agl-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________

FORM 10-Q

_______________________________________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-40332

_______________________________________________________

agilon health, inc.

(Exact name of registrant as specified in its charter)


Delaware			37-1915147
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

6210 E Hwy 290, Suite 450

Austin, TX 78723

(Address of principal executive offices)

(562) 256-3800

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	AGL	New York Stock Exchange

_______________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x NO o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES o NO x

At May 1, 2024, there were 411,261,609 shares of the registrant’s $0.01 par value common stock outstanding.

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agilon health, inc.

INDEX


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	3

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2024 and 2023	5

	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2024 and 2023	6

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	7

	Notes to the Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

Signatures		38

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

agilon health, inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)


	March 31, 2024		December 31, 2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	111,706	$	107,570
Restricted cash and equivalents	6,844		6,759
Marketable securities	307,359		380,773
Receivables, net	1,571,143		942,461
Prepaid expenses and other current assets, net	39,757		42,513
Total current assets	2,036,809		1,480,076
Property and equipment, net	27,539		27,576
Intangible assets, net	72,076		63,769
Goodwill	24,133		24,133
Other assets	155,906		145,312
Total assets	$	2,316,463	$	1,740,866
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Medical claims and related payables	$	1,266,651	$	737,724
Accounts payable and accrued expenses	252,497		233,182
Current portion of long-term debt	7,500		6,250
Total current liabilities	1,526,648		977,156
Long-term debt, net of current portion	29,834		32,308
Other liabilities	71,495		70,381
Total liabilities	1,627,977		1,079,845

Commitments and contingencies

Stockholders' equity (deficit):
Common stock, $0.01 par value: 2,000,000 shares authorized; 410,843 and 406,387 shares issued and outstanding, respectively	4,108		4,064
Additional paid-in capital	2,020,803		1,986,899
Accumulated deficit	(1,332,890)		(1,326,826)
Accumulated other comprehensive income (loss)	(2,747)		(2,298)
Total agilon health, inc. stockholders' equity (deficit)	689,274		661,839
Noncontrolling interests	(788)		(818)
Total stockholders’ equity (deficit)	688,486		661,021
Total liabilities and stockholders’ equity (deficit)	$	2,316,463	$	1,740,866

The condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities (“VIEs”) as agilon health, inc., together with its consolidated subsidiaries and VIEs (the “Company”), is the primary beneficiary of these VIEs. The condensed consolidated balance sheets include total assets that can only be used to settle obligations of the Company’s consolidated VIEs totaling $1.71 billion and $1.07 billion as of March 31, 2024 and December 31, 2023, respectively, and total liabilities of the Company’s consolidated VIEs for which creditors do not have recourse to the general credit of the primary beneficiary of $1.49 billion and $930.60 million as of March 31, 2024 and December 31, 2023, respectively. See Note 14 for additional details.

See accompanying Notes to the Condensed Consolidated Financial Statements.

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agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended March 31,
	2024		2023
Revenues:
Medical services revenue	$	1,601,195	$	1,053,119
Other operating revenue	3,159		1,193
Total revenues	1,604,354		1,054,312
Expenses:
Medical services expense	1,443,842		897,572
Other medical expenses	85,424		83,617
General and administrative (including noncash stock-based compensation expense of $16,909 and $13,585, respectively)	76,422		69,752
Depreciation and amortization	5,844		2,954
Total expenses	1,611,532		1,053,895
Income (loss) from operations	(7,178)		417
Other income (expense):
Income (loss) from equity method investments	5,684		1,376
Other income (expense), net	5,892		7,892

Interest expense	(1,284)		(1,493)
Income (loss) before income taxes	3,114		8,192
Income tax benefit (expense)	133		1,759
Income (loss) from continuing operations	3,247		9,951
Discontinued operations:
Income (loss) before gain (loss) on sales	(518)		6,008
Gain (loss) on sales of assets, net	(8,763)		—
Total discontinued operations	(9,281)		6,008
Net income (loss)	(6,034)		15,959
Noncontrolling interests’ share in (earnings) loss	(30)		63
Net income (loss) attributable to common shares	$	(6,064)	$	16,022

Net income (loss) per common share, basic and diluted
Continuing operations	$	0.01	$	0.02
Discontinued operations	$	(0.02)	$	0.02
Weighted average shares outstanding
Basic	408,938		413,136
Diluted	413,437		426,586

See accompanying Notes to the Condensed Consolidated Financial Statements.

