UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, ~~2021~~2022


☐	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 001-40332

agilon health, inc.

(Exact name of registrant as specified in its charter)

Delaware

37-1915147

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

~~1 World Trade Center~~6210 E Hwy 290, Suite ~~2000~~450

~~Long Beach~~Austin, CATX ~~90831~~78723

(Address of principal executive offices)

(562) 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
Common stock, $0.01 par value	AGL	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. 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). 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	☐

Non-accelerated Filer	☒	Smaller Reporting Company	☐

		Emerging Growth Company	☐

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 ☐ NO ☒

At July ~~31, 2021,~~29, 2022, there were ~~390,882,560~~410,936,377 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 June 30, ~~2021~~2022 and December 31, ~~2020~~2021	3

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2022 and 2021	5

	Condensed Consolidated Statements of Contingently Redeemable Common Stock and Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	56

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	78

	Notes to the Condensed Consolidated Financial Statements	89

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2021

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3635

Item 4.	Controls and Procedures	3635

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3736

Item 1A.	Risk Factors	3736

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3736

Item 6.	Exhibits	3837

Signatures		3938

agilon health, inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)


	June 30, 2021	December 31, 2020	June 30, 2022			December 31, 2021
	(unaudited)		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$1,109,372	$106,795	$	668,574		$	1,040,039
Restricted cash and equivalents	16,343	28,383		15,085			14,781
Marketable securities				285,590			—
Receivables, net	338,359	144,555		607,632			293,407
Prepaid expenses and other current assets, net	15,740	9,639		24,528			18,968
Current assets held for sale and discontinued operations, net	—	4,825
Total current assets	1,479,814	294,197		1,601,409			1,367,195
Property and equipment, net	4,589	6,456		15,808			9,161
Intangible assets, net	58,663	60,468		62,505			55,398
Goodwill	41,540	41,540		41,540			41,540
Other assets, net	117,128	43,700		119,260			112,958
Total assets	$1,701,734	$446,361	$	1,840,522		$	1,586,252
LIABILITIES, CONTINGENTLY REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Medical claims and related payables	$300,981	$162,868	$	458,038		$	239,014
Accounts payable and accrued expenses	107,599	97,244		142,048			112,946
Current portion of long-term debt	3,750	3,041		5,000			5,000
Current liabilities held for sale and discontinued operations	—	3,682
Total current liabilities	412,330	266,835		605,086			356,960
Long-term debt, net of current portion	45,862	64,665		40,943			43,401
Other liabilities	93,264	90,091		91,122			94,295
Total liabilities	551,456	421,591		737,151			494,656

Commitments and contingencies

Contingently redeemable common stock, $0.01 par value: 76,201 shares issued and outstanding at December 31, 2020	—	309,500

Stockholders' equity (deficit):
Common stock, $0.01 par value: 2,000,000 shares authorized; 390,883 and 249,374 shares issued and outstanding, respectively	3,909	2,494
Common stock, $0.01 par value: 2,000,000 shares authorized; 408,204 and 400,095 shares issued and outstanding, respectively				4,082			4,001
Additional paid-in capital	2,011,651	263,966		2,076,329			2,045,572
Accumulated deficit	(865,113)	(551,190)		(977,096	)		(957,677	)
Accumulated other comprehensive income (loss)				513			0
Total agilon health, inc. stockholders' equity (deficit)	1,150,447	(284,730)		1,103,828			1,091,896
Noncontrolling interests	(169)	0		(457	)		(300	)
Total stockholders’ equity (deficit)	1,150,278	(284,730)		1,103,371			1,091,596
Total liabilities, contingently redeemable common stock and stockholders’ equity (deficit)	$1,701,734	$446,361
Total liabilities and stockholders’ equity (deficit)			$	1,840,522		$	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 or the~~ Company’s consolidated VIEs totaling $~~455.9~~748.3 million and $~~287.9~~420.5 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~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 $~~330.6~~539.9 million and $~~174.0~~282.0 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. See Note 13 for additional details.

See accompanying Notes to the Condensed Consolidated Financial Statements.

agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Revenues:
Medical services revenue	$	497,678		$	292,495		$	910,090		$	582,309		$	669,184		$	497,678		$	1,321,607		$	910,090
Other operating revenue		1,278			1,099			1,970			2,333			950			1,278			1,972			1,970
Total revenues		498,956			293,594			912,060			584,642			670,134			498,956			1,323,579			912,060
Expenses:
Medical services expense		442,483			220,363			802,837			468,016			587,140			442,483			1,153,348			802,837
Other medical expenses		33,694			34,761			57,355			53,187			49,080			33,694			93,853			57,355
General and administrative		43,013			34,248			79,318			60,832
Stock-based compensation expense		274,548			2,155			276,020			3,176
General and administrative (including noncash stock-based compensation expense of $6,553, $274,548, $10,523, and $276,020, respectively)														51,924			317,561			91,758			355,338
Depreciation and amortization		3,581			3,319			7,008			6,517			3,042			3,581			6,415			7,008
Total expenses		797,319			294,846			1,222,538			591,728			691,186			797,319			1,345,374			1,222,538
Income (loss) from operations		(298,363	)		(1,252	)		(310,478	)		(7,086	)		(21,052	)		(298,363	)		(21,795	)		(310,478	)
Other income (expense):
Other income (expense), net		2,967			(74	)		4,303			48			6,997			2,967			9,266			4,303
Gain (loss) on lease terminations														(5,458	)		0			(5,458	)		0
Interest expense		(1,498	)		(2,080	)		(4,439	)		(4,229	)		(945	)		(1,498	)		(1,816	)		(4,439	)
Income (loss) before income taxes		(296,894	)		(3,406	)		(310,614	)		(11,267	)		(20,458	)		(296,894	)		(19,803	)		(310,614	)
Income tax benefit (expense)		(435	)		(39	)		(451	)		(39	)		(580	)		(435	)		(509	)		(451	)
Income (loss) from continuing operations		(297,329	)		(3,445	)		(311,065	)		(11,306	)		(21,038	)		(297,329	)		(20,312	)		(311,065	)
Discontinued operations:
Income (loss) before income taxes		(1,547	)		(4,340	)		(2,898	)		(12,429	)		321			(1,547	)		750			(2,898	)
Income tax benefit (expense)		(65	)		(126	)		(129	)		(275	)		(14	)		(65	)		(14	)		(129	)
Total discontinued operations		(1,612	)		(4,466	)		(3,027	)		(12,704	)		307			(1,612	)		736			(3,027	)
Net income (loss)		(298,941	)		(7,911	)		(314,092	)		(24,010	)		(20,731	)		(298,941	)		(19,576	)		(314,092	)
Noncontrolling interests’ share in (earnings) loss		96			0			169			0			82			96			157			169
Net income (loss) attributable to common shares	$	(298,845	)	$	(7,911	)	$	(313,923	)	$	(24,010	)	$	(20,649	)	$	(298,845	)	$	(19,419	)	$	(313,923	)

Net income (loss) per common share, basic and diluted
Continuing operations	$	(0.79	)	$	(0.01	)	$	(0.88	)	$	(0.03	)	$	(0.05	)	$	(0.79	)	$	(0.05	)	$	(0.88	)
Discontinued operations	$	0		$	(0.01	)	$	(0.01	)	$	(0.04	)	$	0		$	0		$	0		$	(0.01	)
Weighted average shares outstanding, basic and diluted		377,445			323,702			351,695			321,827			407,339			377,445			404,666			351,695

See accompanying Notes to the Condensed Consolidated Financial Statements.

agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net income (loss)	$	(20,731	)	$	(298,941	)	$	(19,576	)	$	(314,092	)
Other comprehensive income (loss):
Net unrealized gain (loss) on marketable securities, net of tax		513			0			513			0
Total comprehensive income (loss)		(20,218	)		(298,941	)		(19,063	)		(314,092	)
Comprehensive (income) loss attributable to noncontrolling interests		82			96			157			169
Total comprehensive income (loss) attributable to agilon health, inc.	$	(20,136	)	$	(298,845	)	$	(18,906	)	$	(313,923	)

See accompanying Notes to the Condensed Consolidated Financial Statements.

agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF CONTINGENTLY REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

(unaudited)

