agilon health, inc. [AGL] Filings

10-Q 1 agl-20240630.htm 10-Q agl-20240630

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 June 30, 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 August 1, 2024, there were 411,482,837 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 June 30, 2024 and December 31, 2023	3

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2024 and 2023	5

	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2024 and 2023	6

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023	8

	Notes to the Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 5.	Other Information	40

Item 6.	Exhibits	41

Signatures		42

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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)


	June 30, 2024		December 31, 2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	109,490	$	107,570
Restricted cash and equivalents	6,846		6,759
Marketable securities	291,622		380,773
Receivables, net	1,437,040		942,461
Prepaid expenses and other current assets, net	39,012		42,513
Total current assets	1,884,010		1,480,076
Property and equipment, net	27,821		27,576
Intangible assets, net	74,821		63,769
Goodwill	24,133		24,133
Other assets	152,530		145,312
Total assets	$	2,163,315	$	1,740,866
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Medical claims and related payables	$	1,097,664	$	737,724
Accounts payable and accrued expenses	280,899		233,182
Current portion of long-term debt	8,750		6,250
Total current liabilities	1,387,313		977,156
Long-term debt, net of current portion	27,360		32,308
Other liabilities	72,775		70,381
Total liabilities	1,487,448		1,079,845

Commitments and contingencies

Stockholders' equity (deficit):
Common stock, $0.01 par value: 2,000,000 shares authorized; 411,447 and 406,387 shares issued and outstanding, respectively	4,114		4,064
Additional paid-in capital	2,038,540		1,986,899
Accumulated deficit	(1,363,572)		(1,326,826)
Accumulated other comprehensive income (loss)	(2,447)		(2,298)
Total agilon health, inc. stockholders' equity (deficit)	676,635		661,839
Noncontrolling interests	(768)		(818)
Total stockholders’ equity (deficit)	675,867		661,021
Total liabilities and stockholders’ equity (deficit)	$	2,163,315	$	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 $1.60 billion and $1.07 billion as of June 30, 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 $1.36 billion and $930.6 million as of June 30, 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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Medical services revenue	$	1,479,579	$	1,067,234	$	3,080,774	$	2,120,353
Other operating revenue	3,179		1,881		6,338		3,074
Total revenues	1,482,758		1,069,115		3,087,112		2,123,427
Expenses:
Medical services expense	1,374,060		932,823		2,817,902		1,830,395
Other medical expenses	76,523		81,716		161,947		165,333
General and administrative (including noncash stock-based compensation expense of $18,207, $19,446, $35,116, and $33,031, respectively)	69,612		79,254		146,034		149,006
Depreciation and amortization	5,907		4,279		11,751		7,233
Total expenses	1,526,102		1,098,072		3,137,634		2,151,967
Income (loss) from operations	(43,344)		(28,957)		(50,522)		(28,540)
Other income (expense):
Income (loss) from equity method investments	9,955		8,472		15,639		9,848
Other income (expense), net	4,841		7,087		10,733		14,979

Interest expense	(1,697)		(1,555)		(2,981)		(3,048)
Income (loss) before income taxes	(30,245)		(14,953)		(27,131)		(6,761)
Income tax benefit (expense)	(417)		(1,073)		(284)		686
Income (loss) from continuing operations	(30,662)		(16,026)		(27,415)		(6,075)
Discontinued operations:
Income (loss) before gain (loss) on sales	—		(769)		(518)		5,239
Gain (loss) on sales of assets, net	—		—		(8,763)		—
Total discontinued operations	—		(769)		(9,281)		5,239
Net income (loss)	(30,662)		(16,795)		(36,696)		(836)
Noncontrolling interests’ share in (earnings) loss	(20)		46		(50)		109
Net income (loss) attributable to common shares	$	(30,682)	$	(16,749)	$	(36,746)	$	(727)

Net income (loss) per common share, basic and diluted
Continuing operations	$	(0.07)	$	(0.04)	$	(0.07)	$	(0.01)
Discontinued operations	$	—	$	—	$	(0.02)	$	0.01
Weighted average shares outstanding
Basic	411,271		410,338		409,152		411,748
Diluted	411,271		410,338		409,152		411,748

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	(30,662)	$	(16,795)	$	(36,696)	$	(836)
Other comprehensive income (loss):
Net unrealized gain (loss) on marketable securities, net of tax	325		(2,768)		(132)		(872)
Foreign currency translation adjustment	(25)		(52)		(17)		63
Total comprehensive income (loss)	(30,362)		(19,615)		(36,845)		(1,645)
Comprehensive (income) loss attributable to noncontrolling interests	(20)		46		(50)		109
Total comprehensive income (loss) attributable to agilon health, inc.	$	(30,382)	$	(19,569)	$	(36,895)	$	(1,536)

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 June 30, 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
April 1, 2024	410,843	$	4,108	$	2,020,803	$	(1,332,890)	$	(2,747)	$	(788)	$	688,486
Net income (loss)	—	—		—		(30,682)		—		20		(30,662)
Other comprehensive income (loss)	—	—		—		—		300		—		300
Exercise of stock options	42	1		170		—		—		—		171
Vesting of restricted stock units	690	6		(6)		—		—		—		—
Shares withheld related to net share settlement	(128)	(1)		(634)		—		—		—		(635)

Stock-based compensation expense	—	—		18,207		—		—		—		18,207
June 30, 2024	411,447	$	4,114	$	2,038,540	$	(1,363,572)	$	(2,447)	$	(768)	$	675,867

For the three months ended June 30, 2023:


	Total Stockholders’ Equity
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Stockholders’ Equity (Deficit)
	Shares	Amount
April 1, 2023	414,465	$	4,145	$	2,130,126	$	(1,048,208)	$	(3,549)	$	(674)	$	1,081,840
Net income (loss)	—	—		—		(16,749)		—		(46)		(16,795)
Other comprehensive income (loss)	—	—		—		—		(2,820)		—		(2,820)
Exercise of stock options	265	2		926		—		—		—		928
Vesting of restricted stock units	373	4		(4)		—		—		—		—
Shares withheld related to net share settlement	(61)	(1)		(1,714)		—		—		—		(1,715)
Common stock repurchase	(9,615)	(96)		(201,468)		—		—		—		(201,564)
Stock-based compensation expense	—	—		19,572		—		—		—		19,572
June 30, 2023	405,427	$	4,054	$	1,947,438	$	(1,064,957)	$	(6,369)	$	(720)	$	879,446

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agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

(unaudited)

For the six months ended June 30, 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)	—	—		—		(36,746)		—		50		(36,696)
Other comprehensive income (loss)	—	—		—		—		(149)		—		(149)
Exercise of stock options	1,476	15		2,611		—		—		—		2,626
Vesting of restricted stock units	1,860	17		(17)		—		—		—		—
Shares withheld related to net share settlement	(250)	(2)		(1,279)		—		—		—		(1,281)
Issuance of common stock	1,974	20		15,210		—		—		—		15,230
Stock-based compensation expense	—	—		35,116		—		—		—		35,116
June 30, 2024	411,447	$	4,114	$	2,038,540	$	(1,363,572)	$	(2,447)	$	(768)	$	675,867

For the six months ended June 30, 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)	—	—		—		(727)		—		(109)		(836)
Other comprehensive income (loss)	—	—		—		—		(809)		—		(809)
Exercise of stock options	2,267	22		10,523		—		—		—		10,545
Vesting of restricted stock units	452	5		(5)		—		—		—		—
Shares withheld related to net share settlement	(62)	(1)		(1,742)		—		—		—		(1,743)
Common stock repurchase	(9,615)	(96)		(201,468)		—		—		—		(201,564)
Stock-based compensation expense	—	—		33,244		—		—		—		33,244
June 30, 2023	405,427	$	4,054	$	1,947,438	$	(1,064,957)	$	(6,369)	$	(720)	$	879,446

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agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	(36,696)	$	(836)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	11,751		9,704
Stock-based compensation expense	35,116		33,244
Loss (income) from equity method investments	(15,639)		(9,848)
Distributions of earnings from equity method investments	3,340		—
(Gain) loss on sale of assets, net and impairments	3,784		—
Other noncash items	(837)		(2,322)
Changes in operating assets and liabilities:	(67,312)		(111,957)
Net cash provided by (used in) operating activities	(66,493)		(82,015)
Cash flows from investing activities:
Purchase of property and equipment	(6,451)		(7,811)
Purchase of intangible assets	(17,893)		(1,837)
Investment in loans receivable and other	(9,742)		(8,468)
Investments in marketable securities	(12,006)		(65,568)
Proceeds from maturities of marketable securities and other	115,747		97,269
Net cash paid in business combination	—		(44,367)

Net cash provided by (used in) investing activities	69,655		(30,782)
Cash flows from financing activities:
Proceeds from equity issuances, net	1,345		8,802
Common stock repurchase	—		(200,000)
Repayments of long-term debt	(2,500)		(2,500)
Net cash provided by (used in) financing activities	(1,155)		(193,698)
Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents	2,007		(306,495)
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	116,336		184,550
Cash, cash equivalents and restricted cash and equivalents from discontinued operations, end of period	—		16,635
Cash, cash equivalents and restricted cash and equivalents, end of period	$	116,336	$	201,185

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 June 30, 2024, the Company, through its contracted physician networks, provided care to approximately 512,800 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”) Medicare 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”) through its equity method investments.

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 and six months ended June 30, 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 June 30, 2024 and December 31, 2023, the Company’s gross carrying amount of property and equipment was $47.3 million and $41.9 million, with accumulated depreciation of $19.5 million and $14.3 million, respectively. For the three months ended June 30, 2024 and 2023, the Company recognized $2.9 million and $1.8 million, respectively, in depreciation expense, which is included in depreciation and amortization expense in the condensed consolidated statements

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of operations. For the six months ended June 30, 2024 and 2023, the Company recognized $5.8 million and $3.5 million, respectively, in 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 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

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diagnosis data from various settings. The Company and healthcare providers collect and submit the necessary and available 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 and six months ended June 30, 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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Payor A	22	%	23	%	22	%	21	%
Payor B	19	%	15	%	17	%	16	%
Payor C	*		14	%	*		13	%
Payor D	*		11	%	*		11	%

___________________________________________

*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:


	June 30, 2024		December 31, 2023
Payor A	12	%	13	%
Payor B	16	%	11	%

Payor D	14	%	21	%

During the second quarter ended June 30, 2024, the Company completed the termination of certain payor contracts. As a result, during the three months ended June 30, 2024, a reduction of $55.9 million is included in medical services revenue from selected payor contract terminations that were retroactively effective January 1, 2024.

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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):


	June 30, 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	$	168,357	$	26	$	(1,317)	$	167,066	$	234,821	$	180	$	(1,604)	$	233,397
U.S. Treasury notes	125,774		11		(1,229)		124,556		138,329		261		(1,206)		137,384
Other	—		—		—		—		10,000		—		(8)		9,992
	$	294,131	$	37	$	(2,546)	$	291,622	$	383,150	$	441	$	(2,818)	$	380,773

For the three months ended June 30, 2024, the Company recognized total interest income of $4.8 million, of which $3.3 million was related to its marketable securities investments and $1.5 million was related to interest on cash and cash equivalent balances. For the three months ended June 30, 2023, the Company recognized total interest income of $7.2 million, of which $4.8 million was related to its marketable securities investments and $2.4 million was related to interest on cash and cash equivalent balances. For the six months ended June 30, 2024, the Company recognized total interest income of $10.2 million, of which $7.2 million was related to its marketable securities investments and $3.0 million was related to interest on cash and cash equivalent balances. For the six months ended June 30, 2023, the Company recognized total interest income of $15.5 million, of which $9.6 million was related to its marketable securities investments and $5.9 million was related to interest on cash and cash equivalent balances.

