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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/03/22 agilon health, inc. 10-Q 9/30/22 74:10M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 3.50M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 29K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 29K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 25K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 25K
11: R1 Document and Entity Information HTML 76K
12: R2 Condensed Consolidated Balance Sheets HTML 135K
13: R3 Condensed Consolidated Balance Sheets HTML 48K
(Parenthetical)
14: R4 Condensed Consolidated Statements of Operations HTML 145K
15: R5 Consolidated Statements of Operations HTML 24K
(Parenthetical)
16: R6 Condensed Consolidated Statements of Comprehensive HTML 50K
Income (Loss)
17: R7 Condensed Consolidated Statements of Contingently HTML 124K
Redeemable Common Stock and Stockholders' Equity
(Deficit)
18: R8 Condensed Consolidated Statements of Cash Flows HTML 97K
19: R9 Business HTML 29K
20: R10 Summary of Significant Accounting Policies HTML 45K
21: R11 Revenue, Receivables, and Concentration of Credit HTML 94K
Risk
22: R12 Marketable Securities and Fair Value Measurements HTML 113K
23: R13 Other Assets, net HTML 60K
24: R14 Medical Claims and Related Payables HTML 90K
25: R15 Other Liabilities HTML 55K
26: R16 Debt HTML 51K
27: R17 Commitments and Contingencies HTML 38K
28: R18 Common Stock HTML 36K
29: R19 Net Income (Loss) Per Common Share HTML 135K
30: R20 Discontinued Operations HTML 161K
31: R21 Supplemental Cash Flow Information HTML 82K
32: R22 Variable Interest Entities HTML 149K
33: R23 Summary of Significant Accounting Policies HTML 134K
(Policies)
34: R24 Revenue, Receivables, and Concentration of Credit HTML 86K
Risk (Tables)
35: R25 Marketable Securities and Fair Value Measurements HTML 106K
(Tables)
36: R26 Other Assets, net (Tables) HTML 56K
37: R27 Medical Claims and Related Payables (Tables) HTML 86K
38: R28 Other Liabilities (Tables) HTML 51K
39: R29 Net Income (Loss) Per Common Share (Tables) HTML 135K
40: R30 Discontinued Operations (Tables) HTML 161K
41: R31 Supplemental Cash Flow Information (Tables) HTML 84K
42: R32 Variable Interest Entities (Tables) HTML 147K
43: R33 Business - Additional Information (Details) HTML 27K
44: R34 Summary of Significant Accounting Policies - HTML 42K
Additional Information (Details)
45: R35 Revenue, Receivables, and Concentration of Credit HTML 29K
Risk - Additional Information (Details)
46: R36 Revenue, Receivables, and Concentration of Credit HTML 43K
Risk - Schedules of Concentration of Risk as a
Percentage of Revenues and Receivables (Details)
47: R37 Revenue, Receivables, and Concentration of Credit HTML 29K
Risk - Schedules of Concentration of Risk as a
Percentage of Revenues and Receivables
(Parenthetical) (Details)
48: R38 Marketable Securities and Fair Value Measurements HTML 41K
- Schedule of marketable debt securities (Details)
49: R39 Marketable Securities and Fair Value Measurements HTML 44K
- Schedule of fair value on a recurring basis
(Details)
50: R40 Marketable Securities and Fair Value Measurements HTML 30K
- Additional Information (Details)
51: R41 Other Assets, net - Schedule of Other Assets, Net HTML 40K
(Details)
52: R42 Medical Claims and Related Payables - Summary HTML 49K
Changes in Medical Claims and Related Payables
(Details)
53: R43 Other Liabilities - Summary of Other Liabilities HTML 35K
(Details)
54: R44 Other Liabilities - Additional Information HTML 33K
(Details)
55: R45 Debt - Additional Information (Details) HTML 103K
56: R46 Commitments and Contingencies - Additional HTML 27K
Information (Details)
57: R47 Common Stock - Additional Information (Details) HTML 42K
58: R48 Net Income (Loss) Per Common Share - Computation HTML 79K
of Basic and Diluted EPS (Details)
59: R49 Net Income (Loss) Per Common Share - Summary of HTML 32K
Weighted-average Potential Shares of Common Stock
Were Excluded From Calculation of Diluted Net
Income (Loss) Per Share Attributable to Common
Stockholders (Details)
60: R50 Discontinued Operations - Additional Information HTML 26K
(Details)
61: R51 Discontinued Operations - Summary of Results of HTML 62K
Discontinued Operations (Details)
62: R52 Discontinued Operations - Summary of Significant HTML 24K
Non-Cash Operating Items for Discontinued
Operations (Details)
63: R53 Supplemental Cash Flow Information - Summary of HTML 38K
Supplemental Cash Flow Information (Details)
64: R54 Supplemental Cash Flow Information - Summary of HTML 32K
Cash, Cash Equivalents and Restricted Cash
Equivalents from Continuing Operations (Details)
65: R55 Variable Interest Entities - Summary of HTML 56K
Consolidated Asset and Liabilities Include VIE
Assets and Liabilities (Details)
66: R56 Variable Interest Entities - Additional HTML 39K
Information (Details)
67: R57 Variable Interest Entities - Schedule of Equity HTML 33K
Method Investments (Details)
68: R58 Variable Interest Entities - Summary of Operating HTML 54K
Results (Details)
69: R59 Variable Interest Entities - Summary of Operating HTML 24K
Results (Parenthetical) (Details)
72: XML IDEA XML File -- Filing Summary XML 136K
70: XML XBRL Instance -- agl-20220930_htm XML 2.44M
71: EXCEL IDEA Workbook of Financial Reports XLSX 125K
10: EX-101.CAL XBRL Calculations -- agl-20220930_cal XML 137K
8: EX-101.DEF XBRL Definitions -- agl-20220930_def XML 637K
7: EX-101.LAB XBRL Labels -- agl-20220930_lab XML 1.18M
9: EX-101.PRE XBRL Presentations -- agl-20220930_pre XML 903K
6: EX-101.SCH XBRL Schema -- agl-20220930 XSD 159K
73: JSON XBRL Instance as JSON Data -- MetaLinks 398± 624K
74: ZIP XBRL Zipped Folder -- 0000950170-22-021905-xbrl Zip 329K
| 10-Q |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM i 10-Q
(Mark One)
i ☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended i September 30, i 2022 /
OR
i ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number i 001-40332
i agilon health, inc.
(Exact name of registrant as specified in its charter)
i Delaware |
i 37-1915147 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
i 6210 E Hwy 290, i Suite 450
(Address of principal executive offices)
i (562) i 256-3800
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
i Common stock, $0.01 par value |
i AGL |
i New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer |
☐ |
|
Accelerated Filer |
☐ |
|
|
|
|
|
i Non-accelerated Filer |
☒ |
|
Smaller Reporting Company |
i ☐ |
|
|
|
|
|
|
|
|
Emerging Growth Company |
i ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES i ☐ NO ☒
At October 31, 2022, there were i 411,854,786 shares of the registrant’s $0.01 par value common stock outstanding.
agilon health, inc.
INDEX
|
|
|
PART I. FINANCIAL INFORMATION |
|
|
|
|
|
Item 1. |
Unaudited Financial Statements: |
|
|
|
|
|
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 |
3 |
|
|
|
|
4 |
|
|
|
|
|
5 |
|
|
|
|
|
6 |
|
|
|
|
|
8 |
|
|
|
|
|
9 |
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
|
|
|
Item 3. |
35 |
|
|
|
|
Item 4. |
35 |
|
|
|
|
|
||
|
|
|
Item 1. |
36 |
|
|
|
|
Item 1A. |
36 |
|
|
|
|
Item 2. |
36 |
|
|
|
|
Item 5. |
36 |
|
|
|
|
Item 6. |
38 |
|
|
|
|
39 |
||
2
agilon health, inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
|
|
|
|
|
||||
|
|
(unaudited) |
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
i 551,287 |
|
|
$ |
i 1,040,039 |
|
Restricted cash and equivalents |
|
|
i 13,192 |
|
|
|
i 14,781 |
|
Marketable securities |
|
|
i 407,993 |
|
|
|
— |
|
Receivables, net |
|
|
i 637,731 |
|
|
|
i 293,407 |
|
Prepaid expenses and other current assets, net |
|
|
i 24,067 |
|
|
|
i 18,968 |
|
Total current assets |
|
|
i 1,634,270 |
|
|
|
i 1,367,195 |
|
Property and equipment, net |
|
|
i 17,940 |
|
|
|
i 9,161 |
|
Intangible assets, net |
|
|
i 60,602 |
|
|
|
i 55,398 |
|
Goodwill |
|
|
i 41,540 |
|
|
|
i 41,540 |
|
Other assets, net |
|
|
i 116,083 |
|
|
|
i 112,958 |
|
Total assets |
|
$ |
i 1,870,435 |
|
|
$ |
i 1,586,252 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Medical claims and related payables |
|
$ |
i 490,840 |
|
|
$ |
i 239,014 |
|
Accounts payable and accrued expenses |
|
|
i 162,386 |
|
|
|
i 112,946 |
|
Current portion of long-term debt |
|
|
i 5,000 |
|
|
|
i 5,000 |
|
Total current liabilities |
|
|
i 658,226 |
|
|
|
i 356,960 |
|
Long-term debt, net of current portion |
|
|
i 39,713 |
|
|
|
i 43,401 |
|
Other liabilities |
|
|
i 87,207 |
|
|
|
i 94,295 |
|
Total liabilities |
|
|
i 785,146 |
|
|
|
i 494,656 |
|
|
|
|
|
|
|
|
||
Commitments and contingencies |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Stockholders' equity (deficit): |
|
|
|
|
|
|
||
Common stock, $ i i 0.01 / par
value: i i 2,000,000 / shares
authorized; |
|
|
i 4,117 |
|
|
|
i 4,001 |
|
Additional paid-in capital |
|
|
i 2,094,562 |
|
|
|
i 2,045,572 |
|
Accumulated deficit |
|
|
( i 1,007,764 |
) |
|
|
( i 957,677 |
) |
Accumulated other comprehensive income (loss) |
|
|
( i 5,098 |
) |
|
|
i — |
|
Total agilon health, inc. stockholders' equity (deficit) |
|
|
i 1,085,817 |
|
|
|
i 1,091,896 |
|
Noncontrolling interests |
|
|
( i 528 |
) |
|
|
( i 300 |
) |
Total stockholders’ equity (deficit) |
|
|
i 1,085,289 |
|
|
|
i 1,091,596 |
|
Total liabilities and stockholders’ equity (deficit) |
|
$ |
i 1,870,435 |
|
|
$ |
i 1,586,252 |
|
The condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities (“VIEs”) as agilon health, inc., together with its consolidated subsidiaries and variable interest entities (the “Company”), is the primary beneficiary of these VIEs. The condensed consolidated balance sheets include total assets that can only be used to settle obligations of the Company’s consolidated VIEs totaling $ i 805.9 million and $ i 420.5 million as of September 30, 2022 and December 31, 2021, respectively, and total liabilities of the Company’s consolidated VIEs for which creditors do not have recourse to the general credit of the primary beneficiary of $ i 587.8 million and $ i 282.0 million as of September 30, 2022 and December 31, 2021, respectively. See Note 14 for additional details.
See accompanying Notes to the Condensed Consolidated Financial Statements.