For the three months ended June 30, ~~2021:~~2022:

Contingently
Redeemable
Common Stock

Total Stockholders’ Equity

Common Stock

Additional
Paid-In

Accumulated

Noncontrolling

Total
Stockholders’
Equity

Shares

Amount

Shares

Amount

Capital

Deficit

Interest

(Deficit)
April 1, 2021

76,201

$309,500

249,474

$2,494

$265,603

$(566,268)

$(73)

$(298,244)
Net income (loss)

  —

  —

  —

  —

  —

(298,845)

(96)

(298,941)
Reclassification of contingently
   redeemable common stock in
   connection with initial
   public offering ("IPO")

(76,201)

(309,500)

76,201

762

308,738

  —

  —

309,500
Issuance of common stock in
   connection with IPO,
   net of offering costs

  —

  —

53,590

536

1,162,493

  —

  —

1,163,029
Issuance of common stock under
   partner physician group equity
   agreements upon IPO

  —

  —

11,672

117

268,350

  —

  —

268,467
Exercise of stock options
   and other, net

  —

  —

(54)

  —

386

  —

  —

386
Stock-based compensation
   expense

  —

  —

  —

  —

6,081

  —

  —

6,081
June 30, 2021

  —

$—

390,883

$3,909

$2,011,651

$(865,113)

$(169)

$1,150,278


	Total Stockholders’ Equity
	Common Stock					Additional Paid-In			Accumulated			Accumulated Other Comprehensive		Noncontrolling			Total Stockholders’ Equity
	Shares			Amount		Capital			Deficit			Income (loss)		Interest			(Deficit)
April 1, 2022		405,727		$	4,057	$	2,064,242		$	(956,447	)	$	—	$	(375	)	$	1,111,477
Net income (loss)		—			—		—			(20,649	)		—		(82	)		(20,731	)
Other comprehensive income (loss)		—			—		—			—			513		—			513
Exercise of stock options		2,370			24		6,293			—			—		—			6,317
Vesting of restricted stock units		140			1		(1	)		—			—		—			—
Shares withheld related to net share settlement		(33	)		—		(758	)		—			—		—			(758	)
Stock-based compensation expense		—			—		6,553			—			—		—			6,553
June 30, 2022		408,204		$	4,082	$	2,076,329		$	(977,096	)	$	513	$	(457	)	$	1,103,371

For the six months ended June 30, ~~2021:~~2022:


	Total Stockholders’ Equity
	Common Stock					Additional Paid-In			Accumulated			Accumulated Other Comprehensive		Noncontrolling			Total Stockholders’ Equity
	Shares			Amount		Capital			Deficit			Income (loss)		Interest			(Deficit)
January 1, 2022		400,095		$	4,001	$	2,045,572		$	(957,677	)	$	—	$	(300	)	$	1,091,596
Net income (loss)		—			—		—			(19,419	)		—		(157	)		(19,576	)
Other comprehensive income (loss)		—			—		—			—			513		—			513
Exercise of stock options		8,002			80		20,993			—			—		—			21,073
Vesting of restricted stock units		140			1		(1	)		—			—		—			—
Shares withheld related to net share settlement		(33	)		—		(758	)		—			—		—			(758	)
Stock-based compensation expense		—			—		10,523			—			—		—			10,523
June 30, 2022		408,204		$	4,082	$	2,076,329		$	(977,096	)	$	513	$	(457	)	$	1,103,371

Contingently
Redeemable
Common Stock

Total Stockholders’ Equity

Common Stock

Additional
Paid-In

Accumulated

Noncontrolling

Total
Stockholders’
Equity

Shares

Amount

Shares

Amount

Capital

Deficit

Interest

(Deficit)
January 1, 2021

76,201

$309,500

249,374

$2,494

$263,966

$(551,190)

$—

$(284,730)
Net income (loss)

  —

  —

  —

  —

  —

(313,923)

(169)

(314,092)
Reclassification of contingently
   redeemable common stock in
   connection with IPO

(76,201)

(309,500)

76,201

762

308,738

  —

  —

309,500
Issuance of common stock in
   connection with IPO,
   net of offering costs

  —

  —

53,590

536

1,162,493

  —

  —

1,163,029
Issuance of common stock under
   partner physician group equity
   agreements upon IPO

  —

  —

11,672

117

268,350

  —

  —

268,467
Exercise of stock options
   and other, net

  —

  —

46

  —

551

  —

  —

551
Stock-based compensation
   expense

  —

  —

  —

  —

7,553

  —

  —

7,553
June 30, 2021

  —

$—

390,883

$3,909

$2,011,651

$(865,113)

$(169)

$1,150,278

agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF CONTINGENTLY REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

(unaudited)

For the three months ended June 30, ~~2020:~~2021:

Contingently Redeemable
Common Stock

Total Stockholders’ Equity

Common Stock

Additional
Paid-In

Accumulated

Total
Stockholders’
Equity

Shares

Amount

Shares

Amount

Capital

Deficit

(Deficit)
April 1, 2020

76,201

$309,500

246,924

$2,469

$257,254

$(507,237)

$(247,514)
Net income (loss)

  —

  —

  —

  —

  —

(7,911)

(7,911)
Issuance of common stock, net

  —

  —

1,023

10

4,591

  —

4,601
Exercise of stock options and other, net

  —

  —

335

3

310

  —

313
Stock-based compensation expense

  —

  —

  —

  —

2,231

  —

2,231
June 30, 2020

76,201

$309,500

248,282

$2,482

$264,386

$(515,148)

$(248,280)


	Contingently Redeemable Common Stock						Total Stockholders’ Equity
							Common Stock					Additional Paid-In		Accumulated			Noncontrolling			Total Stockholders’ Equity
	Shares			Amount			Shares			Amount		Capital		Deficit			Interests			(Deficit)
April 1, 2021		76,201		$	309,500			249,474		$	2,494	$	265,603	$	(566,268	)	$	(73	)	$	(298,244	)
Net income (loss)		—			—			—			—		—		(298,845	)		(96	)		(298,941	)
Reclassification of contingently redeemable common stock in connection with initial public offering ("IPO")		(76,201	)		(309,500	)		76,201			762		308,738		—			—			309,500
Issuance of common stock in connection with IPO, net of offering costs		—			—			53,590			536		1,162,493		—			—			1,163,029
Issuance of common stock under partner physician group equity agreements upon IPO		—			—			11,672			117		268,350		—			—			268,467
Exercise of stock options and other, net		—			—			(54	)		—		386		—			—			386
Stock-based compensation expense		—			—			—			—		6,081		—			—			6,081
June 30, 2021		0		$	0			390,883		$	3,909	$	2,011,651	$	(865,113	)	$	(169	)	$	1,150,278

For the six months ended June 30, ~~2020:~~2021:

Contingently Redeemable
Common Stock

Total Stockholders’ Equity

Common Stock

Additional
Paid-In

Accumulated

Total
Stockholders’
Equity

Shares

Amount

Shares

Amount

Capital

Deficit

(Deficit)
January 1, 2020

69,860

$281,000

246,743

$2,467

$256,643

$(491,138)

$(232,028)
Net income (loss)

  —

  —

  —

  —

  —

(24,010)

(24,010)
Issuance of contingently
   redeemable common stock

6,341

28,500

  —

  —

(460)

  —

(460)
Issuance of common stock, net

  —

  —

1,023

10

4,591

  —

4,601
Exercise of stock options and other, net

  —

  —

516

5

310

  —

315
Stock-based compensation
   expense

  —

  —

  —

  —

3,302

  —

3,302
June 30, 2020

76,201

$309,500

248,282

$2,482

$264,386

$(515,148)

$(248,280)


	Contingently Redeemable Common Stock						Total Stockholders’ Equity
							Common Stock				Additional Paid-In		Accumulated			Noncontrolling			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount		Capital		Deficit			Interests			(Deficit)
January 1, 2021		76,201		$	309,500			249,374	$	2,494	$	263,966	$	(551,190	)	$	0		$	(284,730	)
Net income (loss)		—			—			—		—		—		(313,923	)		(169	)		(314,092	)
Reclassification of contingently redeemable common stock in connection with IPO		(76,201	)		(309,500	)		76,201		762		308,738		—			—			309,500
Issuance of common stock in connection with IPO, net of offering costs		—			—			53,590		536		1,162,493		—			—			1,163,029
Issuance of common stock under partner physician group equity agreements upon IPO		—			—			11,672		117		268,350		—			—			268,467
Exercise of stock options and other, net		—			—			46		—		551		—			—			551
Stock-based compensation expense		—			—			—		—		7,553		—			—			7,553
June 30, 2021		0		$	0			390,883	$	3,909	$	2,011,651	$	(865,113	)	$	(169	)	$	1,150,278