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agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2024		2023
Net income (loss)	$	(6,034)	$	15,959
Other comprehensive income (loss):
Net unrealized gain (loss) on marketable securities, net of tax	(457)		1,896
Foreign currency translation adjustment	8		115
Total comprehensive income (loss)	(6,483)		17,970
Comprehensive (income) loss attributable to noncontrolling interests	(30)		63
Total comprehensive income (loss) attributable to agilon health, inc.	$	(6,513)	$	18,033

See accompanying Notes to the Condensed Consolidated Financial Statements.

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agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

(unaudited)

For the three months ended March 31, 2024:


	Total Stockholders’ Equity
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (loss)		Noncontrolling Interest		Total Stockholders’ Equity (Deficit)
	Shares	Amount
January 1, 2024	406,387	$	4,064	$	1,986,899	$	(1,326,826)	$	(2,298)	$	(818)	$	661,021
Net income (loss)	—	—		—		(6,064)		—		30		(6,034)
Other comprehensive income (loss)	—	—		—		—		(449)		—		(449)
Exercise of stock options	1,434	14		2,441		—		—		—		2,455
Vesting of restricted stock units	1,170	11		(11)		—		—		—		—
Shares withheld related to net share settlement	(122)	(1)		(645)		—		—		—		(646)
Issuance of common stock	1,974	20		15,210		—		—		—		15,230
Stock-based compensation expense	—	—		16,909		—		—		—		16,909
March 31, 2024	410,843	$	4,108	$	2,020,803	$	(1,332,890)	$	(2,747)	$	(788)	$	688,486

For the three months ended March 31, 2023:


	Total Stockholders’ Equity
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (loss)		Noncontrolling Interest		Total Stockholders’ Equity (Deficit)
	Shares	Amount
January 1, 2023	412,385	$	4,124	$	2,106,886	$	(1,064,230)	$	(5,560)	$	(611)	$	1,040,609
Net income (loss)	—	—		—		16,022		—		(63)		15,959
Other comprehensive income (loss)	—	—		—		—		2,011		—		2,011
Exercise of stock options	2,002	20		9,597		—		—		—		9,617
Vesting of restricted stock units	79	1		(1)		—		—		—		—
Shares withheld related to net share settlement	(1)	—		(28)		—		—		—		(28)
Stock-based compensation expense	—	—		13,672		—		—		—		13,672
March 31, 2023	414,465	$	4,145	$	2,130,126	$	(1,048,208)	$	(3,549)	$	(674)	$	1,081,840

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agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	(6,034)	$	15,959
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	5,844		4,189
Stock-based compensation expense	16,909		13,672
Loss (income) from equity method investments	(5,684)		(1,376)
(Gain) loss on sale of assets, net	4,996		—
Other noncash items	(472)		(1,785)
Changes in operating assets and liabilities:	(63,335)		(91,470)
Net cash provided by (used in) operating activities	(47,776)		(60,811)
Cash flows from investing activities:
Purchase of property and equipment	(3,139)		(3,717)
Purchase of intangible assets	(11,438)		—
Funding of loans receivable and other	(8,508)		(1,301)
Investments in marketable securities	—		(29,969)
Proceeds from maturities of marketable securities and other	74,523		28,540
Net cash paid in business combination	—		(44,367)

Net cash provided by (used in) investing activities	51,438		(50,814)
Cash flows from financing activities:
Proceeds from equity issuances, net	1,809		9,589

Repayments of long-term debt	(1,250)		(1,250)
Net cash provided by (used in) financing activities	559		8,339
Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents	4,221		(103,286)
Cash, cash equivalents and restricted cash and equivalents from continuing operations, beginning of period	114,329		475,912
Cash, cash equivalents and restricted cash and equivalents from discontinued operations, beginning of period	—		31,768
Cash, cash equivalents and restricted cash and equivalents, beginning of period	114,329		507,680
Cash, cash equivalents and restricted cash and equivalents from continuing operations, end of period	118,550		397,023
Cash, cash equivalents and restricted cash and equivalents from discontinued operations, end of period	—		7,371
Cash, cash equivalents and restricted cash and equivalents, end of period	$	118,550	$	404,394

See accompanying Notes to the Condensed Consolidated Financial Statements.