3
agilon health, inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical services revenue |
|
$ |
i 693,934 |
|
|
$ |
i 457,646 |
|
|
$ |
i 2,015,541 |
|
|
$ |
i 1,367,736 |
|
Other operating revenue |
|
|
i 924 |
|
|
|
i 967 |
|
|
|
i 2,896 |
|
|
|
i 2,937 |
|
Total revenues |
|
|
i 694,858 |
|
|
|
i 458,613 |
|
|
|
i 2,018,437 |
|
|
|
i 1,370,673 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical services expense |
|
|
i 618,287 |
|
|
|
i 414,202 |
|
|
|
i 1,771,635 |
|
|
|
i 1,217,039 |
|
Other medical expenses |
|
|
i 50,659 |
|
|
|
i 29,454 |
|
|
|
i 144,512 |
|
|
|
i 86,809 |
|
General and administrative (including noncash stock-based |
|
|
i 51,980 |
|
|
|
i 46,643 |
|
|
|
i 143,738 |
|
|
|
i 401,981 |
|
Depreciation and amortization |
|
|
i 3,450 |
|
|
|
i 3,915 |
|
|
|
i 9,865 |
|
|
|
i 10,923 |
|
Total expenses |
|
|
i 724,376 |
|
|
|
i 494,214 |
|
|
|
i 2,069,750 |
|
|
|
i 1,716,752 |
|
Income (loss) from operations |
|
|
( i 29,518 |
) |
|
|
( i 35,601 |
) |
|
|
( i 51,313 |
) |
|
|
( i 346,079 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense), net |
|
|
i 574 |
|
|
|
( i 269 |
) |
|
|
i 9,840 |
|
|
|
i 4,034 |
|
Gain (loss) on lease terminations |
|
|
i — |
|
|
|
i — |
|
|
|
( i 5,458 |
) |
|
|
i — |
|
Interest expense |
|
|
( i 1,000 |
) |
|
|
( i 867 |
) |
|
|
( i 2,816 |
) |
|
|
( i 5,306 |
) |
Income (loss) before income taxes |
|
|
( i 29,944 |
) |
|
|
( i 36,737 |
) |
|
|
( i 49,747 |
) |
|
|
( i 347,351 |
) |
Income tax benefit (expense) |
|
|
( i 559 |
) |
|
|
( i 256 |
) |
|
|
( i 1,068 |
) |
|
|
( i 707 |
) |
Income (loss) from continuing operations |
|
|
( i 30,503 |
) |
|
|
( i 36,993 |
) |
|
|
( i 50,815 |
) |
|
|
( i 348,058 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) before income taxes |
|
|
( i 224 |
) |
|
|
i 1,117 |
|
|
|
i 526 |
|
|
|
( i 1,781 |
) |
Income tax benefit (expense) |
|
|
( i 12 |
) |
|
|
( i 82 |
) |
|
|
( i 26 |
) |
|
|
( i 211 |
) |
Total discontinued operations |
|
|
( i 236 |
) |
|
|
i 1,035 |
|
|
|
i 500 |
|
|
|
( i 1,992 |
) |
Net income (loss) |
|
|
( i 30,739 |
) |
|
|
( i 35,958 |
) |
|
|
( i 50,315 |
) |
|
|
( i 350,050 |
) |
Noncontrolling interests’ share in (earnings) loss |
|
|
i 71 |
|
|
|
i 115 |
|
|
|
i 228 |
|
|
|
i 284 |
|
Net income (loss) attributable to common shares |
|
$ |
( i 30,668 |
) |
|
$ |
( i 35,843 |
) |
|
$ |
( i 50,087 |
) |
|
$ |
( i 349,766 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per common share, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Continuing operations |
|
$ |
( i i 0.07 / |
) |
|
$ |
( i i 0.09 / |
) |
|
$ |
( i i 0.12 / |
) |
|
$ |
( i i 0.95 / |
) |
Discontinued operations |
|
$ |
i i — / |
|
|
$ |
i i — / |
|
|
$ |
i i — / |
|
|
$ |
( i i 0.01 / |
) |
Weighted average shares outstanding, basic and diluted |
|
|
i i 411,065 / |
|
|
|
i i 391,229 / |
|
|
|
i i 406,823 / |
|
|
|
i i 365,018 / |
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
4
agilon health, inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Net income (loss) |
|
$ |
( i 30,739 |
) |
|
$ |
( i 35,958 |
) |
|
$ |
( i 50,315 |
) |
|
$ |
( i 350,050 |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net unrealized gain (loss) on marketable securities, |
|
|
( i 5,611 |
) |
|
|
i — |
|
|
|
( i 5,098 |
) |
|
|
i — |
|
Total comprehensive income (loss) |
|
|
( i 36,350 |
) |
|
|
( i 35,958 |
) |
|
|
( i 55,413 |
) |
|
|
( i 350,050 |
) |
Comprehensive (income) loss attributable to |
|
|
i 71 |
|
|
|
i 115 |
|
|
|
i 228 |
|
|
|
i 284 |
|
Total comprehensive income (loss) attributable to |
|
$ |
( i 36,279 |
) |
|
$ |
( i 35,843 |
) |
|
$ |
( i 55,185 |
) |
|
$ |
( i 349,766 |
) |
See accompanying Notes to the Condensed Consolidated Financial Statements.
5
agilon health, inc.
CONDENSED CONSOLIDATED STATEMENTS OF CONTINGENTLY REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands)
(unaudited)
For the three months ended September 30, 2022:
|
|
Total Stockholders’ Equity |
|
|||||||||||||||||||||||||
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated Other Comprehensive |
|
|
Noncontrolling |
|
|
Total |
|
||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (loss) |
|
|
Interest |
|
|
(Deficit) |
|
|||||||
|
|
i 408,204 |
|
|
$ |
i 4,082 |
|
|
$ |
i 2,076,329 |
|
|
$ |
( i 977,096 |
) |
|
$ |
i 513 |
|
|
$ |
( i 457 |
) |
|
$ |
i 1,103,371 |
|
|
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 30,668 |
) |
|
|
— |
|
|
|
( i 71 |
) |
|
|
( i 30,739 |
) |
Other comprehensive |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 5,611 |
) |
|
|
— |
|
|
|
( i 5,611 |
) |
Exercise of stock options |
|
|
i 3,390 |
|
|
|
i 33 |
|
|
|
i 10,356 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 10,389 |
|
Vesting of restricted stock units |
|
|
i 149 |
|
|
|
i 2 |
|
|
|
( i 2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares withheld related to |
|
|
( i 2 |
) |
|
|
— |
|
|
|
( i 28 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 28 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 7,907 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 7,907 |
|
|
|
i 411,741 |
|
|
$ |
i 4,117 |
|
|
$ |
i 2,094,562 |
|
|
$ |
( i 1,007,764 |
) |
|
$ |
( i 5,098 |
) |
|
$ |
( i 528 |
) |
|
$ |
i 1,085,289 |
|
|
For the nine months ended September 30, 2022:
|
|
Total Stockholders’ Equity |
|
|||||||||||||||||||||||||
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated Other Comprehensive |
|
|
Noncontrolling |
|
|
Total |
|
||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (loss) |
|
|
Interest |
|
|
(Deficit) |
|
|||||||
|
|
i 400,095 |
|
|
$ |
i 4,001 |
|
|
$ |
i 2,045,572 |
|
|
$ |
( i 957,677 |
) |
|
$ |
— |
|
|
$ |
( i 300 |
) |
|
$ |
i 1,091,596 |
|
|
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 50,087 |
) |
|
|
— |
|
|
|
( i 228 |
) |
|
|
( i 50,315 |
) |
Other comprehensive |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 5,098 |
) |
|
|
— |
|
|
|
( i 5,098 |
) |
Exercise of stock options |
|
|
i 11,392 |
|
|
|
i 113 |
|
|
|
i 31,349 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 31,462 |
|
Vesting of restricted stock units |
|
|
i 289 |
|
|
|
i 3 |
|
|
|
( i 3 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares withheld related to |
|
|
( i 35 |
) |
|
|
— |
|
|
|
( i 786 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 786 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 18,430 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 18,430 |
|
|
|
i 411,741 |
|
|
$ |
i 4,117 |
|
|
$ |
i 2,094,562 |
|
|
$ |
( i 1,007,764 |
) |
|
$ |
( i 5,098 |
) |
|
$ |
( i 528 |
) |
|
$ |
i 1,085,289 |
|
|
6
agilon health, inc.
CONDENSED CONSOLIDATED STATEMENTS OF CONTINGENTLY REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands)
(unaudited)
For the three months ended September 30, 2021:
|
|
Total Stockholders’ Equity |
|
|||||||||||||||||||||
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Interest |
|
|
(Deficit) |
|
||||||
|
|
i 390,883 |
|
|
$ |
i 3,909 |
|
|
$ |
i 2,011,651 |
|
|
$ |
( i 865,113 |
) |
|
$ |
( i 169 |
) |
|
$ |
i 1,150,278 |
|
|
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 35,843 |
) |
|
|
( i 115 |
) |
|
|
( i 35,958 |
) |
Offering costs in connection |
|
|
— |
|
|
|
— |
|
|
|
i 104 |
|
|
|
— |
|
|
|
— |
|
|
|
i 104 |
|
Exercise of stock options |
|
|
i 665 |
|
|
|
i 6 |
|
|
|
i 1,049 |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,055 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 11,960 |
|
|
|
— |
|
|
|
— |
|
|
|
i 11,960 |
|
|
|
i 391,548 |
|
|
$ |
i 3,915 |
|
|
$ |
i 2,024,764 |
|
|
$ |
( i 900,956 |
) |
|
$ |
( i 284 |
) |
|
$ |
i 1,127,439 |
|
|
For the nine months ended September 30, 2021:
|
|
Contingently |
|
|
|
Total Stockholders’ Equity |
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||||
|
|
Shares |
|
|
Amount |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Interests |
|
|
(Deficit) |
|
||||||||
|
|
i 76,201 |
|
|
$ |
i 309,500 |
|
|
|
|
i 249,374 |
|
|
$ |
i 2,494 |
|
|
$ |
i 263,966 |
|
|
$ |
( i 551,190 |
) |
|
$ |
i — |
|
|
$ |
( i 284,730 |
) |
|
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 349,766 |
) |
|
|
( i 284 |
) |
|
|
( i 350,050 |
) |
Reclassification of contingently |
|
|
( i 76,201 |
) |
|
|
( i 309,500 |
) |
|
|
|
i 76,201 |
|
|
|
i 762 |
|
|
|
i 308,738 |
|
|
|
— |
|
|
|
— |
|
|
|
i 309,500 |
|
Issuance of common stock in |
|
|
— |
|
|
|
— |
|
|
|
|
i 53,590 |
|
|
|
i 536 |
|
|
|
i 1,162,597 |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,163,133 |
|
Issuance of common stock under |
|
|
— |
|
|
|
— |
|
|
|
|
i 11,672 |
|
|
|
i 117 |
|
|
|
i 268,350 |
|
|
|
— |
|
|
|
— |
|
|
|
i 268,467 |
|
Exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
|
i 711 |
|
|
|
i 6 |
|
|
|
i 1,600 |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,606 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 19,513 |
|
|
|
— |
|
|
|
— |
|
|
|
i 19,513 |
|
|
|
i — |
|
|
$ |
i — |
|
|
|
|
i 391,548 |
|
|
$ |
i 3,915 |
|
|
$ |
i 2,024,764 |
|
|
$ |
( i 900,956 |
) |
|
$ |
( i 284 |
) |
|
$ |
i 1,127,439 |
|
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
7
agilon health, inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
|
2021 |
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
( i 50,315 |
) |
|
$ |
( i 350,050 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
i 9,865 |
|
|
|
i 11,032 |
|
Stock-based compensation expense |
|
|
i 18,430 |
|
|
|
i 287,980 |
|
Loss on debt extinguishment |
|
|
i — |
|
|
|
i 1,590 |
|
Loss (income) from equity method investments |
|
|
( i 3,473 |
) |
|
|
( i 2,080 |
) |
Other noncash items |
|
|
i 4,261 |
|
|
|
( i 111 |
) |
Changes in operating assets and liabilities |
|
|
( i 59,617 |
) |
|
|
( i 47,623 |
) |
Net cash provided by (used in) operating activities |
|
|
( i 80,849 |
) |
|
|
( i 99,262 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment, net |
|
|
( i 11,937 |
) |
|
|
( i 3,164 |
) |
Purchase of intangible assets |
|
|
( i 12,415 |
) |
|
|
( i 6,794 |
) |
Investment in loans receivable and other |
|
|
( i 4,510 |
) |
|
|
( i 76,613 |
) |
Investments in marketable securities |
|
|
( i 423,183 |
) |
|
|
i — |
|
Proceeds from sale of marketable securities and other |
|
|
i 15,127 |
|
|
|
i 1,312 |
|
Proceeds from sale of business and property, net of cash divested |
|
|
i 500 |
|
|
|
( i 2,644 |
) |
Net cash provided by (used in) investing activities |
|
|
( i 436,418 |
) |
|
|
( i 87,903 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from initial public offering |
|
|
i — |
|
|
|
i 1,170,942 |
|
Proceeds from other equity issuances, net |
|
|
i 30,676 |
|
|
|
i 1,606 |
|
Proceeds from the issuance of long-term debt |
|
|
i — |
|
|
|
i 100,000 |
|
Repayments of long-term debt |
|
|
( i 3,750 |
) |
|
|
( i 118,647 |
) |
Equity and debt issuance costs and other |
|
|
i — |
|
|
|
( i 9,928 |
) |
Net cash provided by (used in) financing activities |
|
|
i 26,926 |
|
|
|
i 1,143,973 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents |
|
|
( i 490,341 |
) |
|
|
i 956,808 |
|
Cash, cash equivalents and restricted cash and equivalents from |
|
|
i 1,054,820 |
|
|
|
i 135,178 |
|
Cash, cash equivalents and restricted cash and equivalents from |
|
|
i — |
|
|
|
i 3,917 |
|
Cash, cash equivalents and restricted cash and equivalents, |
|
|
i 1,054,820 |
|
|
|
i 139,095 |
|
Cash, cash equivalents and restricted cash and equivalents, end of period |
|
$ |
i 564,479 |
|
|
$ |
i 1,095,903 |
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
8
agilon health, inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. Business
Description of Business
agilon health, inc., through its partnerships and platform, provides the necessary capabilities, capital, and business model for existing physician groups to create a Medicare-centric, globally capitated line of business. As of September 30, 2022, the Company, through its contracted physician networks, provided care to approximately i 266,600 Medicare Advantage members enrolled with private health plans. Beginning January 1, 2022, the Company expanded its operations into: (i) Syracuse, New York, (ii) Grand Rapids and Traverse City, Michigan; (iii) Pinehurst, North Carolina; and (iv) Longview and Texarkana, Texas, along with additional partnerships in the Company’s existing Ohio markets. Beginning January 1, 2022, the Company also began operating i three additional Direct Contracting Entities (“DCE”) that, in collaboration with i four of its physician group partners, are participating in the Center for Medicare & Medicaid Services Innovation Center’s Direct Contracting Model, which is being redesigned and renamed the Accountable Care Organization Realizing Equity, Access, and Community Health (“ACO REACH”) Model beginning in 2023.
See Note 14 for additional discussions related to the Company’s involvement with VIEs.