See accompanying Notes to the Condensed Consolidated Financial Statements.

agilon health, inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2022			2021
Cash flows from operating activities:
Net income (loss)	$	(314,092	)	$	(24,010	)	$	(19,576	)	$	(314,092	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		7,095			6,845			6,415			7,095
Stock-based compensation expense		276,020			3,302			10,523			276,020
Loss on debt extinguishment		1,590			0			0			1,590
Loss (income) from equity method investments		(2,532	)		(380	)		(7,787	)		(2,532	)
Other noncash items		2,011			520			3,497			2,011
Changes in operating assets and liabilities		(50,211	)		(21,775	)		(76,568	)		(50,211	)
Net cash provided by (used in) operating activities		(80,119	)		(35,498	)		(83,496	)		(80,119	)
Cash flows from investing activities:
Purchase of property and equipment, net		(646	)		(941	)		(8,504	)		(646	)
Purchase of intangible assets		(4,018	)		(306	)		(12,168	)		(4,018	)
Investment in loans receivable and other		(70,307	)		(2,166	)		(4,510	)		(70,307	)
Proceeds from repayment of loans receivable		1,277			1,062
Investments in marketable securities								(285,077	)		0
Proceeds from repayment of loans receivable and other								4,279			1,277
Proceeds from sale of business and property, net of cash divested		(2,644	)		0			500			(2,644	)
Net cash provided by (used in) investing activities		(76,338	)		(2,351	)		(305,480	)		(76,338	)
Cash flows from financing activities:
Proceeds from initial public offering		1,170,942			0			0			1,170,942
Proceeds from other equity issuances, net		0			32,727			20,315			551
Proceeds from exercise of stock options		551			315
Proceeds from the issuance of long-term debt		100,000			0			0			100,000
Repayments of long-term debt								(2,500	)		(118,648	)
Equity and debt issuance costs and other		(9,768	)		0			0			(9,768	)
Repayments of long-term borrowings and other		(118,648	)		(1,520	)
Net cash provided by (used in) financing activities		1,143,077			31,522			17,815			1,143,077
Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents		986,620			(6,327	)		(371,161	)		986,620
Cash, cash equivalents and restricted cash and equivalents from continuing operations, beginning of period		135,178			139,152			1,054,820			135,178
Cash, cash equivalents and restricted cash and equivalents from discontinued operations, beginning of period		3,917			6,460			0			3,917
Cash, cash equivalents and restricted cash and equivalents, beginning of period		139,095			145,612			1,054,820			139,095
Cash, cash equivalents and restricted cash and equivalents from continuing operations, end of period		1,125,715			134,552
Cash, cash equivalents and restricted cash and equivalents from discontinued operations, end of period		0			4,733
Cash, cash equivalents and restricted cash and equivalents, end of period	$	1,125,715		$	139,285		$	683,659		$	1,125,715

See accompanying Notes to the Condensed Consolidated Financial Statements.

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 June 30, ~~2021,~~2022, the Company, through its contracted physician networks, provided care to ~~approximately~~ approxima~~181,700~~tely 261,300 ~~Medicare~~Medicare Advantage members enrolled with private health plans.



During 2020, the Company entered into strategic partnerships to further expand its operations beginning January 1, 2021 into: (i) Buffalo, New York; (ii) Toledo, Ohio; and (iii) Hartford, Connecticut. In December 2020, the Company entered into a strategic partnership to further expand its operations beginning Beginning January 1, 2022, ~~into~~the Company expanded its operations into: (i) Syracuse, New ~~York.~~



~~During 2021, the Company entered into strategic partnerships to further expand its operations beginning January 1, 2022 into: (i)~~York, (ii) Grand Rapids and Traverse City, Michigan; ~~(ii)~~(iii) Pinehurst, North Carolina; and (iii) Longview and Texarkana, Texas, along with additional partnerships in the Company’s existing Ohio ~~and Texas~~ markets.



~~On April~~ Beginning January 1, ~~2021,~~2022, the Company ~~launched~~ 5also began operating three additional Direct Contracting Entities (“~~DCE”~~DCE��) that, in collaboration with 7four of its physician group partners, are participating in the Center for Medicare & Medicaid ~~Innovation’s~~Services Innovation Center’s Direct Contracting ~~Model.~~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 1314 for additional discussions related to the Company’s involvement with VIEs.

The Company is ultimately controlled by 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.

~~Initial Public Offering~~

~~On April 19, 2021, the Company completed its initial public offering ("IPO") in which it issued and sold an aggregate~~ ~~53,590,000~~ ~~shares of common stock at $23.00~~ ~~per share. The Company received net proceeds of approximately $1.2~~ ~~billion after deducting underwriting discounts and commissions and before deducting offering costs of $7.9~~ ~~million.~~

~~Upon the completion of the IPO, the Company issued~~ ~~11.7~~ ~~million shares of common stock under partner physician group equity agreements and recognized stock-based compensation expense of $268.5~~ ~~million in April 2021. Additionally, as of June 30, 2021, the Company provided $67.8~~ million in financing to physician partner groups in connection with taxes payable on shares distributed to them upon completion of the IPO. Such amounts are included in other assets, net in the condensed consolidated balance sheets. See Note 4.

~~The Company also recognized $2.6~~ ~~million of expense related to stock options that vested upon the completion of the IPO and $3.7~~ ~~million of expense related to a severance payment to its former chief executive officer contingent upon the completion of the IPO.~~

In connection with the IPO, the Company’s Board of Directors approved the agilon health, inc. 2021 Omnibus Equity Incentive Plan, or the “Omnibus Incentive Plan.” The equity awards approved by the compensation committee for grants to employees in connection with the completion of the IPO represent ~~1.9~~ ~~million shares of common stock issuable upon the exercise or vesting of such awards.~~

In connection with the completion of the IPO, the management agreement with CD&R was terminated pursuant to a termination agreement, dated as of April 16, 2021. The Company was not charged a fee in connection with the termination of this agreement.

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 six months ended June 30, ~~2021,~~2022, including the impact of COVID-19, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~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, ~~2020~~2021 included in the Company’s ~~prospectus (File No. 333-254435) dated April 14, 2021~~Annual Report on Form 10-K filed with the Securities and Exchange ~~Commission (“SEC”) pursuant to Rule 424(b) under the Securities Exchange Act of 1934, as amended, on April 16, 2021 (the “Prospectus”).~~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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, goodwill of $39.0 million was allocated to the Company’s Hawaii reporting unit, which had a negative carrying value.

As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company’s gross carrying amount of amortizable intangible assets was $~~105.8~~120.9 million and $~~101.9~~108.7 million, with accumulated amortization of $~~47.2~~58.4 million and $~~41.4~~53.3 million, respectively. For the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized $~~3.0~~2.4 million and $~~2.8~~3.0 million, respectively, in amortization expense, which is included in depreciation and amortization expense in the condensed consolidated statement of operations. For the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized $~~5.8~~5.1 million and $~~5.5~~5.8 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company’s gross carrying amount of property and equipment was $~~12.6~~23.6 million and $~~13.7~~17.4 million, with accumulated depreciation of $~~8.0~~7.8 million and $~~7.3~~8.2 million, respectively. For the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized $0.6 million and $~~0.5~~0.6 million, respectively, in depreciation expense, which is included in depreciation and amortization expense in the condensed consolidated statement of operations. For the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized $~~1.2~~1.3 million and $~~1.0~~1.1 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 ~~June 2021,~~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 ~~completed~~evaluates available-for-sale marketable securities for any credit-related impairment when the ~~sale~~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 ~~building and~~loss for the amount of such decline. As of June 30, 2022, the Company did not record any impairment related ~~land for $1.1~~ ~~million.~~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.

