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agilon health, inc. (AGL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue rose 44% to $1.522B while EPS was $(0.26); gross profit improved versus prior year but remained negative, and medical margin was roughly breakeven amid elevated utilization and Part D/supplemental cost headwinds .
  • 2025 outlook prioritizes profitability over growth: MA membership guided down to 490–520K, revenue $5.825–$6.025B, and medical margin up to $275–$325M; adjusted EBITDA expected at $(95)–$(55)M with Part D risk carved down to <30% of membership and 40% of membership repriced effective Jan 1, 2025 .
  • Key positive drivers: payor bid impacts, quality incentives (aiming >4.25 Stars), RAF improvement (~net +2%), operating initiatives ($50M), and exits of underperforming contracts/markets; headwinds include continued elevated medical cost trend (~6.3% gross, 5.3% net) and IRA-driven Part D losses for remaining exposure .
  • Stock narrative catalysts: disciplined growth (year-1 glidepath/no downside for new partners), reduced underwriting beta (Part D carve-outs, supplemental benefits reductions), and 2026 CMS Advance Notice signaling a potentially improving rate environment .

What Went Well and What Went Wrong

What Went Well

  • Medical margin and adjusted EBITDA improved vs prior year in Q4; medical margin was $0.566M and adj. EBITDA loss narrowed to $(83.97)M, aided by exits and cost discipline .
  • Strategic repricing and risk reduction: 40% of membership repriced with better Part C percentage-of-premium and quality incentives; Part D exposure reduced to <30% of membership for 2025 .
  • Clinical/quality outperformance: MA readmissions/hospital/ER rates 20–30% better than local FFS benchmarks; Year 2+ markets quality approaching or >4.25 Stars, supporting payor incentives .

What Went Wrong

  • Elevated medical costs persisted; Q4 gross profit remained negative at $(38.3)M and medical margin only breakeven, pressured by Part D and supplemental benefits and a $5M reserve for expected 2025 losses on exiting partnerships .
  • FY2024 medical margin fell to $205M (from $299M in 2023) due to elevated utilization and prior-year development; adj. EBITDA loss widened to $(154)M vs $(95)M in 2023 .
  • FY2024 guidance was lowered in Q3: medical margin cut to $210–$240M (from $400–$450M) and adj. EBITDA to $(155)–$(135)M (from $(60)–$(15)M) after risk adjustment and Part D pressures emerged intra-quarter .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$1,483 $1,451 $1,522
EPS (basic & diluted, Continuing) ($USD)$(0.07) $(0.29) $(0.26)
Gross Profit ($USD Millions)$32.2 $(64.2) $(38.3)
Medical Margin ($USD Millions)$105.5 $(58.3) $0.566
Adjusted EBITDA ($USD Millions)$(2.83) $(96.47) $(83.97)

Segment breakdown (Q4 2024):

SegmentRevenues ($USD Millions)Medical Margin ($USD Millions)
Medicare Advantage (Consolidated)$1,522.5 $0.566
CMS ACO Models (Unconsolidated)$473.1 $24.23

KPIs:

KPIQ2 2024Q3 2024Q4 2024
Medicare Advantage Members (end, 000s)513 525 527
ACO Model Members (end, 000s)132 132 132
Total Members Live on Platform (end, 000s)645 657 659
Avg. MA Members (000s)507 535 527

Notes:

  • Management highlighted breakeven medical margin in Q4 (“$1M”) vs non-GAAP reconciliation of $0.566M—difference reflects rounding and presentation .
  • Consensus estimates (EPS, revenue, EBITDA) from S&P Global were unavailable at time of request due to access limits; comparisons to Street are therefore not provided.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenues ($B)FY 2024$6.010–$6.040 $6.050–$6.065 Raised slightly (range shifted up)
Medical Margin ($M)FY 2024$400–$450 $210–$240 Lowered materially
Adjusted EBITDA ($M)FY 2024$(60)–$(15) $(155)–$(135) Lowered materially
Geography Entry Costs ($M)FY 2024$55–$45 $37–$33 Lowered
MA Members (000s)FY 2025N/A490–520 N/A
Total Revenues ($B)FY 2025N/A$5.825–$6.025 N/A
Medical Margin ($M)FY 2025N/A$275–$325 N/A
Adjusted EBITDA ($M)FY 2025N/A$(95)–$(55) N/A
Geography Entry Costs ($M)FY 2025N/A$35–$40 N/A
MA Members (000s)Q1 2025N/A490–510 N/A
Total Revenues ($B)Q1 2025N/A$1.480–$1.520 N/A
Medical Margin ($M)Q1 2025N/A$125–$140 N/A
Adjusted EBITDA ($M)Q1 2025N/A$10–$25 N/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Part D exposure & IRA impactNo explicit carve-outs; standard operations Significant headwinds: PYD and lower risk adjustment; guidance cut partly due to Part D Part D exposure cut to <30%; PMPM losses for remaining exposure assumed to double due to IRA Improving risk posture (reduced beta)
Risk adjustment v28 / RAFMaintaining guidance; execution plan Lower-than-expected 2024 risk adjustment; guidance reduced Net ~2% RAF improvement assumed in 2025; v28 phase-in pressure embedded Stabilizing with improved visibility
Quality/Stars incentivesPlatform support costs trending to target; operational focus Operational actions post Q3 headwinds Target >4.25 Stars; increased incentives in 2025 payor contracts Tailwind to revenue/margin
Payor bids/repricingGuidance maintained; ongoing payor relationship work Updated FY24 guidance acknowledges macro cost pressure 40% membership repriced; payor bids lower cost trend ~100bps (6.3%→5.3% net) Terms improved; cost share impacts favorable
Clinical programs (palliative, high-acuity)Capability build underway Emphasis on execution improvements Focused initiatives across burden of illness, palliative care, HF/dementia/COPD to reduce ER/inpatient Execution intensifying
ACO REACH performancePositive contribution; Q2 ACO adj. EBITDA $11M Q3 ACO adj. EBITDA $12M; strong savings vs benchmarks Latest period $150M gross savings (~13%); expect $35–$40M ACO adj. EBITDA in 2025 Sustained strength
Cash/Working capitalCash & securities $408M; ACO cash $104M Cash & securities $399M; ACO cash $113M Cash & securities $406M; working capital levers improved cash burn; 2025 cash use ~$110M Improving cash discipline
Membership strategyGrowth with performance action plan Exiting 2 unprofitable partnerships and payor contracts Measured growth: 2025 class 20K on glidepath (no downside); exits ~54K members; tighter attribution Disciplined/defensive
Medical cost trend & “two-midnight” ruleInline Q2 FY24 trend reset higher; Q3 headwinds FY24 6.8% (incl. ~50bps two-midnight); 2025 6.3% gross, 5.3% net post payor bids Elevated but moderating net

