agilon health inc

Previous wording

The information set forth in this Item 2 is intended to provide readers with an understanding of our financial condition, changes in financial condition, and results of operations. We will discuss and provide our analysis in the following order:

Current wording

The information set forth in this Item 2 is intended to provide readers with an understanding of our financial condition, changes in financial condition, and results of operations and should be read in connection with the accompanying Condensed Consolidated Financial Statements and notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Report. We will discuss and provide our analysis in the following order:

Previous wording

•Medicare Advantage members of approximately 512,800 as of June 30, 2024 increased 38% from June 30, 2023.

Current wording

•Medicare Advantage members of approximately 525,200 as of September 30, 2024 increased 37% from September 30, 2023.

Previous wording

•CMS ACO Models (defined below) attributed beneficiaries of approximately 131,700 as of June 30, 2024 increased 51% from June 30, 2023.

Current wording

•CMS ACO Models (defined below) attributed beneficiaries of approximately 132,200 as of September 30, 2024 increased 51% from September 30, 2023.

Previous wording

•Total revenue of $1.5 billion increased 39% from the second quarter of 2023.

Current wording

•Total revenue of $1.5 billion increased 28% from the third quarter of 2023.

Previous wording

•Adjusted EBITDA loss of $3 million, compared to earnings of $12 million in the second quarter 2023.

Current wording

•Adjusted EBITDA loss of $96 million, compared to earnings of $6 million in the third quarter 2023.

Previous wording

Medicare Advantage members increased 38% from June 30, 2023, which includes contributions from new geographies and growth within geographies existing prior to 2023. Total members live on the platform includes 512,800 Medicare Advantage members and 131,700 attributed CMS ACO Models beneficiaries.

Current wording

Medicare Advantage members increased 37% from September 30, 2023, which includes contributions from new geographies and growth within geographies existing prior to 2023. Total members live on the platform includes 525,200 Medicare Advantage members and 132,200 attributed CMS ACO Models beneficiaries.

Previous wording

Average Medicare Advantage membership was 507,000 during the second quarter of 2024.

Current wording

Average Medicare Advantage membership was 535,400 during the third quarter of 2024.

Previous wording

(1)Represents physician compensation expense related to surplus sharing and other care management expenses that help to create medical cost efficiency. Includes costs in geographies that are in implementation and are not yet generating revenue and investments to grow existing markets. For the three months ended June 30, 2024 and 2023, costs incurred in implementing geographies were $18,000 and $7.7 million, respectively. For the six months ended June 30, 2024 and 2023, costs incurred in implementing geographies were $0.6 million and $10.0 million, respectively.

Current wording

(1)Represents physician compensation expense related to surplus sharing and other care management expenses that help to create medical cost efficiency. Includes costs in geographies that are in implementation and are not yet generating revenue and investments to grow existing markets. For the three months ended September 30, 2024 and 2023, costs incurred in implementing geographies were $1.4 million and $10.3 million, respectively. For the nine months ended September 30, 2024 and 2023, costs incurred in implementing geographies were $2.0 million and $20.3 million, respectively.

Previous wording

Medical services revenue constitutes substantially all of our total revenue for the three and six months ended June 30, 2024 and 2023.

Current wording

Medical services revenue constitutes substantially all of our total revenue for the three and nine months ended September 30, 2024 and 2023.

Previous wording

Comparison of the Three and Six Months Ended June 30, 2024 to the Three and Six Months Ended June 30, 2023

Current wording

Comparison of the Three and Nine Months Ended September 30, 2024 to the Three and Nine Months Ended September 30, 2023

Previous wording

Medical services revenue increased for the six months ended June 30, 2024 due primarily to growth in average membership of 39%, which was attributable to seven new geographies that began to generate revenue in 2024 and growth in our existing geographies. The increase in medical services revenue for the six months ended June 30, 2024 was also driven, to a lesser extent, by an increase in PMPM capitation rates of 4%.