The Company’s largest shareholder is an investment fund associated with Clayton Dubilier & Rice, LLC (“CD&R”), a private equity firm headquartered in New York, New York. All funds affiliated with CD&R are considered related parties.
/NOTE 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information.
The condensed consolidated financial statements include the accounts of agilon health, inc., its wholly-owned subsidiaries, and both joint ventures and VIEs that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation. All adjustments (consisting of normal recurring adjustments unless otherwise indicated), which the Company considers necessary to present fairly its financial position, results of operations, and cash flows, have been included. Operating results for the three and nine months ended September 30, 2022, including the impact of COVID-19, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The accompanying condensed consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Use of Estimates
Management is required to make estimates and assumptions in the preparation of financial statements. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates can include, among other things, those used to determine revenues and related receivables from risk adjustments, medical services expense and related payables (including the reserve for incurred but not reported (“IBNR”) claims), and the valuation and related recognition of impairments of long-lived assets, including goodwill. Management’s estimates for revenue recognition, medical services expense, and other estimates, judgments, and assumptions, may be materially and adversely different from actual results as a result of the COVID-19 pandemic, among other things. See Note 9 for additional discussion on the impact of the COVID-19 pandemic. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates.
Goodwill and Amortizable Intangible Assets
As of both September 30, 2022 and December 31, 2021, goodwill of $ i i 39.0 / million was allocated to the Company’s Hawaii reporting unit, which had a negative carrying value.
9
As of September 30, 2022 and December 31, 2021, the Company’s gross carrying amount of amortizable intangible assets was $ i 121.2 million and $ i 108.7 million, with accumulated amortization of $ i 60.6 million and $ i 53.3 million, respectively. For the three months ended September 30, 2022 and 2021, the Company recognized $ i 2.1 million and $ i 3.3 million, respectively, in amortization expense, which is included in depreciation and amortization expense in the condensed consolidated statement of operations. For the nine months ended September 30, 2022 and 2021, the Company recognized $ i 7.2 million and $ i 9.1 million, respectively, in amortization expense, which is included in depreciation and amortization expense in the condensed consolidated statement of operations.
/Property and Equipment
As of September 30, 2022 and December 31, 2021, the Company’s gross carrying amount of property and equipment was $ i 26.5 million and $ i 17.4 million, with accumulated depreciation of $ i 9.1 million and $ i 8.2 million, respectively. For the three months ended September 30, 2022 and 2021, the Company recognized $ i 1.4 million and $ i 0.6 million, respectively, in depreciation expense, which is included in depreciation and amortization expense in the condensed consolidated statement of operations. For the nine months ended September 30, 2022 and 2021, the Company recognized $ i 2.7 million and $ i 1.8 million, respectively, in depreciation expense, which is included in depreciation and amortization expense in the condensed consolidated statement of operations.
/Marketable Securities
The Company's investments in marketable securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in total stockholders' equity (deficit). The Company determines the appropriate classification of these investments at the time of purchase and reevaluates such designation at each balance sheet date. In general, the Company’s marketable securities are classified as current assets without regard to the securities’ contractual maturity dates because they may be readily liquidated.
Interest income, realized gains and losses on sales of securities, and other-than-temporary declines in the fair value of marketable securities, if any, are included as a component of other income (expense), net in the condensed consolidated statements of operations. The cost of securities sold is based on the specific identification method.
At each reporting period, the Company evaluates available-for-sale marketable securities for any credit-related impairment when the fair value of the investment is less than its amortized cost. The Company evaluates the underlying credit quality and credit ratings of the issuers, and, if necessary, the expected cash flows of the financial instruments. When the Company determines that the decline in fair value of an investment is below the carrying value and this decline is other-than-temporary, the Company reduces the carrying value of the marketable security it holds and records a loss for the amount of such decline. As of September 30, 2022, the Company did not record any impairment related to other-than-temporary declines in the fair value of marketable securities.
Income Taxes
The Company determined the income tax provision for interim periods using an estimate of the Company’s annual effective tax rate, applied to year-to-date results, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimated annual effective tax rate, and if the estimated annual effective tax rate changes, a cumulative catch-up adjustment is recorded in that quarter. The Company applied the intra-period tax allocation rules to allocate income taxes between continuing operations and discontinued operations as prescribed in U.S. GAAP, where the tax effect of income (loss) before income taxes from continuing operations is computed without regard to the tax effects of income (loss) before income taxes from the other categories.
NOTE 3. Revenue, Receivables, and Concentration of Credit Risk
Medical Services Revenue
Medical services revenue consists of capitation fees under contracts with various Medicare Advantage payors (“payors”). Under the typical capitation arrangement, the Company is entitled to monthly per-member, per-month (“PMPM”) fees to provide a defined range of healthcare services for Medicare Advantage health plan members (“members”) attributed to the Company’s contracted primary care physicians. PMPM fees are determined as a percent of the premium payors receive from the Centers for Medicare & Medicaid Services’ (“CMS”) for these members. The Company generally accepts full financial risk for members attributed to its contracted primary care physicians and therefore is responsible for the cost of all healthcare services required by those members. Fees are generally recorded gross in revenue because the Company is acting as a principal in coordinating and controlling the range of services provided (other than clinical decisions) under its capitation contracts with payors. Capitation contracts with payors are generally multi-year arrangements and have a single performance obligation that constitutes a series, as defined by Accounting Standards Codification ("ASC") 606, Revenue From Contracts With Customers, to stand ready on a monthly basis to provide all aspects of necessary medical
10
care to members for the contracted period. The Company recognizes revenue in the month in which eligible members are entitled to receive healthcare benefits during the contract term.
The transaction price for the Company’s capitation contracts is variable, as the PMPM fees to which the Company is entitled are subject to periodic adjustment under CMS’s risk adjustment payment methodology. CMS deploys a risk adjustment model that determines premiums paid to all payors according to each member’s health status and certain demographic factors. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from various settings. The Company and healthcare providers collect and submit the necessary and available diagnosis data to payors and such data is utilized by the Company to estimate risk adjustment payments to be received in subsequent periods. Risk adjustment-related revenues are estimated using the most likely amount methodology and amounts are only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. PMPM fees are also subject to adjustment for incentives or penalties based on the achievement of certain quality metrics defined in the Company’s contracts with payors. The Company recognizes incentive revenue as earned using the most likely amount methodology and only to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved.
Neither the Company nor any of its affiliates is a registered insurance company because state law in the states in which it operates does not require such registration for risk-bearing providers.
Receivables
Receivables primarily consist of amounts due under capitation contracts with various payors. Receivables due under capitation contracts are recorded monthly based on reports received from payors and management’s estimate of risk adjustment payments to be received in subsequent periods for open performance years. Receivables are recorded and stated at the amount expected to be collected.
Concentration
The Company contracts with various payors whereby the Company is entitled to monthly PMPM fees to provide a defined range of healthcare services for members attributed to its contracted primary care physicians. Substantially all of these PMPM fees are derived from the Medicare Advantage program, accounting for nearly i i i i 100 / / / % of the totals for the three and nine months ended September 30, 2022 and 2021. The Company generally accepts full financial risk for such members and therefore is responsible for the cost of all healthcare services required by them. Substantially all of the Company’s receivable balances are from a small number of payors.
The following table provides the Company’s revenue concentration with respect to major payors as a percentage of the Company’s total revenues:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Payor A |
|
|
i 26 |
% |
|
|
i 26 |
% |
|
|
i 25 |
% |
|
|
i 26 |
% |
Payor B |
|
|
i 19 |
% |
|
|
i 21 |
% |
|
|
i 19 |
% |
|
|
i 20 |
% |
Payor C |
|
|
i 14 |
% |
|
|
i 15 |
% |
|
|
i 14 |
% |
|
|
i 16 |
% |
Payor D |
|
* |
|
|
|
i 11 |
% |
|
* |
|
|
|
i 11 |
% |
||
* Less than i 10% of total revenues.
/The following table provides the Company’s concentration of credit risk with respect to major payors as a percentage of receivables, net:
|
|
|
|
|
||||
Payor A |
|
|
i 13 |
% |
|
|
i 18 |
% |
Payor B |
|
|
i 22 |
% |
|
|
i 21 |
% |
Payor C |
|
|
i 10 |
% |
|
|
i 14 |
% |
Payor D |
|
* |
|
|
|
i 12 |
% |
|
* Less than i 10% of total receivables.
11
NOTE 4. Marketable Securities and Fair Value Measurements
Marketable Securities
The following table summarizes the Company’s marketable securities (in thousands):
|
|
|
||||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities |
|
$ |
i 252,662 |
|
|
$ |
i 25 |
|
|
$ |
( i 3,894 |
) |
|
$ |
i 248,793 |
|
U.S. Treasury notes |
|
|
i 150,479 |
|
|
|
i 114 |
|
|
|
( i 1,269 |
) |
|
|
i 149,324 |
|
Other |
|
|
i 9,950 |
|
|
|
i — |
|
|
|
( i 74 |
) |
|
|
i 9,876 |
|
|
|
$ |
i 413,091 |
|
|
$ |
i 139 |
|
|
$ |
( i 5,237 |
) |
|
$ |
i 407,993 |
|
The Company’s unrealized losses from marketable securities as of September 30, 2022 were caused primarily by interest rate increases and not by unfavorable changes in the credit quality associated with these securities that impacted the Company’s assessment on collectability of principal and interest. At September 30, 2022, the Company had $ i 360.5 million marketable securities in an unrealized loss position for less than twelve months. The Company does not intend to sell marketable securities that are in an unrealized loss position, and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. Therefore, the Company believes these losses to be temporary. There was i no allowance for credit losses on available-for-sale marketable securities at September 30, 2022.
Fair Value Measurements
The Company’s financial instruments consist of cash and cash equivalents, restricted cash equivalents, marketable securities, receivables, other liabilities, accounts payable, certain accrued expenses, and borrowings which consist of a term loan and a revolving credit facility. The carrying values of the financial instruments classified as current in the condensed consolidated balance sheets approximate their fair values due to their short-term maturities. The Company may be required, from time to time, to measure its loans to physician partner groups in connection with taxes payable on shares distributed to them upon completion of the IPO at fair value on a nonrecurring basis. Such measurements are classified within Level 2 of the fair value hierarchy. The carrying values of the term loan and revolving credit facility are a reasonable estimate of fair value because the interest rates on such borrowings approximate market rates as of the reporting date. Such borrowings are classified within Level 2 of the fair value hierarchy. During the nine months ended September 30, 2022 and 2021, there were no material transfers of financial assets or liabilities in or out of Level 3.
The Company measures and discloses the fair value of nonfinancial and financial assets and liabilities utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:
The table below summarizes the Company’s financial instruments measured at fair value on a recurring basis (in thousands):
|
|
|
||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|||
Corporate debt securities |
|
$ |
i — |
|
|
$ |
i 248,793 |
|
|
$ |
i — |
|
U.S. Treasury notes |
|
|
i 149,324 |
|
|
|
i — |
|
|
|
i — |
|
Other |
|
|
i 9,876 |
|
|
|
i — |
|
|
|
i — |
|
|
|
$ |
i 159,200 |
|
|
$ |
i 248,793 |
|
|
$ |
i — |
|
12
/
NOTE 5. Other Assets, net
The following table summarizes the Company’s other assets, net (in thousands):
|
|
|
|
|
||||
Loans to physician partners |
|
$ |
i 73,777 |
|
|
$ |
i 76,821 |
|
Indemnification assets |
|
|
i 2,142 |
|
|
|
i 2,107 |
|
Health plan deposits |
|
|
i 11,728 |
|
|
|
i 11,523 |
|
Equity method investments(1) |
|
|
i 11,843 |
|
|
|
i 6,690 |
|
Right-of-use lease assets |
|
|
i 13,033 |
|
|
|
i 11,739 |
|
Other |
|
|
i 3,560 |
|
|
|
i 4,078 |
|
|
|
$ |
i 116,083 |
|
|
$ |
i 112,958 |
|
Loans to Physician Partners
The Company provided loans to its physician partners in connection with taxes payable on shares distributed to them in connection with the initial public offering ("IPO"). These loans mature between 2026 and 2031 with nominal interest compounding annually and no prepayment penalties. Such loans are stated at the amount expected to be collected.
Indemnification Assets
Indemnification assets have been established to offset certain pre-closing liabilities for which the prior owners of some of the Company’s California subsidiaries are obligated to indemnify the Company. The Company deems the amounts receivable under the indemnification agreements to be fully collectible should indemnification claims arise, and, as such, a valuation allowance is not deemed necessary.
/NOTE 6. Medical Claims and Related Payables
Medical services expense represents costs incurred for medical services provided to members by physicians, hospitals and other ancillary providers for which the Company is financially responsible and that are paid either directly by the Company or by payors with whom the Company has contracted. Medical services expenses are recognized in the period in which services are provided and include estimates of claims that have been incurred but have either not yet been received, processed, or paid and as such, not reported.
Such estimates are developed using actuarial methods commonly used by health insurance actuaries that include a number of factors and assumptions including medical service utilization trends, changes in membership, observed medical cost trends, historical claim payment patterns and other factors. Generally, for the most recent months, the Company estimates claim costs incurred by applying observed medical cost trend factors to the average PMPM medical costs incurred in prior months for which more complete claims data are available.