The following table summarizes the Company’s marketable securities maturity as of June 30, 2024 (in thousands):


Year	Amortized Cost		Fair Value
2024	$	63,282	$	63,063
2025	177,274		175,292
2026	53,575		53,267

	$	294,131	$	291,622

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 June 30, 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	$	29,142	$	115	$	109,829	$	1,202
U.S. Treasury notes	24,062		109		88,538		1,120

	$	53,204	$	224	$	198,367	$	2,322

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	Less Than 12 Months				12 Months or Greater
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Marketable securities:
Corporate debt securities	$	55,343	$	167	$	126,189	$	1,437
U.S. Treasury notes	37,486		303		75,980		903
Other	9,992		8		—		—
	$	102,821	$	478	$	202,169	$	2,340

The Company’s unrealized losses from marketable securities as of June 30, 2024 and December 31, 2023 were caused primarily by interest rate increases. The Company does not intend to sell marketable securities that are in an unrealized loss position, and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. There was no allowance for credit losses on available-for-sale marketable securities at June 30, 2024 or December 31, 2023.

Fair Value Measurements

The Company’s financial instruments consist of cash and cash equivalents, restricted cash and cash equivalents, marketable securities, receivables, other liabilities, accounts payable, certain accrued expenses, and borrowings which consist of a term loan and a revolving credit facility. The carrying values of the financial instruments classified as current in the consolidated balance sheets approximate their fair values due to their short-term maturities. The Company's cash and cash equivalents are classified within Level 1 of the fair value hierarchy. The Company may be required, from time to time, to measure its loans to physician partner groups, primarily in connection with taxes payable on shares distributed to them upon completion of the Company's initial public offering ("IPO"), at fair value on a nonrecurring basis. Such measurements are classified within Level 2 of the fair value hierarchy. The carrying values of the term loan and revolving credit facility are a reasonable estimate of fair value because the interest rates on such borrowings approximate market rates as of the reporting date. Such borrowings are classified within Level 2 of the fair value hierarchy. During the three and six months ended June 30, 2024 and 2023, there were no material transfers of financial assets or liabilities within the fair value hierarchy.

The Company measures and discloses the fair value of nonfinancial and financial assets and liabilities utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:

•Level 1—quoted prices for identical instruments in active markets;

•Level 2—quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

•Level 3—fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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The table below summarizes the Company’s financial instruments measured at fair value on a recurring basis (in thousands):


	June 30, 2024						December 31, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Marketable securities:
Corporate debt securities	$	—	$	167,066	$	—	$	—	$	233,397	$	—
U.S. Treasury notes	124,556		—		—		137,384		—		—
Other	—		—		—		9,992		—		—
	$	124,556	$	167,066	$	—	$	147,376	$	233,397	$	—


NOTE 5. Other Assets

The following table summarizes the Company’s other assets (in thousands):


	June 30, 2024		December 31, 2023
Loans to physician partners	$	71,385	$	71,862
Health plan deposits	2,051		2,051
Equity method investments(1)	51,008		44,753
Right-of-use lease assets	12,626		13,411
Other	15,460		13,235
	$	152,530	$	145,312

___________________________________________

(1)See Note 14 for additional discussion related to the Company's equity method investments.

Loans to Physician Partners

Loans to physician partners primarily represent loans in connection with taxes payable on shares distributed to them in connection with the IPO. These loans mature between 2026 and 2031 with nominal interest compounding annually and no prepayment penalties. Such loans are stated at the amount expected to be collected.


NOTE 6. Medical Claims and Related Payables

Medical services expense represents costs incurred for medical services provided to members by physicians, hospitals and other ancillary providers for which the Company is financially responsible and are paid by payors with whom the Company has contracted. Medical services expenses are recognized in the period in which services are provided and include estimates of claims that have been incurred but have either not yet been received, processed, or paid and as such, not reported.

Such estimates are developed using actuarial methods commonly used by health insurance actuaries that include a number of factors and assumptions including medical service utilization trends, changes in membership, observed medical cost trends, historical claim payment patterns and other factors. Generally, for the most recent months, the Company estimates claim costs incurred by applying observed medical cost trend factors to the average PMPM medical costs incurred in prior months for which more complete claims data are available.

Each period, the Company re-examines previously established medical claims payable estimates based on actual claim submissions and other changes in facts and circumstances. As more complete claims information becomes available, the Company adjusts its estimates and recognizes those changes in estimates in the period in which the change is identified. The difference between the estimated liability and the actual settlements of claims is recognized in the period the claims are settled. The Company’s medical claims payable balance represents management’s best estimate of its liability for unpaid medical costs as of June 30, 2024 and 2023. The Company uses judgment to determine the appropriate assumptions for developing the required estimates.

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The following table presents the components of changes in medical claims and related payables (in thousands):


	June 30,
	2024		2023
Medical claims and related payables, beginning of the year	$	723,071	$	339,748
Components of incurred costs related to:
Current year	2,802,803		1,790,634
Prior years	15,099		39,761
Discontinued operations - current year	—		146,585
Discontinued operations - prior years	—		4,581
	2,817,902		1,981,561
Claims paid related to:
Current year	(1,806,692)		(774,743)
Prior years	(650,106)		(304,682)
Discontinued operations - current year	—		(107,907)
Discontinued operations - prior years	—		(47,017)
	(2,456,798)		(1,234,349)
Medical claims and related payables, end of the period	$	1,084,175	$	1,086,960

Medical claims and related payables also include $13.5 million and $14.7 million, as of June 30, 2024 and December 31, 2023, respectively, that is recoverable from other parties under risk sharing arrangements and is presented as prepaid expenses and other current assets, net in the condensed consolidated balance sheets.

