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agilon health, inc. (AGL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 materially missed Street expectations: revenue $1.395B vs $1.472B consensus (−5%), EPS $(0.25) vs $(0.11) consensus, and Adjusted EBITDA $(83)M vs $(29)M; misses were driven by lower-than-expected risk adjustment and unfavorable prior period development. The company withdrew full‑year 2025 guidance and announced a CEO transition. Shares fell >25% after-hours on the news. [Values retrieved from S&P Global: revenue, EPS, EBITDA consensus*]
  • The quarter included negative prior period development of $66M (exited markets $20M, Part D $13M, 2024 risk adjustment $37M) and a $48M year‑to‑date reduction to 2025 risk adjustment for 72% of members on the enhanced data platform. Medical margin fell to $(53)M (from $106M YoY) and Adjusted EBITDA to $(83)M (from $(3)M YoY).
  • Leadership change: Steven Sell stepped down; co‑founder Ronald A. Williams named Executive Chairman, an “Office of the Chairman” was formed, and a CEO search is underway. Management emphasized urgency, accountability, and execution to position for 2026 improvement. Guidance was suspended to reflect these transitions and visibility work.
  • Operating posture: reduced Part D exposure (<30% of membership), intensified payer negotiations for 2026 (targeting better economics/quality incentives), and scaling clinical pathways (heart failure, palliative) while improving data visibility; 2H/2026 is the expected recovery timeline absent additional shocks.

What Went Well and What Went Wrong

  • What Went Well

    • Data visibility and contracting levers: “We have significantly improved our data visibility and timeliness… ~72% of our patient population is validated in our enhanced data platform,” supporting forecasting and 2026 planning.
    • Quality and cost execution markers: Year‑2+ markets’ admission/ER rates were 20–30% better than local fee‑for‑service; quality performance “at or above 4.25 stars,” enabling incremental payer quality dollars.
    • Risk de‑risking steps: Part D exposure already reduced to <30% of 2025 membership with further carve‑outs targeted in 2026 contracting; 50% of membership up for re‑pricing.

  • What Went Wrong

    • Risk adjustment shortfall: Final 2024 payer data and mid‑year 2025 indications showed lower‑than‑expected RAF; $37M reduction to 2024 risk adjustment and $48M YTD reduction to 2025 risk adjustment for the 72% on the new data platform.
    • Prior period development: Additional $66M of negative development (exited markets $20M; Part D $13M; 2024 RA $37M), materially impacting medical margin.
    • Guidance suspension and leadership transition amplified uncertainty: Company withdrew FY2025 guidance and announced CEO departure and leadership changes, raising near‑term execution risk and roiling the stock.

Financial Results

Performance trend (oldest → newest)

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$1.483 $1.533 $1.395
Net Income (Loss) ($USD Millions)$(30.7) $12.1 $(104.4)
Gross Profit (Loss) ($USD Millions)$32.2 $50.7 $(52.4)
Medical Margin ($USD Millions)$105.5 $128.0 $(53.2)
Adjusted EBITDA ($USD Millions)$(2.8) $20.6 $(83.3)

Q2 2025 actual vs S&P Global consensus

MetricQ2 2025 ActualQ2 2025 Consensus
Revenue ($USD Billions)$1.395 $1.472*
EPS (Diluted, Continuing) ($)$(0.25) $(0.11)*
Adjusted EBITDA ($USD Millions)$(83.3) $(28.5)*

Values marked with * are from S&P Global.

Segment view (Q2 2025)

Metric ($USD Millions)Medicare Advantage (Consolidated)CMS ACO Models (Unconsolidated)
Total Revenues$1,395.0 $434.8
Medical Services Expense$(1,445.2) $(401.9)
Other Medical Expenses$(2.2) $(17.8)
Medical Margin$(53.2) $32.9

KPIs (Q2 2025)

KPIValue
Medicare Advantage members (EOP)498,000
ACO Model members (EOP)116,000
Total members on platform (EOP)614,000
Average MA members498,000
Cash & marketable securities$327M
Total debt$35M
ACO cash (off‑balance sheet)$176M

Drivers and context

  • Negative development and RAF: $66M negative development (exited markets $20M; Part D $13M; 2024 RA $37M) and $48M YTD 2025 RAF reduction for 72% of members on the enhanced platform.
  • Cost trends: Year‑2+ markets medical cost trend 5.9% (vs 6.0% Q2 2024), with pressure in inpatient and Part B oncology drugs; overall trends in line with expectations.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent UpdateChange
Total RevenuesFY 2025$5.85–$6.03B Suspended Withdrawn
Medical MarginFY 2025$275–$325M Suspended Withdrawn
Adjusted EBITDAFY 2025$(95)–$(55)M Suspended Withdrawn
MA Members (EOP)FY 2025490k–520k Suspended Withdrawn
ACO Model Members (EOP)FY 2025105k–115k Suspended Withdrawn
Geography Entry CostsFY 2025$35–$40M Suspended Withdrawn
RevenueQ2 2025$1.435–$1.505B Actual $1.395B Missed guide
Medical MarginQ2 2025$50–$70M Actual $(53)M Missed guide
Adjusted EBITDAQ2 2025$(35)–$(20)M Actual $(83)M Missed guide

Management suspended FY2025 guidance due to leadership change, visibility initiatives, and market uncertainty.

