agilon health(US:AGL)2025-02-26 07:00Financial Data and Key Metrics Changes - For Q4 2024, Medicare Advantage (MA) membership increased by 36% year-over-year to 527,000 members, driven by the expansion of the '24 partner class and 4.1% same geography growth [10][30] - Total revenue grew by 44% to $1.52 billion for the quarter and $6.06 billion for the year, primarily driven by the class of '24 and organic growth in existing classes [11][31] - Adjusted EBITDA was negative $84 million for the quarter and negative $154 million for the year, reflecting elevated medical cost trends and unfavorable prior year development [12][37] Business Line Data and Key Metrics Changes - ACO model membership reached 132,000 members, representing a 48% year-over-year growth [30] - Medical margin for Q4 2024 was $1 million, compared to a negative margin of $102 million in Q4 2023, while the full year 2024 medical margin was $205 million compared to $299 million in 2023 [34] - Medical expenses for Q4 2024 increased by 31% to $1.52 billion, driven by the expansion of the 2024 class and elevated cost trends [32] Market Data and Key Metrics Changes - The company anticipates a full-year MA membership decline of approximately 4% or 22,000 members for 2025, projecting a range of 490,000 to 520,000 members [14] - Revenue for 2025 is forecasted to decline by 2% to $5.925 billion, driven by the anticipated membership decline [15] Company Strategy and Development Direction - The company aims to be cash flow breakeven by 2027, focusing on reducing underwriting exposure to costs outside its control and pursuing profitable growth [7][8] - Strategic decisions include constraining 2025 MA membership to balance near-term risks and opportunities, while enhancing clinical and operational capabilities [13][21] - The company is investing in clinical programs to improve quality outcomes and reduce medical costs, leveraging technology and data analytics [22][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a challenging macro environment for 2025 but expresses optimism for a more favorable overall environment in 2026 and beyond [9][24] - The recent favorable trends in payor bids and the 2026 advanced notice from CMS are seen as positive signals for future performance [25][28] Other Important Information - The company has exited two unprofitable partnerships and improved back-end processes to enhance visibility and reduce volatility around risk adjustment and medical costs [27] - Cash and marketable securities at the end of Q4 2024 were $406 million, with an expected cash use of approximately $110 million for 2025 [39][50] Q&A Session Summary Question: Changes to Part D and its impact on P&L - Management explained that they have reduced Part D risk to less than 30% of membership, which reflects a successful strategy to manage costs [56][57] - Part D continues to be a loss, and the company has doubled the PMPM loss for 2025 based on anticipated increases from the Inflation Reduction Act [59][60] Question: Year 1 performance expectations - The class of '24 performed strongly, while the class of '25 is smaller with a focus on measured growth and a care management fee structure [63][64] Question: Medical cost trend guidance - Management confirmed that the 50 basis point estimate for the 2 Midnight rule is incorporated into the 2025 guidance, and supplemental benefits are expected to decrease due to payor adjustments [72][73] Question: ACO REACH impact - The company is exiting an underperforming MSSP contract, which had a significant negative impact on profitability [79] Question: Working capital improvements - Management highlighted disciplined cash management and successful partnership exits as key factors improving cash flow [85][88] Question: Visibility on initiatives to improve medical margin - Management expressed confidence in initiatives aimed at improving quality performance and clinical management, which are expected to offset revenue and cost challenges [92][96] Question: 2026 MA advance notice - Management is encouraged by the advance notice but emphasizes the need for rates to catch up with increased costs in Medicare Advantage [101][102]