Current wording

Medical services revenue increased for the three months ended September 30, 2024 due primarily to growth in average membership of 38%, which was attributable to seven new geographies that began to generate revenue in 2024 and growth in our existing geographies. The increase in medical services revenue for the three months ended September 30, 2024 was partially offset by a decrease in PMPM capitation rates of 7%. Medical services revenue also decreased as a result of higher costs associated with prescription drug benefits provided under the Medicare Part D program and lower risk adjustment revenue, including unfavorable prior period development.

Previous wording

Medical services expense increased for the three months ended June 30, 2024 due primarily to growth in average membership of 36%, which was attributable to seven new geographies that became operational in 2024 and growth in our existing geographies. The increase in medical services expense for the three months ended June 30, 2024 was also driven, to a lesser extent, by an increase in average medical services expense per member of 9%. Medical services expense for the three months ended June 30, 2024 includes a $54.3 million reduction related to selected payor contract terminations that were retroactively effective January 1, 2024.

Current wording

Medical services expense increased for the three months ended September 30, 2024 due primarily to growth in average membership of 38%, which was attributable to seven new geographies that became operational in 2024 and growth in our existing geographies. The increase in medical services expense for the three months ended September 30, 2024 was also driven by an increase in average medical services expense per member of 7%, which was primarily due to the continued impact of elevated medical cost trends and unfavorable prior period reserve development.

Previous wording

Medical services expense increased for the six months ended June 30, 2024 due primarily to growth in average membership of 39%, which was attributable to seven new geographies that became operational in 2024 and growth in our existing geographies. The increase in medical services expense for the six months ended June 30, 2024 was also driven, to a lesser extent, by an increase in average medical services expense per member of 11%.

Current wording

Medical services expense increased for the nine months ended September 30, 2024 due primarily to growth in average membership of 39%, which was attributable to seven new geographies that became operational in 2024 and growth in our existing geographies. The increase in medical services expense for the nine months ended September 30, 2024 was also driven by an increase in average medical services expense per member of 9%, which was primarily due to the continued impact of elevated medical cost trends and unfavorable prior period reserve development.

Previous wording

Other medical expenses decreased by $5.2 million, or 6%, for the three months ended June 30, 2024 compared to the same period in 2023. Partner physician incentive expense declined by $14.4 million to $30.3 million in 2024 compared to $44.7 million in 2023. Other provider costs increased by $9.2 million to $46.2 million in 2024 compared to $37.0 million in the same period in 2023, resulting from the increase in the number of geographies and members on our platform. Other provider costs for the three months ended June 30, 2023 include $7.7 million of costs related to geographies that became operational in 2024.

Current wording

Other medical expenses decreased by $68.0 million, or 88%, for the three months ended September 30, 2024 compared to the same period in 2023. Partner physician incentive expense decreased by $63.9 million to $(25.4) million in 2024 compared to $38.5 million in the same period in 2023 as a result of the recent losses generated in our geographies, which is a function of medical services revenues less the sum of medical services expenses, other provider costs and market operating costs, for the respective geography. Other provider costs decreased by $4.2 million to $34.5 million in 2024 compared to $38.7 million in the same period in 2023, resulting from the increase in the number of geographies and members on our platform. Other provider costs for the three months ended September 30, 2023 include $10.3 million of costs related to geographies that became operational in 2024.

Previous wording

Other medical expenses decreased by $3.4 million, or 2%, for the six months ended June 30, 2024 compared to 2023. Partner physician incentive expense declined by $22.3 million to $80.1 million in 2024 compared to $102.4 million in 2023. Other provider costs increased by $18.9 million to $81.8 million in 2024 compared to $62.9 million in 2023, resulting from the increase in the number of geographies and members on our platform. Other provider costs for the six months ended June 30, 2024 and 2023 include $0.6 million and $10.0 million, respectively, of costs related to geographies that became operational in the following year.

