agilon health, inc. (NYSE:AGL) Q3 2022 Results Conference Call November 3, 2022 5:00 PM ET Company Participants Matthew Gillmor - VP, IR Steve Sell - CEO Tim Bensley - CFO Conference Call Participants Lisa Gill - JP Morgan Justin Lake - Wolfe Research Adam Ron - Bank of America Ryan Daniels - William Blair Whit Mayo - SVB Securities Sean Dodge - RBC Capital Markets Taji Phillips - Jefferies Stephen Baxter - Wells Fargo Jamie Perse - Goldman Sachs Gary Taylor - Cowen Operator Hello, and a warm welcome to tod ...

agilon health, inc. (NYSE:AGL) Q2 2022 Earnings Conference Call August 4, 2022 5:00 PM ET Company Participants Matthew Gillmor – Vice President of Investor Relations Steve Sell – Chief Executive Officer Tim Bensley – Chief Financial Officer Conference Call Participants Lisa Gill – JPMorgan Justin Lake – Wolfe Research Stephen Baxter – Wells Fargo Taji Phillips – Jefferies Whit Mayo – SVB Securities Adam Ron – Bank of America Jack Senft – William Blair Gary Taylor – Cowen George Hill – Deutsche Bank Operator ...

Membership Growth - Medicare Advantage members increased by 44% to approximately 261,200 as of June 30, 2022, compared to 181,700 in the same period of 2021[110] - DCE attributed beneficiaries increased by 63% to approximately 90,500 as of June 30, 2022, compared to the same period in 2021[110] - Average Medicare Advantage membership during the second quarter was 265,400[113] Revenue Performance - Total revenue for the second quarter of 2022 was $670 million, representing a 34% increase from the second quarter of 2021[110] - Year-to-date total revenue for 2022 reached $1.3 billion, a 45% increase compared to 2021[112] - Medical services revenue for the three months ended June 30, 2022, was $669,184,000, an increase of 34.4% from $497,678,000 in the same period of 2021[124] - For the six months ended June 30, 2022, medical services revenue rose by 45% to $1.32 billion from $910.1 million in 2021, attributed to the expansion into six new geographies[146] - Total revenues for the six months ended June 30, 2022, were $1,323,579,000, compared to $912,060,000 for the same period in 2021, reflecting a growth of 45.2%[143] Profitability and Loss - The net loss for the second quarter of 2022 was $21 million, significantly reduced from a net loss of $299 million in the second quarter of 2021[110] - Adjusted EBITDA for the second quarter of 2022 was positive $7 million, compared to negative $2 million in the second quarter of 2021[110] - Net income (loss) for the three months ended June 30, 2022, was $(20,731,000), an improvement from $(298,941,000) in the same period of 2021[143] - The company reported a net loss of $3 million for the three months ended June 30, 2022, compared to a net loss of $60 million in the same period of 2021[145] - Adjusted EBITDA for the three months ended June 30, 2022, was $7.5 million, compared to a loss of $1.7 million for the same period in 2021[163] Medical Expenses - Medical services expense for the three months ended June 30, 2022, was $587,140,000, an increase of 32.7% from $442,483,000 in the same period of 2021[143] - Medical services expense for the three months ended June 30, 2022, increased by 33% to $587.1 million compared to $442.5 million in 2021, reflecting the growth in average membership[147] - Other medical expenses for the three months ended June 30, 2022, were $49,080,000, compared to $33,694,000 in the same period of 2021, reflecting a 45.5% increase[143] - Other medical expenses for the three months ended June 30, 2022, rose by 46% to $49.1 million from $33.7 million in 2021, with partner physician incentive expenses increasing by $9.0 million[149] Operating Costs - Platform support costs for the second quarter of 2022 were $36.3 million, an 18% increase from $30.7 million in the second quarter of 2021[120] - Operating costs to support live geographies and enterprise functions increased by $5.6 million to $36.3 million for the three months ended June 30, 2022[151] - Platform support costs for the three months ended June 30, 2022, were $36,291,000, representing 5% of revenue, down from 6% in the same period of 2021[129] Cash Flow and Financing - Cash and cash equivalents as of June 30, 2022, totaled $668.6 million, with investments in marketable securities amounting to $285.6 million[164] - Net cash used in operating activities was $83.5 million for the six months ended June 30, 2022, compared to $80.1 million for the same period in 2021, indicating a slight increase in cash outflow[171] - Net cash used in investing activities was $305.5 million for the six months ended June 30, 2022, significantly higher than $76.3 million for the same period in 2021, reflecting increased investments in marketable securities[173] - Net cash provided by financing activities was $17.8 million for the six months ended June 30, 2022, a substantial decrease from $1.1 billion in the same period of 2021, primarily due to the IPO proceeds received in 2021[174] Future Outlook - The company expects to continue incurring operating losses and generating negative cash flows from operations for the foreseeable future due to ongoing investments in business expansion[165] - The company may require additional capital resources in the future to execute strategic initiatives for growth, potentially through public or private equity offerings and/or debt financings[167] - The company plans to continue expanding into new geographies, which is expected to drive further revenue growth in the future[148] Debt and Interest Rates - The company executed a credit facility agreement with a $100.0 million senior secured term loan and a $100.0 million senior secured revolving credit facility[175] - The company repaid $50.0 million of the Secured Term Loan Facility on April 26, 2021, with a maturity date extended to February 18, 2026[175] - The interest rate for LIBO Rate Loans is set at 4.00%, stepping down to 3.50% on October 1, 2023[176] - The company has a commitment fee of 0.50% on the unfunded 2021 Revolving Credit Facility amount, stepping down to 0.375% on October 1, 2023[176] - The company is exposed to market risks related to floating rate debt under the Credit Facilities, which may impact financial statements due to interest rate fluctuations[183] Accounting Policies - There have been no significant changes to the company's critical accounting policies during 2022[181]

