Agilon Health, Inc. Q2 FY2025 earnings call

• Ron Williams discussed being appointed Executive Chairman, the company's mission to transform health care for seniors, strategic initiatives in 2024 to strengthen the platform, but underperformance in 2025 due to industry complexities and execution issues. - Jeff Schwaneke highlighted initiatives to reduce variability and drive improved performance, including enhancing the platform, data visibility, quality and delivery programs, improving contract economics, and provided details on second quarter financial results, including lower risk adjustment, Part D challenges, and impact of the enhanced data platform.

Medicare Advantage membership at the end of Q2 2025 was 498,000 members compared to 513,000 members in Q2 2024. ACO REACH membership in the second quarter was 116,000 members compared to 132,000 members in the second quarter of 2024. Total revenue for Q2 2025 was $1.4 billion compared to $1.48 billion in Q2 2024. Medical margin for the second quarter 2025 was negative $53 million compared to positive $106 million in Q2 of 2024. The final 2024 payer data indicated lower risk adjustment, leading to a lower 2024 risk baseline, and 2025 risk adjustment was trending lower than expected with activity levels not materializing. Part D costs were unfavorable, and there was negative prior period development of $66 million related to risk adjustment and Part D.

• Withdrew 2025 financial guidance. - Focus on improving near-term profitability through actions like improving contract economics, enhancing data platform, reducing exposure to uncontrollable items, and focusing on cost discipline. - Expect improved profitability in 2026 with a positive rate environment, continued execution on clinical and quality initiatives, and improved burden of illness performance. - 2026 growth is under review with high selectivity based on business performance.

• Industry complexities and headwinds more acute than expected. - Execution issues leading to underperformance. - Lower risk adjustment than previously expected for 2024 and 2025. - Unfavorable development in Part D costs. - Variability in market-based factors affecting financial results.

Q: Jack Slevin asked about turnaround pillars and market exits.

A: Jeff Schwaneke said majority levers are same, need to reduce time from performance evaluation to action, data model is important, and payer economics is a big component; Ron Williams added about unmet medical need in Medicare Advantage population and tools to support physicians.

Q: George Hill asked about 72% book and 2026 earnings.

A: Jeff Schwaneke said there was net lift after v28 impact, 2026 impacted by final rates, contracting, operating expense optimization, and medical cost trends, with focus on execution and discipline.

Q: Andrew Mok asked about burden of illness assessments and cost trend.

A: Jeff Schwaneke said burden of illness assessments didn't yield expected revenue due to clinical program implementation, and first half cost trend was in line with expectations, with pressure points in inpatient costs and Part B drugs.

Q: David Larsen asked about cost trend details.

A: Jeff Schwaneke said pressure points in inpatient costs and Part B drugs like oncology.

Q: Lance Wilkes asked about practice partnerships and other medical expenses.

A: Ron Williams talked about practice partnerships with long-term primary care groups, market presidents and medical directors supporting them; Jeff Schwaneke said other medical expense is due to partner share calculations on a partner-by-partner basis.

Q: Lisa Gill asked about cash balances.

A: Jeff Schwaneke said ended quarter with $327 million in cash and marketable securities, $176 million off-balance sheet cash from ACO entities, and confident in having enough cash to navigate to 2026.