Management Commentary

  • “We are still managing through a challenging Medicare Advantage environment… [strategic actions] reduce our underwriting risks, improve our platform capabilities, and maintain cost discipline” — Steve Sell, CEO .
  • “We intend for this focused approach to continue in 2025… our goal is to be cash flow breakeven by 2027” — Steve Sell .
  • “Over the last 6 months, we have exited 2 unprofitable partnerships and underperforming payor contracts… reduced our exposure in areas outside our control, such as Medicare Part D” — Jeff Schwaneke, CFO .
  • “For January 2025, we successfully repriced 40% of our membership… while reducing our Part D exposure to less than 30%” — Steve Sell .
  • “We expect to execute on $50 million of operating, quality and clinical initiatives in 2025… more than offset by continued high medical cost trend” — Jeff Schwaneke .

Q&A Highlights

  • Part D mechanics and outlook: AGL records Part D net in revenue; for 2025, PMPM losses assumed to double for remaining risk due to IRA; Part D exposure reduced to <30% of members .
  • Glidepath contracting: Year-1 “care management fee/no downside” for most of 20K Class of 2025 lives; upside incentives exist; aim to move to full-risk in year 2 subject to market/payor dynamics .
  • Cost trend drivers: Two-midnight rule estimated ~50bps in FY2024; payor bids reduce 2025 net cost trend by ~100bps; supplemental benefits broadly reduced (~97% of bids) .
  • Cash and working capital: Ending cash/securities ~$406M; expected 2025 cash use ~$110M; improvements from exits, tighter WC, and payor prepayments .
  • ACO programs: Strong performance in REACH; exploring post-2026 program options with optimism around extension or new full-risk FFS constructs .

Estimates Context

  • Wall Street consensus (S&P Global) for EPS, revenue, and EBITDA was unavailable due to access limits at the time of analysis; as a result, estimates-based comparisons are not provided. If required, we can refresh when access is restored.

Key Takeaways for Investors

  • 2025 is a transition/inflection year: lower membership, but improved margin profile from exits, repricing, quality incentives, and reduced Part D exposure; medical margin midpoint guided up ~46% YoY to $300M .
  • Reduced underwriting beta should dampen volatility: <30% Part D exposure, supplemental benefits reductions, and standard protective contract language are in place heading into 2025 .
  • Quality-driven economics can offset rate/utilization pressure: targets >4.25 Stars with increased payor incentives, coupled with clinical programs focused on high-acuity conditions .
  • Elevated utilization persists: FY2025 net cost trend guided at ~5.3% (6.3% gross), embedding two-midnight and bid effects—investors should model continued cost pressure through 2025 .
  • Cash discipline and runway: ~$406M cash/securities, expected 2025 cash use ~$110M, and target cash flow breakeven by 2027—liquidity appears adequate for execution .
  • Watch 2026 rate setting and payor negotiations: CMS Advance Notice is constructive; 50% of membership repricing targeted for Jan 1, 2026, creating potential tailwinds if rates improve .
  • Near-term trading lens: Narrative likely hinges on proof of execution (Q1 2025 margin/EBITDA within guide), stability in cost trend, and visible benefits from operating initiatives ($50M) and quality incentives .

Appendix: Additional Q4 vs Guidance Check

MetricQ4 2024 Guidance (from Q3 PR)Q4 2024 Actual
Total Revenues ($USD Billions)$1.512–$1.527 $1.522
Medical Margin ($USD Millions)$5–$35 $0.566 (low-end, near breakeven)
Adjusted EBITDA ($USD Millions)$(85)–$(65) $(83.97) (low-end)

All quotes, figures, and guidance extracted from primary sources cited above.