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agilon health Reports First Quarter 2022 Results

Revenue growth of 58%, driven by 51% growth in Medicare Advantage membership

Total members live on the agilon platform grew to 342,000, including 250,000 Medicare Advantage members and 92,000 Direct Contracting beneficiaries

Medical Margin increased 66%, reflecting agilon’s aligned partnership model driving positive results across diverse geographies

agilon health, inc. (NYSE: AGL), the trusted partner empowering physicians to transform health in our communities, announced results for the first quarter ended March 31, 2022.

First Quarter 2022 Results:

  • Total revenue of $653 million increased 58% during the first quarter compared to $413 million in the first quarter 2021. Normalized for the timing of a retroactive group contract in the prior year, revenue growth in the first quarter 2022 would have been 49%.
  • Total members live on the agilon platform increased to 342,000 as of March 31, including 250,000 Medicare Advantage (MA) members and 92,000 Direct Contracting beneficiaries. Consolidated MA membership increased 51% year-over-year, with 20% growth in same geographies. Normalized for last year’s retroactive group contract, MA membership would have increased 43%, with 14% growth in same geographies.
  • Net income of $1 million in the first quarter compared to a net loss of $15 million in the first quarter 2021.
  • Medical margin of $86 million increased 66% during the first quarter compared to $52 million in the first quarter 2021. Medical margin represented 13.2% of revenue during the first quarter 2022, compared to 12.6% in the prior year quarter.
  • Adjusted EBITDA of $12 million compared to $4 million during the first quarter 2021.

“We are creating a sustainable model for primary care and the success of physicians on the agilon network is reinforcing our collective momentum,” said Steve Sell, Chief Executive Officer. “Our results this quarter further demonstrate the unique ability of our aligned partnership model to rapidly and efficiently scale across diverse physician groups and communities.”

Outlook for Second Quarter and Fiscal Year 2022:

 

Quarter Ended

June 30, 2022

 

Year Ended

December 31, 2022

 

Low

High

 

Low

 

High

Medicare Advantage Members1

253,000

 

258,000

 

260,000

 

270,000

Direct Contracting Members1

85,000

 

90,000

 

80,000

 

85,000

Total Members Live on Platform1

338,000

 

348,000

 

340,000

 

355,000

Total Revenues ($M)

$640

 

$652

 

$2,505

 

$2,590

Medical Margin ($M)

$80

 

$83

 

$290

 

$305

Adjusted EBITDA ($M)2

$4

 

$7

 

$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 for the Quarter Ending March 31, 2022

Total members live on the agilon platform increased to 342,100 as of March 31, 2022. Total members live on the platform include 250,300 Medicare Advantage members and 91,800 attributed Direct Contracting beneficiaries.

agilon’s consolidated Medicare Advantage membership increased 51% year-over-year, driven by contributions from new geographies and 20% growth within same geographies. Normalized for the timing of a retroactive group contract in the prior year, total and same geography Medicare Advantage membership would have increased 43% and 14%, respectively.

Average Medicare Advantage membership was 248,000 during the first quarter.

Webcast and Conference Call:

agilon health will host a conference call to discuss first quarter 2022 results on Thursday, May 5, 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 757732. A simultaneous webcast can be accessed by visiting the “Events & Presentation” 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 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, and 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 best physician groups and health systems have a sustained, thriving future. For more information go to 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

 

 

 

March 31,

2022

 

 

December 31,

2021

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,021,754

 

 

$

1,040,039

 

Restricted cash and equivalents

 

 

14,470

 

 

 

14,781

 

Receivables, net

 

 

571,869

 

 

 

293,407

 

Prepaid expenses and other current assets, net

 

 

19,847

 

 

 

18,968

 

Total current assets

 

 

1,627,940

 

 

 

1,367,195

 

Property and equipment, net

 

 

12,526

 

 

 

9,161

 

Intangible assets, net

 

 

53,709

 

 

 

55,398

 

Goodwill

 

 

41,540

 

 

 

41,540

 

Other assets, net

 

 

119,496

 

 

 

112,958

 

Total assets

 

$

1,855,211

 