During the second quarter ended June 30, 2024, the Company completed the termination of certain payor contracts. As a result, during the three months ended June 30, 2024, a reduction of $54.3 million is included in medical services expense from selected payor contract terminations that were retroactively effective January 1, 2024.


NOTE 7. Other Liabilities

The following table summarizes the Company’s other liabilities (in thousands):


	June 30, 2024		December 31, 2023
Other long-term contingencies	$	49,000	$	49,000
Lease liabilities, long-term	10,063		10,905
Equity method liabilities – CMS ACO Models	4,895		1,199
Other	8,817		9,277
	$	72,775	$	70,381

As of both June 30, 2024 and December 31, 2023, the Company’s accruals for contingent liabilities related to unasserted claims were $49.0 million. The accrued amounts represent the Company’s estimate of probable losses in accordance with ASC Topic 450, Contingencies.

See Note 14 for equity method liabilities related to the Company's CMS ACO Models investments.


NOTE 8. Debt

On February 18, 2021, the Company executed a credit facility agreement (as amended by the First Amendment to Credit Agreement, dated as of March 1, 2021 and the Second Amendment to Credit Agreement, dated as of May 25, 2023, the “Credit Facility”). The Credit Facility includes: (i) a $100.0 million secured term loan (the “Secured Term Loan Facility”) and (ii) a $100.0 million senior secured revolving credit facility (the “Secured Revolving Facility”) with a

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capacity to issue standby letters of credit in certain circumstances up to a maximum of $100.0 million. Subject to specified conditions and receipt of commitments, the Secured Term Loan Facility may be expanded (or a new term loan facility, revolving credit facility or letter of credit facility added) by up to (i) $50.0 million plus (ii) an additional amount determined in accordance with a formula tied to repayment of certain of the Company’s indebtedness. The maturity date of the Credit Facility is February 18, 2026.

As of June 30, 2024, the Company had $36.2 million outstanding under the Secured Term Loan Facility and availability under the Secured Revolving Facility was $51.4 million, as the Company had outstanding letters of credit totaling $48.6 million. The standby letters of credit are automatically extended without amendment for one-year periods, unless the Company notifies the institution in advance of the expiration date that the letter will be terminated. No amounts have been drawn on the outstanding letters of credit as of June 30, 2024.

Effective with the Second Amendment to Credit Agreement on May 25, 2023, the Company transitioned to the Secured Overnight Financing Rate ("SOFR") as a benchmark interest rate used in the Credit Agreement. At the Company’s option, borrowings under the Credit Agreement can be either: (i) SOFR Rate Loans, (ii) Daily Simple SOFR Rate Loans, or (iii) Base Rate Loans. Daily Simple SOFR Rate Loans and SOFR Rate Loans bear interest at a rate equal to the sum of 3.50% and the higher of (a) SOFR, as defined in the credit agreement, and (b) 0%. Base Rate Loans bear interest at a rate equal to the sum of 2.50% and the highest of: (a) 0.50% in excess of the overnight federal funds rate, (b) the prime rate established by the administrative agent from time to time, (c) the one-month SOFR rate (adjusted for maximum reserves) plus 1.00% and (d) 0%. Additionally, the Company pays a commitment fee on the unfunded Secured Revolving Facility amount of 0.375%. The Company must also pay customary letter of credit fees. As of June 30, 2024, the effective interest rate on the Secured Term Loan Facility was 9.376%.

The Credit Facility is guaranteed by certain of the Company’s subsidiaries, including those identified as VIEs, and contain customary covenants including, among other things, limitations on restricted payments including: (i) dividends and distributions from restricted subsidiaries, (ii) requirements of minimum financial ratios, and (iii) limitation on additional borrowings based on certain financial ratios. Failure to meet any of these covenants could result in an event of default under the Credit Agreement. If an event of default occurs, the lenders could elect to declare all amounts outstanding under the Credit Agreement to be immediately due and payable. The Company was in compliance with all covenants under the Credit Facilities.

As of both June 30, 2024 and December 31, 2023, the Company had $25.1 million outstanding surety bonds related to health plan payor risk-bearing capital contributions.


NOTE 9. Commitments and Contingencies

Legal Proceedings

From time to time, the Company is a party to, or has a significant relationship to, legal proceedings, lawsuits, and other claims that arise in the ordinary course of the Company's business. Except as described in this Note 9, the Company is not aware of any other legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Company's business, prospects, financial condition, results of operations or cash flows. The Company’s policy is to expense legal costs as they are incurred.

In February and March 2024, three putative class action lawsuits, (1) New England Teamsters Pension Fund v. agilon health, inc. et al., 1:24-cv-00297 (W.D. Tex., March 19, 2024); (2) Hope v. agilon health, inc. et al., 1:24-cv-00305 (W.D. Tex., March 25, 2024); and (3) Indiana Public Retirement System v. agilon health et al., 1:24-cv-02506 (S.D.N.Y., April 2, 2024), were filed. The lawsuits name the Company and certain current and former members of the Company’s executive team and Board of Directors as defendants. The lawsuits generally assert securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended and under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, in connection with statements made in the Company’s annual and quarterly reports and earnings releases related to, among other things, the Company’s medical utilization and claims rates, medical margin, incurred but not reported reserve, and profit margins between April 2021 to February 2024. The lawsuits seek compensatory damages, attorney’s fees and other unspecified equitable and/or injunctive relief. The Company is unable to estimate the ultimate individual or aggregate amount of monetary liability or financial impact due to the early stages of the litigation.