Each period, the Company re-examines previously established medical claims payable estimates based on actual claim submissions and other changes in facts and circumstances. As more complete claims information becomes available, the Company adjusts its estimates and recognizes those changes in estimates in the period in which the change is identified. The difference between the estimated liability and the actual settlements of claims is recognized in the period the claims are settled. The Company’s medical claims payable balance represents management’s best estimate of its liability for unpaid medical costs as of September 30, 2022 and 2021. The Company uses judgment to determine the appropriate assumptions for developing the required estimates.
13
The following table presents the components of changes in medical claims and related payables (in thousands):
|
|
|
||||||
|
|
|
|
2021 |
|
|||
Medical claims and related payables, beginning of the year |
|
$ |
i 239,014 |
|
|
$ |
i 164,161 |
|
Components of incurred costs related to: |
|
|
|
|
|
|
||
Current year |
|
|
i 1,756,943 |
|
|
|
i 1,217,386 |
|
Prior years |
|
|
i 14,692 |
|
|
|
( i 347 |
) |
Discontinued operations - current year |
|
|
— |
|
|
|
i 1,241 |
|
Discontinued operations - prior years |
|
|
i — |
|
|
|
( i 2,000 |
) |
|
|
|
i 1,771,635 |
|
|
|
i 1,216,280 |
|
Claims paid related to: |
|
|
|
|
|
|
||
Current year |
|
|
( i 1,283,242 |
) |
|
|
( i 939,588 |
) |
Prior years |
|
|
( i 236,413 |
) |
|
|
( i 148,327 |
) |
Discontinued operations - current year |
|
|
— |
|
|
|
( i 1,241 |
) |
Discontinued operations - prior years |
|
|
( i 154 |
) |
|
|
( i 3,164 |
) |
|
|
|
( i 1,519,809 |
) |
|
|
( i 1,092,320 |
) |
Medical claims and related payables, end of the period |
|
$ |
i 490,840 |
|
|
$ |
i 288,121 |
|
Medical claims and related payables presented in the periods above include immaterial balances related to claims liabilities associated with certain divested California businesses for which the Company has retained the liability for claims incurred prior to the date of divestiture.
/NOTE 7. Other Liabilities
The following table summarizes the Company’s other liabilities (in thousands):
|
|
|
|
|
||||
Other long-term contingencies |
|
$ |
i 63,001 |
|
|
$ |
i 71,344 |
|
Reserve for uncertain tax positions |
|
|
i 2,142 |
|
|
|
i 2,107 |
|
Right-of-use lease liabilities, long-term |
|
|
i 10,288 |
|
|
|
i 7,904 |
|
Equity method liabilities – DCEs |
|
|
i 6,395 |
|
|
|
i 6,380 |
|
Other |
|
|
i 5,381 |
|
|
|
i 6,560 |
|
|
|
$ |
i 87,207 |
|
|
$ |
i 94,295 |
|
As of September 30, 2022 and December 31, 2021, the Company’s accruals for contingent liabilities related to unasserted claims were $ i 63.0 million and $ i 71.3 million, respectively. The accrued amounts represent the Company’s estimate of probable losses in accordance with ASC Topic 450, Contingencies. The Company’s estimate of the range of reasonably possible losses in excess of such accruals was $ i 0 to $ i 47.4 million as of September 30, 2022.
See Note 14 for equity method liabilities related to the Company's DCE investments.
/NOTE 8. Debt
On February 18, 2021, the Company executed a credit facility agreement (as amended by the First Amendment to Credit Agreement, dated as of March 1, 2021, the “Credit Facilities”). The Credit Facilities include: (i) a $ i 100.0 million secured term loan (the “Secured Term Loan Facility”) and (ii) a $ i 100.0 million senior secured revolving credit facility (the “Secured Revolving Facility”) with a capacity to issue standby letters of credit in certain circumstances up to a maximum of $ i 80.0 million. Subject to specified conditions and receipt of commitments, the Secured Term Loan Facility may be expanded (or a new term loan facility, revolving credit facility or letter of credit facility added) by up to (i) $ i 50.0 million plus (ii) an additional amount determined in accordance with a formula tied to repayment of certain of the Company’s indebtedness. The proceeds from the Secured Term Loan Facility were used to refinance an aggregate of $ i 68.6 million of outstanding indebtedness under the prior credit facility and unsecured debt, with the remaining $ i 30.1 million of net proceeds used for working capital and other general corporate purposes. In connection with the refinance of the existing debt, the Company recognized $ i 1.1 million of additional interest expense for the write-off of the related debt issuance costs. The Secured Term Loan Facility required, among other things, a mandatory prepayment of $ i 50.0 million if gross proceeds from the IPO exceeded
14
$ i 1.0 billion. On April 26, 2021, the Company repaid $ i 50.0 million of the Secured Term Loan Facility. The maturity date of the Credit Facilities is i February 18, 2026.
As of September 30, 2022, the Company had $ i 45.0 million outstanding under the Secured Term Loan Facility and availability under the Secured Revolving Facility was $ i 49.8 million, as the Company had outstanding letters of credit totaling $ i 50.2 million, of which $ i 26.5 million was for the Company's DCE investments. The standby letters of credit are automatically extended without amendment for i one-year periods, unless the Company notifies the institution in advance of the expiration date that the letter will be terminated. i No amounts have been drawn on the outstanding letters of credit as of September 30, 2022.
At the Company’s option, borrowings under the agreement can be either: (i) LIBO Rate Loans or (ii) Base Rate Loans. LIBO Rate Loans bear interest at a rate equal to the sum of i 4.00% (stepping down to i 3.50% on and following October 1, 2023) and the higher of (a) LIBO, as defined in the credit agreement, and (b) i 0%. Base Rate Loans bear interest at a rate equal to the sum of i 3.00% (stepping down to i 2.50% on and following October 1, 2023) and the highest of: (a) i 0.50% in excess of the overnight federal funds rate, (b) the prime rate established by the administrative agent from time to time, (c) the one-month LIBO rate (adjusted for maximum reserves) plus i 1.00% and (d) i 0%. Additionally, the Company pays a commitment fee on the unfunded 2021 Revolving Credit Facility amount of i 0.50% (stepping down to i 0.375% on and following October 1, 2023). The Company must also pay customary letter of credit fees. As of September 30, 2022, the effective interest rate on the Secured Term Loan Facility was i 7.145%.
The Credit Facilities are guaranteed by certain of the Company’s subsidiaries, including those identified as VIEs, and contain customary covenants including, among other things, limitations on restricted payments including: (i) dividends and distributions from restricted subsidiaries, (ii) requirements of minimum financial ratios, and (iii) limitation on additional borrowings based on certain financial ratios. i Failure to meet any of these covenants could result in an event of default under the agreement. If an event of default occurs, the lenders could elect to declare all amounts outstanding under the agreement to be immediately due and payable. i As of September 30, 2022, the Company was in compliance with all covenants under the Credit Facilities.
/NOTE 9. Commitments and Contingencies
Legal Proceedings
From time to time, the Company is a party to, or has a significant relationship to, legal proceedings, lawsuits, and other claims. The Company is not aware of any legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Company’s financial condition, results of operations or cash flows. The Company’s policy is to expense legal costs as they are incurred.
COVID-19
The Company continues to monitor and assess the estimated operating and financial impact of the COVID-19 pandemic, which has not subsided. As the COVID-19 pandemic evolves, the Company continues to process, assemble, and assess member utilization information and the ultimate impact on the Company's business, results of operations, financial condition and cash flows remains uncertain. During 2021 and the first nine months of 2022, overall care activity continued to increase, including a mix of temporary deferral of care activity and COVID-19 related care costs. These costs may be incurred at future points in time, and it is possible that the deferral of healthcare services, or the impact of the Company’s members (who are seniors typically with chronic conditions) being diagnosed with COVID-19, could cause additional health problems in its existing members, which could increase costs in the future. In future periods, care patterns may moderately exceed normal baselines as previously deferred care is obtained and acuity temporarily rises due to missed regular care. From time to time, health system capacity may be subject to possible increased volatility due to the pandemic. The Company cannot accurately estimate the net ultimate impact, positive or negative, to medical services expense at this time.
Given the disruption caused by COVID-19, it is unclear whether the Company’s contracted physicians will be able to document the health conditions of members as comprehensively as they did in historical periods. Because risk adjustment factors in the current period are based on the preceding year’s diagnosed disease conditions, the Company’s revenue in future periods may be adversely impacted.
As the COVID-19 pandemic has not yet fully subsided, the ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 pandemic, new information that may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption. The ultimate impact of these matters to the Company and its financial condition cannot be reasonably estimated at this time.
15
The Company believes that its cash resources, funds from the IPO in April 2021, borrowing capacity available under the Secured Revolving Facility, and cash flow generated from operations will continue to be sufficient to withstand the financial impact of the pandemic and will enable the Company to continue to support its operations, regulatory requirements, debt repayment obligations, and geography expansion for the foreseeable future.
Regulatory Matters
The healthcare industry is subject to numerous laws and regulations of federal, state, and local governments. Violations of these laws and regulations could result in expulsion from government healthcare programs, together with the imposition of significant fines and penalties. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time.
The healthcare regulatory landscape is constantly changing. It is difficult to predict which final rules may be adopted and implemented by federal and state authorities, and if such final rules would result in any material adverse effect on the Company’s business, consolidated financial condition, results of operations, or cash flows. Management is unable to determine how any future government spending cuts will affect Medicare reimbursement. There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of healthcare that, if adopted, could have a material adverse effect on the Company’s condensed consolidated financial statements.
Contractual Obligations
The Company’s capital commitments to physician partners to support physician partner expansion and related purposes increased by $ i 79.9 million, to $ i 136.7 million at September 30, 2022 when compared to December 31, 2021. There have been no other material changes, outside of the ordinary course of business and indebtedness (see Note 8), to the Company’s commitments during the nine months ended September 30, 2022.
/NOTE 10. Common Stock
Common Stock
2022. During the nine months ended September 30, 2022, the Company issued approximately i 11.6 million shares of common stock primarily in connection with exercises and vesting of stock-based awards.
2021. During the nine months ended September 30, 2021, the Company issued approximately i 711,000 shares of common stock primarily in connection with exercises and vesting of stock-based awards.
On April 14, 2021, the Company priced the IPO of its common stock at an offering price of $ i 23.00 per share for i 46,600,000 shares, pursuant to the Prospectus. On April 15, 2021, the underwriters exercised their option to purchase an additional i 6,990,000 shares of common stock. On April 19, 2021, the Company’s sale of an aggregate of i 53,590,000 shares of common stock was completed.
Upon the completion of the IPO, the Company issued i 11.7 million shares of common stock under partner physician group equity agreements and recognized stock-based compensation expense of $ i 268.5 million in April 2021.
The redemption feature of the Company’s contingently redeemable common stock terminated upon the completion of the IPO in April 2021. Accordingly, such common stock was reclassified from temporary equity in the mezzanine section of the condensed consolidated balance sheet to permanent equity.
/NOTE 11. Net Income (Loss) Per Common Share
Basic net income (loss) per common share (“EPS”) is computed based upon the weighted average number of common shares outstanding. Diluted net income (loss) per common share is computed based upon the weighted average number of common shares outstanding plus the impact of common shares issuable from the assumed conversion of stock options, certain performance restricted stock units, and unvested restricted stock units. Only those instruments having a dilutive impact on basic loss per share are included in diluted loss per share during the periods presented.
16
The following table illustrates the computation of basic and diluted EPS (in thousands, except per share amounts):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from continuing operations |
|
$ |
( i 30,503 |
) |
|
$ |
( i 36,993 |
) |
|
$ |
( i 50,815 |
) |
|
$ |
( i 348,058 |
) |
Noncontrolling interests’ share in (earnings) loss from |
|
|
i 71 |
|
|
|
i 115 |
|
|
|
i 228 |
|
|
|
i 284 |
|
Net income (loss) attributable to common stockholders |
|
|
( i 30,432 |
) |
|
|
( i 36,878 |
) |
|
|
( i 50,587 |
) |
|
|
( i 347,774 |
) |
Income (loss) from discontinued operations |
|
|
( i 236 |
) |
|
|
i 1,035 |
|
|
|
i 500 |
|
|
|
( i 1,992 |
) |
Net income (loss) attributable to common stockholders |
|
$ |
( i 30,668 |
) |
|
$ |
( i 35,843 |
) |
|
$ |
( i 50,087 |
) |
|
$ |
( i 349,766 |
) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding, basic and diluted |
|
|
i i 411,065 / |
|
|
|
i i 391,229 / |
|
|
|
i i 406,823 / |
|
|
|
i i 365,018 / |
|
Net income (loss) per share attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per common share from |
|
$ |
( i i 0.07 / |
) |
|
$ |
( i i 0.09 / |
) |
|
$ |
( i i 0.12 / |
) |
|
$ |
( i i 0.95 / |
) |
Net income (loss) per common share from |
|
$ |
i i — / |
|
|
$ |
i i — / |
|
|
$ |
i i — / |
|
|
$ |
( i i 0.01 / |
) |
Basic net income (loss) per share is the same as diluted net income (loss) per share for each period presented, as the inclusion of all potential common shares outstanding would have been antidilutive. i The following table provides the weighted-average potential shares of common stock that were excluded from the calculation of diluted net income (loss) per share attributable to common stockholders because their effect would have been anti-dilutive (in thousands):
|
|
Nine Months Ended |
|
|||||
|
|
|
|
2021 |
|
|||
Stock options - service only condition |
|
|
i 9,883 |
|
|
|
i 23,877 |
|
Equity awards - market and/or performance condition |
|
|
i 10,591 |
|
|
|
i 16,575 |
|
Restricted stock units |
|
|
i 1,908 |
|
|
|
i 885 |
|
NOTE 12. Discontinued Operations
Discontinued operations are a component of an entity that has either been disposed of or is deemed held-for-sale and, (i) the operations and cash flows of the component have been or will be eliminated from ongoing operations as a result of the disposal transaction, and (ii) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.
i During 2020, the Company implemented a plan to divest its California operations, which included the entirety of its Medicaid line of business, via three separate transactions with different parties. In August 2020, October 2020 and February 2021, the Company disposed of its Southern California operations, Fresno, California operations, and remaining California operations, respectively. The Company’s decision to exit California and the Medicaid line of business represented a strategic shift that had a major effect on its operations and financial results. As such, the Company’s California operations are reflected in the condensed consolidated financial statements as discontinued operations.