The Company’s income taxes from continuing operations for the three and six months ended June 30, 2021 and 2020 were not material. The Company’s annual estimated effective tax rate differs from the statutory rate primarily as a result of changes in the valuation allowance.

~~Recent Accounting Pronouncements~~

~~Adopted~~

~~Credit Losses.In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13,~~ ~~Measurement of Credit Losses on Financial Instruments~~ (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting by requiring timelier recognition of credit losses on loans and other financial instruments held at amortized cost. The amendments in ASU 2016-13 eliminate the “probable” initial threshold for recognition of credit losses in current accounting guidance and, instead, reflect an entity’s current estimate of all expected credit losses over the life of the financial instrument. When credit losses were measured under prior accounting guidance, an entity generally only considered past events and current conditions in measuring the incurred loss. The amendments in ASU2016-13 broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss. A reporting entity is required to apply the amendments in ASU 2016-13 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. Upon adoption of ASU 2016-13, the Company is required to reassess its financial assets measured at amortized costs and off-balance sheet credit exposures, including loan commitments. In November 2019, the FASB issued ASU 2019-10, ~~Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates~~ (“ASU 2019-10”). ASU 2019-10 amended the effective date for ASU 2016-13. ASU 2016-13 is effective for fiscal years, and interim periods within, beginning after December 15, 2019 for public companies, unless they qualify for an “emerging growth company.” The Company qualified as an emerging growth company prior to the completion of its IPO and elected to use the extended transition period for complying with this accounting standard through fiscal years beginning after December 15, 2022~~. However, as the Company ceased to be an emerging growth company as of January 1, 2021, the Company adopted ASU 2016-13 effective~~ ~~January 1, 2021. The adoption of ASU 2016-13 did not have an impact on the Company’s condensed consolidated financial statements.~~

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 ~~percentage~~percent of the premium payors receive from the Centers for Medicare & Medicaid ~~Services~~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

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 ~~accurate~~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~~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 is economically dependent on maintaining a base of primary care and specialty care physicians as well as capitation contracts with payors. The loss of certain of those contracts could have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

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 100% of the totals for the three and six months ended June 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.

~~Revenue from Medicare Advantage constitutes substantially all of the Company’s total revenue, accounting for nearly~~ ~~100% of the Company’s total revenues for the three and six months ended June 30, 2021 and 2020.~~

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 June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Payor A		24	%		38	%		26	%		38	%		24	%		24	%		25	%		26	%
Payor B		19	%		20	%		20	%		20	%		19	%		19	%		19	%		20	%
Payor C		20	%		12	%		17	%		12	%		13	%		20	%		14	%		17	%
Payor D		11	%	*				10	%	*				11	%		11	%		10	%		10	%

* Less than 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:


	June 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
Payor A		18	%		38	%		14	%		18	%
Payor B		24	%		27	%		22	%		21	%
Payor C		13	%	*				13	%		14	%
Payor D		14	%	*			*				12	%

* Less than 10% of total receivables.

NOTE 4. Marketable Securities and Fair Value Measurements

Marketable Securities

The following table summarizes the Company’s marketable securities (in thousands):


	June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Marketable securities:
Corporate debt securities	$	137,407	$	25	$	(141	)	$	137,291
U.S. Treasury notes		137,719		625		0			138,344
Other		9,951		4		0			9,955
	$	285,077	$	654	$	(141	)	$	285,590

The Company’s unrealized losses from marketable securities as of June 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 June 30, 2022, the Company had $131.0 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. As of June 30, 2022, the Company did not have the intent to sell any of the available-for-sale debt securities in an unrealized loss position. Therefore, the Company believes these losses to be temporary. There was 0 allowance for credit losses on available-for-sale marketable securities at June 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 six months ended June 30, 2022 and 2021, there were no material transfers of financial assets or liabilities between Level 1, Level 2 and 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:

•

Level 1—quoted prices for identical instruments in active markets;

•

Level 2—quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

•

Level 3—fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The table below summarizes the Company’s financial instruments measured at fair value on a recurring basis (in thousands):


	June 30, 2022
	Level 1		Level 2		Level 3
Marketable securities:
Corporate debt securities	$	0	$	137,291	$	0
U.S. Treasury notes		138,344		0		0
Other		9,955		0		0
	$	148,299	$	137,291	$	0

NOTE 4.5. Other Assets, net

The following table summarizes the Company’s other assets, net (in thousands):


	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Loans to physician partners	$	67,828	$	0	$	74,519	$	76,821
Indemnification assets		10,137		10,009		2,130		2,107
Health plan deposits		11,523		11,523		11,728		11,523
Equity method investments(1)		11,997		8,502		13,402		6,690
Right-of-use assets		9,208		9,585		13,758		11,739
Other		6,435		4,081		3,723		4,078
	$	117,128	$	43,700	$	119,260	$	112,958

(1)

See Note 14 for additional discussion related to the Company's equity method investments.

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 ~~IPO. See Note 1.~~initial public offering ("IPO"). These loans mature between 2026 and ~~2030~~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.

~~Equity Method Investments~~

~~On April 1, 2021, the Company launched~~ 5 ~~wholly-owned DCEs in collaboration with~~ 7 ~~of its physician group partners. As of June 30, 2021, the Company had~~ 7 ~~equity method investments that were deemed to be VIEs.~~ ~~The following table summarizes the Company’s equity method investments (in thousands):~~

June 30,
2021

December 31,
2020

Direct contracting entities

$
2,603

$
0

Other

9,394

8,502

$
11,997

$
8,502

For the Company’s equity method investments, it has determined that it is not the primary beneficiary of and, therefore, does not consolidate the VIEs because it does not have the ability to control activities that most significantly impact their economic performance. See Note 13.

~~The combined summarized operating results of the Company’s DCEs for the three and six months ended June 30, 2021 are as follows (in thousands):~~

Total

Medical services revenue

$
163,984

Medical services expense

(152,154
)
Other medical expenses(1)

(7,156
)
Net income

1,840

~~(1)~~

~~Includes physician incentive expenses of $3.6~~ ~~million.~~

NOTE 5.6. 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 ~~the Company’s obligations for medical services~~claims that have been ~~rendered by third parties,~~incurred but ~~for which claims~~ have either not yet been received, processed, or ~~paid.~~paid and as such, not reported.

Such estimates are based on many variables, including utilization trends, membership volumes, and historical claim payment patterns which are used to develop “completion factors” used to determine the amount of incurred but unpaid servicesdeveloped using an actuarial ~~process that is consistently applied each reporting period and that is~~methods commonly used by health insurance ~~actuaries.~~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 ~~in which~~ 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 June 30, ~~2021~~2022 and ~~December 31, 2020.~~2021. The Company uses judgment to determine the appropriate assumptions for developing the required estimates.

The following table presents the components of changes in medical claims and related payables (in thousands):

June 30,
2021

December 31,
2020

Medical claims and related payables, beginning of the year

$
164,161

$
121,779

Components of incurred costs related to:

Current year

803,711

1,026,940

Prior years

(874
)

(5,063
)
Discontinued operations - current year

1,234

85,732

Discontinued operations - prior years

(1,862
)

(1,543
)

802,209

1,106,066

Claims paid related to:

Current year

(517,368
)

(870,979
)
Prior years

(144,260
)

(94,868
)
Discontinued operations - current year

(298
)

(80,754
)
Discontinued operations - prior year(1)

(3,463
)

(17,083
)

(665,389
)

(1,063,684
)
Medical claims and related payables, end of the period

$
300,981

$
164,161

~~(1)~~

~~Includes $1.5~~ ~~million that was disposed in February 2021.~~


	June 30,
	2022			2021
Medical claims and related payables, beginning of the year	$	239,014		$	164,161
Components of incurred costs related to:
Current year		1,140,375			803,711
Prior years		12,973			(874	)
Discontinued operations - current year		—			1,234
Discontinued operations - prior years		(229	)		(1,862	)
		1,153,119			802,209
Claims paid related to:
Current year		(706,478	)		(517,368	)
Prior years		(227,777	)		(144,260	)
Discontinued operations - current year		—			(298	)
Discontinued operations - prior year		160			(3,463	)
		(934,095	)		(665,389	)
Medical claims and related payables, end of the period	$	458,038		$	300,981