agilon health, inc. (NYSE:AGL) Q1 2022 Earnings Conference Call May 5, 2022 5:00 PM ET Company Participants Matthew Gillmor - Vice President of Investor Relations Steven Sell - Chief Executive Officer Tim Bensley - Chief Financial Officer Conference Call Participants Lisa Gill - JPMorgan Chase & Co. Whit Mayo - SVB Securities LLC Harrison Zhuo - Wolfe Research, LLC Stephen Baxter - Wells Fargo Securities LLC Gary Taylor - Cowen Inc. Nicholas Spiekhout - William Blair & Company Sandy Draper - Guggenheim Part ...

PART I. FINANCIAL INFORMATION [Item 1. Unaudited Financial Statements](index=2&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2022 and 2021, detailing balance sheets, operations, equity, cash flows, and accounting notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$1.86 billion** by March 31, 2022, driven by receivables, while total liabilities rose to **$743.7 million**, primarily from medical claims, with stockholders' equity slightly increasing Condensed Consolidated Balance Sheets (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $1,627,940 | $1,367,195 | | **Total assets** | $1,855,211 | $1,586,252 | | **Total current liabilities** | $610,461 | $356,960 | | **Total liabilities** | $743,734 | $494,656 | | **Total stockholders' equity** | $1,111,477 | $1,091,596 | - A significant portion of assets and liabilities belong to consolidated Variable Interest Entities (VIEs) As of March 31, 2022, VIE assets totaled **$712.6 million** and liabilities were **$535.9 million**[13](index=13&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2022 total revenues grew **58%** to **$653.4 million**, resulting in a net income of **$1.2 million**, a significant improvement from a **$15.1 million** net loss in Q1 2021 Q1 2022 vs Q1 2021 Statement of Operations (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Total revenues** | $653,445 | $413,104 | | Medical services expense | $566,208 | $360,354 | | Income (loss) from operations | ($743) | ($12,115) | | **Net income (loss)** | $1,155 | ($15,151) | | Net income (loss) attributable to common shares | $1,230 | ($15,078) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved to **$23.2 million** in Q1 2022, while investing activities remained stable and financing cash decreased due to prior year debt issuance Q1 2022 vs Q1 2021 Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($23,233) | ($40,828) | | Net cash used in investing activities | ($8,869) | ($9,074) | | Net cash provided by financing activities | $13,506 | $30,298 | | **Net decrease in cash** | **($18,596)** | **($19,604)** | [Notes to the Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes provide critical context to the financial statements, detailing the company's business operations, accounting policies, revenue recognition, credit risk concentrations, debt structure, contingencies, and the nature of its variable interest entities (VIEs), including reliance on Medicare Advantage, revenue concentration, and discontinued California operations - The company's business model focuses on providing capabilities for physician groups to create a Medicare-centric, globally capitated line of business, serving approximately **250,300 Medicare Advantage members** as of March 31, 2022[26](index=26&type=chunk) - Revenue from Medicare Advantage constitutes nearly **100% of total revenues** For Q1 2022, three payors (A, B, and C) accounted for **25%**, **19%**, and **14%** of total revenues, respectively, indicating significant customer concentration[40](index=40&type=chunk)[42](index=42&type=chunk) - The company divested its California operations, now reported as discontinued operations, but remains responsible for certain pre-closing liabilities, including matters related to the California Department of Managed Health Care (DMHC)[73](index=73&type=chunk)[66](index=66&type=chunk) - The company operates through **18 wholly-owned risk-bearing entities (RBEs)** consolidated as VIEs, and holds **10 unconsolidated equity method investments** in VIEs, primarily Direct Contracting Entities (DCEs)[83](index=83&type=chunk)[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2022 financial results, highlighting significant membership and revenue growth, improved profitability, key operating metrics, COVID-19 impact, non-GAAP measures, liquidity, and capital resources, emphasizing its globally capitated model and continued geographic expansion Q1 2022 Key Financial and Operating Metrics | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | MA members | 250,300 | 165,300 | 51% | | Medical services revenue | $652.4M | $412.4M | 58% | | Medical margin | $86.2M | $52.1M | 66% | | Adjusted EBITDA | $12.0M | $3.8M | 220% | - Revenue growth was driven by a **52% increase in average membership** from new and existing geographies, along with a **4% increase in per-member, per-month (PMPM) capitation rates**[139](index=139&type=chunk) - The company achieved operating leverage, with General & Administrative expenses decreasing as a percentage of revenue from **9% in Q1 2021 to 6% in Q1 2022**[143](index=143&type=chunk) - As of March 31, 2022, the company had a strong liquidity position with **$1.0 billion in cash and cash equivalents**, which management believes is sufficient to meet working capital needs for at least the next 12 months[155](index=155&type=chunk)[157](index=157&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on floating-rate debt, with a hypothetical 100 basis point change having an immaterial impact of less than $1.0 million on quarterly interest expense, and minimal risk on cash and cash equivalents - The primary market risk is interest rate changes affecting the company's floating-rate debt[174](index=174&type=chunk) - A hypothetical **100 basis point change** in interest rates would impact quarterly interest expense by **less than $1.0 million**[174](index=174&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during Q1 2022 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were **effective** as of the end of the period[176](index=176&type=chunk) - No material changes in internal control over financial reporting were identified during the quarter[177](index=177&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to Note 8 for legal proceedings, which describes an ongoing DMHC investigation related to divested California operations, but no other material adverse effects are anticipated - For details on legal proceedings, the report refers to Note 8 of the Condensed Consolidated Financial Statements[179](index=179&type=chunk) [Item 1A. Risk Factors](index=33&type=page&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - There have been no material changes to the risk factors disclosed in the company's 2021 Form 10-K[180](index=180&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the reporting period - The company reported no unregistered sales of equity securities for the period[180](index=180&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including new employment and separation agreements, and required CEO and CFO certifications - Exhibits filed include employment agreements for Benjamin Shaker and Girish Venkatachaliah, separation agreements for Lisa Dombro and Theodore Halkias, and various officer certifications[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) Signatures

