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agilon health Reports Fourth Quarter 2023 Results

AUSTIN, Texas , February 27 /Businesswire/ - agilon health, inc. (NYSE: AGL), the trusted partner empowering physicians to transform health care in our communities, announced results for the fourth quarter and fiscal year ended December 31, 2023.

“agilon is navigating through a complex transition period for the Medicare Advantage industry and for our company, and we are taking significant actions to help mitigate the impact of this evolving environment and strengthening our reserves,” said Steve Sell, chief executive officer. “While near-term dynamics are negatively affecting our financial results, demand for our platform and the fundamental drivers of our business remain strong as we continue to deliver significant value to patients, payors, and our PCP partners. We believe we are well positioned to accelerate performance over the medium and long-term.”

Fourth Quarter and Fiscal Year 2023 Results:

  • Total members on the agilon platform increased to 477,700 as of December 31, 2023, including 388,400 Medicare Advantage members and 89,300 ACO REACH beneficiaries. Medicare Advantage membership increased 68%, with 11% growth in same geographies.
  • Total revenue of $1.06 billion in the fourth quarter 2023 increased 72% compared to $615 million in the fourth quarter 2022. For the fiscal year 2023, total revenue of $4.32 billion increased 81% compared to $2.39 billion in 2022.
  • Gross profit of negative $95 million in the fourth quarter 2023 compared to $16 million in the fourth quarter 2022. For the fiscal year 2023, gross profit of $70 million compared to $111 million in 2022. Net loss of $230 million in the fourth quarter 2023 compared to a loss of $57 million in the fourth quarter 2022. For the fiscal year 2023, net loss of $263 million compared to a loss of $107 million in 2022.
  • Medical margin of negative $102 million during the fourth quarter 2023, compared to $63 million in the fourth quarter 2022. For the fiscal year 2023, Medical Margin of $299 million, compared to $291 million in 2022. Medical Margin during the fourth quarter 2023 was negatively impacted by accelerating medical costs including prior period development from previous quarters.
  • Adjusted EBITDA loss of $137 million in the fourth quarter 2023, compared to an Adjusted EBITDA loss of $32 million in the fourth quarter 2022. For the fiscal year 2023, Adjusted EBITDA loss of $95 million, compared to an Adjusted EBITDA loss of $45 million in the fiscal year 2022.

Key Financial and Operating Metrics ($M):

(Fourth Quarter 2023 vs. 2022)

 

Three Months

Ended December 31,

 

 

Change

 

2023

 

2022

 

% YoY

Medicare Advantage Members1

388,400

 

230,800

 

68%

ACO REACH Members1, 2

89,300

 

89,000

 

—%

Total Members Live on Platform1, 2

477,700

 

319,800

 

49%

Avg. Medicare Advantage Members

391,700

 

233,300

 

68%

Total revenues

$1,056

 

$615

 

72%

Gross Profit

($95)

 

$16

 

NM

Medical Margin

($102)

 

$63

 

NM

Net Loss

($230)

 

($57)

 

NM

Adjusted EBITDA3

($137)

 

($32)

 

NM

Geography Entry Costs

$26

 

$32

 

(19%)

 
  1. Membership metrics reflect end of period results.
  2. agilon’s ACO REACH entities are not included within its consolidated financial results.
  3. agilon's ACO REACH entities contributed $6 million and $8 million to Adjusted EBITDA during the fourth quarter 2023 and fourth quarter 2022, respectively.

Key Financial and Operating Metrics ($M):

(Fiscal Year 2023 vs. 2022)

 

Twelve Months

Ended December 31,

 

 

Change

 

2023

 

2022

 

% YoY

Medicare Advantage Members1

388,400

 

230,800

 

68%

ACO REACH Members1, 2

89,300

 

89,000

 

—%

Total Members Live on Platform1, 2

477,700

 

319,800

 

49%

Avg. Medicare Advantage Members

379,400

 

225,100

 

69%

Total revenues

$4,316

 

$2,388

 

81%

Gross Profit

$70

 

$111

 

(37%)

Medical Margin

$299

 

$291

 

3%

Net Loss

($263)

 

($107)

 

NM

Adjusted EBITDA3

($95)

 

($45)

 

NM

Geography Entry Costs

$75

 

$68

 

10%

 
  1. Membership metrics reflect end of period results.
  2. agilon’s ACO REACH entities are not included within its consolidated financial results.
  3. agilon's ACO REACH entities contributed $39 million and $14 million to Adjusted EBITDA during the fiscal year 2023 and fiscal year 2022, respectively.

Medical Margin Performance Details

For the fiscal year 2023, Medical Margin of $299 million was approximately $51 million below the midpoint of the company’s guidance of range of $340 million to $360 million provided on January 5, 2024. The company estimates approximately $38 million of the lower Medical Margin is from costs and revenue attributable to the fourth quarter and $13 million of the lower Medical Margin is attributable to costs and revenue attributable previous periods.

Relative to the company’s previous guidance, the lower Medical Margin was primarily driven by two factors. First, as the company completed the financial closing process in February, it received updated data including relatively complete claims data from its largest payors, and additional information such as seasonality factors and census data. The company completed its analysis of this data in mid-February, with support from internal and external actuaries, which indicated medical claims were higher than the company’s previous estimate. Second, in light of this new information and the dynamic utilization environment, the company strengthened its reserve position for incurred but not reported medical claims. A range of reserve scenarios were developed and the company has reserved at the high-end of its estimates. The company believes this is a prudent approach given the environment.