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agilon health, inc.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


NOTE 1. Business

Description of Business

agilon health, inc., through its partnerships and platform, provides the necessary capabilities, capital, and business model for existing physician groups to create a Medicare-centric, globally capitated line of business. As of March 31, 2024, the Company, through its contracted physician networks, provided care to approximately 522,800 Medicare Advantage members enrolled with private health plans. Beginning January 1, 2024, the Company expanded its operations into: (i) Lexington, Kentucky and (ii) Augusta, Georgia, along with additional partnerships in the Company’s existing Texas, Pennsylvania, and Michigan markets. Additionally, beginning January 1, 2024, the Company began participating in the Centers for Medicare & Medicaid Services' (“CMS”) Shared Savings Program (“MSSP”), along with its existing participation in the Accountable Care Organization Realizing Equity, Access, and Community Health (“ACO REACH”) Model, (collectively, “CMS ACO Models”).

See Note 14 for additional discussions related to the Company’s involvement with VIEs.

The Company’s largest shareholder is an investment fund associated with Clayton Dubilier & Rice, LLC (“CD&R”), a private equity firm. All funds affiliated with CD&R are considered related parties.


NOTE 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The condensed consolidated financial statements include the accounts of agilon health, inc., its wholly-owned subsidiaries, and both joint ventures and VIEs that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation. All adjustments (consisting of normal recurring adjustments unless otherwise indicated), which the Company considers necessary to present fairly its financial position, results of operations, and cash flows, have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The accompanying condensed consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Use of Estimates

Management is required to make estimates and assumptions in the preparation of financial statements. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates can include, among other things, those used to determine revenues and related receivables from risk adjustments, medical services expense and related payables (including the reserve for incurred but not reported (“IBNR”) claims), and valuation of long-lived assets, goodwill and intangible assets (acquired in business combinations and analysis of impairment). Management’s estimates for revenue recognition, medical services expense, and other estimates, judgments, and assumptions, may be materially and adversely different from actual results. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates.

Property and Equipment

As of March 31, 2024 and December 31, 2023, the Company’s gross carrying amount of property and equipment was $44.3 million and $41.9 million, with accumulated depreciation of $16.8 million and $14.3 million, respectively. For the three months ended March 31, 2024 and 2023, the Company recognized $2.8 million and $1.7 million, respectively, in

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depreciation expense, which is included in depreciation and amortization expense in the condensed consolidated statements of operations.

Income Taxes

The Company determines the income tax provision for interim periods using an estimate of the Company’s annual effective tax rate, applied to year-to-date results, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimated annual effective tax rate, and if the estimated annual effective tax rate changes, a cumulative catch-up adjustment is recorded in that quarter. The Company applied the intra-period tax allocation rules to allocate income taxes between continuing operations and discontinued operations as prescribed in U.S. GAAP, where the tax effect of income (loss) before income taxes from continuing operations is computed without regard to the tax effects of income (loss) before income taxes from the other categories.

Recent Accounting Pronouncements

In November of 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which amends certain reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Additionally, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments in ASU 2023-07 are required to be applied retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of ASU 2023-07 on the disclosures in its condensed consolidated financial statements.

In December of 2023, the FASB issued ASU 2023-09, Income Taxes—Improvements to Income Tax Disclosures (“ASU 2023-09”), which amends certain disclosure requirements related to income taxes. The amendments in ASU 2023-09 require public business entities on an annual basis to: (i) disclose specific categories in the rate reconciliation and (ii) provide additional information for reconciling items that meet a quantitative threshold. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. The amendments in ASU 2023-09 can be applied on a prospective basis or retrospective application. Early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of ASU 2023-09 on the disclosures in its condensed consolidated financial statements.


NOTE 3. Revenue, Receivables, and Concentration of Credit Risk

Medical Services Revenue

Medical services revenue consists of capitation fees under contracts with various Medicare Advantage payors (“payors”). Under the typical capitation arrangement, the Company is entitled to monthly per-member, per-month (“PMPM”) fees to provide a defined range of healthcare services for Medicare Advantage health plan members (“members”) attributed to the Company’s contracted primary care physicians. PMPM fees are determined as a percent of the premium payors receive from the Centers for Medicare & Medicaid Services’ (“CMS”) for these members. The Company generally accepts full financial risk for members attributed to its contracted primary care physicians and therefore is responsible for the cost of all healthcare services required by those members. Fees are generally recorded gross in revenue because the Company is acting as a principal in coordinating and controlling the range of services provided (other than clinical decisions) under its capitation contracts with payors. Capitation contracts with payors are generally multi-year arrangements and have a single performance obligation that constitutes a series, as defined by Accounting Standards Codification (“ASC”) 606, Revenue From Contracts With Customers (“ASC 606”), to stand ready on a monthly basis to provide all aspects of necessary medical care to members for the contracted period. The Company recognizes revenue in the month in which eligible members are entitled to receive healthcare benefits during the contract term.