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NOTE 10. Common Stock

Common Stock

2024. During the three months ended June 30, 2024, the Company issued approximately 0.6 million shares of common stock primarily in connection with exercises and vesting of stock-based awards. During the six months ended June 30, 2024, the Company issued approximately 3.1 million shares of common stock primarily in connection with exercises and vesting of stock-based awards. Additionally, during the six months ended June 30, 2024, the Company issued approximately 2.0 million shares of common stock to settle liabilities related to the exchange of common stock for reduced physician partner compensation percentage in certain ACO REACH entities.

2023. During the three months ended June 30, 2023, the Company issued approximately 0.6 million shares of common stock primarily in connection with exercises and vesting of stock-based awards. During the six months ended June 30, 2023, the Company issued approximately 2.7 million shares of common stock primarily in connection with exercises and vesting of stock-based awards.

On May 18, 2023, the Company repurchased and retired approximately 9.6 million shares of common stock pursuant to an underwritten secondary public offering of approximately 94.6 million shares of its common stock sold by CD&R. The Company paid approximately $20.80 per share, which is the same per share price paid by the underwriters to CD&R in the offering.


NOTE 11. Net Income (Loss) Per Common Share

Basic net income (loss) per common share (“EPS”) is computed based upon the weighted average number of common shares outstanding. Diluted net income (loss) per common share is computed based upon the weighted average number of common shares outstanding plus the impact of common shares issuable from the assumed conversion of stock options, certain performance restricted stock units, and unvested restricted stock units. Only those instruments having a dilutive impact on basic net income (loss) per share are included in diluted net income (loss) per share during the periods presented.

The following table illustrates the computation of basic and diluted EPS (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator
Income (loss) from continuing operations	$	(30,662)	$	(16,026)	$	(27,415)	$	(6,075)
Noncontrolling interests’ share in (earnings) loss from continuing operations	(20)		46		(50)		109
Net income (loss) attributable to common stockholders before discontinued operations	(30,682)		(15,980)		(27,465)		(5,966)
Income (loss) from discontinued operations	—		(769)		(9,281)		5,239
Net income (loss) attributable to common stockholders	$	(30,682)	$	(16,749)	$	(36,746)	$	(727)
Denominator
Weighted average shares outstanding – basic	411,271		410,338		409,152		411,748
Weighted average shares outstanding – diluted	411,271		410,338		409,152		411,748
Net income (loss) per share attributable to common stockholders
Net income (loss) per common share from continuing operations, basic and diluted	$	(0.07)	$	(0.04)	$	(0.07)	$	(0.01)
Net income (loss) per common share from discontinued operations, basic and diluted	$	—	$	—	$	(0.02)	$	0.01

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The following table provides the weighted-average potential shares of common stock that were excluded from the calculation of diluted net income (loss) per share attributable to common stockholders because their effect would have been anti-dilutive (in thousands):


	June 30,
	2024	2023
Stock options	17,421	17,865
Restricted stock units	20,177	9,021


NOTE 12. Goodwill and Amortizable Intangible Assets

As of both June 30, 2024 and December 31, 2023, the Company’s goodwill balance was $24.1 million. There were no events or circumstances that warranted an interim impairment test for goodwill during the six months ended June 30, 2024.

As of June 30, 2024 and December 31, 2023, the Company’s gross carrying amount of amortizable intangible assets was $124.6 million and $108.0 million, with accumulated amortization of $49.8 million and $44.2 million, respectively. For the three months ended June 30, 2024 and 2023, the Company recognized $3.0 million and $2.5 million, respectively, in amortization expense, which is included in depreciation and amortization expense in the condensed consolidated statements of operations. For the six months ended June 30, 2024 and 2023, the Company recognized $6.0 million and $3.7 million, respectively, in amortization expense, which is included in depreciation and amortization expense in the condensed consolidated statements of operations.

Acquisition

On February 28, 2023, the Company completed the acquisition of My Personal Health Record Express, Inc. (the “Acquisition”), a leading provider of value-based care technology and interoperability solutions for cash consideration of $45.3 million, net of cash acquired and subject to certain post-closing adjustments. The Company accounted for the Acquisition utilizing the acquisition method of accounting, which requires assets and liabilities to be recognized based on estimates of their acquisition date fair values. The determination of the values of the acquired assets and assumed liabilities, including other intangible assets and deferred taxes, requires significant judgment. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the Company estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Measurement period adjustments are recorded in the period in which they are determined, as if they had been completed at the acquisition date. Upon the conclusion of the final determination of the values of assets acquired or liabilities assumed, or one year after the date of acquisition, whichever comes first, any subsequent adjustments are recorded within the Company's consolidated results of operations. The following allocation of the purchase price related to the Acquisition based upon the fair value of assets, which included developed technology of $27.5 million, and assumed net liabilities of $3.8 million, with the residual amount being recorded as goodwill of $21.6 million. The intangible assets acquired have a weighted-average life of 10 years.

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NOTE 13. Supplemental Cash Flow Information

The following table provides supplemental cash flow information (in thousands):


	Six Months Ended June 30,
	2024		2023
Supplemental cash flow information:
Interest paid	$	1,981	$	3,174
Income taxes paid	355		1,653
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use asset obtained in exchange for new operating lease liability	326		435
Settlement of liabilities through issuance of stock	15,230		—

The following table summarizes cash, cash equivalents and restricted cash equivalents (in thousands):


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	109,490	$	107,570
Restricted cash and equivalents(1)	6,846		6,759
Cash, cash equivalents and restricted cash equivalents	$	116,336	$	114,329

___________________________________________

(1)Restricted cash and equivalents primarily consist of amounts used as collateral to secure letters of credit that the Company is required to maintain pursuant to contracts with payors.