17
The results of discontinued operations are as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical services revenue |
|
$ |
i 1 |
|
|
$ |
i 1,289 |
|
|
$ |
i 512 |
|
|
$ |
i 4,602 |
|
Other operating revenue |
|
|
i 4 |
|
|
|
i 8 |
|
|
|
i 14 |
|
|
|
i 31 |
|
Total revenues |
|
|
i 5 |
|
|
|
i 1,297 |
|
|
|
i 526 |
|
|
|
i 4,633 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical services expense |
|
|
i 229 |
|
|
|
( i 131 |
) |
|
|
i — |
|
|
|
( i 759 |
) |
Other medical expenses |
|
|
i — |
|
|
|
i 5 |
|
|
|
i — |
|
|
|
i 2,496 |
|
General and administrative |
|
|
i — |
|
|
|
i 302 |
|
|
|
i — |
|
|
|
i 5,044 |
|
Depreciation and amortization |
|
|
i — |
|
|
|
i 22 |
|
|
|
i — |
|
|
|
i 109 |
|
Income (loss) from operations |
|
|
( i 224 |
) |
|
|
i 1,099 |
|
|
|
i 526 |
|
|
|
( i 2,257 |
) |
Other income (expense), net |
|
|
i — |
|
|
|
i 18 |
|
|
|
i — |
|
|
|
( i 15 |
) |
Gain (loss) on sale of assets |
|
|
i — |
|
|
|
i — |
|
|
|
i — |
|
|
|
i 491 |
|
Income (loss) before income taxes |
|
|
( i 224 |
) |
|
|
i 1,117 |
|
|
|
i 526 |
|
|
|
( i 1,781 |
) |
Income tax benefit (expense) |
|
|
( i 12 |
) |
|
|
( i 82 |
) |
|
|
( i 26 |
) |
|
|
( i 211 |
) |
Net income (loss) from |
|
$ |
( i 236 |
) |
|
$ |
i 1,035 |
|
|
$ |
i 500 |
|
|
$ |
( i 1,992 |
) |
The following table provides significant non-cash operating items for discontinued operations that are included in the condensed consolidated statements of cash flows (in thousands):
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
|
|
2021 |
|
|||
Non-cash operating activities from discontinued operations: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
$ |
i — |
|
|
$ |
i 109 |
|
NOTE 13. Supplemental Cash Flow Information
The following table provides supplemental cash flow information (in thousands):
|
|
Nine Months Ended |
|
|||||
|
|
|
|
2021 |
|
|||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
i 2,878 |
|
|
$ |
i 3,853 |
|
Income taxes paid |
|
|
i 4,223 |
|
|
|
i 1,738 |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Right-of-use asset obtained in exchange for new operating lease liability |
|
|
i 7,288 |
|
|
|
i 3,908 |
|
Reclassification of contingently redeemable common stock in connection with IPO |
|
|
i — |
|
|
|
i 309,500 |
|
Issuance of common stock under partner physician group equity agreements |
|
|
i — |
|
|
|
i 268,467 |
|
Offering costs accrued at end of period |
|
|
i — |
|
|
|
i 295 |
|
Non-cash investment in unconsolidated subsidiaries |
|
|
i 190 |
|
|
|
i 763 |
|
The following table summarizes cash, cash equivalents and restricted cash equivalents from continuing operations (in thousands):
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
i 551,287 |
|
|
$ |
i 1,040,039 |
|
Restricted cash and equivalents(1) |
|
|
i 13,192 |
|
|
|
i 14,781 |
|
Cash, cash equivalents and restricted cash equivalents |
|
$ |
i 564,479 |
|
|
$ |
i 1,054,820 |
|
18
NOTE 14. Variable Interest Entities
Consolidated Variable Interest Entities
agilon health, inc.’s consolidated assets and liabilities as of September 30, 2022 and December 31, 2021 include certain assets of VIEs that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to agilon health, inc.
agilon health, inc.’s consolidated assets and liabilities include VIE assets and liabilities as follows (in thousands):
|
|
|
|
|
||||
Assets(1) |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
i 138,833 |
|
|
$ |
i 104,741 |
|
Restricted cash equivalents |
|
|
i 10,610 |
|
|
|
i 13,210 |
|
Receivables, net |
|
|
i 625,394 |
|
|
|
i 276,590 |
|
Prepaid expenses and other current assets, net |
|
|
i 10,567 |
|
|
|
i 7,046 |
|
Property and equipment, net |
|
|
i 1,465 |
|
|
|
i 1,147 |
|
Intangible assets, net |
|
|
i 9,016 |
|
|
|
i 7,220 |
|
Other assets, net |
|
|
i 10,032 |
|
|
|
i 10,580 |
|
Liabilities(1) |
|
|
|
|
|
|
||
Medical claims and related payables |
|
|
i 446,638 |
|
|
|
i 195,812 |
|
Accounts payable and accrued expenses |
|
|
i 137,187 |
|
|
|
i 81,702 |
|
Other liabilities |
|
|
i 3,980 |
|
|
|
i 4,521 |
|
Risk-bearing Entities. At September 30, 2022, the Company operates i 24 wholly-owned risk-bearing entities (“RBEs”) for the purpose of entering into risk-bearing contracts with payors. Each RBE’s equity at risk is considered insufficient to finance its activities without additional support, and, therefore, each RBE is considered a VIE. i The Company consolidates the RBEs as it has determined that it is the primary beneficiary because it has: (i) the ability to control the activities that most significantly impact the RBEs’ economic performance; and (ii) the obligation to absorb losses or right to receive benefits that could potentially be significant to the RBEs. Specifically, the Company has the unilateral ability and authority, through the RBE governance and management agreements, to make significant decisions about strategic and operating activities of the RBEs, including negotiating and entering into risk-bearing contracts with payors, and approving the RBEs’ annual operating budgets. The Company also has the obligation to fund losses of the RBEs and the right to receive a significant percentage of any financial surplus generated by the RBEs. The assets of the RBEs primarily consist of cash and cash equivalents, receivables, net, intangible assets, net, and other assets, net; its obligations primarily consist of medical claims and related payables as well as operating expenses of the RBEs (accounts payable and accrued expenses), including incentive compensation obligations to the Company’s physician partners. On February 18, 2021, the Company executed the Credit Facilities, which are guaranteed by certain of the Company’s VIEs. Assets generated by the RBEs (primarily from medical services revenues) may be used, in certain limited circumstances, to settle the Company’s contractual debt obligations.
Unconsolidated Variable Interest Entities
As of September 30, 2022, the Company had i nine equity method investments (liabilities) that were deemed to be VIEs. The Company has determined that the activities that most significantly impact the performance of these VIEs consist of the allocation of resources to and other decisions related to clinical activities and provider contracting decisions. Because the Company does not have the ability to control these activities due to another party’s control of the VIEs’ board of directors, the Company has determined that it is not the primary beneficiary of and therefore does not consolidate these VIEs. The Company's maximum loss exposure as a result of the Company’s involvement with the VIEs cannot be quantified as the Company has the obligation to provide ongoing operational support to the unconsolidated VIEs, as needed.
19
Equity Method Investments
The following table summarizes the Company’s equity method investments (in thousands):
|
|
|
|
|
||||
Equity method investments - Other(1) |
|
$ |
i 8,293 |
|
|
$ |
i 6,690 |
|
Equity method investments - DCEs(1) |
|
|
i 3,550 |
|
|
|
i — |
|
Equity method liabilities - DCEs(2) |
|
|
( i 6,395 |
) |
|
|
( i 6,380 |
) |
The Company is a partner in i eight wholly-owned DCEs in collaboration with i 12 of its physician group partners operating in i 10 geographies. i The combined summarized operating results of the Company’s DCEs are as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Medical services revenue |
|
$ |
i 241,408 |
|
|
$ |
i 144,931 |
|
|
$ |
i 786,171 |
|
|
$ |
i 308,915 |
|
Medical services expense |
|
|
( i 231,910 |
) |
|
|
( i 135,529 |
) |
|
|
( i 735,924 |
) |
|
|
( i 287,683 |
) |
Other medical expenses(1) |
|
|
( i 9,215 |
) |
|
|
( i 6,468 |
) |
|
|
( i 34,019 |
) |
|
|
( i 13,624 |
) |
Net income (loss)(2) |
|
|
( i 4,361 |
) |
|
|
( i 117 |
) |
|
|
i 3,345 |
|
|
|
i 1,723 |
|
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
All references in this report to “agilon,” “we,” “us” or “our” mean agilon health, inc., together with its consolidated subsidiaries. Unless the context suggests otherwise, references to “agilon health, inc.” mean the parent company without its subsidiaries.
Cautionary Language Regarding Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q (the “Report”) that are not historical factual statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates,” or the negative versions of these words or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this Report and include, without limitation, statements regarding our intentions, beliefs, assumptions, or current expectations concerning, among other things, our financial position, results of operations, cash flows, prospects, and growth strategies.
Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be outside our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition, and liquidity, and the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition, and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Part II, Item 1A. “Risk Factors” in this Report, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Report. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:
21
Except as required by law, we do not undertake, and hereby disclaim, any obligation to update any forward-looking statements, which speak only as of the date on which they are made.
22
The information set forth in this Item 2 is intended to provide readers with an understanding of our financial condition, changes in financial condition, and results of operations. We will discuss and provide our analysis in the following order:
Overview and Recent Developments
Our business is transforming healthcare by empowering the primary care physician (“PCP”) to be the agent for change in the communities they serve. We believe that PCPs, with their intimate patient-physician relationships, are best positioned to drive meaningful change in quality, cost, and patient experience when provided with the right infrastructure and payment model. Through our combination of the agilon platform, a long-term partnership model with existing physician groups and a growing network of like-minded physicians, we are poised to revolutionize healthcare for seniors across communities throughout the United States. Our purpose-built model provides the necessary capabilities, capital, and business model for existing physician groups to create a Medicare-centric, globally capitated line of business. Our model operates by forming RBEs within local geographies, that enter into arrangements with payors providing for monthly payments to manage the total healthcare needs of our physician partners’ attributed patients (or, global capitation arrangements), contract with agilon to perform certain functions, and enter into long-term professional service agreements with one or more anchor physician groups pursuant to which the anchor physician groups receive a base compensation rate and share in the savings from successfully improving quality of care and reducing costs.
Our business model is differentiated by its focus on existing community-based physician groups and is built around three key elements: (1) agilon’s platform; (2) agilon’s long-term physician partnership approach; and (3) agilon’s network. With our model, our goal is to remove the barriers that prevent community-based physicians from evolving to a Total Care Model, where the physician is empowered to manage health outcomes and the total healthcare needs of their attributed Medicare patients.
Our platform, partnership, and network model enable our physician partners to be the quarterback for healthcare delivery in their community, and successfully operate a Medicare-centric, globally capitated line of business. This generates improving quality and cost outcomes, growing membership, and increasing medical margin per member, which we share with our physician partners pursuant to our long-term partnership model. We believe this continuous improvement in patient and physician engagement and experience leads to more PCPs joining our platform and ultimately improves the success of each physician partner on the platform. As our platform grows, we believe we will be able to leverage our scale to drive additional investment in our geographies to accelerate this flywheel for the benefit of our physician partners and their patients.
Third Quarter 2022 Results:
23
Year to Date 2022 Results:
Membership Details
Medicare Advantage members increased 45% from September 30, 2021, which includes contributions from new geographies and growth within geographies existing prior to 2022. Total members live on the platform includes 266,600 Medicare Advantage members and 89,400 attributed Direct Contracting beneficiaries.
Average Medicare Advantage membership was 270,050 during the third quarter.
COVID-19
Since March 2020, we have implemented precautionary measures to protect the health and safety of our employees, physicians and members in connection with the COVID-19 pandemic. Because COVID-19 infections have been reported throughout the United States, certain national, provincial, state, and local governmental authorities have issued proclamations and/or directives aimed at minimizing the spread of COVID-19, certain of which have been relaxed in 2022. Additionally, more restrictive proclamations and/or directives may be issued in the future, in the event of a resurgence of outbreaks of COVID-19 or the outbreaks of any of its variants.
As the COVID-19 pandemic has not yet fully subsided, the ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 pandemic, new information that may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or we, may direct, which may result in an extended period of continued business disruption. The ultimate impact of these matters to us and our financial condition cannot be reasonably estimated at this time.