~~Beginning and ending balances of medical~~Medical claims and related payables ~~disclosed~~presented in the periods above ~~for December 31, 2020,~~ include $~~1.1~~ ~~million and $1.3~~ ~~million, respectively, of claims liabilities that are presented as current liabilities held for sale and discontinued operations. As of June 30, 2021 and December 31, 2020, medical claims and~~immaterial balances related ~~payables also include $1.0~~ ~~million and $4.1~~ ~~million, respectively, of~~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 6.7. Other Liabilities

The following table summarizes the Company’s other liabilities (in thousands):


	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Other long-term contingencies	$	74,808	$	71,693	$	68,761	$	71,344
Reserve for uncertain tax positions		10,137		10,009		2,130		2,107
Lease liabilities, long-term		5,345		5,508		11,038		7,904
Equity method liabilities – DCEs						3,639		6,380
Other		2,974		2,881		5,554		6,560
	$	93,264	$	90,091	$	91,122	$	94,295

As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the ~~Company had~~Company’s accruals for contingent liabilities ofrelated to unasserted claims were $~~74.8~~68.8 million and $~~71.7~~71.3 million, ~~respectively, related to unasserted claims. While~~respectively. The accrued amounts represent the ~~Company intends to vigorously defend its position, the Company has established a liability for the potential exposure, including interest and penalties. Additionally, the Company estimated~~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 ~~reserves accrued on the condensed consolidated balance sheets to be~~such accruals was $0 to $~~23.3~~42.2 million as of June 30, ~~2021.~~2022.

See Note 14 for equity method liabilities related to the Company's DCE investments.

NOTE 7.8. 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 ~~“2021 Credit~~“Credit Facilities”). The ~~2021~~ Credit Facilities include: (i) a $100.0 million secured term loan (the ~~“2021 Secured~~“Secured Term Loan Facility”) and (ii) a $100.0 million senior secured revolving credit facility (the ~~“2021 Secured~~“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 ~~2021~~ 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 the Company’s indebtedness. The proceeds from the ~~2021~~ Secured Term Loan Facility were used to refinance an aggregate of $68.6 million of outstanding indebtedness under the prior credit facility and unsecured debt, with the remaining $30.1 million of net proceeds used for working capital and other general corporate purposes. ~~The maturity date~~

~~of the 2021 Credit Facilities was~~ ~~February 18, 2024~~ ~~or, following the completion of an IPO, February 18,2026 with mandated periodic payments.~~ In connection with the refinance of the existing debt, the Company recognized $1.1 million of additional interest expense for the write-off of the related debt issuance costs. The ~~2021~~ Secured Term Loan Facility required, among other things, a mandatory prepayment of $50.0 million if gross proceeds from the IPO exceeded

$1.0 billion. On April 26, 2021, the Company repaid $50.0 million of the ~~2021~~ Secured Term Loan Facility. The maturity date of the ~~2021~~ Credit Facilities ~~was extended to~~is February 18, 2026~~, with mandatory periodic payments.~~.

As of June 30, ~~2021,~~2022, the Company had $~~50.0~~46.3 million outstanding under the ~~2021~~ Secured Term Loan Facility and availability under the ~~2021~~ Secured Revolving Facility was $~~64.4~~49.8 million, as the Company had outstanding letters of credit totaling $~~35.6~~50.2 million, of which $~~14.0~~26.5 million was for the Company's DCE investments. The standby letters of credit are automatically extended without amendment for one-year periods, unless the Company notifies the institution in advance of the expiration date that the letter will be terminated. NaN amounts have been drawn on the outstanding letters of credit as of June 30, ~~2021.~~2022.

At the Company’s option, borrowings under the ~~2021 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, the Company pays a commitment fee on the unfunded 2021 ~~Secured~~ Revolving Credit Facility amount of 0.50% ~~(stepping~~(stepping down to 0.375% on and following October 1, 2023). The Company must also pay customary letter of credit fees. As of June 30, ~~2021,~~2022, the weighted average effective interest rate on the ~~2021~~ Secured Term Loan Facility was ~~4.46~~4.87%.

The ~~2021~~ 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. 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. As of June 30, ~~2021,~~2022, the Company was in compliance with all covenants under the ~~2021~~ Credit Facilities.

NOTE 8.9. 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. Except as described below, 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, ~~and as it~~which has not subsided. As the COVID-19 pandemic evolves, the Company continues to process, assemble, and assess member utilization ~~information.~~ information~~Throughout most~~ and the ultimate impact on the Company's business, results of ~~2020,~~operations, financial condition and cash flows remains uncertain. During 2021 and the ~~Company’s members incurred lower healthcare costs than would have otherwise been expected, which resulted in lower medical services expenses incurred. This reduction was impacted by the~~first half of 2022, overall care activity continued to increase, including a mix of temporary deferral of ~~non-essential~~ care ~~amid the~~activity and COVID-19 ~~pandemic and improved medical cost management, among other factors.~~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.

~~The~~As the COVID-19 pandemic has not yet 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 ~~outbreak,~~

pandemic, new information ~~which~~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.

The Company believes that its cash resources, funds from the IPO in April 2021, borrowing capacity available under the ~~2021~~ 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.

Compliance Requirements

In February 2018, the Company self-disclosed to the California Department of Managed Health Care (“DMHC”), the California Department of Health Care Services, and its affected payors certain noncompliant practices in the Company’s claims and utilization management. The Company submitted various reports in May, June, and August of 2018 and coordinated with the DMHC and certain of its payors to remediate noncompliant claims and utilization management practices and implement improvements through various corrective action plan (“CAPs”). On December 17, 2019, the Company completed substantial remediation of all known deficiencies identified by the DMHC’s audit findings. In February 2021, the Company completed divesting all of its California operations. On March 9, 2021, the Company received a set of investigative interrogatories from the DMHC pursuant to its investigation of conduct and matters described in the Company’s various reports. The interrogatories sought information concerning certain claims data and authorizations denied due to lack of medical necessity, including information regarding the health plans affected thereby. The Company responded timely to such interrogatories and provided requested information. Any adverse review, audit or investigation could result in, among other things: refunding of amounts the Company have been paid pursuant to its contracts; or the imposition of fines, penalties and other sanctions on the Company, or certain of its payors. While the Company does not expect the amount to be material, it is unable to predict the potential dollar value of recoupments or fines, penalties or other sanctions that may be ~~imposed~~imposed on the Company or the impacted payors related to the DMHC’s audit findings, if any. Per publicly available information, 56 ~~(5)~~ out of the 9 ~~(9)~~ impacted payors have entered into letters of agreement with the DMHC whereby each of the payors have agreed to pay an administrative penalty related to the deficiencies. These penalties equal $~~122,500~~0.2 million in the aggregate. ~~The DMHC has imposed an administrative penalty on at least one of the remaining impacted payors.~~ At least one payor ~~has~~ formally sought indemnification from the Company in the amount of $80,000 for penalties related to the DMHC audit findings. The Company is unable to predict the potential dollar value of claims or demands that could be asserted in the future, if any. While the Company has divested all of its California operations as of February 2021, for the Southern California and Fresno divestiture transactions the Company will continue to be responsible for any liabilities arising from the business which were incurred prior to the closing date of each transaction, including any fines, penalties and other sanctions relating to the DMHC matter described above, the payment of claims for medical services incurred prior to the effective date of each transaction, a liability for unrecognized tax benefits for which the Company is indemnified and other contingent liabilities that ~~the Company~~management currently ~~believes~~believe are ~~remote.~~remote.

Contractual Obligations

The Company’s capital commitments to physician partners to support physician partner expansion and related purposes increased by $~~23.2~~28.4 million, to $~~41.9~~85.2 million at June 30, ~~2021~~2022 when compared to December 31, ~~2020.~~2021. There have been no other material changes, outside of the ordinary course of business and indebtedness (see Note 7)8), to the Company’s commitments during the six months ended June 30, ~~2021~~2022.

1516

NOTE 9.10. Common Stock

Common Stock

~~As of~~ 2022. During the six months ended June 30, 2022, the Company issued approximately ~~, 2021, the Company’s authorized capital stock consisted of~~ ~~2.0~~8.1 ~~billion~~million shares of common stock ~~par value $0.01~~ ~~per share.~~primarily in connection with exercises and vesting of stock-based awards.