NOTE 14. Variable Interest Entities

Consolidated Variable Interest Entities

agilon health, inc.’s consolidated assets and liabilities as of June 30, 2024 and December 31, 2023 include certain assets of VIEs that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to agilon health, inc.

agilon health, inc.’s consolidated assets and liabilities include VIE assets and liabilities as follows (in thousands):


	June 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	74,639	$	62,154
Restricted cash equivalents	6,844		6,757
Receivables, net	1,435,410		940,618
Prepaid expenses and other current assets, net	22,704		21,907
Property and equipment, net	1,472		1,754
Intangible assets, net	50,035		25,561
Other assets, net	6,013		6,334
Liabilities
Medical claims and related payables	1,097,664		737,724
Accounts payable and accrued expenses	255,440		188,671
Other liabilities	4,201		4,184

Risk-bearing Entities. At June 30, 2024, the Company operates 34 wholly-owned risk-bearing entities (“RBEs”) for the purpose of entering into risk-bearing contracts with payors. Each RBE’s equity at risk is considered insufficient to

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finance its activities without additional support, and, therefore, each RBE is considered a VIE. The Company consolidates the RBEs as it has determined that it is the primary beneficiary because it has: (i) the ability to control the activities that most significantly impact the RBEs’ economic performance; and (ii) the obligation to absorb losses or right to receive benefits that could potentially be significant to the RBEs. Specifically, the Company has the unilateral ability and authority, through the RBE governance and management agreements, to make significant decisions about strategic and operating activities of the RBEs, including negotiating and entering into risk-bearing contracts with payors, and approving the RBEs’ annual operating budgets. The Company also has the obligation to fund losses of the RBEs and the right to receive a significant percentage of any financial surplus generated by the RBEs. The assets of the RBEs primarily consist of cash and cash equivalents, receivables, net, intangible assets, net, and other assets. Its obligations primarily consist of medical claims and related payables as well as operating expenses of the RBEs (accounts payable and accrued expenses), including incentive compensation obligations to the Company’s physician partners. On February 18, 2021, the Company executed the Credit Facility, which is guaranteed by certain of the Company’s VIEs. Assets generated by the RBEs (primarily from medical services revenues) may be used, in certain limited circumstances, to settle the Company’s contractual debt obligations.

Unconsolidated Variable Interest Entities

As of June 30, 2024, the Company had 11 equity method investees that were deemed to be VIEs. The Company has determined that the activities that most significantly impact the performance of these VIEs consist of the allocation of resources to and other decisions related to clinical activities and provider contracting decisions. Because the Company does not have the ability to control these activities due to another party’s control of the VIEs’ board of directors, the Company has determined that it is not the primary beneficiary of and therefore does not consolidate these VIEs. The Company provided support to assist its CMS ACO Models investments in obtaining surety bonds related to risk-bearing capital contributions to CMS. As of June 30, 2024 and December 31, 2023, the ACOs had $103.0 million and $38.5 million outstanding surety bonds. The Company's maximum loss exposure as a result of the Company’s involvement with the VIEs cannot be quantified as the Company has the obligation to provide ongoing operational support to the unconsolidated VIEs, as needed.

Equity Method Investments

The following table summarizes the Company’s equity method investees (in thousands):


	June 30, 2024		December 31, 2023
Equity method investments - Other(1)	$	9,511	$	9,148
Equity method investments - CMS ACO Models(1)	41,497		35,605
Equity method liabilities - CMS ACO Models(2)	(4,895)		(1,199)

___________________________________________

(1)Included in Other assets, net in the condensed consolidated balance sheets.

(2)Included in Other liabilities in the condensed consolidated balance sheets.

The Company is a partner in 10 wholly-owned CMS ACO Models entities in collaboration with 15 of its physician group partners operating in 13 geographies. The combined summarized operating results of the Company’s CMS ACO Models entities are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Medical services revenue	$	446,914	$	280,820	$	887,074	$	561,349
Medical services expense	(406,921)		(241,844)		(805,713)		(499,321)
Other medical expenses(1)	(22,268)		(23,424)		(47,673)		(39,168)
Income (loss) from operations	11,325		11,184		20,857		13,185
Net income (loss)(2)	9,921		8,426		15,552		9,760

___________________________________________

(1)For the three months ended June 30, 2024 and 2023, includes physician incentive expenses of $13.7 million and $16.6 million, respectively. For the six months ended June 30, 2024 and 2023, includes physician incentive expenses of $30.4 million and $26.3 million, respectively.

(2)Included in Income (loss) from equity method investments in the condensed consolidated statements of operations.

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The combined summarized balance sheet of the Company’s CMS ACO Models entities are as follows (in thousands):


	June 30, 2024		December 31, 2023
Current assets	$	429,516	$	174,967
Noncurrent assets	3,342		3,341
Total assets	432,858		178,308
Current and total liabilities	396,256		142,027


NOTE 15. Discontinued Operations

Discontinued operations is a component of an entity that has either been disposed of or is deemed held-for-sale and, (i) the operations and cash flows of the component have been or will be eliminated from ongoing operations as a result of the disposal transaction, and (ii) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. On October 31, 2023, the Company completed the disposition of MDX Hawaii, Inc. and its related operations. The Company’s decision to exit Hawaii and the Independent Practice Association line of business represents a strategic shift that will have a major effect on its operations and financial results. As such, the Company’s Hawaii operations are reflected in the consolidated financial statements as discontinued operations for all periods presented.

The results of discontinued operations are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Medical services revenue	$	—	$	79,810	$	—	$	161,521
Other operating revenue	—		127		—		251
Total revenues	—		79,937		—		161,772
Expenses:
Medical services expense	—		75,911		—		151,166
Other medical expenses	—		1,409		—		3,816
General and administrative	—		2,245		518		(661)
Depreciation and amortization	—		1,236		—		2,471
Income (loss) from operations	—		(864)		(518)		4,980
Other income (expense), net	—		128		—		332
Gain (loss) on sales of assets, net	—		—		(8,763)		—
Interest expense	—		(33)		—		(73)
Net income (loss) from discontinued operations attributable to common shares	$	—	$	(769)	$	(9,281)	$	5,239

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The following table provides significant non-cash operating items for discontinued operations that are included in the consolidated statements of cash flows for the six months ended June 30, 2023 (in thousands):


Non-cash operating activities from discontinued operations:
Depreciation and amortization	$	2,471
Stock-based compensation expense	213

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

All references in this report to “agilon,” “the Company”, “we,” “us” or “our” mean agilon health, inc., together with its consolidated subsidiaries. Unless the context suggests otherwise, references to “agilon health, inc.” mean the parent company without its subsidiaries.

