Agilon Health, Inc. Q1 FY2025 earnings call

• Partnerships and payer exits: Benefited results, reduced Medicare Part D exposure and improved payer contracting terms.
• Quality and clinical initiatives: Progress in strengthening network, enhancing platform with technology, clinical pathways, and operating efficiency.
• Technology investment: Acquisition of mphrX enhanced data gathering and processing, improved integration with health systems to support clinical outcomes.
• Cost management: Focus on reducing operating variability, negotiating better payer terms, and managing medical cost trends through strategic initiatives.

For the quarter, agilon health reported membership of 491,000, relatively flat year over year. Total revenue for Q1 2025 was $1.53 million, down from $1.60 million in Q1 2024. Medical margin for Q1 2025 was $128 million, down from $157 million in Q1 2024. Adjusted EBITDA for the quarter was $21 million, down from $29 million in Q1 2024. Membership revenue contribution is tied to Medicare Advantage and ACO REACH segments, with Q1 MA membership at 491,000 and ACO REACH at 114,000.

• Q2 2025: Medicare Advantage membership expected to be 485,000-515,000, ACO model membership 105,000-115,000. Revenue expected $1.44B-$1.51B, Medical margin $50M-$70M, Adjusted EBITDA negative $35M-$20M.
• Full year 2025: Medicare Advantage members 490,000-520,000, revenue $5.85B-$6.03B, Medical margin $275M-$325M, Adjusted EBITDA negative $95M-$55M.
• 2026: Encouraged by CMS final rate notice increase, focus on reducing Part D exposure, expanding quality incentives, and improving economic terms for Part C.

• Elevated cost trends impacting medical margin.
• Dependence on payer contracting terms for revenue and margin stability.
• Potential impact of Star ratings on payer relationships and quality bonuses.
• Challenges in managing Part D risk due to limited control over drug pricing and formulary.

Q: Stephen Baxter asked about the impact of V-28 risk model transition on agilon health.

A: Steve Sell responded that risk adjustment was in line with expectations, with a net 2% increase year over year, and continuity of primary care physicians with patients was key.

Q: Elizabeth Anderson inquired about lingering impacts from exited areas.

A: Jeff Schwaneke stated that unfavorable development from exited markets was $7 million, minimal impact now.

Q: Jailendra Singh asked about 2026 MA final rate notice and rate clarity.

A: Steve Sell explained 40% of membership was repriced in 2025, 50% up for renewal in 2026, focusing on reducing Part D exposure and quality incentives.

Q: Justin Lake asked about risk scores and member disruption.

A: Steve Sell said risk adjustment increase was on same members, minimal disruption due to primary care continuity.

Q: Amir Farahani asked about 2026 MA rate and EBITDA initiatives.

A: Steve Sell mentioned optimism about 2026 rate, tracking well on quality and clinical cost-saving initiatives.

Q: Lisa Gill asked about medical cost trend visibility and Part D utilization.

A: Steve Sell and Jeff Schwaneke discussed financial pipeline improving visibility, Part D exposure below 30%, minimal impact on utilization.

Q: Ryan Langston asked about Part D and membership reduction.

A: Steve Sell said Part D reduction progress ongoing, not driving membership reduction, group MA at industry average.

Q: Joanna Gajuk asked about 2026 rate notice impact on free cash flow.

A: Steve Sell said final notice was tailwind, but other factors like utilization and V-28 needed consideration.

Q: Ryan Daniels asked about pipeline and partnership growth.

A: Steve Sell said 2026 growth focused, 2027 pipeline strong, disciplined growth approach.

Q: Michael Ha asked about Humana Star ratings impact.

A: Steve Sell said multiple mechanisms to correct, quality performance key for differentiation.

Q: Matthew Shea asked about clinical programs.

A: Steve Sell discussed heart failure and palliative programs, early stages but positive trends.

Q: George Hill asked about provider side and Part B drug risk.

A: Steve Sell said strong provider demand for value-based care, Part B drug risk managed through early detection and coordination.

Q: Whit Mayo asked about negative PYD and 2024 completion factor.

A: Jeff Schwaneke said financial pipeline improved visibility, 90% complete on 2024 dates of service.

Q: Thomas Walsh asked about Q2 EBITDA seasonality.

A: Jeff Schwaneke explained use of incurred basis for budgeting, normal seasonality with incurred development.