Current wording

Other medical expenses decreased by $71.4 million, or 29%, for the nine months ended September 30, 2024 compared to the same period in 2023. Partner physician incentive expense decreased by $86.1 million to $54.8 million in 2024 compared to $140.9 million in the same period in 2023 as a result of the recent losses generated in our geographies, which is a function of medical services revenues less the sum of medical services expenses, other provider costs and market operating costs, for the respective geography. Other provider costs increased by $14.7 million to $116.3 million in 2024 compared to $101.6 million in 2023, resulting from the increase in the number of geographies and members on our platform. Other provider costs for the nine months ended September 30, 2024 and 2023 include $2.0 million and $20.3 million, respectively, of costs related to geographies that became operational in the following year.

Previous wording

General and administrative expenses decreased $9.6 million, or 12%, for the three months ended June 30, 2024 compared to the same period in 2023. Operating costs to support our live geographies and enterprise functions (platform support costs) of $41.7 million in 2024 remained relatively flat compared to $42.0 million in the same period in 2023. Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 3% for the three months ended June 30, 2024 compared to 4% for the same period in 2023. Investments to support geography entry decreased to $4.8 million in 2024, compared to $11.3 million in the same period in 2023 due to decreased costs associated with our geographies that are expected to become operational in the following calendar year and expansion into existing geographies.

Current wording

General and administrative expenses decreased $8.9 million, or 12%, for the three months ended September 30, 2024 compared to the same period in 2023. Operating costs to support our live geographies and enterprise functions (platform support costs) of $42.4 million in 2024 remained relatively flat compared to $41.6 million in the same period in 2023. Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 3% for the three months ended September 30, 2024 compared to 4% for the same period in 2023. Investments to support geography entry decreased to $5.8 million in 2024, compared to $8.0 million in the same period in 2023 due to decreased costs associated with our geographies that are expected to become operational in the following calendar year and expansion into existing geographies. Stock-based compensation expense decreased $7.3 million in 2024 primarily due to the cancellation of stock-based instruments during 2024.

Previous wording

General and administrative expenses decreased $3.0 million, or 2%, for the six months ended June 30, 2024 compared to the same period in 2023. Operating costs to support our live geographies and enterprise functions (platform support costs) increased by $2.1 million to $87.4 million in 2024 compared to $85.3 million in the same period in 2023 due primarily to growth in operating costs incurred to support geographies that became operational in 2024. Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 3% for the six months ended June 30, 2024 compared to 4% for the same period in 2023. Investments to support geography entry decreased to $15.3 million in 2024, compared to $20.6 million in the same period in 2023 due to decreased costs associated with our geographies that are expected to become operational in the following calendar year and expansion into existing geographies.

Current wording

General and administrative expenses decreased $11.9 million, or 5%, for the nine months ended September 30, 2024 compared to the same period in 2023. Operating costs to support our live geographies and enterprise functions (platform support costs) increased by $2.9 million to $129.8 million in 2024 compared to $126.9 million in the same period in 2023 due primarily to growth in operating costs incurred to support geographies that became operational in 2024. Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 3% for the nine months ended September 30, 2024 compared to 4% for the same period in 2023. Investments to support geography entry decreased to $21.2 million in 2024, compared to $28.6 million in the same period in 2023 due to decreased costs associated with our geographies that are expected to become operational in the following calendar year and expansion into existing geographies. Stock-based compensation expense decreased $5.3 million in 2024 primarily due to the cancellation of stock-based instruments during 2024.

Previous wording

Other income (expense), net decreased $2.2 million, or 32%, for the three months ended June 30, 2024 compared to the same period in 2023 primarily from interest income as a result of the maturities of various marketable securities investments.

Current wording

Other income (expense), net increased $6.4 million, or 31%, for the nine months ended September 30, 2024 compared to the same period in 2023 primarily from $11.7 million of income related to services rendered to our CMS ACO Models investments, partially offset by decline in interest income as a result of the maturities of various marketable securities investments.

Previous wording

Total discontinued operations is related to the sale of our Hawaii operations in October 2023. Total discontinued operations for the six months ended June 30, 2024 is primarily related to loss on sale of our Hawaii operations compared to income from discontinued operations for the six months ended June 30, 2023.