Cautionary Language Regarding Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q (the “Report”) 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 (the “Exchange Act”). Some of the forward-looking statements can be identified by the use of forward-looking terms 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. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this Report and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, our financial position, results of operations, cash flows, prospects, and growth strategies.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be outside our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition, and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. As explained in greater detail under Item 9A. “Controls and Procedures” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, we are undertaking a broad range of remedial procedures to address the material weaknesses in our internal control over financial reporting identified as of December 31, 2023. Our efforts to improve our internal controls are ongoing. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Report. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

•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 maintain and secure additional contracts with Medicare Advantage (“MA”) payors on favorable terms, if at all;

•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;

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•our ability 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 to perform and fund their operations;

•environmental, social, and governance issues;

•our reliance on a limited number of key payors;

•the limited terms of contracts with our payors and our ability to renew them upon expiration;

•our ability to navigate the changing healthcare payor market;

•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 physician partners’ ability to comply with 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;

•our 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 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 under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

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.

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:

•Overview and Recent Developments

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•Key Financial and Operating Metrics

•Key Components of Our Results of Operations

•Results of Operations

•Non-GAAP Financial Measures

•Liquidity and Capital Resources

•Critical Accounting Policies and Estimates

•Recent Accounting Pronouncements

Overview and Recent Developments

Our business is transforming healthcare by empowering the primary care physicians (“PCPs”) to be the agent for change in the communities they serve. We believe that PCPs, with their intimate patient-physician relationships, are best positioned to drive meaningful change in quality, cost, and patient experience when provided with the right infrastructure and payment model. Through our combination of the agilon platform, a long-term partnership model with existing physician groups and a growing network of like-minded physicians, we are poised to revolutionize healthcare for seniors across communities throughout the United States. Our purpose-built model provides the necessary capabilities, capital, and business model for existing physician groups to create a Medicare-centric, globally capitated line of business. Our model operates by forming risk-bearing entities (“RBEs”) within local geographies, that enter into arrangements with payors providing for monthly payments to manage the total healthcare needs of our physician partners’ attributed patients (or, global capitation arrangements). The RBEs also contract with agilon to perform certain functions and enter into long-term professional service agreements with one or more anchor physician groups pursuant to which the anchor physician groups receive a base compensation rate and share in the savings from successfully improving quality of care and reducing costs.

Our business model is differentiated by its focus on existing community-based physician groups and is built around three key elements: (1) agilon’s platform; (2) agilon’s long-term physician partnership approach; and (3) agilon’s network. With our model, our goal is to remove the barriers that prevent community-based physicians from evolving to a Total Care Model, where the physician is empowered to manage health outcomes and the total healthcare needs of their attributed Medicare patients.

Second Quarter 2024 Results:

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

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

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

•Gross profit of $32 million, compared to $55 million in the second quarter of 2023.

•Medical margin of $106 million, compared to $134 million in the second quarter of 2023.

•Net loss of $31 million, compared to $17 million in the second quarter of 2023.

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

Year to Date 2024 Results as of June 30, 2024:

•Total revenue of $3.1 billion increased 45% from the first half of 2023.

•Gross profit of $107 million, compared to $128 million in the first half of 2023.

•Medical margin of $263 million, compared to $290 million in the first half of 2023.

•Net loss of $37 million, compared to $1 million in the first half of 2023.

•Adjusted EBITDA of $26 million, compared to $37 million in the first half 2023.

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Membership Details

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.

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

Key Financial and Operating Metrics

All of our key metrics exclude historical results from our Hawaii operations (which are included as discontinued operations in our condensed consolidated financial statements).

We monitor the following key financial and operating metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. We believe the following key metrics are useful in evaluating our business (dollars in thousands):


	As of and For the					As of and For the
	Three Months Ended June 30,					Six Months Ended June 30,
	2024		2023		% Change	2024		2023		% Change
MA members	512,800		372,800		38	512,800		372,800		38
Medical services revenue	$	1,479,579	$	1,067,234	39	$	3,080,774	$	2,120,353	45
Gross profit	$	32,175	$	54,576	(41)	$	107,263	$	127,699	(16)
Medical margin(1)	$	105,519	$	134,411	(21)	$	262,872	$	289,958	(9)
Platform support costs	$	41,687	$	42,041	(1)	$	87,399	$	85,333	2
Net income (loss)	$	(30,662)	$	(16,795)	(83)	$	(36,696)	$	(836)	(4,289)
Adjusted EBITDA(1)	$	(2,830)	$	12,469	(123)	$	26,224	$	36,507	(28)

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(1)Medical margin and Adjusted EBITDA are non-GAAP financial measures. Gross profit is the most directly comparable financial measure calculated in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) to medical margin. Net income (loss) is the most directly comparable financial measure calculated in accordance with U.S. GAAP to Adjusted EBITDA. See “—Non-GAAP Financial Measures" below for additional information.

Medicare Advantage Members

Our MA members include all individuals enrolled in an MA plan that are attributed to the PCPs on our platform at the end of a given period.

Medical Services Revenue

Our medical services revenue consists of capitation revenue under contracts with various payors. Under the typical capitation arrangement, we are entitled to per member per month ("PMPM") fees to provide a defined range of healthcare services for MA health plan members through our contracted physician partners and affiliated PCPs. Such fees are typically based on a defined percentage of corresponding premium that payors receive from the Centers for Medicare & Medicaid Services' (“CMS”). We recognize capitation revenue over the period eligible members are entitled to receive healthcare services.