Financial Data and Key Metrics Changes - Total members live on the agilon platform increased 82% year-over-year to 238,000, with consolidated Medicare Advantage membership increasing 42% to 186,000 [9][20] - Revenue for the fourth quarter increased 44% year-over-year to $463 million, while full-year revenue increased 50% to $1.83 billion [10][21] - Medical margin for the fourth quarter was $31 million, a 15% increase from $27 million in the prior year, while full-year medical margin was $182 million compared to $192 million in 2020 [10][21] - Adjusted EBITDA was negative $26.7 million in the fourth quarter and negative $38.6 million for the full year, with expectations for breakeven to a positive $10 million in 2022 [23][25] Business Line Data and Key Metrics Changes - Membership growth in Medicare Advantage was driven by the addition of three new geographies and strong same geography growth of 15% [20] - Medical margin per member per month in partner markets was $94 in 2021, with expectations to increase to $127 to $130 in 2022 [11][12] - Direct contracting members ended the quarter at 52,000, with expectations for modest adjusted EBITDA contribution in 2022 [20][25] Market Data and Key Metrics Changes - The company is expanding its footprint to cover 12 states, 25 geographies, and 23 partners, with expectations to approach 500,000 senior patients on the platform by the end of 2023 [15][19] - Hawaii represents 15% of membership for 2022, with plans to finalize a partnership with Hawaii Health Network to improve performance in this market [16][17] Company Strategy and Development Direction - The company aims to transform healthcare by empowering primary care doctors and shifting from a fee-for-service model to a value-based subscription model [8][12] - The focus is on deep alignment with primary care doctors, local market scale, and being a first mover in fee-for-service dominated geographies [7][12] - The company is optimistic about the ACO Reach program, which emphasizes health equity and provider governance, aligning with its mission and values [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong growth for 2022, expecting membership and revenues to grow by 40% or higher, with positive adjusted EBITDA reflecting an increase in MA medical margin of over $120 million [12][25] - The company anticipates that existing partner market medical margins will improve significantly, driven by better insights and actionable information [12][37] - Management noted that the competitive environment remains favorable, with a growing demand for a new primary care business model [68] Other Important Information - The company has over $1 billion in cash on hand and under $50 million in outstanding debt, indicating strong capitalization [24] - Platform support costs increased but remain well below revenue growth, highlighting the efficiency of the company's model [22] Q&A Session Summary Question: Insights on the class of 2023 and membership growth - Management confirmed that the 80,000 new members are solely Medicare Advantage and highlighted the strong demand for a new primary care business model driving this growth [30][31] Question: Direct contracting expectations for 2022 - Management moderated expectations for direct contracting but still anticipates it to be a positive contributor to adjusted EBITDA [32][33] Question: Performance in existing markets and medical margins - Management indicated that existing partner markets are performing better than expected, with medical margins projected to increase significantly [36][37] Question: Hawaii market performance and partnership - Management clarified that the partnership with Hawaii Health Network aims to improve performance in this non-partner market, shifting 20% of MA membership to this arrangement [45][46] Question: Overall trends and COVID impact in 2022 - Management expects utilization to return to pre-COVID levels, with a shift from inpatient to outpatient care [48][49] Question: Future growth expectations and competitive landscape - Management expressed confidence in continued strong growth and noted that competition remains manageable, with a focus on building partnerships in new markets [68][69]