Earnings Call Insights: agilon health, inc. (AGL) Q3 2025
Management View
Executive Chairman Ronald Williams stated, "For the third quarter, we reported revenue of $1.44 billion, medical margin of negative $57 million and adjusted EBITDA of negative $91 million." He emphasized the reinitiation of 2025 guidance, noting actions taken for cost discipline and clinical program execution but cited headwinds from lower-than-expected RAF contribution and high costs from exited markets.
Williams discussed ongoing transformation, highlighting, "We expect to have improved forecasting and lower volatility as well as significant internal and market-driven tailwinds." He outlined tailwinds including clinical initiatives, enhanced data analytics, and payer bid improvements, supported by "more favorable payer bids, including increased premiums, maximum out-of-pocket and deductibles, benefiting agilon's financial performance."
Williams also revealed operating cost reductions: "We have reduced our operating costs by $30 million."
Williams stated, "With increased visibility, we have reinstated our 2025 guidance. At the midpoint, we expect revenue of $5.82 billion, medical margin of $5 million and adjusted EBITDA of negative $258 million."
Williams highlighted technology investments: "Through our enhanced data pipeline, which went live in the first quarter, we now have more timely direct payer data feeds... on approximately 80% of our members."
Williams reported progress in clinical programs, "We have reduced new inpatient heart failure diagnosis rates from 18% in 2024 to 5% in 2025 across our MA population."
Williams addressed leadership, "While we are making progress in our search for a CEO... we remain committed to moving decisively now to enhance performance and agilon's position for sustainable value creation."
CFO Jeffrey Schwaneke said, "For today's discussion, I will cover 4 key areas: First, I will walk through our third quarter results. Second, I will provide details on our reinstated 2025 guidance and a bridge to our jumping off point for 2026."
Schwaneke detailed, "Medicare Advantage membership at the end of Q3 2025 was 503,000 members compared to 525,000 members in Q3 2024... ACO REACH membership for Q3 was 115,000 members compared to 132,000 members in the same period of 2024."
Schwaneke highlighted a $73 million impact from lower 2025 risk adjustment scores, with a $20 million negative impact from exited markets.
Schwaneke stated, "Adjusted EBITDA for the quarter was negative $91 million compared to negative $96 million in the third quarter of 2024."
Schwaneke reported cash and securities of $311 million on the balance sheet and $172 million off-balance sheet in ACO entities.
Outlook
Williams announced reinstated 2025 guidance with a midpoint revenue of $5.82 billion, medical margin of $5 million, and adjusted EBITDA of negative $258 million.
Schwaneke projected Medicare Advantage membership for 2025 in the range of 503,000 to 506,000 and ACO model membership between 113,000 to 115,000.
Revenue for 2025 is expected to be between $5.81 billion to $5.83 billion, with medical margins between negative $5 million to $15 million and adjusted EBITDA guidance of negative $270 million to negative $245 million.
Schwaneke said, "We expect to end the year with approximately $310 million of cash on our balance sheet, including approximately $65 million held off balance sheet by our ACO entities."
He described 2026 as having several tailwinds: "macro factors like the 9% benchmark rate increase, better aligned payer contracts and the disciplined cost actions Ron outlined."
He added, "We anticipate pursuing a reverse stock split and expect to seek stockholder approval at our Annual General Meeting in 2026."
Financial Results
Williams reported third quarter revenue of $1.44 billion.
Medical margin for Q3 was negative $57 million and adjusted EBITDA was negative $91 million.
Schwaneke cited a $50 million true-up for the remaining 28% of members impacting revenue.
Exited markets negatively impacted the quarter by $20 million.
Schwaneke said, "Adjusted EBITDA related to this [ACO REACH] program this quarter was ahead of expectations at $18 million."
agilon ended the quarter with $311 million in cash and marketable securities and $172 million in off-balance sheet cash.
Q&A
Hua Ha, Robert W. Baird: Asked about the EBITDA impact from ACO REACH program changes and narrowing of savings rates. Schwaneke responded that lower economics are expected from the program and that some ACOs may move to the MSSP program for better economics.
