agilon health(AGL) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Unaudited Financial Statements The unaudited financial statements reflect substantial asset growth and a widened net loss due to the April 2021 IPO and increased stock-based compensation Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 (unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,081,601 | $106,795 | | Total current assets | $1,452,866 | $294,197 | | Total assets | $1,685,120 | $446,361 | | Liabilities & Equity | | | | Medical claims and related payables | $288,121 | $162,868 | | Total liabilities | $557,681 | $421,591 | | Total stockholders' equity (deficit) | $1,127,439 | $(284,730) | - The significant increase in cash and cash equivalents and the shift from a stockholders' deficit to a substantial equity position are primarily attributable to the net proceeds from the company's IPO in April 2021[27][179] Condensed Consolidated Statements of Operations Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $458,613 | $312,684 | $1,370,673 | $897,326 | | Medical services expense | $414,202 | $260,933 | $1,217,039 | $728,949 | | Stock-based compensation expense | $11,960 | $1,558 | $287,980 | $4,734 | | Income (loss) from operations | $(35,601) | $(9,844) | $(346,079) | $(16,930) | | Net income (loss) | $(35,958) | $(11,827) | $(350,050) | $(35,837) | | Net income (loss) per share, basic and diluted | $(0.09) | $(0.04) | $(0.95) | $(0.07) | - Revenue for the nine months ended Sep 30, 2021, increased by 53% YoY, driven by membership growth, but net loss widened significantly due to a $283.2 million increase in stock-based compensation expense recognized upon the IPO[157][167] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Cash Flow Category | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(99,262) | $(39,865) | | Net cash used in investing activities | $(87,903) | $(1,208) | | Net cash provided by financing activities | $1,143,973 | $25,381 | | Net increase (decrease) in cash | $956,808 | $(15,692) | - The substantial increase in cash was driven by $1.17 billion in proceeds from the IPO, partially offset by cash used in operations and investing activities, including $76.6 million for investments in loans receivable related to IPO tax obligations[22][190] Notes to the Condensed Consolidated Financial Statements - The company completed its IPO on April 19, 2021, selling 53.6 million shares and receiving net proceeds of approximately $1.2 billion, recognizing $268.5 million in stock-based compensation expense for shares issued to partner physician groups[27] - Revenue is almost entirely from Medicare Advantage capitation contracts, with three major payors (A, B, and C) accounting for 26%, 20%, and 16% of total revenues respectively for the nine months ended Sep 30, 2021[42][44] - In February 2021, the company divested its remaining California operations, now reported as discontinued, but remains responsible for certain pre-closing liabilities[87][88] - On February 18, 2021, the company entered into new credit facilities, including a $100 million term loan and a $100 million revolving facility, with a $50 million mandatory prepayment on the term loan following the IPO[61][64] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 47% Q3 revenue growth to increased Medicare Advantage members and capitation rates, while net loss widened due to higher medical services expenses and significant post-IPO stock-based compensation Overview and Recent Developments Third Quarter 2021 Financial Highlights | Metric | Q3 2021 | Change from Q3 2020 | | :--- | :--- | :--- | | Medicare Advantage Members | 184,100 | +43% | | Total Revenue | $459 million | +47% | | Net Loss | $36 million | Increased from $12 million loss | | Medical Margin | $43 million | Decreased from $51 million | | Adjusted EBITDA | -$14 million | Decreased from +$2 million | - The company launched five Direct Contracting Entities (DCEs) on April 1, 2021, serving approximately 52,400 beneficiaries as of September 30, 2021[116] - Completed an IPO in April 2021 with net proceeds of approximately $1.2 billion and refinanced its debt in February 2021[117][118] Results of Operations Comparison of Results for the Nine Months Ended September 30 (in thousands) | Line Item | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Medical services revenue | $1,367,736 | $894,043 | 53% | | Medical services expense | $1,217,039 | $728,949 | 67% | | General and administrative | $114,001 | $91,200 | 25% | | Stock-based compensation expense | $287,980 | $4,734 | 5983% | | Income (loss) from operations | $(346,079) | $(16,930) | -1944% | - The 53% increase in medical services revenue for the first nine months of 2021 was driven by 45% growth in average membership and a 5% increase in PMPM capitation rates[157] - Medical services expense grew faster than revenue (67% vs 53%) due to membership growth and an increase in average medical services expense per member, partly reflecting lower healthcare utilization in the prior year due to COVID-19[158][161] Non-GAAP Financial Measures Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net income (loss) | $(35,958) | $(350,050) | | Adjustments: | | | | (Income) loss from discontinued operations | $(1,035) | $1,992 | | Interest expense | $867 | $5,306 | | Income tax expense | $256 | $707 | | Depreciation and amortization | $3,915 | $10,923 | | Stock-based compensation expense | $11,960 | $287,980 | | Other adjustments | $4,970 | $21,215 | | Adjusted EBITDA | $(14,015) | $(11,927) | - The company uses non-GAAP measures like Network Contribution and Adjusted EBITDA to identify underlying business trends, with Adjusted EBITDA being negative $11.9 million for the nine months ended Sep 30, 2021, a significant decrease from the prior year[169][170][178] Liquidity and Capital Resources - As of September 30, 2021, the company had cash and cash equivalents of $1.1 billion, primarily due to $1.2 billion in net proceeds from its April 2021 IPO[179] - Net cash used in operating activities increased to $99.3 million for the nine months ended Sep 30, 2021, from $39.9 million in the prior year, due to higher geography entry costs, increased G&A expenses, and changes in claims payment processes[188] - Management believes existing cash and borrowing capacity will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months[181] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its floating-rate debt, with a 100 basis point change estimated to impact interest expense by less than $1.0 million - The company's main market risk is interest rate changes affecting its floating-rate debt, where a 1% (100 basis point) change in rates would impact interest expense by less than $1.0 million for the nine-month period[204] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[206] - No material changes were made to the internal control over financial reporting during the third quarter of 2021[207] PART II. OTHER INFORMATION Item 1. Legal Proceedings Information regarding legal proceedings, including an ongoing investigation by the California Department of Managed Health Care, is incorporated by reference from Note 8 of the financial statements - Information regarding legal proceedings is incorporated by reference from Note 8 to the financial statements[209] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Prospectus - There have been no material changes to the risk factors disclosed in the company's Prospectus[210] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits filed with this report include certifications from the Principal Executive Officer and Principal Financial Officer as required by the Securities Exchange Act[212][213]