AGL Q1 Earnings Call: Membership Declines, Technology Investments, and Cautious Outlook for 2025

Healthcare services company Agilon Health (NYSE:AGL) reported Q1 CY2025 results topping the market’s revenue expectations, but sales fell by 4.5% year on year to $1.53 billion. The company expects next quarter’s revenue to be around $1.47 billion, close to analysts’ estimates. Its non-GAAP profit of $0.03 per share was $0.02 above analysts’ consensus estimates.

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StockStory’s Take

Agilon Health’s first quarter results were shaped by ongoing efforts to optimize its Medicare Advantage member base and improve operating efficiency. Management attributed the reported revenue and margin performance to disciplined growth, partner and payer exits, and execution on clinical initiatives, while acknowledging that persistent cost pressures—especially in inpatient and drug spending—remained a headwind. CEO Steve Sell noted, "These results reflect the benefit of our previously disclosed partnership and payer exits, continued execution on quality and clinical initiatives, and better payer contracting terms to reduce Medicare Part D exposure."

Looking ahead, agilon health’s forward guidance is influenced by expectations for a more stable operating environment and ongoing initiatives to lower risk exposure and enhance clinical quality. The company highlighted opportunities stemming from favorable regulatory changes in 2026 and continued investments in technology and clinical programs. Management characterized 2025 as a transition year, emphasizing its focus on profitability, cash management, and negotiating improved payer terms to support long-term financial stability.

Key Insights from Management’s Remarks

Management’s commentary highlighted the deliberate approach to managing growth and risk, as well as the continued rollout of technology and clinical programs designed to support quality care and operational efficiency.

• Disciplined Membership Strategy: The company’s focus remained on measured growth, with membership essentially flat year over year after deliberate market and payer exits. Management explained that these actions were intended to limit underwriting risk and prioritize profitability.
• Reduced Part D Exposure: Agilon health further decreased its exposure to Medicare Part D (the prescription drug benefit), with less than 30% of members now carrying Part D risk. Management described this as a key step in reducing variability in financial results, noting ongoing negotiations to lower this figure further in upcoming contract cycles.
• Technology and Data Platform Investments: The company continued to invest in technology, such as the integration of its mphrX acquisition and enhancements to data pipelines. These upgrades have improved data visibility and analytics, supporting care coordination and real-time performance tracking across clinical programs.
• Expansion of Clinical Pathways: Agilon health scaled its heart failure and palliative care programs, aiming for earlier disease detection and better chronic disease management. Management reported that the palliative care initiative led to a material increase in advanced illness management enrollment and a reduction in hospital admissions per 1,000 patients.
• Margin Management Initiatives: The company reported progress on quality incentive programs and clinical cost management, which are expected to drive financial improvements over time. Management stated that these initiatives would provide a stronger foundation for operating leverage and long-term performance, particularly as external cost trends stabilize.

Drivers of Future Performance

Management expects 2025 to be a year of financial transition, with profitability supported by a mix of cautious member growth, lower risk exposure, and investments in quality and technology.

• Contract Negotiations and Rate Environment: Upcoming payer contract renewals covering roughly half of the membership are expected to drive improved terms and lower Part D risk, with management citing the 2026 CMS (Centers for Medicare & Medicaid Services) rate notice as a meaningful positive catalyst for revenue yield and margin.
• Clinical Program Maturation: The rollout of disease management pathways for heart failure and palliative care is expected to show greater financial and clinical impact in 2026 and beyond, as patient identification and intervention efforts mature.
• Cost Control and Operating Discipline: Ongoing efforts to reduce supplemental benefit risk, optimize cash management, and leverage new data systems are seen as key to maintaining margin stability despite persistent utilization pressures in inpatient and drug costs.

Top Analyst Questions

• Stephen Baxter (Wells Fargo): Asked about the V-28 risk model transition’s impact on 2025 and whether it differed from prior expectations. Management responded that risk adjustment impacts were in line with projections and that prior preparation minimized disruption.
• Elizabeth Anderson (Evercore ISI): Questioned lingering effects from previously exited markets on current results. CFO Jeff Schwaneke indicated that most negative development from exited markets was contained to 2024, with minimal ongoing impact.
• Jailendra Singh (Truist Securities): Sought clarity on how the favorable 2026 CMS rate notice will flow through to agilon’s contracts and when renewal terms would be finalized. Management explained that percentage-of-premium contracts would benefit directly, with most renewals still in progress.
• Lisa Gill (JPMorgan): Inquired about medical cost trend visibility and the drivers of elevated inpatient and drug spending. Management detailed new data pipelines improving claims visibility, and noted that inpatient admissions were higher early in the quarter but moderated by March.
• Matthew Shea (Needham): Asked about the potential margin impact of new clinical programs in heart failure, dementia, and COPD. Management said these programs are in early stages, with costs reflected in 2025 and benefits expected to build in 2026.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be tracking (1) progress on payer contract negotiations and further reductions in Part D risk exposure; (2) measurable results from the expansion of heart failure and palliative care pathways, including their impact on hospital utilization; and (3) the company’s ability to maintain cost discipline and improve forecasting accuracy through its enhanced data platform. Execution on these initiatives will shape agilon health’s ability to stabilize margins and position for growth in 2026.

agilon health currently trades at a forward price-to-sales ratio of 0.2×. At this valuation, is it a buy or sell post earnings? Find out in our free research report.

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