 

$

1,586,252

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Medical claims and related payables

 

$

472,323

 

 

$

239,014

 

Accounts payable and accrued expenses

 

 

133,138

 

 

 

112,946

 

Current portion of long-term debt

 

 

5,000

 

 

 

5,000

 

Total current liabilities

 

 

610,461

 

 

 

356,960

 

Long-term debt, net of current portion

 

 

42,172

 

 

 

43,401

 

Other liabilities

 

 

91,101

 

 

 

94,295

 

Total liabilities

 

 

743,734

 

 

 

494,656

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit):

 

 

 

 

 

 

Common stock, $0.01 par value: 2,000,000 shares authorized; 405,727 and 400,095 shares issued and outstanding, respectively

 

 

4,057

 

 

 

4,001

 

Additional paid-in capital

 

 

2,064,242

 

 

 

2,045,572

 

Accumulated deficit

 

 

(956,447

)

 

 

(957,677

)

Total agilon health, inc. stockholders' equity (deficit)

 

 

1,111,852

 

 

 

1,091,896

 

Noncontrolling interests

 

 

(375

)

 

 

(300

)

Total stockholders’ equity (deficit)

 

 

1,111,477

 

 

 

1,091,596

 

Total liabilities and stockholders’ equity (deficit)

 

$

1,855,211

 

 

$

1,586,252

 

agilon health, inc.

Consolidated Statements of Operations

In thousands, except per share data

(unaudited)

 

 

 

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

Medical services revenue

 

$

652,423

 

 

$

412,412

 

Other operating revenue

 

 

1,022

 

 

 

692

 

Total revenues

 

 

653,445

 

 

 

413,104

 

Expenses:

 

 

 

 

 

 

Medical services expense

 

 

566,208

 

 

 

360,354

 

Other medical expenses

 

 

44,773

 

 

 

23,661

 

General and administrative (including noncash stock-based compensation expense of $3,970 and $1,472, respectively)

 

 

39,834

 

 

 

37,777

 

Depreciation and amortization

 

 

3,373

 

 

 

3,427

 

Total expenses

 

 

654,188

 

 

 

425,219

 

Income (loss) from operations

 

 

(743

)

 

 

(12,115

)

Other income (expense):

 

 

 

 

 

 

Other income (expense), net

 

 

2,269

 

 

 

1,336

 

Interest expense

 

 

(871

)

 

 

(2,941

)

Income (loss) before income taxes

 

 

655

 

 

 

(13,720

)

Income tax benefit (expense)

 

 

71

 

 

 

(16

)

Income (loss) from continuing operations

 

 

726

 

 

 

(13,736

)

Discontinued operations:

 

 

 

 

 

 

Income (loss) before and income taxes

 

 

429

 

 

 

(1,351

)

Income tax benefit (expense)

 

 

 

 

 

(64

)

Total discontinued operations

 

 

429

 

 

 

(1,415

)

Net income (loss)

 

 

1,155

 

 

 

(15,151

)

Noncontrolling interests’ share in (earnings) loss

 

 

75

 

 

 

73

 

Net income (loss) attributable to common shares

 

$

1,230

 

 

$

(15,078

)

 

 

 

 

 

 

 

Net income (loss) per common share, basic and diluted

 

 

 

 

 

 

Continuing operations

 

$

 

 

$

(0.04

)

Discontinued operations

 

$

 

 

$

(0.01

)

Weighted average shares outstanding

 

 

 

 

 

 

Basic

 

 

401,964

 

 

 

325,659

 

Diluted

 

 

424,065

 

 

 

325,659

 

agilon health, inc.