2021. During the six months ended June 30, 2021, the Company issued approximately 46,000 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 $23.00 per share for 46,600,000 shares, pursuant to the Prospectus. On April 15, 2021, the underwriters exercised their option to purchase an additional 6,990,000 shares of common stock. On April 19, 2021, the Company’s sale of an aggregate of 53,590,000 shares of common stock was ~~completed, see Note 1.~~completed.

Upon the completion of the IPO, the Company issued 11.7 million shares of common stock under partner physician group equity agreements and recognized stock-based compensation expense of $268.5 million in April ~~2021, see Note 1.~~

~~2020.~~ ~~During the six months ended June 30, 2020, the Company issued and sold approximately~~ ~~1.0~~ ~~million shares of common stock to certain officers and directors at a purchase price of $4.49~~ ~~per share and received aggregate proceeds of $4.6~~ ~~million.~~

~~Contingently Redeemable Common Stock~~

~~2020.~~ ~~During 2020, the Company closed private placements to third-party investors in which it issued and sold~~ ~~6.3~~ ~~million shares of contingently redeemable common stock at a purchase price of $4.49~~ ~~per share and received aggregate proceeds of $28.5~~ ~~million.~~

The private placements of contingently redeemable common stock had a redemption feature that required the Company, in certain limited circumstances, to repurchase stock. Because the redemption feature was outside the control of the Company, the related capital contribution did not qualify as permanent equity and was classified as temporary equity in the mezzanine section of the condensed consolidated balance sheet. The redemption feature terminated upon the completion of an initial public offering of the Company’s common stock. The common stock classified as temporary equity was recorded at an initial carrying value equal to the gross proceeds received, which represented their fair value at the date of issuance.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, see Note 1.~~equity.

NOTE ~~10.~~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.

The following table illustrates the computation of basic and diluted EPS (in thousands, except per share amounts):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Numerator
Income (loss) from continuing operations	$	(297,329	)	$	(3,445	)	$	(311,065	)	$	(11,306	)	$	(21,038	)	$	(297,329	)	$	(20,312	)	$	(311,065	)
Noncontrolling interests’ share in (earnings) loss from continuing operations														82			96			157			169
Net income (loss) attributable to common stockholders before discontinued operations														(20,956	)		(297,233	)		(20,155	)		(310,896	)
Income (loss) from discontinued operations		(1,612	)		(4,466	)		(3,027	)		(12,704	)		307			(1,612	)		736			(3,027	)
Noncontrolling interests’ share in (earnings) loss		96			0			169			0
Net income (loss) attributable to common stockholders	$	(298,845	)	$	(7,911	)	$	(313,923	)	$	(24,010	)	$	(20,649	)	$	(298,845	)	$	(19,419	)	$	(313,923	)
Denominator
Weighted average shares outstanding, basic and diluted		377,445			323,702			351,695			321,827			407,339			377,445			404,666			351,695
Net income (loss) per share attributable to common stockholders
Net income (loss) per common share from continuing operations, basic and diluted	$	(0.79	)	$	(0.01	)	$	(0.88	)	$	(0.03	)	$	(0.05	)	$	(0.79	)	$	(0.05	)	$	(0.88	)
Net income (loss) per common share from discontinued operations, basic and diluted	$	0		$	(0.01	)	$	(0.01	)	$	(0.04	)	$	0		$	0		$	0		$	(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. 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):


	Six Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2022		2021
Stock options - service only condition		24,542		26,620		11,833		24,542
Stock options - market and/or performance condition		16,655		18,315
Equity awards - market and/or performance condition						12,070		16,655
Restricted stock units		881		138		1,260		881

NOTE ~~11.~~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.

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, ~~for a gross sale price of $2.5~~ ~~million and recognized a gain on sale of $1.3~~ ~~million. In October 2020, the Company disposed of its~~ Fresno, California operations, ~~for a gross sales price of $26.0~~ ~~million~~ and ~~recognized a gain on sale of approximately $19.0~~ million. The Company retained the working capital of both disposal groups and, therefore, such working capital accounts are not presented as assets and liabilities related to discontinued operations in the condensed consolidated balance sheets. In November 2020, the Company signed a letter of intent to sell its remaining California operations, ~~for a gross sales price of $1.0~~ ~~million. The sale closed in February 2021.~~

respectively. The Company’s decision to exit California and the Medicaid line of business ~~represents~~represented a strategic shift that ~~will have~~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.

See Note 89 for additional details on the Company's investigative interrogatories from the DMHC.

The results of discontinued operations are as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Revenues:

Medical services revenue

$
(534
)

$
51,757

$
3,313

$
101,941

Other operating revenue

0

56

23

111

Total revenues

(534
)

51,813

3,336

102,052

Expenses:

Medical services expense

(1,266
)

28,981

(628
)

57,421

Other medical expenses

11

18,741

2,491

37,863

General and administrative

2,154

8,351

4,742

19,030

Depreciation and amortization

33

163

87

328

Income (loss) from operations

(1,466
)

(4,423
)

(3,356
)

(12,590
)
Other income (expense), net

(81
)

154

(33
)

336

Gain (loss) on sale of assets

0

0

491

0

Interest expense

0

(71
)

0

(175
)
Income (loss) before income taxes

(1,547
)

(4,340
)

(2,898
)

(12,429
)
Income tax benefit (expense)

(65
)

(126
)

(129
)

(275
)
Net income (loss) from
discontinued operations

$
(1,612
)

$
(4,466
)

$
(3,027
)

$
(12,704
)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenues:
Medical services revenue	$	167		$	(534	)	$	511		$	3,313
Other operating revenue		10			0			10			23
Total revenues		177			(534	)		521			3,336
Expenses:
Medical services expense		(144	)		(1,266	)		(229	)		(628	)
Other medical expenses		0			11			0			2,491
General and administrative		0			2,154			0			4,742
Depreciation and amortization		0			33			0			87
Income (loss) from operations		321			(1,466	)		750			(3,356	)
Other income (expense), net		0			(81	)		0			(33	)
Gain (loss) on sale of assets		0			0			0			491
Income (loss) before income taxes		321			(1,547	)		750			(2,898	)
Income tax benefit (expense)		(14	)		(65	)		(14	)		(129	)
Net income (loss) from discontinued operations	$	307		$	(1,612	)	$	736		$	(3,027	)

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):


	Six Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2022		2021
Non-cash operating activities from discontinued operations:
Depreciation and amortization	$	87	$	328	$	0	$	87
Stock-based compensation expense		0		127

NOTE ~~12.~~13. Supplemental Cash Flow Information

The following table provides supplemental cash flow information (in thousands):


	Six Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2022		2021
Supplemental cash flow information:
Interest paid	$	2,907	$	4,055	$	1,950	$	2,907
Income taxes paid		1,653		—		566		1,653
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use asset obtained in exchange for new operating lease liability		861		—		7,288		861
Reclassification of contingently redeemable common stock in connection with IPO		309,500		—		0		309,500
Issuance of common stock under partner physician group equity agreements upon IPO		268,467		—		0		268,467
Deferred offering costs accrued at end of period		558		—
Offering costs accrued at end of period						0		558
Non-cash investment in unconsolidated subsidiaries		763		—		190		763

The following table summarizes cash, cash equivalents and restricted cash equivalents from continuing operations (in thousands):


	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Cash and cash equivalents	$	1,109,372	$	106,795	$	668,574	$	1,040,039
Restricted cash and equivalents(1)		16,343		28,383		15,085		14,781
Cash, cash equivalents and restricted cash equivalents	$	1,125,715	$	135,178	$	683,659	$	1,054,820

(1)

Restricted cash and equivalents primarily consist of amounts used as collateral to secure letters of credit that the Company is required to maintain pursuant to contracts with payors.

