned partnership model. Other medical expenses are largely variable and proportionate to the level of surplus in each respective geography.

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) geography entry costs, (vi) stock-based compensation expense, (vii) severance and related costs, and (viii) 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.

Income (loss) from operations is the most directly comparable GAAP measure to network contribution. Net income (loss) is the most directly comparable GAAP measure to Adjusted EBITDA.

We believe network contribution and Adjusted EBITDA help identify underlying trends in our business and facilitate evaluation of period-to-period operating performance of our live geographies 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 network contribution 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 network contribution 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 network contribution and Adjusted EBITDA or similarly titled non-GAAP measures differently from the way we calculate these metrics. As a result, our presentation of network contribution and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, limiting their usefulness as comparative measures.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220804005728/en/

Investor Contact

Matthew Gillmor

VP, Investor Relations

investors@agilonhealth.com

Media Contact

Claire Mulhearn

Chief Communications & Public Affairs Officer

media@agilonhealth.com

Source: agilon health

FAQ

What were Agilon Health's total revenues for Q2 2022?

Agilon Health reported total revenues of $670 million for Q2 2022.

How much did Medicare Advantage membership grow at Agilon Health?

Medicare Advantage membership grew 44% year-to-date, reaching 261,200 members.

What is the medical margin of Agilon Health for Q2 2022?

Agilon Health's medical margin for Q2 2022 was $82 million, reflecting an increase of 49%.

How does Agilon Health's adjusted EBITDA compare to last year?

Agilon Health's adjusted EBITDA for Q2 2022 was $7 million, an improvement from negative $2 million in Q2 2021.

What was the net loss for Agilon Health in Q2 2022?

Agilon Health reported a net loss of $21 million in Q2 2022, an improvement from a net loss of $299 million in the same quarter last year.