Executive Summary / Key Takeaways

• agilon health (AGL) is undergoing a significant transformation, shifting from rapid growth to a focused strategy on profitability, risk reduction, and operational efficiency within its Medicare-centric, globally capitated business model.
• The company's differentiated technology platform, including its enhanced data pipeline and AI capabilities, is a core competitive advantage, driving improved clinical outcomes and operational visibility, as evidenced by reduced inpatient heart failure diagnoses and improved palliative care metrics.
• Despite recent financial underperformance driven by lower-than-expected risk adjustment and elevated medical costs, AGL has reinstated its 2025 guidance, projecting a medical margin of -$5 million to $15 million and Adjusted EBITDA of -$270 million to -$245 million at the midpoint, reflecting strategic exits and cost discipline.
• A robust 2026 outlook is anticipated, supported by macro tailwinds like a 9% benchmark rate increase, better aligned payer contracts, $30 million in operating cost reductions, and the full impact of clinical initiatives, with a goal of achieving cash flow breakeven by 2027.
• Key risks include ongoing legal proceedings, NYSE non-compliance due to low stock price, and the inherent volatility of medical cost trends, necessitating vigilant execution of strategic initiatives.

The Foundation of Value-Based Care: agilon health's Strategic Imperative

agilon health, inc. (AGL) operates at the forefront of healthcare transformation, empowering primary care physicians (PCPs) to deliver comprehensive, value-based care to senior patients across the United States. Its core business revolves around a Medicare-centric, globally capitated model, where AGL partners with existing physician groups to manage the total healthcare needs of attributed Medicare Advantage (MA) members. This model is designed to improve quality outcomes, reduce costs, and enhance the patient experience by aligning incentives and providing PCPs with the necessary capabilities, capital, and a robust business framework.

Founded in 2016, with Ronald A. Williams assuming the role of Board Chairman in 2017, agilon health has consistently championed the physician-patient relationship as the cornerstone of effective healthcare. The company's strategic journey has been marked by continuous evolution, including the 2023 acquisition of mphrX to bolster data analytics and insights, and the strategic disposition of MDX Hawaii, Inc. in late 2023 to streamline its business focus.

The broader industry landscape, characterized by an expanding Medicare Advantage market and increasing demand for full-risk value-based care partners, underscores AGL's strategic positioning. CMS data indicates the MA market is growing at 3.9% year-over-year and 1.9% year-to-date, creating a fertile environment for companies that can consistently deliver on quality and cost metrics. AGL's model, which consistently demonstrates utilization performance 20% to 30% better than the local fee-for-service benchmark and quality scores approaching or greater than 4.25 stars, is well-suited to capitalize on these trends.

Technological Edge: Powering Precision Healthcare

At the heart of agilon health's competitive differentiation lies its advanced technology platform, which integrates data analytics and AI-driven insights to optimize healthcare delivery. The 2023 acquisition of mphrX significantly enhanced the company's ability to gather and process data, deriving critical insights across healthcare delivery networks. This investment has led to improved integration with health information exchanges, labs, EMRs, and payers, accelerating the onboarding of agilon partners and the rapid integration of clinical data, directly benefiting patients and physicians.

A pivotal development in Q1 2025 was the launch of AGL's enhanced data pipeline. This system provides more timely, direct payer data feeds with validated and highly correlated member-level clinical and claims data, alongside member-level risk scores for approximately 80% of its members. This increased visibility and alignment of financial and operational data is expected to enable quicker identification and implementation of improvements, forming a critical component of AGL's competitive moat.

The tangible benefits of this technological backbone are evident in AGL's clinical programs. The Burden of Illness (BOI) program, leveraging AI and advanced technology, ensures accurate identification and documentation of patients' health conditions, strengthening clinical accuracy and supporting the value-based care model. The company's Heart Failure clinical pathway, for instance, has demonstrated remarkable results: new inpatient heart failure diagnosis rates were reduced from 18% in 2024 to 5% in 2025 across its MA population. Furthermore, in markets with virtual pharmacy solutions, approximately 50% of heart failure patients with reduced ejection fraction receive Guideline-Directed Medication Therapy, significantly higher than the national average of 30%. When combined with transitions of care cardiology, 30-day readmission rates have fallen below 5%, compared to a national average of approximately 20%.

Similarly, the Palliative Care Program, now live across most markets, has shown a significant reduction in hospital admissions per 1,000 for enrolled patients, with a material increase in patient enrollment in Q1 2025. These programs, along with pilots for COPD and dementia, are expected to contribute positively to financial results in 2026 and beyond, by enabling earlier PCP intervention to prevent disease progression, alleviate symptom burden, and avoid unnecessary ER and inpatient utilization. This technological leadership translates directly into better patient outcomes, lower medical costs, and a stronger value proposition for both physicians and payers, enhancing AGL's market positioning and long-term growth strategy.