Performance Action Plan

On January 5, 2024 agilon health announced a targeted action plan to improve performance. This plan includes expanding onboarding support for newer primary care physicians (PCPs) in mature markets, refining payor partnerships, improving data visibility and analytics, and accelerating operating efficiency. Management anticipates these actions will support growth in Adjusted EBITDA in 2024 and beyond.

The company has made solid progress on the targeted action plan. Progress to date includes physician trainings in mature markets with 90% of new physicians in those markets to be trained during the first half of 2024; increased data visibility from most all national and large regional payors as well as targeted changes to our percentage of premium rates in key markets; onboarding of payor data into the company’s new financial pipeline with over 55% of membership data expected in the first quarter and over 75% of membership data during the second quarter; and a reduction in platform support to 3% of revenue in 2024.

Class of 2025 New Partners

agilon health anticipates the Class of 2025 new partners will include at least 5 physician groups with more than 60,000 new Medicare Advantage (MA) members. Beginning in 2025, the agilon health physician network will expand to at least 36 physician groups and 3,000 primary care physicians.

agilon health now anticipates geographic entry costs will be in the range of $55 million to $65 million, down from the company’s previous expectation of ~$70 million. Given the current environment, agilon health is taking a measured approach to growth for the Class of 2025.

Capital Position and Balance Sheet

agilon health’s balance sheet as of December 31, 2023 included cash, cash equivalents and marketable securities of $495 million and total debt of $39 million. In addition, agilon health has $22 million of cash associated with the company’s unconsolidated ACO REACH entities.

Outlook for Fiscal Year 2024 ($M):

agilon health’s updated guidance assumes that the higher medical cost trend from 2023 will continue in 2024. Revised guidance assumes a medical cost trend of approximately 6.6% in 2024 for Year 2+ markets, which is 250 bps above the company’s prior expectation and compares to the 7.0% medical cost trend observed in 2023. Medical cost trend includes the impact of the company’s clinical programs and excludes the impact from non-medical costs (e.g., supplemental benefits), which is expected to drive less impact to cost trend in 2024 compared to 2023.

 

Year Ended December 31, 2024

Updated Guidance1

 

Previous Guidance

Low

 

High

 

Low

 

High

Medicare Advantage Members1

540,000

 

550,000

 

548,000

 

553,000

ACO REACH Members1,2

120,000

 

125,000

 

N/A

 

N/A

Total Members Live on Platform1

660,000

 

675,000

 

N/A

 

N/A

Avg. Medicare Advantage Members

527,000

 

536,000

 

N/A

 

N/A

Total Revenues

$6,350

 

$6,465

 

$6,350

 

$6,420

Medical Margin

$400

 

$450

 

$560

 

$600

Adjusted EBITDA3

($60)

 

($15)

 

$40

 

$60

Geography Entry Costs4

$65

 

$55

 

$70

 

$70

 
  1. Membership reflects management’s outlook for end of period.
  2. agilon’s partnered ACO REACH entities are not consolidated within its financial results.
  3. Adjusted EBITDA contribution from ACO REACH is expected to be approximately $40 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 First Quarter 2024 ($M):

Quarter Ended

March 31, 2024

Low

 

High

Medicare Advantage Members1

520,000

 

530,000

ACO REACH Members1,2

125,000

 

130,000

Total Members Live on Platform1

645,000

 

660,000

Avg. Medicare Advantage Members

516,000

 

525,000

Total Revenues

$1,605

 

$1,630

Medical Margin

$155

 

$170

Adjusted EBITDA3

$15

 

$25

Geography Entry Costs4

$23

 

$20

 
  1. Membership reflects management’s outlook for end of period.
  2. agilon’s partnered ACO REACH entities are not consolidated within its financial results.
  3. Adjusted EBITDA contribution from ACO REACH is expected to be approximately $14 million for the first 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.

We have not reconciled guidance for Medical Margin to Gross Profit or Adjusted EBITDA to net income (loss), the most comparable GAAP measures, and have 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 fourth quarter and fiscal year 2023 results on Tuesday, February 27, 2024 at 4:30 PM Eastern Time. The conference call can be accessed by dialing (833) 470-1428 for U.S. participants and +1 (929) 526-1599 for international participants and referencing participant code 615568. 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 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 2,400+ 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 X, 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 timing, outcomes and other details relating to current, pending or contemplated new markets, growth opportunities, ability to deliver sustainable long-term value, business environment, long-term opportunities and strategic growth plans, 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 first 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 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; 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 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.

agilon health, inc.

Consolidated Balance Sheets

In thousands, except per share data

 

 

December 31,

 

2023

 

2022

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

107,570

 

 

$

465,302

 

Restricted cash and equivalents

 

6,759

 

 

 

10,610

 

Marketable securities

 

380,773

 

 

 

411,901

 

Receivables, net

 

942,461

 

 

 

492,364

 

Prepaid expenses and other current assets, net

 

42,513

 

 

 

31,572

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