The transaction price for the Company’s capitation contracts is variable, as the PMPM fees to which the Company is entitled are subject to periodic adjustment under CMS’s risk adjustment payment methodology. CMS deploys a risk adjustment model that determines premiums paid to all payors according to each member’s health status and certain demographic factors. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from various settings. The Company and healthcare providers collect and submit the necessary and available

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diagnosis data to payors and such data is utilized by the Company to estimate risk adjustment payments to be received in subsequent periods. Risk adjustment-related revenues are estimated using the most likely amount methodology and amounts are only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. PMPM fees are also subject to adjustment for incentives or penalties based on the achievement of certain quality metrics defined in the Company’s contracts with payors. The Company recognizes incentive revenue as earned using the most likely amount methodology and only to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved.

Neither the Company nor any of its affiliates is a registered insurance company because state law in the states in which it operates does not require such registration for risk-bearing providers.

Receivables

Receivables primarily consist of amounts due under capitation contracts with various payors. Receivables due under capitation contracts are recorded monthly based on reports received from payors and management’s estimate of risk adjustment payments to be received in subsequent periods for open performance years. Receivables are recorded at the amount expected to be realized.

Concentration

The Company contracts with various payors whereby the Company is entitled to monthly PMPM fees to provide a defined range of healthcare services for members attributed to its contracted primary care physicians. The Company generally accepts full financial risk for such members and therefore is responsible for the cost of all healthcare services required by them. Substantially all of the Company’s receivable balances are from a small number of payors. Revenue from Medicare Advantage payors constitutes substantially all of the Company’s total revenue for the three months ended March 31, 2024 and 2023.

The following table provides the Company’s revenue concentration with respect to major payors as a percentage of the Company’s total revenues:


	Three Months Ended March 31,
	2024		2023
Payor A	22	%	20	%
Payor B	15	%	17	%
Payor C	14	%	13	%
Payor D	*		10	%

___________________________________________

*Less than 10% of total revenues.

The following table provides the Company’s concentration of credit risk with respect to major payors as a percentage of receivables, net:


	March 31, 2024		December 31, 2023
Payor A	14	%	13	%
Payor B	14	%	11	%
Payor C	12	%	*
Payor D	13	%	21	%

___________________________________________

*Less than 10% of total receivables.

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NOTE 4. Marketable Securities and Fair Value Measurements

Marketable Securities

The following table summarizes the Company’s marketable securities (in thousands):


	March 31, 2024								December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable securities:
Corporate debt securities	$	184,107	$	63	$	(1,547)	$	182,623	$	234,821	$	180	$	(1,604)	$	233,397
U.S. Treasury notes	126,085		53		(1,402)		124,736		138,329		261		(1,206)		137,384
Other	—		—		—		—		10,000		—		(8)		9,992
	$	310,192	$	116	$	(2,949)	$	307,359	$	383,150	$	441	$	(2,818)	$	380,773

For the three months ended March 31, 2024, the Company recognized total interest income of $5.4 million, of which $4.0 million was related to its marketable securities investments and $1.4 million was related to interest on cash and cash equivalent balances. For the three months ended March 31, 2023, the Company recognized total interest income of $8.3 million, of which $4.9 million was related to its marketable securities investments and $3.4 million was related to interest on cash and cash equivalent balances.

The following table summarizes the Company’s marketable securities maturity as of March 31, 2024 (in thousands):


Year	Amortized Cost		Fair Value
2024	$	92,005	$	91,495
2025	176,926		174,802
2026	41,261		41,062

	$	310,192	$	307,359

The following table summarizes the Company’s marketable securities with gross unrealized losses by security type aggregated by the length of time the investments have been in a continuous unrealized loss position as of March 31, 2024 (in thousands):


	Less Than 12 Months				12 Months or Greater
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Marketable securities:
Corporate debt securities	$	50,514	$	212	$	101,513	$	1,335
U.S. Treasury notes	49,359

SEC Form 10-Q filed by agilon health inc.