Strategic Realignment and Operational Discipline

agilon health is currently undergoing a strategic realignment to address recent underperformance and capitalize on future opportunities. In Q2 2025, Steven Sell stepped down as President and CEO, with co-founder Ronald A. Williams appointed Executive Chairman to drive improved execution and strengthen critical relationships. An "Office of the Chairman" has been established to instill urgency, accountability, and performance across the enterprise.

The company's strategic initiatives are centered on several key areas:

• Improved Contract Economics: AGL is in active negotiations with payer partners for 2026, with approximately 50% of its membership up for renewal. The focus is on further reducing Part D exposure (already below 30% for 2025), expanding quality incentives, and securing improved economic terms for Part C. Management is taking a disciplined approach, prepared to take decisive action with payers whose benefit designs and pricing are inconsistent with market dynamics, even if it results in reduced membership.
• Cost Structure Optimization: Through centralization of functions, technology implementation, and alignment with PCP partners, AGL has reduced headcount and streamlined capital requirements and third-party costs. These operating expense initiatives are projected to reduce costs by approximately $30 million in 2026.
• Measured Growth: For 2025, MA membership is projected to decline by approximately 4% to a midpoint of 505,000 members, reflecting a strategic decision to constrain growth, exit underperforming partnerships (54,000 members exited in 2024, an additional 29,000 to exit end of 2025), and manage attribution more tightly. The 2025 new partner class is smaller (20,000 members) and largely on a "glide path" approach with no downside risk in year one, mitigating volatility. The Class of 2026 is expected to be larger, with 30,000 to 45,000 new members.

Financial Performance and Outlook

agilon health's recent financial performance reflects the challenges of a volatile healthcare environment and the impact of its strategic adjustments. For the three months ended September 30, 2025, total revenues decreased by 1% year-over-year to $1.44 billion, primarily due to membership declines from partnership exits and lower risk adjustment revenue. Medical services expense also decreased by 1% to $1.49 billion, largely due to reduced membership, though partially offset by a 4% increase in average medical services expense per member due to elevated medical cost trends. Other medical expenses, however, increased by 47% to $13.49 million, driven by higher partner physician incentive expenses related to losses in exited partnerships. General and administrative expenses saw an 11% reduction to $56.2 million, benefiting from lower platform support costs and reduced stock-based compensation.

For the nine months ended September 30, 2025, total revenues were $4.36 billion, a 4% decrease from the prior year. Medical margin for this period was $18 million, a significant decline from $205 million in the same period of 2024. Adjusted EBITDA for the nine months ended September 30, 2025, was a loss of $154 million, compared to a loss of $70 million in the prior year. These figures underscore the impact of lower-than-expected risk adjustment contributions and elevated medical cost trends. The company estimates the full-year 2025 impact to medical margin from lower-than-expected risk adjustment to be approximately $150 million, with a significant portion attributed to a new payer in 2024 for which prior year data was unavailable.

Despite these headwinds, AGL's ACO REACH segment continues to demonstrate strong performance. Income from equity method investments increased by 542% to $13.13 million in Q3 2025, primarily from CMS ACO Models investments, driven by higher medical margin and the exit of underperforming partners. Adjusted EBITDA related to ACO REACH was $18 million in Q3 2025, ahead of expectations. For the full year 2024, ACO model Adjusted EBITDA was $33 million, down from $39 million in 2023, partly due to a $5 million charge for an underperforming MSSP contract slated for exit in 2025.

Liquidity and Capital Resources
As of September 30, 2025, agilon health maintained a cash and cash equivalents balance of $171.7 million and marketable securities of $139.2 million.

The company expects to end 2025 with approximately $310 million in cash and 2026 with at least $100 million, including cash held in ACO REACH entities. Net cash provided by operating activities for the nine months ended September 30, 2025, was $85.2 million, an increase from $74.2 million in the prior year, primarily due to the timing of settlements with payers. The company's Credit Facility, with $35 million outstanding under the Secured Term Loan Facility and an effective interest rate of 8.27% as of September 30, 2025, matures in February 2026. AGL anticipates pursuing a reverse stock split, seeking stockholder approval in 2026, to address NYSE non-compliance related to its stock price. The company's long-term goal is to achieve cash flow breakeven by 2027.

2025 Guidance and 2026 Outlook
agilon health has reinstated its full-year 2025 guidance, projecting revenue between $5.81 billion and $5.83 billion, medical margin between negative $5 million and $15 million, and Adjusted EBITDA between negative $270 million and negative $245 million. This outlook incorporates the impact of lower-than-expected risk scores for 2025, costs from exited markets, positive development in first-half medical costs, strong ACO REACH performance, and continued operating cost discipline.