The COVID-19 pandemic continues to evolve and the ultimate impact on our business, results of operations, financial condition, and cash flows remains uncertain. During 2021 and the first nine months of 2022, overall care activity continued to increase, including a mix of temporary deferral of care activity and COVID-19 related care costs. These costs may be incurred at future points in time, and it is possible that the deferral of healthcare services, or the impact of our members (who are seniors typically with chronic conditions) being diagnosed with COVID-19, could cause additional health problems in our existing members, which could increase costs in the future. In future periods, care patterns may moderately exceed normal baselines as previously deferred care is obtained and acuity temporarily rises due to missed regular care. From time to time, health system capacity may be subject to possible increased volatility due to the pandemic. We cannot accurately estimate the net ultimate impact, positive or negative, to medical services expense at this time.
Given the disruption caused by COVID-19, it is unclear whether our contracted physicians will be able to document the health conditions of our members as comprehensively as they did in historical periods. Because risk adjustment factors in the current period are based on the preceding year’s diagnosed disease conditions, our revenue in future periods may be adversely impacted.
24
Key Financial and Operating Metrics
All of our key metrics exclude historical results from our California operations (which are included as discontinued operations in our condensed consolidated financial statements).
We monitor the following key financial and operating metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. We believe the following key metrics are useful in evaluating our business (dollars in thousands):
|
|
As of and For the |
|
|
As of and For the |
|
||||||||||||||||||
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
|||||||
MA members |
|
|
266,600 |
|
|
|
184,100 |
|
|
|
45 |
|
|
|
266,600 |
|
|
|
184,100 |
|
|
|
45 |
|
Medical services revenue |
|
$ |
693,934 |
|
|
$ |
457,646 |
|
|
|
52 |
|
|
$ |
2,015,541 |
|
|
$ |
1,367,736 |
|
|
|
47 |
|
Medical margin |
|
$ |
75,647 |
|
|
$ |
43,444 |
|
|
|
74 |
|
|
$ |
243,906 |
|
|
$ |
150,697 |
|
|
|
62 |
|
Platform support costs |
|
$ |
34,764 |
|
|
$ |
33,547 |
|
|
|
4 |
|
|
$ |
104,868 |
|
|
$ |
92,622 |
|
|
|
13 |
|
Network contribution(1) |
|
$ |
32,140 |
|
|
$ |
17,467 |
|
|
|
84 |
|
|
$ |
110,283 |
|
|
$ |
71,903 |
|
|
|
53 |
|
Adjusted EBITDA(1) |
|
$ |
(4,653 |
) |
|
$ |
(14,015 |
) |
|
|
67 |
|
|
$ |
14,872 |
|
|
$ |
(11,927 |
) |
|
|
225 |
|
Medicare Advantage Members
Our MA members include all individuals enrolled in an MA plan that are attributed to the PCPs on our platform at the end of a given period.
Medical Services Revenue
Our medical services revenue consists of capitation revenue under contracts with various payors. Under the typical capitation arrangement, we are entitled to PMPM fees to provide a defined range of healthcare services for MA health plan members through our contracted physician partners and affiliated PCPs. Such fees are typically based on a defined percentage of corresponding premium that payors receive from CMS. We recognize capitation revenue over the period eligible members are entitled to receive healthcare services.
Medical Margin
Medical margin represents the amount earned from medical services revenue after medical services expenses are deducted. Medical services expense represents costs incurred for medical services provided to our members. As our platform matures over time, we expect medical margin to increase in absolute dollars. However, medical margin PMPM may vary as the percentage of new members brought onto our platform fluctuates. New membership added to the platform is typically dilutive to medical margin PMPM. Furthermore, in light of COVID-19, we continue to evaluate the ultimate impact of the pandemic on medical margin.
The following table presents our medical margin (dollars in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Medical services revenue |
|
$ |
693,934 |
|
|
$ |
457,646 |
|
|
$ |
2,015,541 |
|
|
$ |
1,367,736 |
|
Medical services expense |
|
|
(618,287 |
) |
|
|
(414,202 |
) |
|
|
(1,771,635 |
) |
|
|
(1,217,039 |
) |
Medical margin |
|
$ |
75,647 |
|
|
$ |
43,444 |
|
|
$ |
243,906 |
|
|
$ |
150,697 |
|
Network Contribution
We define network contribution as medical services revenue less the sum of: (i) medical services expense and (ii) other medical expenses excluding costs incurred in implementing geographies. Other medical expenses consist of physician compensation expense related to surplus sharing and other direct medical expenses incurred to improve care for our members. We believe this metric provides insight into the economics of our Total Care Model, as it includes all medical services expense associated with our members’ care as well as partner compensation and additional medical costs we incur as part of our aligned partnership model. Other medical expenses are largely variable and proportionate to the level of surplus in each respective geography.
25
The following table presents our network contribution (dollars in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Medical services revenue |
|
$ |
693,934 |
|
|
$ |
457,646 |
|
|
$ |
2,015,541 |
|
|
$ |
1,367,736 |
|
Medical services expense |
|
|
(618,287 |
) |
|
|
(414,202 |
) |
|
|
(1,771,635 |
) |
|
|
(1,217,039 |
) |
Other medical expenses—live geographies(1) |
|
|
(43,507 |
) |
|
|
(25,977 |
) |
|
|
(133,623 |
) |
|
|
(78,794 |
) |
Network contribution |
|
$ |
32,140 |
|
|
$ |
17,467 |
|
|
$ |
110,283 |
|
|
$ |
71,903 |
|
See “—Non-GAAP Financial Measures” for information regarding our use of network contribution and a reconciliation of income (loss) from operations to network contribution.
Platform Support Costs
Our platform support costs, which include regionally-based support personnel and other operating costs to support our geographies, are expected to decrease over time as a percentage of revenue as our physician partners add members and our revenue grows. Our operating expenses at the enterprise level include resources and technology to support payor contracting, clinical program development, quality, data management, finance, and legal functions.
The table below represents costs to support our live geographies and enterprise functions, which are included in general and administrative expenses (dollars in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Platform support costs |
|
$ |
34,764 |
|
|
$ |
33,547 |
|
|
$ |
104,868 |
|
|
$ |
92,622 |
|
% of Revenue |
|
|
5 |
% |
|
|
7 |
% |
|
|
5 |
% |
|
|
7 |
% |
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss) adjusted to exclude: (i) income (loss) from discontinued operations, net of income taxes, (ii) interest expense, (iii) income tax expense (benefit), (iv) depreciation and amortization, (v) geography entry costs, (vi) stock-based compensation expense, (vii) severance and related costs, and (viii) certain other items that are not considered by us in the evaluation of ongoing operating performance. We reflect our share of Adjusted EBITDA for equity method investments by applying our actual ownership percentage for the period to the applicable reconciling items on an entity-by-entity basis. Net income (loss) is the most directly comparable U.S. GAAP measure to Adjusted EBITDA.
See “—Non-GAAP Financial Measures” for information regarding our use of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA.
Key Components of Our Results of Operations
Revenues
Medical Services Revenue
Our medical services revenue consists of capitation revenue under contracts with various payors. Under the typical capitation arrangement, we are entitled to PMPM fees to provide a defined range of healthcare services for MA health plan members through our contracted physician partners and affiliated PCPs. Such fees are typically based on a defined percentage of corresponding premium that payors receive from CMS. We recognize capitation revenue over the period eligible members are entitled to receive healthcare services.
Medical services revenue constitutes substantially all of our total revenue, accounting for approximately 100% of our total revenues for the three and nine months ended September 30, 2022 and 2021.
26
Operating Expenses
Medical Services Expense
In each of our geographies, a network of physicians, hospitals, and other healthcare providers provide care to our members. Medical services expense represents costs incurred for medical services provided to our members. Our medical services expense trends primarily relate to changes in per visit costs incurred by our members, along with changes in health system and provider utilization of services. Medical services expenses are recognized in the period in which services are provided and include estimates of our obligations for medical services that have been rendered by third parties but for which claims have either not yet been received, processed, or paid.
Other Medical Expenses
Other medical expenses include: (i) partner physician compensation expense and (ii) other provider costs. Partner physician compensation expense represents obligations to our physician partners corresponding to a portion of the surplus generated in our geographies, which is a function of medical services revenues less the sum of medical services expenses, other provider costs, and market operating costs for the respective geography. Physician payment obligations are reconciled quarterly, and settlement payments are typically issued to providers on an annual basis in arrears, with interim payments issued periodically. Other provider costs include payments to support physician-patient engagement, certain other medical costs, and other care management expenses that help to create medical cost efficiency. Other provider costs include costs incurred for geographies that are in implementation and are not yet generating revenue.
General and Administrative
General and administrative expenses consist of market-based support personnel and other operating costs to support our geographies, personnel and other operating costs to support our enterprise functions, and investments to support development and expansion of our physician partners. Our enterprise functions include salaries and related expenses, stock-based compensation (including shares issued under partner physician group equity agreements in connection with our IPO), operational support expenses, technology infrastructure, finance, and legal, as well as other costs associated with the continued growth of our platform. For the purposes of calculating physician partner incentive expense, we allocate a portion of our enterprise general and administrative expenses to our geographies.
General and administrative expenses also include severance, management fees paid to our majority shareholder prior to our IPO (pursuant to a consulting agreement, which terminated in connection with the IPO), and accruals for unasserted claims.
Depreciation and Amortization
Depreciation and amortization expenses are associated with our property and equipment and acquired intangible assets. Depreciation includes expenses associated with buildings, computer equipment and software, furniture and fixtures, and leasehold improvements. Amortization primarily includes expenses associated with acquired intangible assets.
Other Income (Expense)
Other Income (Expense), Net
Other income (expense), net includes the following items:
Interest Expense
Interest expense consists primarily of interest expense associated with our outstanding debt, including amortization of debt discounts and costs.
27
Income Tax Benefit (Expense)
We are subject to corporate U.S. federal, state, and local income taxation. Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates.
Total Discontinued Operations
Total discontinued operations consist of the results of our California operations, which include the entirety of our Medicaid line of business. For certain of our California divestiture transactions, we continue to be responsible for any liabilities arising from the business that were incurred prior to the closing date of such transaction, including any fines, penalties, the payment of claims for medical services incurred prior to the effective date of each transaction, a liability for unrecognized tax benefits for which we are indemnified, and other contingent liabilities that we currently believe are remote. For additional discussion, see Note 12 to the Consolidated Condensed Financial Statements.
Results of Operations
The following table summarizes key components of our results of operations (dollars in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical services revenue |
|
$ |
693,934 |
|
|
$ |
457,646 |
|
|
$ |
2,015,541 |
|
|
$ |
1,367,736 |
|
Other operating revenue |
|
|
924 |
|
|
|
967 |
|
|
|
2,896 |
|
|
|
2,937 |
|
Total revenues |
|
|
694,858 |
|
|
|
458,613 |
|
|
|
2,018,437 |
|
|
|
1,370,673 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical services expense |
|
|
618,287 |
|
|
|
414,202 |
|
|
|
1,771,635 |
|
|
|
1,217,039 |
|
Other medical expenses |
|
|
50,659 |
|
|
|
29,454 |
|
|
|
144,512 |
|
|
|
86,809 |
|
General and administrative (including noncash stock-based |
|
|
51,980 |
|
|
|
46,643 |
|
|
|
143,738 |
|
|
|
401,981 |
|
Depreciation and amortization |
|
|
3,450 |
|
|
|
3,915 |
|
|
|
9,865 |
|
|
|
10,923 |
|
Total expenses |
|
|
724,376 |
|
|
|
494,214 |
|
|
|
2,069,750 |
|
|
|
1,716,752 |
|
Income (loss) from operations |
|
|
(29,518 |
) |
|
|
(35,601 |
) |
|
|
(51,313 |
) |
|
|
(346,079 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense), net |
|
|
574 |
|
|
|
(269 |
) |
|
|
9,840 |
|
|
|
4,034 |
|
Gain (loss) on lease terminations |
|
|
— |
|
|
|
— |
|
|
|
(5,458 |
) |
|
|
— |
|
Interest expense |
|
|
(1,000 |
) |
|
|
(867 |
) |
|
|
(2,816 |
) |
|
|
(5,306 |
) |
Income (loss) before income taxes |
|
|
(29,944 |
) |
|
|
(36,737 |
) |
|
|
(49,747 |
) |
|
|
(347,351 |
) |
Income tax benefit (expense) |
|
|
(559 |
) |
|
|
(256 |
) |
|
|
(1,068 |
) |
|
|
(707 |
) |
Income (loss) from continuing operations |
|
|
(30,503 |
) |
|
|
(36,993 |
) |
|
|
(50,815 |
) |
|
|
(348,058 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from discontinued operations |
|
|
(224 |
) |
|
|
1,117 |
|
|
|
526 |
|
|
|
(1,781 |
) |
Income tax benefit (expense) |
|
|
(12 |
) |
|
|
(82 |
) |
|
|
(26 |
) |
|
|
(211 |
) |
Total discontinued operations |
|
|
(236 |
) |
|
|
1,035 |
|
|
|
500 |
|
|
|
(1,992 |
) |
Net income (loss) |
|
|
(30,739 |
) |
|
|
(35,958 |
) |
|
|
(50,315 |
) |
|
|
(350,050 |
) |
Noncontrolling interests’ share in earnings (loss) |
|
|
71 |
|
|
|
115 |
|
|
|
228 |
|
|
|
284 |
|
Net income (loss) attributable to common shares |
|
$ |
(30,668 |
) |
|
$ |
(35,843 |
) |
|
$ |
(50,087 |
) |
|
$ |
(349,766 |
) |
28
The following table summarizes our results of operations as a percentage of total revenues:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical services revenue |
|
|
100 |
|
% |
|
100 |
|
% |
|
100 |
|
% |
|
100 |
|
% |
Other operating revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total revenues |
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical services expense |
|
|
89 |
|
|
|
90 |
|
|
|
88 |
|
|
|
89 |
|
|
Other medical expenses |
|
|
7 |
|
|
|
6 |
|
|
|
7 |
|
|
|
6 |
|
|
General and administrative (including noncash stock-based |
|
|
7 |
|
|
|
10 |
|
|
|
7 |
|
|
|
29 |
|
|
Depreciation and amortization |
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
Total expenses |
|
|
104 |
|
|
|
108 |
|
|
|
103 |
|
|
|
125 |
|
|
Income (loss) from operations |
|
|
(4 |
) |
|
|
(8 |
) |
|
|
(3 |
) |
|
|
(25 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense), net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Gain (loss) on lease terminations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Interest expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Income (loss) before income taxes |
|
|
(4 |
) |
|
|
(8 |
) |
|
|
(2 |
) |
|
|
(25 |
) |
|
Income tax benefit (expense) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Income (loss) from continuing operations |
|
|
(4 |
) |
|
|
(8 |
) |
|
|
(3 |
) |
|
|
(25 |
) |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Income tax benefit (expense) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net income (loss) |
|
|
(4 |
) |
|
|
(8 |
) |
|
|
(2 |
) |
|
|
(26 |
) |
|
Noncontrolling interests’ share in earnings (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net income (loss) attributable to common shares |
|
|
(4 |
) |
% |
|
(8 |
) |
% |
|
(2 |
) |
% |
|
(26 |
) |
% |
Comparison of the Three and Nine Months Ended September 30, 2022 to the Three and Nine Months Ended September 30, 2021
Medical Services Revenue
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||||||
Medical services revenue |
|
$ |
693,934 |
|
|
$ |
457,646 |
|
|
$ |
236,288 |
|
|
|
52 |
% |
|
$ |
2,015,541 |
|
|
$ |
1,367,736 |
|
|
$ |
647,805 |
|
|
|
47 |
% |
% of total revenues |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
||||
Medical services revenue increased for the three and nine months ended September 30, 2022 due primarily to growth in average membership of 47% and 45%, respectively, which was attributable to six new geographies that began to generate revenue in 2022 and growth in our existing geographies. The increase in medical services revenue for the three and nine months ended September 30, 2022 was also driven, to a lesser extent, by an increase in PMPM capitation rates of 3% and 2%, respectively.