Gross Profit

Gross profit represents the amount earned from total revenues less medical services expense and other medical expenses. Total revenues include medical services revenue and other operating revenue. The Company’s costs of revenues consist of medical services expense and other medical expenses, which represents the costs that are directly related to providing the services that generate revenue.

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The following table presents our gross profit (dollars in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Total revenues	$	1,482,758	$	1,069,115	$	3,087,112	$	2,123,427
Medical services expense	(1,374,060)		(932,823)		(2,817,902)		(1,830,395)
Other medical expenses(1)	(76,523)		(81,716)		(161,947)		(165,333)
Gross profit	$	32,175	$	54,576	$	107,263	$	127,699

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(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.

Medical Margin

We define medical margin as medical services revenue after medical services expense is 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 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.

See “—Non-GAAP Financial Measures” for information regarding our use of medical margin and a reconciliation of gross profit to medical margin.

Platform Support Costs

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 and compliance functions.

The table below represents costs to support our live geographies and enterprise functions, which are included in general and administrative expenses (dollars in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Platform support costs	$	41,687		$	42,041		$	87,399		$	85,333
% of Revenue	3		%	4		%	3		%	4		%

Net Income (Loss) and Adjusted EBITDA

Net income (loss) is the most directly comparable U.S. GAAP measure to Adjusted EBITDA. 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) stock-based compensation expense, (vi) severance and related costs, and (vii) 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.

See “—Non-GAAP Financial Measures” for information regarding our use of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA.

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Key Components of Our Results of Operations

Revenues

Medical Services Revenue

Our medical services revenue consists of capitation revenue under contracts with various payors. Under the typical capitation arrangement, we are entitled to PMPM fees to provide a defined range of healthcare services for MA health plan members through our contracted physician partners and affiliated PCPs. Such fees are typically based on a defined percentage of corresponding premium that payors receive from CMS. We recognize capitation revenue over the period eligible members are entitled to receive healthcare services.

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

Operating Expenses

Medical Services Expense

In each of our geographies, a network of physicians, hospitals, and other healthcare providers provide care to our members. Medical services expense represents costs incurred for medical services provided to our members. Our medical services expense trends primarily relate to changes in per visit costs incurred by our members, along with changes in health system and provider utilization of services. Medical services expenses are recognized in the period in which services are provided and include estimates of our obligations for medical services that have been rendered by third parties but for which claims have either not yet been received, processed, or paid.

Other Medical Expenses

Other medical expenses include: (i) partner physician compensation expense and (ii) other provider costs. Partner physician compensation expense represents obligations to our physician partners corresponding to a portion of the surplus 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. Physician payment obligations are reconciled quarterly, and settlement payments are typically issued to providers on an annual basis in arrears, with interim payments issued periodically. Other provider costs include payments to support physician-patient engagement, certain other medical costs, and other care management expenses that help to create medical cost efficiency. Other provider costs include costs incurred for geographies that are in implementation and are not yet generating revenue.

General and Administrative

General and administrative expenses consist of market-based support personnel and other operating costs to support our geographies, personnel and other operating costs to support our enterprise functions, and investments to support development and expansion of our physician partners. Our enterprise functions include salaries and related expenses, stock-based compensation (including shares issued under partner physician group equity agreements), operational support expenses, technology infrastructure, finance, and legal, as well as other costs associated with the continued growth of our platform. For the purposes of calculating physician partner incentive expense, we allocate a portion of our enterprise general and administrative expenses to our geographies. General and administrative expenses also include severance and accruals for unasserted claims.

Depreciation and Amortization

Depreciation and amortization expenses are associated with our property and equipment and acquired intangible assets. Depreciation includes expenses associated with computer equipment and software, furniture and fixtures, and leasehold improvements. Amortization primarily includes expenses associated with acquired intangible assets.

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Other Income (Expense)

Income (loss) from equity method investments

Income (loss) from equity method investments consists primarily of income associated with our participation in the 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”).

Other Income (Expense), Net

Other income (expense), net includes interest income, which consists primarily of interest earned on our cash and cash equivalents, restricted cash and cash equivalents, and marketable securities, including amortization/accretion of discount/premium.

Interest Expense

Interest expense consists primarily of interest expense associated with our outstanding debt, including amortization of debt discounts and costs.

Income Tax Benefit (Expense)

We are subject to corporate U.S. federal, state, and local income taxation. Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates.

Total Discontinued Operations

Total discontinued operations primarily consist of the results of our Hawaii operations. For certain of our divestiture transactions, we continue to be responsible for any liabilities arising from the business that were incurred prior to the closing date of such transaction, including any fines, penalties, and other sanctions, the payment of claims for medical services incurred prior to the effective date of each transaction, a liability for unrecognized tax benefits for which we are indemnified, and other contingent liabilities that we currently believe are remote. For additional discussion, see Note 15 to the Condensed Consolidated Financial Statements.

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Results of Operations

The following table summarizes key components of our results of operations (dollars in thousands):


Three Months Ended June 30,		Six Months Ended June 30,
2024	2023	2024	2023

agilon health, inc. [AGL] Filings
10-Q	[2024-08-06]
10-Q	[2024-05-07]
10-K	[2024-02-27]
10-Q	[2023-11-02]
10-Q	[2023-08-03]
10-Q	[2023-05-09]
10-K	[2023-03-01]
10-Q	[2022-11-03]
10-Q	[2022-08-04]
10-Q	[2022-05-05]
10-K	[2022-03-03]
10-Q	[2021-10-28]
S-1	[2021-08-30]
10-Q	[2021-08-04]
10-Q	[2021-05-26]
S-1	[2021-03-18]