Agilon Health, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet comparisons are to December 31, 2023. Agilon supports physician groups providing capitated, Medicare-focused care. It reported approximately 522,800 Medicare Advantage members and 131,000 beneficiaries attributed to CMS ACO Models. Operations expanded into Lexington, Kentucky and Augusta, Georgia, with additions in existing markets.
Financial and operating results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $1.604 billion | $1.054 billion | +52% |
| Gross profit | $75.1 million | $73.1 million | +3% |
| Medical margin (non-GAAP) | $157.4 million | $155.5 million | +1% |
| Operating income (loss) | ($7.2 million) | $0.4 million | — |
| Continuing-operations income | $3.2 million | $10.0 million | — |
| Net income (loss) | ($6.0 million) | $16.0 million | — |
| Adjusted EBITDA (non-GAAP) | $29.1 million | $24.0 million | +21% |
| Operating cash flow | ($47.8 million) | ($60.8 million) | $13.0 million less cash used |
Medical services revenue grew 52%, reflecting 43% growth in average membership and a 7% increase in PMPM capitation rates. Medical services expense rose 61%, driven by membership growth and a 13% increase in average expense per member. As a result, medical services expense increased to 90% of revenue from 85%; gross profit margin declined to approximately 4.7% from 6.9%. Platform support costs rose 6% to $45.7 million but declined to 3% of revenue from 4%. The net loss included an $8.8 million loss on the sale of Hawaii operations in discontinued operations; continuing operations remained profitable.
At March 31, cash and cash equivalents were $111.7 million, restricted cash was $6.8 million, and marketable securities were $307.4 million. Together, cash and marketable securities totaled approximately $425.9 million. Receivables were $1.571 billion, versus $942.5 million at year-end; medical claims and related payables were $1.267 billion, versus $737.7 million. The filing attributes operating cash-flow changes primarily to the timing of settlements with payors. Total debt was approximately $37.3 million on the balance sheet; the term loan had $37.5 million outstanding, carried a 9.394% effective rate, and matures in February 2026. Revolver availability was $60.7 million after $39.3 million of letters of credit. The company reported covenant compliance.
Changes, outlook and material risks
- Membership and revenue expanded substantially, but medical costs grew faster than revenue and medical margin was nearly flat. Management cited higher per-member medical expense and noted that new members typically dilute medical margin per member.
- The company began participating in the Medicare Shared Savings Program in 2024 in addition to ACO REACH. Income from equity-method investments increased to $5.7 million from $1.4 million, primarily due to new and growing CMS ACO Model investments.
- Management expects operating losses and negative operating cash flows for the foreseeable future as it invests in expansion. It believes existing cash, marketable securities, and borrowing capacity will meet working-capital and capital-expenditure needs for at least 12 months, while cautioning that assumptions may prove inaccurate and further capital may be needed. The filing provides no specific numerical earnings or revenue guidance.
- Estimates of risk-adjusted revenue, medical costs, and incurred-but-not-reported claims are significant and could differ materially from actual results. Revenue and receivables are concentrated among a small number of payors; three payors represented 22%, 15%, and 14% of Q1 revenue.
- Three putative securities class actions filed in 2024 allege, among other matters, misstatements concerning medical utilization, claims rates, reserves, and margins. The company said it could not estimate the potential liability or financial impact. It also recorded $49.0 million for probable losses related to unasserted claims.
- Disclosure controls related to a previously identified material weakness in internal control over financial reporting were not effective as of March 31, 2024; remediation efforts continue. Assets and liabilities of consolidated VIEs are substantial, and VIE assets are generally restricted to settling those entities’ obligations.
Important facts for investors to verify
- Whether higher medical costs per member persist and how they affect medical margin, claims reserves, and earnings.
- Payor settlement timing, receivables collectability, and the adequacy of IBNR claims estimates.
- Progress toward remediating the material weakness and any resulting changes to controls or reported estimates.
- Developments in the securities litigation, unasserted-claims reserve, and the company’s exposure to unconsolidated CMS ACO Model entities.
- Whether liquidity, available revolver capacity, and cash-flow trends remain consistent with management’s stated 12-month assessment.