NOTE ~~13.~~14. Variable Interest Entities

Consolidated Variable Interest Entities

agilon health, inc.’s consolidated assets and liabilities as of June 30, ~~2021~~2022 and December 31, ~~2020~~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):


	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Assets(1)
Cash and cash equivalents	$	93,835	$	93,053	$	122,678	$	104,741
Restricted cash equivalents		14,202		25,032		13,210		13,210
Receivables, net		319,178		136,636		583,275		276,590
Prepaid expenses and other current assets, net		2,106		5,986		11,291		7,046
Property and equipment, net		735		797		1,583		1,147
Intangible assets, net		8,469		8,208		6,024		7,220
Other assets, net		17,382		13,343		10,262		10,580
Assets held for sale and discontinued operations, net		—		4,825
Liabilities(1)
Medical claims and related payables		244,014		97,146		417,943		195,812
Accounts payable and accrued expenses		74,941		62,294		117,785		81,702
Other liabilities		11,635		10,926		4,161		4,521
Liabilities held for sale and discontinued operations		—		3,682

(1)

Assets and liabilities of VIEs presented above include the assets and liabilities of the Company’s Independent Practice Associations in California, which are consolidated VIEs and whose operations are reflected in the condensed consolidated financial statements as discontinued operations.

Risk-bearing Entities. At June 30, ~~2021,~~2022, the Company operates 1720 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. 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 ~~2021~~ 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 June 30, ~~2021,~~2022, the Company had 79 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 the VIEs because it does not have the ability to control the activities that most significantly impact their economic performance. As of June 30, 2021 and December 31, 2020, the carrying amounts of the investments of the VIEs were $~~12.0~~ ~~million and $8.5~~ ~~million, respectively.~~these VIEs. The Company's maximum loss exposure as a result of the Company’s involvement with the VIEs cannot be ~~quantified. See Note 4.~~

19quantified as the Company has the obligation to provide ongoing operational support to the unconsolidated VIEs, as needed.

Equity Method Investments

The following table summarizes the Company’s equity method investments (in thousands):


	June 30, 2022			December 31, 2021
Equity method investments - Other(1)	$	8,247		$	6,690
Equity method investments - DCEs(1)		5,155			—
Equity method liabilities - DCEs(2)		(3,639	)		(6,380	)

(1)

Included in Other assets, net in the consolidated balance sheets.

(2)

Included in Other liabilities in the consolidated balance sheets.

The Company is a partner in 8 wholly-owned DCEs in collaboration with 12 of its physician group partners operating in 10 geographies. The combined summarized operating results of the Company’s DCEs are as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Medical services revenue	$	277,050		$	163,984		$	544,763		$	163,984
Medical services expense		(255,663	)		(152,154	)		(504,014	)		(152,154	)
Other medical expenses(1)		(12,160	)		(7,156	)		(24,804	)		(7,156	)
Net income (loss)(2)		5,694			1,840			7,706			1,840

(1)

For the three months ended June 30, 2022 and 2021, includes physician incentive expenses of $5.9 million and $3.6 million, respectively. For the six months ended June 30, 2022 and 2021, includes physician incentive expenses of $12.1 million and $3.6 million, respectively

(2)

Included in Other income (expense) in the consolidated statements of operations.

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”~~“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 ~~prospectus~~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 ~~prospectus.~~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 ~~prospectus,~~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 ~~the captions~~Part I, Item 1A. “Risk Factors” ~~and “Special Note Regarding Forward-Looking Statements and Information”~~ in our ~~prospectus (File No. 333-254435) dated April 14,~~Annual Report on Form 10-K for the fiscal year ended December 31, 2021, ~~filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b) under the Exchange Act on April 16, 2021 (the “Prospectus”),~~ 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 ~~prospectus.~~Report. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

•

our history of net losses, and our ability to achieve or maintain profitability in an environment of increasing expenses;

•

our ability to identify and develop successful new geographies, physician partners, and health plan payors, or to execute upon our growth initiatives;

•

our ability to execute our ~~operation~~operating strategies or to achieve results consistent with our historical performance;

•

our expectation that our expenses will increase in the future and the risk that medical expenses incurred on behalf of members may exceed the amount of medical revenues we receive;

•

our ability to secure contracts with Medicare Advantage (“MA”) payors or to secure MA at favorable financial terms;

•

our ability to recover startup costs incurred during the initial stages of development of our physician partner relationships and program initiatives;

•

our ability to obtain additional capital needed to support our business;

•

significant reductions in our membership;

•

challenges for our physician partners in the transition to our “Total Care Model”;

•

inaccuracies in the estimates and assumptions we use to project the size, revenue, or medical expense ~~amounts~~ of our target market;

•

the spread of, and response to, the novel coronavirus, or COVID-19, and the inability to predict the ultimate impact on us;

•

inaccuracies in the estimates and assumptions we use to project our members’ risk adjustment factors, medical services expense, incurred but not reported claims, and earnings pursuant to payor contracts;

•

the impact of restrictive or exclusivity clauses in some of our contracts with physician partners that may prohibit us from establishing new ~~RBEs~~ risk-bearing entities (each, an “RBE”) within certain geographies in the future;

•

the impact of restrictive or exclusivity clauses in some of our contracts with physician partners that may subject us to investigations or litigation;

•

our ability to retain our management team and key employees or attract qualified personnel in the future;

•

our ability to realize the full value of our intangible assets and any impairment charges we have or may record;

•

adverse determinations of tax matters;

•

security breaches, loss of data, or other disruptions to our data platforms;

•

our reliance on third parties for internet infrastructure and bandwidth to operate our business and provide services to our members and physician partners;

•

our ability to protect the confidentiality of our know-how and other proprietary and internally developed information;



~~the impact of devoting significant attention and resources to the provision of certain transition services in connection with the disposition of our California operations;~~

•

our subsidiaries’ lack of performance or ability to fund their operations, which could require us to fund such losses;

•

our dependence on a limited number of key health plan payors;

•

the limited terms of our contracts with health plan payors and that they may not be renewed upon their expiration;

•

our reliance on our health plan payors for membership attribution and assignment, data and reporting accuracy, and claims payment;

•

our dependence on physician partners and other providers to effectively manage the quality and cost of care, and perform obligations under payor contracts;

•

difficulties in obtaining accurate and complete diagnosis data;

•

our dependence on physician partners to accurately, timely, and sufficiently document their services and potential False Claims Act or other liability if any diagnosis information or encounter data are inaccurate or incorrect;

•

our reliance on third-party software and data to operate our business and provide services to our members and physician partners;

•

the impact of consolidation in the healthcare industry;

•

reductions in reimbursement rates or methodology applied to derive reimbursement from, or discontinuation of, federal government healthcare programs, from which we derive substantially all of our total revenue;

•

uncertain or adverse economic conditions, including a downturn or decrease in government expenditures;



~~our ability to compete in our competitive industry;~~

•

the impact of government performance standards and benchmarks on our compensation and reputation;

•

statutory or regulatory changes, administrative rulings, interpretations of policy, and determinations by intermediaries and governmental funding restrictions, and their impact on government funding, program coverage, and reimbursements;

•

regulatory proposals directed at containing or lowering the cost of healthcare and our participation in such proposed models;

•

we, our physician partners, or affiliates being subject to federal or state investigations, audits, and enforcement actions;

•

regulatory inquiries and corrective action plans imposed by our health plan payors;

•

repayment obligations arising out of payor audits;

•

the impact on our revenue of Centers for Medicare & Medicaid Services’ (“CMS”) modifying the methodology used to determine the revenue associated with MA members;

•

negative publicity regarding the managed healthcare industry;

•

the extensive regulation of the healthcare industry at the federal, state, and local levels;

•

our ~~substantial~~ indebtedness and the potential that we may incur additional substantial indebtedness;

•

our ability to compete in our competitive industry; and

•

risks related to other factors discussed under “Risk Factors” in Annual Report on Form 10-K for the ~~Prospectus.~~fiscal year ended December 31, 2021.

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.

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

•

COVID-19 Update

•

Key Financial and Operating Metrics

•

Key Components of Our Results of Operations

•

Results of Operations

•

Non-GAAP Financial ~~Measure~~Measures

•

Liquidity and Capital Resources



~~Off-Balance Sheet Arrangements~~

•

Critical Accounting Policies and Estimates

•

Recent Accounting Pronouncements

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.

Second Quarter ~~2021~~2022 Results:

•

Medicare Advantage members of approximately 261,200 as of June 30, 2022 increased 44% from June 30, 2021.