Looking to 2026, the company anticipates a "strong stepping stone" year with improved forecasting and lower volatility. Several tailwinds are expected to drive material improvement:

• Macro Factors: A 9% benchmark rate increase from CMS and more favorable payer bids, including increased premiums, maximum out-of-pocket, and deductibles, are expected to positively impact medical margin.
• Operating Efficiencies: The $30 million reduction in operating costs for 2026 will enhance operating leverage.
• Clinical Programs: The enhanced data pipeline, AI advances for BOI, and execution of clinical pathways are expected to deliver results "over and above the final year of V28."
• Contracting: Further reduction in Part D exposure (potentially below 30%), expansion of quality incentives, and improved Part C economic terms are key focus areas.

Competitive Landscape and Positioning

agilon health operates in a highly competitive healthcare services sector, vying with diversified giants like UnitedHealth Group (UNH), Humana (HUM), CVS Health (TICKER:CVS, through Aetna), and Centene Corporation (CNC). AGL's competitive advantage is rooted in its physician-centric, value-based care model, which fosters deep, long-standing relationships between PCPs and their senior patients (averaging over ten years). This model drives superior clinical outcomes and utilization performance, consistently achieving 4+ Star plans for approximately 75% of its members (compared to 65% for the overall MA market in 2026 ratings) and a consolidated average of 4.2 stars across its markets. This quality performance is a significant differentiator, enabling AGL to secure increased quality incentives in payer contracts.

Compared to its larger, more diversified competitors, AGL's specialized focus allows for greater agility and responsiveness to local market needs, potentially leading to stronger provider relationships and more effective care coordination. While AGL may not match the sheer scale, diversified revenue streams, or financial resilience of a UNH or HUM, its targeted approach to senior primary care enables superior operational execution in niche segments. For instance, AGL's gross profit margin of -0.79% and EBITDA margin of -4.92% reflect its growth-oriented stage and investment in its platform, contrasting with the more mature and often positive margins of established payers. However, AGL's P/S ratio of 0.05 indicates a significantly lower valuation multiple relative to its revenue base, reflecting market skepticism about its current profitability but also potential for upside if its strategic realignment proves successful.

AGL's vulnerabilities include its reliance on partnerships, which can entail customer acquisition costs and exposure to provider turnover, and its less diversified revenue base compared to conglomerates like CVS. However, high barriers to entry in healthcare, such as regulatory approvals and the need for established networks, help protect AGL's market position. The company's strategic emphasis on reducing exposure to uncontrollable risks like Part D and supplemental benefits, while maximizing rewards for areas within its control (quality, Part C medical cost management), is a direct response to competitive pressures and evolving industry dynamics.

Risks and Challenges

Despite the optimistic outlook, agilon health faces several pertinent risks. The company is currently involved in class action lawsuits and stockholder derivative lawsuits alleging securities fraud and breach of fiduciary duty related to its financial guidance and operational disclosures. The outcome and financial impact of these legal proceedings remain uncertain due to their early stages.

Furthermore, AGL received a notice from the NYSE on November 5, 2025, regarding non-compliance with continued listing standards, as its average stock price fell below $1.00 for 30 consecutive trading days. While the company plans to seek stockholder approval for a reverse stock split in 2026, this highlights investor sentiment and market pressures.

The impact of lower-than-expected risk adjustment, which is estimated to negatively affect 2025 medical margin by approximately $150 million, underscores the challenges in accurately forecasting revenue in a complex regulatory environment. Elevated medical cost trends, particularly in inpatient services and Part D oncology drugs, remain a top priority for management. The ongoing leadership transition, with a search for a permanent CEO, introduces an element of uncertainty, though the active engagement of Executive Chairman Ron Williams aims to mitigate this.

Conclusion

agilon health stands at a critical juncture, transforming its operational and financial trajectory amidst a dynamic healthcare landscape. The company's foundational commitment to empowering primary care physicians through a globally capitated, value-based care model remains a powerful differentiator. Its strategic realignment, marked by a renewed focus on profitability, disciplined growth, and rigorous cost management, is designed to stabilize performance and unlock long-term value.

The integration of advanced technology, particularly the enhanced data pipeline and AI-driven clinical pathways, is not merely an operational improvement but a core competitive advantage that translates into tangible benefits for patient care and financial outcomes. While the company confronts significant challenges, including legal headwinds, market volatility, and the need to restore investor confidence, the strategic initiatives currently underway, coupled with favorable macro trends anticipated in 2026, position AGL for a potential reacceleration of medical margin and Adjusted EBITDA growth. Investors should closely monitor the execution of these strategic initiatives, particularly the success of payer contract negotiations and the continued impact of clinical programs, as AGL strives to achieve its goal of cash flow breakeven by 2027 and solidify its position as a leading partner in senior value-based care.