Jack Slevin, Jefferies: Asked about the scope of payer contract exits. Schwaneke: "We are taking a very disciplined approach and where the economics don't make sense... we don't have to do business with that payer." Williams added, "This is about being profitable and achieving the kind of margin that we want."
Jailendra Singh, Truist: Asked for an update on the CEO search. Williams said, "We have some very good candidates coming forward... we feel good about where we are in pace and timing."
Ryan Langston, TD Cowen: Asked about cash at ACO entity level and risk revenue impacts. Schwaneke explained, "At the end of the quarter, we had $172 million in the REACH entities... we'll roughly be at the $65 million" post settlements, and highlighted improved data pipeline for risk scores.
Justin Lake, Wolfe Research: Asked about fee-for-service trends and payer bid designs for 2026. Schwaneke stated fee-for-service cost trends are 8.5% and noted payers are "pricing for margin" with increased out-of-pocket maximums and deductibles as tailwinds.
Craig Jones, BofA: Inquired about clinical program savings. Schwaneke: Benefits will accrue in 2026 and will be permanent, not one-time boosts.
Daniel Grosslight, Citi: Asked about provider contract changes. Schwaneke said no substantial changes are being made; cost savings were mostly from corporate and market operating costs.
Andrew Mok, Barclays: Asked about membership contracted for 2026. Schwaneke indicated about 50% of contracts were up for renewal with substantial agreement reached but final details pending.
Matthew Shea, Needham: Inquired about clinical program rollouts. Schwaneke said new pilots like COPD and dementia will expand in 2026 with consultation from partners.
David Larsen, BTIG: Asked about impact of the Big Beautiful Bill Act. Schwaneke said no meaningful impact is expected.
Amir Bani, Evercore: Asked about Humana benefit stability and working capital. Schwaneke explained contract economics are reviewed for all payers and did not specify minimum working capital needs.
Sentiment Analysis
Analyst tone during Q&A was neutral to slightly cautious, with several probing questions about contract economics, risk adjustment, and cost trends. Analysts sought clarity on the impact of program changes and membership trends.
Management tone in prepared remarks was confident and emphasized decisive action and transformation, with Williams stating, "We believe we are establishing a solid 2026 baseline..."
In Q&A, management remained measured but emphasized discipline and readiness to make difficult decisions, with direct statements about prioritizing profitability and margin.
Compared to previous quarter, management displayed increased confidence, reinstating guidance and citing enhanced data and cost controls, while analysts' skepticism remained steady.
Quarter-over-Quarter Comparison
Guidance was reinstated this quarter after being withdrawn in Q2, with management now providing explicit revenue, margin, and cash targets for 2025.
Strategic focus shifted further toward operating cost reduction ($30 million reduction announced), enhanced data analytics (now covering 80% of members), and more disciplined membership growth.
Management confidence improved, with specific actions highlighted and a more optimistic tone about 2026, compared to the uncertainty and disappointment expressed in Q2.
Analysts maintained their focus on risk adjustment, contract economics, clinical program impact, and CEO search, similar to previous quarter.
Key metrics such as revenue, membership, and EBITDA were clarified; cost control and data visibility were more prominent in management's discussion.
Risks and Concerns
Lower-than-expected risk adjustment revenue and continued high costs from exited markets remain key challenges.
Membership declined year-over-year as a result of partner exits and a smaller 2025 class.
Management acknowledged potential further reductions in membership if payer contracts are not economically viable, prioritizing margin over scale.
Schwaneke noted, "We may not contract with specific payers in these markets" if terms are not favorable.
Management cited ongoing medical cost pressures in inpatient and oncology drugs but noted stabilization.
Final Takeaway
agilon health’s third quarter highlighted a return to explicit guidance for 2025, underpinned by sharper cost controls, enhanced data-driven insights, and a renewed strategic discipline around payer contracts and clinical programs. While management remains focused on improving near-term profitability and establishing a solid baseline for 2026, ongoing execution on these initiatives and successful contract renegotiations will be pivotal to achieving sustainable financial improvement and restoring investor confidence.