Condensed Consolidated Statements of Cash Flows

In thousands

(unaudited)

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

1,155

 

 

$

(15,151

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

3,373

 

 

 

3,481

 

Stock-based compensation expense

 

 

3,970

 

 

 

1,472

 

Loss on debt extinguishment

 

 

 

 

 

1,186

 

Loss (income) from equity method investments

 

 

(2,033

)

 

 

3

 

Other non-cash items

 

 

556

 

 

 

1,763

 

Changes in operating assets and liabilities

 

 

(30,254

)

 

 

(33,582

)

Net cash provided by (used in) operating activities

 

 

(23,233

)

 

 

(40,828

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

(4,049

)

 

 

(178

)

Purchase of intangible assets

 

 

(1,000

)

 

 

(3,986

)

Investment in loans receivable and other

 

 

(4,503

)

 

 

(1,204

)

Proceeds from repayment of loans receivable and other

 

 

183

 

 

 

 

Proceeds from sale of business and property, net of cash divested

 

 

500

 

 

 

(3,706

)

Net cash provided by (used in) investing activities

 

 

(8,869

)

 

 

(9,074

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

14,756

 

 

 

165

 

Proceeds from the issuance of long-term debt

 

 

 

 

 

100,000

 

Repayments of long-term debt

 

 

(1,250

)

 

 

(68,649

)

Debt issuance costs

 

 

 

 

 

(1,218

)

Net cash provided by (used in) financing activities

 

 

13,506

 

 

 

30,298

 

Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents

 

 

(18,596

)

 

 

(19,604

)

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

 

$

1,036,224

 

 

$

119,491

 

agilon health, inc.

Key Operating Metrics

In thousands

(unaudited)

MEDICAL MARGIN

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

Medical services revenue

 

$

652,423

 

 

$

412,412

 

Medical services expense

 

 

(566,208

)

 

 

(360,354

)

Medical margin

 

$

86,215

 

 

$

52,058

 

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

March 31,

 

 

 

2022

 

 

2021

 

Platform support costs

 

$

33,813

 

 

$

28,408

 

Geography entry costs(1)

 

 

3,804

 

 

 

3,222

 

Severance and related costs

 

 

1,702

 

 

 

454

 

Management fees(2)

 

 

 

 

 

375

 

Stock-based compensation expense

 

 

3,970

 

 

 

1,472

 

Other(3)

 

 

(3,455

)

 

 

3,846

 

General and administrative

 

$

39,834

 

 

$

37,777

 

(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”). 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

March 31,

 

 

 

2022

 

 

2021

 

Income (loss) from operations

 

$

(743

)

 

$

(12,115

)

Other operating revenue

 

 

(1,022

)

 

 

(692

)

Other medical expenses

 

 

44,773

 

 

 

23,661

 

Other medical expenses—live geographies(1)

 

 

(44,593

)

 

 

(21,916

)

General and administrative

 

 

39,834

 

 

 

37,777

 

Depreciation and amortization

 

 

3,373

 

 

 

3,427

 

Network contribution

 

$

41,622

 

 

$

30,142

 

(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 March 31, 2022 and 2021, costs incurred in implementing geographies were $0.2 million and $1.8 million, respectively.

 

ADJUSTED EBITDA

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

Net income (loss)

 

$

1,155

 

 

$

(15,151

)

(Income) loss from discontinued operations, net of income taxes

 

 

(429

)

 

 

1,415

 

Interest expense

 

 

871

 

 

 

2,941

 

Income tax expense (benefit)

 

 

(71

)

 

 

16

 

Depreciation and amortization

 

 

3,373

 

 

 

3,427

 

Geography entry costs(1)

 

 

3,984

 

 

 

4,967

 

Severance and related costs(2)

 

 

1,702

 

 

 

454

 

Management fees(3)

 

 

 

 

 

375

 

Stock-based compensation expense

 

 

3,970

 

 

 

1,472

 

EBITDA adjustments related to equity method investments

 

 

1,171

 

 

 

 

Other(4)

 

 

(3,697

)

 

 

3,846

 

Adjusted EBITDA

 

$

12,029

 

 

$

3,762

 

(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 March 31, 2022 and 2021, (i) $0.2 million and $1.8 million, respectively, are included in other medical expenses and (ii) $3.8 million and $3.2 million, respectively, are included in general and administrative expenses.

(2)

 

For the three months ended March 31, 2022, includes taxes and related costs on stock option exercises for departed executives of $1.2 million.

(3)

 

Represents management fees and other expenses paid to CD&R. 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 and contingent liabilities.

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.

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