Earnings Call Themes & Trends

TopicQ4 2024 (Q‑2)Q1 2025 (Q‑1)Q2 2025 (Current)Trend
Data/technology visibilityBegan upgrading data pipeline; aiming to reduce volatility in RA and claims. Financial data pipeline went live; better member‑level revenue/claims visibility. 72% of population on enhanced platform; high correlation with 2024 final and 2025 mid‑year data. Improving visibility; informs 2026 planning
Risk adjustment (RAF)Expected 2025 net +2% RA; V28 headwinds embedded. Reaffirmed net +2% RA expectation on same‑member basis. Final 2024 RA lower than assumed; mid‑year 2025 trending lower; $37M 2024 RA cut; $48M YTD 2025 cut. Deteriorated vs plan
Medical cost trends2024 trend 6.8% (incl. ~50 bps 2‑Midnight); 2025 net 5.3% assumed via bids. Inpatient/Part B oncology pressure; trends in line; AWV/PCP visits flat. Y2+ trend 5.9% (vs 6.0% YoY); pressures persist but within plan. Stabilizing at elevated level
Part D exposureReduced to <30% for 2025; targeting carve‑outs and caps. Below 30%; negotiate further carve‑outs for 2026. <30% in 2025; pursuing further reductions in 2026 renewals. Improving risk posture
Quality/Stars & incentivesQuality ~4.25 stars; more quality incentives in payer contracts. Expect more quality dollars; programs ramping. Small quality favorability; payers “more willing than ever” to fund quality incentives. Positive lever for 2026
Clinical programsBuilding heart failure, COPD, dementia pathways; Palliative program expansion. HF pathway live in many markets; Palliative scaling; benefits expected in 2026. Continued rollout; focus on high‑risk patients. Execution building; benefits lag
Payer contracting (2026)50% of membership up for renewal; aim to improve Part C terms/quality incentives, reduce Part D. Payers more measured; multiple mechanisms to offset Stars headwinds. Active negotiations; willing to walk from uneconomic deals. Constructive but selective
Leadership/organizationN/AN/ACEO stepped down; Executive Chairman leads “Office of the Chairman”; guidance withdrawn. Transition; execution focus
LiquidityYE2024 cash & securities $406M. Q1 cash & securities $369M; use ~$110M cash in 2025 plan. Q2 cash & securities $327M plus $176M ACO cash; enough to get through 2026. Adequate near‑term liquidity

Management Commentary

  • “We have continued advancing strategic initiatives… enhancing our platform, data visibility, quality and delivery programs and contract economics… However… industry headwinds are more acute… our enhanced data platform is providing visibility that indicates our 2024 and 2025 risk adjustment is also lower than previously expected.” — Executive Chair Ronald A. Williams
  • “Negative prior period development of $66 million… $37 million [2024 RA]… $20 million associated with exited markets… $13 million [Part D]… and $48 million [YTD 2025 RA] reduction for 72% of membership on the enhanced data platform.” — CFO Jeff Schwaneke
  • “Our Y2+ markets’ readmission, hospital admission and ER visit rates [are] 20% to 30% better than local fee-for-service… and quality scores approaching or greater than 4.25 stars.” — Executive leadership
  • “We have reduced our exposure to Medicare Part D with less than 30% of our membership carrying Part D risk in 2025, and we continue to make progress to reduce it further as we enter 2026.” — CFO

Q&A Highlights

  • Risk adjustment drivers: Management emphasized that 2024 BOI/RA “did not yield the expected increase” (not CMS code rejection), attributing it to identification/execution gaps; enhanced data pipeline improves estimation accuracy going forward.
  • 2026 contracting: Active negotiations aiming to reduce Part D further, expand quality incentives, improve Part C terms, and narrow supplemental benefits risk; willing to “not do a deal” if economics are inadequate.
  • Growth posture: 2026 growth remains “under review”; company will be highly selective; glide‑path (no downside) constructs used where appropriate.
  • Cost trend detail: Inpatient and Part B oncology remain pressure points; trends sequentially consistent with Q1 and within plan.
  • Liquidity runway: Management stated confidence that cash is sufficient “to get through 2026.”

Estimates Context

  • Revenue: $1.395B vs $1.472B consensus (miss). EPS: $(0.25) vs $(0.11) consensus (miss). Adjusted EBITDA: $(83)M vs $(29)M consensus (miss). [Values retrieved from S&P Global: revenue, EPS, EBITDA consensus*]
  • The magnitude of the miss was driven by prior period development and lower RAF visibility (final 2024 and mid‑year 2025), partially offset by small quality favorability.

Values marked with * are from S&P Global.

Key Takeaways for Investors

  • Near‑term reset, 2026 pivot: Q2 reveals RAF shortfall and negative PYD; with guidance withdrawn and leadership transition, the setup is a transition year focused on execution with a line‑of‑sight to 2026 margin recovery if payer terms improve and clinical/quality programs scale.
  • Contracting is the swing factor: 50% of MA lives are up for renewal for 1/1/2026; outcomes on Part D carve‑outs, quality incentive pools, and Part C economics will largely determine 2026 profitability.
  • Structural de‑risking continues: Part D exposure is already <30% in 2025, with further reductions targeted—an important lever given IRA‑related drug cost pressures.
  • Cost trend manageable but elevated: Y2+ trend ~5.9% with inpatient and Part B oncology pressures; programmatic pathways (HF, palliative) are designed to bend trend but benefits lag into 2026.
  • Liquidity appears adequate: $327M cash/securities plus $176M ACO cash supports multi‑quarter execution runway; management guided confidence to “through 2026.”
  • Stock setup: The combination of estimate misses, guidance withdrawal, and CEO exit was a clear negative surprise and catalyst for the >25% after‑hours selloff; subsequent performance will hinge on evidence of RAF stabilization, contracting wins, and tighter operating cadence from the new leadership structure. 
Note: All non‑GAAP metrics are as defined by the company. Values marked with * are from S&P Global.