Medical Services Expense
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||||||
Medical services expense |
|
$ |
618,287 |
|
|
$ |
414,202 |
|
|
$ |
204,085 |
|
|
|
49 |
% |
|
$ |
1,771,635 |
|
|
$ |
1,217,039 |
|
|
$ |
554,596 |
|
|
|
46 |
% |
% of total revenues |
|
|
89 |
% |
|
|
90 |
% |
|
|
|
|
|
|
|
|
88 |
% |
|
|
89 |
% |
|
|
|
|
|
|
||||
29
Medical services expense increased for the three and nine months ended September 30, 2022 due primarily to growth in average membership of 47% and 45%, respectively, which was attributable to six new geographies that became operational in 2022 and growth in our existing geographies. The increase in medical services expense for the three months ended September 30, 2022 was also driven, to a lesser extent, by an increase in average medical services expense per member of 2%.
Other Medical Expenses
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||||||
Other medical expenses |
|
$ |
50,659 |
|
|
$ |
29,454 |
|
|
$ |
21,205 |
|
|
|
72 |
% |
|
$ |
144,512 |
|
|
$ |
86,809 |
|
|
$ |
57,703 |
|
|
|
66 |
% |
% of total revenues |
|
|
7 |
% |
|
|
6 |
% |
|
|
|
|
|
|
|
|
7 |
% |
|
|
6 |
% |
|
|
|
|
|
|
||||
Other medical expenses increased by $21.2 million, or 72%, for the three months ended September 30, 2022 compared to 2021. Partner physician incentive expense increased by $7.7 million to $22.0 million in 2022 compared to $14.3 million in 2021. Other provider costs increased by $13.5 million to $28.7 million in 2022 compared to $15.2 million in 2021, resulting from the increase in the number of geographies and members on our platform. Other provider costs for the three months ended September 30, 2022 include $7.2 million of costs related to geographies that will become operational in January 2023, while other provider costs for the three months ended September 30, 2021 include $3.5 million of costs related to geographies that became operational in 2022.
Other medical expenses increased by $57.7 million, or 66%, for the nine months ended September 30, 2022 compared to 2021. Partner physician incentive expense increased by $33.0 million to $75.8 million in 2022 compared to $42.8 million in 2021. Other provider costs increased by $24.7 million to $68.7 million in 2022 compared to $44.0 million in 2021, resulting from the increase in the number of geographies and members on our platform. Other provider costs for the nine months ended September 30, 2022 include $10.9 million of costs related to geographies that will become operational in January 2023, while other provider costs for the nine months ended September 30, 2021 include $8.0 million of costs related to geographies that became operational in 2022.
General and Administrative
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||||||||||||
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||||||
General and administrative |
|
$ |
51,980 |
|
|
$ |
46,643 |
|
|
$ |
5,337 |
|
|
|
11 |
% |
|
$ |
143,738 |
|
|
$ |
401,981 |
|
|
$ |
(258,243 |
) |
|
|
(64 |
)% |
% of total revenues |
|
|
7 |
% |
|
|
10 |
% |
|
|
|
|
|
|
|
|
7 |
% |
|
|
29 |
% |
|
|
|
|
|
|
||||
General and administrative expenses increased $5.3 million, or 11%, for the three months ended September 30, 2022 compared to 2021. Operating costs to support our live geographies and enterprise functions (platform support costs) increased by $1.3 million to $34.8 million in 2022 compared to $33.5 million in 2021 due primarily to growth in operating costs incurred to support geographies that became operational in 2022. Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 5% for the three months ended September 30, 2022 compared to 7% for the same period in 2021. Investments to support geography entry increased to $14.0 million in 2022, compared to $2.7 million in 2021 due to increased costs associated with our geographies that become operational in the following calendar year. Stock-based compensation expense decreased $4.1 million in 2022 primarily due to the satisfaction of a performance condition associated with certain stock options in the third quarter of 2021, which was not repeated in 2022. In aggregate, costs incurred for severance, fees paid to our majority shareholder (pursuant to a consulting agreement, which terminated prior to the IPO), and accruals for unasserted claims and contingent liabilities decreased by $3.2 million primarily as a result of a reduction in reserves for certain contingent liabilities.
General and administrative expenses decreased $258.2 million, or 64%, for the nine months ended September 30, 2022 compared to 2021. Substantially all of the year-over-year decrease in general and administrative expenses is attributable to a $269.6 million decrease in non-cash stock-based compensation expense, which was largely related to shares issued under partner physician group equity agreements in connection with our IPO in April 2021 and the satisfaction of a performance condition associated with certain stock options in the third quarter of 2021. Operating costs to support our live geographies and enterprise functions (platform support costs) increased by $12.3 million to $104.9 million in 2022 compared to $92.6 million in 2021 due primarily to growth in operating costs incurred to support geographies that became operational in 2022. Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 5% for the nine months ended September 30, 2022 compared to 7% for the same period in 2021.
30
Investments to support geography entry increased to $24.4 million in 2022, compared to $12.7 million in 2021 due to increased costs associated with our geographies that become operational in the following calendar year. In aggregate, costs incurred for severance, fees paid to our majority shareholder (pursuant to a consulting agreement, which terminated prior to the IPO), and accruals for unasserted claims and contingent liabilities decreased by $12.7 million primarily as a result of a reduction in reserves for certain contingent liabilities and severance.
Non-GAAP Financial Measures
In addition to providing results that are determined in accordance with U.S. GAAP, we present network contribution and Adjusted EBITDA, which are non-GAAP financial measures.
We define network contribution as medical services revenue less the sum of: (i) medical services expense and (ii) other medical expenses excluding costs incurred in implementing geographies. Other medical expenses consist of physician compensation expense related to surplus sharing and other direct medical expenses incurred to improve care for our members. We believe this metric provides insight into the economics of our Total Care Model as it includes all medical services expense associated with our members’ care as well as partner compensation and additional medical costs we incur as part of our aligned partnership model. Other medical expenses are largely variable and proportionate to the level of surplus in each respective geography.
We define Adjusted EBITDA as net income (loss) adjusted to exclude: (i) income (loss) from discontinued operations, net of income taxes, (ii) interest expense, (iii) income tax expense (benefit), (iv) depreciation and amortization, (v) geography entry costs, (vi) stock-based compensation expense, (vii) severance and related costs, and (viii) certain other items that are not considered by us in the evaluation of ongoing operating performance. We reflect our share of Adjusted EBITDA for equity method investments by applying our actual ownership percentage for the period to the applicable reconciling items on an entity-by-entity basis.
Income (loss) from operations is the most directly comparable U.S. GAAP measure to network contribution. Net income (loss) is the most directly comparable U.S. GAAP measure to Adjusted EBITDA.
We believe network contribution and Adjusted EBITDA help identify underlying trends in our business and facilitate evaluation of period-to-period operating performance of our live geographies by eliminating items that are variable in nature and not considered by us in the evaluation of ongoing operating performance, allowing comparison of our recurring core business operating results over multiple periods. We also believe network contribution and Adjusted EBITDA provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics we use for financial and operational decision-making. We believe network contribution and Adjusted EBITDA or similarly titled non-GAAP measures are widely used by investors, securities analysts, ratings agencies, and other parties in evaluating companies in our industry as a measure of financial performance. Other companies may calculate network contribution and Adjusted EBITDA or similarly titled non-GAAP measures differently from the way we calculate these metrics. As a result, our presentation of network contribution and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, limiting their usefulness as comparative measures.
Adjusted EBITDA is not considered a measure of financial performance under U.S. GAAP, and the items excluded therefrom are significant components in understanding and assessing our financial performance. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as an alternative to such U.S. GAAP measures as net income (loss), cash flows provided by or used in operating, investing, or financing activities or other financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity. Some of these limitations are:
31
The following table sets forth a reconciliation of income (loss) from operations to network contribution using data derived from our condensed consolidated financial statements for the periods indicated (dollars in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Income (loss) from operations |
|
$ |
(29,518 |
) |
|
$ |
(35,601 |
) |
|
$ |
(51,313 |
) |
|
$ |
(346,079 |
) |
Other operating revenue |
|
|
(924 |
) |
|
|
(967 |
) |
|
|
(2,896 |
) |
|
|
(2,937 |
) |
Other medical expenses |
|
|
50,659 |
|
|
|
29,454 |
|
|
|
144,512 |
|
|
|
86,809 |
|
Other medical expenses—live geographies(1) |
|
|
(43,507 |
) |
|
|
(25,977 |
) |
|
|
(133,623 |
) |
|
|
(78,794 |
) |
General and administrative |
|
|
51,980 |
|
|
|
46,643 |
|
|
|
143,738 |
|
|
|
401,981 |
|
Depreciation and amortization |
|
|
3,450 |
|
|
|
3,915 |
|
|
|
9,865 |
|
|
|
10,923 |
|
Network contribution |
|
$ |
32,140 |
|
|
$ |
17,467 |
|
|
$ |
110,283 |
|
|
$ |
71,903 |
|
The following table sets forth a reconciliation of net income (loss) to Adjusted EBITDA using data derived from our condensed consolidated financial statements for the periods indicated (dollars in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Net income (loss) |
|
$ |
(30,739 |
) |
|
$ |
(35,958 |
) |
|
$ |
(50,315 |
) |
|
$ |
(350,050 |
) |
(Income) loss from discontinued operations, net of income taxes |
|
|
236 |
|
|
|
(1,035 |
) |
|
|
(500 |
) |
|
|
1,992 |
|
Interest expense |
|
|
1,000 |
|
|
|
867 |
|
|
|
2,816 |
|
|
|
5,306 |
|
Income tax expense (benefit) |
|
|
559 |
|
|
|
256 |
|
|
|
1,068 |
|
|
|
707 |
|
Depreciation and amortization |
|
|
3,450 |
|
|
|
3,915 |
|
|
|
9,865 |
|
|
|
10,923 |
|
(Gain) loss on lease terminations |
|
|
— |
|
|
|
— |
|
|
|
5,458 |
|
|
|
— |
|
Geography entry costs(1) |
|
|
21,186 |
|
|
|
6,181 |
|
|
|
35,345 |
|
|
|
20,726 |
|
Severance and related costs(2) |
|
|
512 |
|
|
|
856 |
|
|
|
2,470 |
|
|
|
5,098 |
|
Management fees(3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
433 |
|
Stock-based compensation expense |
|
|
7,907 |
|
|
|
11,960 |
|
|
|
18,430 |
|
|
|
287,980 |
|
EBITDA adjustments related to equity method investments(4) |
|
|
1,325 |
|
|
|
1,655 |
|
|
|
2,988 |
|
|
|
2,307 |
|
Other(5) |
|
|
(10,089 |
) |
|
|
(2,712 |
) |
|
|
(12,753 |
) |
|
|
2,651 |
|
Adjusted EBITDA |
|
$ |
(4,653 |
) |
|
$ |
(14,015 |
) |
|
$ |
14,872 |
|
|
$ |
(11,927 |
) |
Liquidity and Capital Resources
We have historically financed our operations primarily through funds generated from our capitation arrangements with payors, issuances of equity securities, and borrowings under credit agreements. We generally invest any excess cash in money market accounts, which are classified as cash equivalents, and marketable securities. Our investment strategies are designed to provide safety and preservation of capital, sufficient liquidity to meet the cash flow needs of our business operations, and attainment of a competitive return. As of September 30, 2022, we had cash and cash equivalents of $551.3 million and investments in marketable securities of $408.0 million.