Current wording

Total discontinued operations is related to the sale of our Hawaii operations in October 2023. Total discontinued operations for the nine months ended September 30, 2024 is primarily related to various remaining obligations from our Hawaii operations compared to losses from discontinued operations for the nine months ended September 30, 2023.

Previous wording

We have historically financed our operations primarily through funds generated from our capitation arrangements with payors, issuances of equity securities, and borrowings under credit agreements. We generally invest any excess cash in money market accounts, which are classified as cash equivalents, and marketable securities. Our investment strategies are designed to provide safety and preservation of capital, sufficient liquidity to meet the cash flow needs of our business operations, and attainment of a competitive return. As of June 30, 2024, we had cash and cash equivalents and restricted cash and equivalents of $116.3 million and investments in marketable securities of $291.6 million.

Current wording

We have historically financed our operations primarily through funds generated from our capitation arrangements with payors, issuances of equity securities, and borrowings under credit agreements. We generally invest any excess cash in money market accounts, which are classified as cash equivalents, and marketable securities. Our investment strategies are designed to provide safety and preservation of capital, sufficient liquidity to meet the cash flow needs of our business operations, and attainment of a competitive return. As of September 30, 2024, we had cash and cash equivalents and restricted cash and equivalents of $153.8 million and investments in marketable securities of $244.8 million.

Previous wording

Net cash used in operating activities was $66.5 million for the six months ended June 30, 2024 compared to $82.0 million for the six months ended June 30, 2023. The decrease in net cash used in operating activities was primarily as a result of the timing of settlements with payors from new and existing geographies. Our cash flow from operations is dependent upon the number of members on our platform, the timing of settlements with payors, and the level of operating and general and administrative expenses necessary to operate and grow our business, among other factors.

Current wording

Net cash used in operating activities was $74.2 million for the nine months ended September 30, 2024 compared to $95.0 million for the nine months ended September 30, 2023. The decrease in net cash used in operating activities was primarily as a result of the timing of settlements with payors from new and existing geographies. Our cash flow from operations is dependent upon the number of members on our platform, the timing of settlements with payors, and the level of operating and general and administrative expenses necessary to operate and grow our business, among other factors.

Previous wording

Net cash provided by investing activities was $69.7 million for the six months ended June 30, 2024 compared to net cash used in investing activities of $30.8 million for the six months ended June 30, 2023. During the six months ended June 30, 2024, we received proceeds from the maturities of marketable securities of $103.3 million and made investments of $34.1 million primarily for the acquisition of intangible assets and property and equipment. During the six months ended June 30, 2023, we completed the acquisition of My Personal Health Record Express, Inc. for $44.4 million.

Current wording

Net cash provided by investing activities was $116.2 million for the nine months ended September 30, 2024 compared to net cash used in investing activities of $41.8 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, we received net proceeds from the maturities of marketable securities of $154.8 million and made investments of $38.6 million primarily for the acquisition of intangible assets and property and equipment. During the nine months ended September 30, 2023, we completed the acquisition of My Personal Health Record Express, Inc. for $44.4 million and made investments in marketable securities of $107.0 million, which were partially offset by proceeds from the maturity of marketable securities of $133.9 million.

Previous wording

Net cash used in financing activities was $1.2 million for the six months ended June 30, 2024 compared to $193.7 million for the six months ended June 30, 2023. During the six months ended June 30, 2023, we used $200.0 million to repurchase shares of our common stock in an underwritten secondary public offering.

Current wording

Net cash used in financing activities was $2.6 million for the nine months ended September 30, 2024 compared to $192.3 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2023, we used $200.0 million to repurchase shares of our common stock in an underwritten secondary public offering.

Previous wording

As of June 30, 2024, we had 411.4 million shares of common stock outstanding. See Note 10 to the Condensed Consolidated Financial Statements for additional information about our equity transactions.

Current wording

As of September 30, 2024, we had 412.0 million shares of common stock outstanding. See Note 10 to the Condensed Consolidated Financial Statements for additional information about our equity transactions.