32
We expect to continue to incur operating losses and generate negative cash flows from operations for the foreseeable future due to the investments we intend to continue to make in expanding our business and additional general and administrative costs we expect to incur related to our operation as a public company. As a result, we may require additional capital resources in the future to execute strategic initiatives to grow our business.
Our primary uses of cash include payments for medical claims and other medical expenses, general and administrative expenses, costs associated with the development of new geographies and expansion of existing geographies, debt service, and capital expenditures. Final reconciliation and receipt of amounts due from payors are typically settled in arrears, following completion of the contractual program year.
Our investment strategies are designed to provide safety and preservation of capital, sufficient liquidity to meet the cash flow needs of our business operations, and attainment of a competitive return.
Based on our planned operations, we believe that our existing cash and cash equivalents, investments in marketable securities, as well as available borrowing capacity under the credit facilities, will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months, though we may require additional capital resources in the future. We have based these estimates on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we expect.
We may require additional financing in the future to fund working capital and pay our obligations. We may seek to raise any necessary additional capital through a combination of public or private equity offerings and/or debt financings. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us, if at all. If adequate funds are not available on acceptable terms when needed, we may be required to significantly reduce operating expenses, which may have a material adverse effect on our business, financial condition, cash flows, and results of operations. If we do raise additional capital through public or private equity, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.
Our ability to pay dividends to holders of our common stock is significantly limited as a practical matter by our growth plans as well as our credit facilities insofar as we may seek to pay dividends out of funds made available to us by agilon health management, inc. (“agilon management”) or its subsidiaries because our credit facilities restrict agilon management’s ability to pay dividends or make loans to us. The borrower on our credit facilities is agilon management, our wholly-owned subsidiary. Our credit facilities are guaranteed by certain of our subsidiaries, including those identified as variable interest entities, and contain customary covenants including, among other things, limitations on restricted payments including: (i) dividends and distributions from restricted subsidiaries, (ii) requirements of minimum financial ratios, and (iii) limitation on additional borrowings based on certain financial ratios.
Cash Flows
The following summary discussion of our cash flows is based on the condensed consolidated statements of cash flows. The following table sets forth changes in cash flows (dollars in thousands):
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
|
|
2021 |
|
|
Change |
|
||||
Net cash provided by (used in) operating activities |
|
$ |
(80,849 |
) |
|
$ |
(99,262 |
) |
|
$ |
18,413 |
|
Net cash provided by (used in) investing activities |
|
|
(436,418 |
) |
|
|
(87,903 |
) |
|
|
(348,515 |
) |
Net cash provided by (used in) financing activities |
|
|
26,926 |
|
|
|
1,143,973 |
|
|
|
(1,117,047 |
) |
Net Cash Provided By (Used In) Operating Activities
Net cash used in operating activities was $80.8 million for the nine months ended September 30, 2022 compared to $99.3 million for the nine months ended September 30, 2021. Net cash used in operating activities remained relatively flat for the nine months ended September 30, 2022 compared to 2021 primarily as a result of the increase in medical margin contributed from new and existing geographies, offset by increased provider costs, including partner physician incentive expenses and the timing of settlements with payors from new and existing geographies.
Our cash flow from operations is dependent upon the number of members on our platform, the timing of settlements with payors, and the level of operating and general and administrative expenses necessary to operate and grow our business, among other factors.
33
Net Cash Provided By (Used In) Investing Activities
Net cash used in investing activities was $436.4 million for the nine months ended September 30, 2022 compared to $87.9 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, we made investments in marketable securities of $423.2 million. During the nine months ended September 30, 2021, we provided net loans to our physician partner groups in connection with taxes payable on shares distributed to them upon completion of the IPO under the partner physician group equity agreements of $76.0 million.
Net Cash Provided By (Used In) Financing Activities
Net cash provided by financing activities was $26.9 million for the nine months ended September 30, 2022 compared to $1.1 billion for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, we received net proceeds of $30.7 million from the exercise of stock options. In February 2021, we refinanced our existing debt with a $100.0 million term loan, receiving net proceeds of $30.1 million. In April 2021, we received net proceeds of approximately $1.2 billion upon the completion of our IPO, after deducting underwriting discounts and commissions and offering costs. Upon completion of our IPO in April 2021, we repaid $50.0 million of the term loan as required under the terms of our credit facility.
Debt Obligations
On February 18, 2021, we executed a credit facility agreement (as amended by the First Amendment to Credit Agreement, dated as of March 1, 2021, the “Credit Facilities”). The Credit Facilities include: (i) a $100.0 million senior secured term loan (the “Secured Term Loan Facility”) and (ii) a $100.0 million senior secured revolving credit facility (the “Secured Revolving Facility”) with a capacity to issue standby letters of credit in certain circumstances up to a maximum of $80.0 million. Subject to specified conditions and receipt of commitments, the Secured Term Loan Facility may be expanded (or a new term loan facility, revolving credit facility or letter of credit facility added) by up to (i) $50.0 million plus (ii) an additional amount determined in accordance with a formula tied to repayment of certain of our indebtedness. The Secured Term Loan Facility requires, among other things, a mandatory prepayment of $50.0 million if gross proceeds from the IPO exceed $1.0 billion. On April 26, 2021, we repaid $50.0 million of the Secured Term Loan Facility. The maturity date of the Credit Facilities was extended to February 18, 2026.
At our option, borrowings under the Credit Facilities, as defined in the credit agreement, can be either: (i) LIBO Rate Loans or (ii) Base Rate Loans. LIBO Rate Loans bear interest at a rate equal to the sum of 4.00% (stepping down to 3.50% on and following October 1, 2023) and the higher of (a) LIBO, as defined in the credit agreement, and (b) 0%. Base Rate Loans bear interest at a rate equal to the sum of 3.00% (stepping down to 2.50% on and following October 1, 2023) and the highest of: (a) 0.50% in excess of the overnight federal funds rate, (b) the prime rate established by the administrative agent from time to time, (c) the one-month LIBO rate (adjusted for maximum reserves) plus 1.00% and (d) 0%. Additionally, we pay a commitment fee on the unfunded 2021 Revolving Credit Facility amount of 0.50% (stepping down to 0.375% on and following October 1, 2023). We must also pay customary letter of credit fees.
The Credit Facilities contain customary covenants including, among other things, limitations on restricted payments including: (i) dividends and distributions from restricted subsidiaries, (ii) requirements of minimum financial ratios, and (iii) limitation on additional borrowings based on certain financial ratios.
For additional discussion on our debt obligations, see Note 8 to the Condensed Consolidated Financial Statements for additional information about our outstanding debt.
Equity
As of September 30, 2022, we had 411.7 million shares of common stock outstanding. See Note 10 to the Condensed Consolidated Financial Statements for additional information about our equity transactions.
Contractual Obligations
Our capital commitments to physician partners to support physician partner expansion and related purposes increased by $79.9 million, to $136.7 million at September 30, 2022 when compared to December 31, 2021. There have been no other material changes, outside of the ordinary course of business and indebtedness, to our commitments during the nine months ended September 30, 2022.
Critical Accounting Policies and Estimates
34
Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our historical experience, known trends and events, and various other assumptions that we believe are reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our condensed consolidated financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Critical Accounting Policies” and Note 2 to the Condensed Consolidated Financial Statements. There have been no significant changes to our critical accounting policies during 2022.
Recent Accounting Pronouncements
There are no new accounting standards that have been issued and we have not adopted that are material to us as of September 30, 2022.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates. We do not use derivative financial instruments in the normal course of business or for speculative or trading purposes.
Our exposures to market risk for changes in interest expense relate primarily to the Credit Facilities. Indebtedness under the Credit Facilities is floating rate debt and is carried at amortized cost. Therefore, fluctuations in interest rates will impact our consolidated financial statements. A rising interest rate environment will increase the amount of interest paid on this debt. A hypothetical 100 basis point change in interest rates would not have a material impact on our interest expense.
We held cash, cash equivalents, restricted cash equivalents, and marketable securities of $972.5 million as of September 30, 2022, consisting of bank deposits, certificates of deposits, money market funds, U.S. Treasury notes, and corporate debt securities. Such interest-earning instruments carry a degree of interest rate risk. A hypothetical 100 basis point change in interest rates would not have a material impact on the fair value of our marketable securities. Declines in interest rates over time will reduce our investment income. The goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), evaluated the effectiveness of our disclosure controls and procedures, as defined by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) concluded that our disclosure controls and procedures were effective as of September 30, 2022 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as such term as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
35
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See the “Legal Proceedings” section of Note 9 to the Condensed Consolidated Financial Statements for information regarding legal proceedings, which information is incorporated by reference in this Item 1.
Item 1A. Risk Factors
In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our Annual Report on Form 10-K. Except as set forth below, there have been no material changes to the risk factors disclosed in the Form 10-K.
We are no longer a “controlled company” within the meaning of the NYSE rules. However, we may continue to rely on exemptions from certain corporate governance requirements during a one-year transition period.
From August 12, 2022, CD&R Investor no longer controlled a majority of the voting power of our outstanding common stock, and we ceased to be a “controlled company” within the meaning of the NYSE corporate governance standards. As a result, the NYSE rules require that we (i) have a majority of independent directors on our board of directors within one year of the date we no longer qualified as a “controlled company,” (ii) have at least one independent director on each of the Compensation and Nominating and Governance Committees on the date we no longer qualified as a “controlled company,” at least a majority of independent directors on each of the Compensation and Nominating and Governance Committees within 90 days of such date and the Compensation and Nominating and Governance Committees composed entirely of independent directors within one year of such date and (iii) perform an annual performance evaluation of the Nominating and Governance and Compensation Committees. During this transition period, we may continue to utilize the available exemptions from certain corporate governance requirements as permitted by the NYSE rules and we presently do not have a majority of independent directors, our Nominating and Governance Committee and Compensation Committees do not consist entirely of independent directors and such committees may not be subject to annual performance evaluations during the transition period. Accordingly, during the transition period, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules and requirements of the NYSE discussed herewith. Furthermore, a change in our board of directors and committee membership may result in a change in corporate strategy and operation philosophies, and may result in deviations from our current strategy.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)
None.
(b)
None.
(c)
None.
Item 5. Other Information
The Company has revised its previously reported deadlines for the receipt of stockholder proposals to be considered at the 2023 annual meeting of stockholders, such deadlines previously reported on the Company’s definitive proxy statement, filed with the U.S. Securities and Exchange Commission on April 11, 2022.
Stockholders may present proposals for action at a future meeting or submit nominations for election of directors only if they comply with the requirements of the Company’s amended and restated by-laws.
Stockholders wishing to bring a proposal or nominate a director at the Company’s annual meeting of stockholders to be held in 2023 (but not include it in the Company’s proxy statement and form of proxy) must provide written notice of such proposal to the Company’s Secretary at the Company’s principal executive offices between January 24, 2023 and February 23, 2023, and comply with the other provisions of the Company’s amended and restated by-laws.
36
The deadline for stockholders to present proposals or a nomination for director to be considered for inclusion in the Company’s proxy statement and form of proxy relating to our annual meeting of stockholders to be held in 2023 has not been revised. Such proposal or nomination must be received by the Company at the Company’s principal executive offices no later than December 12, 2022.
37
Item 6. Exhibits
Exhibit Number |
|
Description |
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.* |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document.* |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.* |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.* |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document.* |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.* |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document).* |
** Furnished herewith.
† Identifies each management contract or compensatory plan or arrangement.
38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 3, 2022 |
|
agilon health, inc. |
|
|
|
|
|
(Registrant) |
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
|
|
|
|
|
|
|
|
|
39
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 2/18/26 | ||||
| 10/1/23 | ||||
| 2/23/23 | ||||
| 1/24/23 | ||||
| 12/31/22 | ||||
| 12/12/22 | ||||
| Filed on: | 11/3/22 | 4, 8-K | ||
| 10/31/22 | ||||
| For Period end: | 9/30/22 | 3, 8-K | ||
| 8/12/22 | 3, 4 | |||
| 7/1/22 | 4 | |||
| 4/11/22 | 4, DEF 14A, DEFA14A | |||
| 1/1/22 | ||||
| 12/31/21 | 10-K | |||
| 9/30/21 | 10-Q | |||
| 7/1/21 | ||||
| 4/26/21 | ||||
| 4/19/21 | 4, 8-K | |||
| 4/16/21 | 3, 4, 424B4 | |||
| 4/15/21 | 424B4, EFFECT | |||
| 4/14/21 | 3, 4, 8-A12B, 8-K, CERT, EFFECT, S-8 | |||
| 3/1/21 | ||||
| 2/18/21 | ||||
| 1/1/21 | ||||
| List all Filings | ||||