•

DCE attributed beneficiaries of approximately 90,500 as of June 30, 2022 increased 63% from June 30, 2021.

•

Total revenue of ~~$499~~$670 million increased ~~70%~~34% from ~~2020.~~ the second quarter of 2021.



~~Members of approximately 181,700 as of June 30 increased 45% from 2020.~~

•

Net loss of ~~$299~~$21 million, compared to $8$299 million in ~~2020.~~the second quarter of 2021. Second quarter 2021 results include $275 million in non-cash stock-based compensation expenses primarily related to the IPO.

•

Medical Margin of ~~$55~~$82 million, compared to ~~$72~~$55 million in ~~2020. The year-over-year change in Medical Margin in part reflects~~ the ~~impact from COVID on healthcare utilization in the prior year quarter.~~second quarter of 2021.

•

Adjusted EBITDA of positive $7 million in the second quarter compared to negative $2 million ~~compared to positive $14 million~~ in ~~2020.~~the second quarter 2021.

Year to Date ~~2021~~2022 Results:

•

Total revenue of ~~$912 million~~$1.3 billion increased ~~56%~~45% from ~~2020.~~2021.

•

Net loss of ~~$314~~$19 million, compared to ~~$24~~$314 million in ~~2020.~~2021. 2021 results include $276 million in non-cash stock-based compensation expenses primarily related to the IPO.

•

Medical Margin of ~~$107~~$168 million, compared to ~~$114~~$107 million in ~~2020.~~2021.

•

Adjusted EBITDA of $2$20 million, compared to ~~$17~~$2 million in ~~2020.~~2021.

Membership Details

~~Membership as of~~Medicare Advantage members increased 44% from June 30, 2021, which includes contributions from new geographies and growth within geographies existing prior to 2022. Total members live on the platform includes 261,200 Medicare Advantage members and 90,500 attributed Direct Contracting beneficiaries.

Average Medicare Advantage membership was ~~approximately 181,700, an increase of 45% from 2020. Average membership~~265,400 during the second quarter of 2021 was approximately 194,000, an increase of 57% from 2020. Average membership during the second quarter included approximately 13,100 retroactive members associated with the first quarter, including a large group MA contract transitioned between two payors in one of our geographies. Second quarter results include $35 million in revenue from these retroactive members.quarter.

~~Direct Contracting~~

In collaboration with seven of our physician group partners, we launched five Direct Contracting Entities (“DCE”) on April 1, 2021. The CMS Innovation Center created the Direct Contracting Model to allow a variety of DCEs to negotiate directly with the government to manage traditional Medicare beneficiaries and share in the savings and risks generated from managing the health services provided to such beneficiaries. While the recent announcement from the CMS Innovation Center will limit new DCE entrants for 2022, we will be able to utilize existing DCEs as a vehicle for existing or new physician groups to participate in the Direct Contracting program. As of June 30, 2021, the DCEs provided coordinated care for over 50,000 attributed beneficiaries on traditional Medicare.

~~Initial Public Offering and Debt Refinancing~~

On April 19, 2021, we completed the initial public offering ("IPO") of 53,590,000 shares of common stock at a price of $23.00 per share. The net proceeds of the offering were approximately $1.2 billion, after underwriting fees and other offering expenses. See Note 1 to the Condensed Consolidated Financial Statements.

Upon the completion of the IPO, we issued 11.7 million shares of common stock under partner physician group equity agreements and recognized stock-based compensation expense of $268.5 million in April 2021.

On February 18, 2021, we executed a new credit facility agreement (the “2021 Secured Credit Facilities”). The 2021 Secured Credit Facilities included an initial $100.0 million senior secured term loan and a $100.0 million senior secured revolving credit facility. Subsequent to the end of the first quarter and in connection with our IPO, we repaid $50.0 million of the senior secured term loan. See Note 7 to the Condensed Consolidated Financial Statements.

~~California Operations~~

In February 2021, we completed the divesture of our California operations by selling the remaining disposal group for a gross sales price of $1.0 million. Our California operations are reflected in the condensed consolidated financial statements as discontinued operations. See Note 8 to the Condensed Consolidated Financial Statements for additional details on the Company's investigative interrogatories from the ~~California Department of Managed Health Care~~.

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.~~COVID-19, certain of which have been relaxed in 2022. Additionally, more restrictive proclamations and/or directives may be issued in the ~~future.~~future, in the event of a resurgence of outbreaks of COVID-19 or the outbreaks of any of its variants.

~~The~~As the COVID-19 pandemic has not yet 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 ~~outbreak,~~pandemic, new information ~~which~~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.

~~Throughout most~~The COVID-19 pandemic continues to evolve and the ultimate impact on our business, results of ~~2020, our members incurred lower healthcare costs than we would have otherwise been expected, which resulted in lower medical services expenses incurred. This reduction was impacted by~~operations, financial condition, and cash flows remains uncertain. During 2021 and the first half of 2022, overall care activity continued to increase, including a mix of temporary deferral of ~~non-essential~~ care ~~amid the~~activity and COVID-19 ~~pandemic and improved medical cost management, among other factors.~~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 ~~our~~ 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.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 public health emergency. The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The changes in tax law did not have a material impact on our results of operations for the three and six months ended June 30, 2021. We will continue to monitor possible future impacts of changes in tax legislation.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							As of and For the							As of and For the
	Three Months Ended June 30,								Six Months Ended June 30,							Three Months Ended June 30,							Six Months Ended June 30,
	2021			2020		% Change			2021		2020		% Change			2022		2021			% Change		2022		2021		% Change
MA members		181,700			125,400		45			181,700		125,400		45			261,300		181,700			44		261,300		181,700		44
Medical services revenue	$	497,678		$	292,495		70		$	910,090	$	582,309		56		$	669,184	$	497,678			35	$	1,321,607	$	910,090		45
Medical margin	$	55,195		$	72,132		(23	)	$	107,253	$	114,293		(6	)	$	82,044	$	55,195			49	$	168,259	$	107,253		57
Platform support costs	$	30,667		$	25,223		22		$	59,075	$	48,743		21		$	36,291	$	30,667			18	$	70,104	$	59,075		19
Network contribution(1)	$	24,294		$	38,510		(37	)	$	54,436	$	63,250		(14	)	$	36,521	$	24,294			50	$	78,143	$	54,436		44
Adjusted EBITDA(1)	$	(1,674	)	$	14,311		(112	)	$	2,088	$	16,888		(88	)	$	7,496	$	(1,674	)		548	$	19,525	$	2,088		835

(1)

Network contribution and Adjusted EBITDA are non-GAAP financial measures. See “—Non-GAAP Financial Measures” for additional information, including reconciliations to the most directly comparable GAAP measures.

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 June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Medical services revenue	$	497,678		$	292,495		$	910,090		$	582,309		$	669,184		$	497,678		$	1,321,607		$	910,090
Medical services expense		(442,483	)		(220,363	)		(802,837	)		(468,016	)		(587,140	)		(442,483	)		(1,153,348	)		(802,837	)
Medical margin	$	55,195		$	72,132		$	107,253		$	114,293		$	82,044		$	55,195		$	168,259		$	107,253

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 ~~incentive~~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 ~~incentive~~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.

The following table presents our network contribution (dollars in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Medical services revenue	$	497,678		$	292,495		$	910,090		$	582,309		$	669,184		$	497,678		$	1,321,607		$	910,090
Medical services expense		(442,483	)		(220,363	)		(802,837	)		(468,016	)		(587,140	)		(442,483	)		(1,153,348	)		(802,837	)
Other medical expenses—live geographies(1)		(30,901	)		(33,622	)		(52,817	)		(51,043	)		(45,523	)		(30,901	)		(90,116	)		(52,817	)
Network contribution	$	24,294		$	38,510		$	54,436		$	63,250		$	36,521		$	24,294		$	78,143		$	54,436

(1)

Represents physician ~~incentive~~compensation expense related to surplus sharing and other direct medical expenses incurred to improve care for our members in our live geographies. Excludes costs in geographies that are in implementation and are not yet generating revenue. For the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, costs incurred in implementing geographies were ~~$2.8~~$3.6 million and ~~$1.1~~$2.8 million, respectively. For the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, costs incurred in implementing geographies were ~~$4.5~~$3.7 million and ~~$2.1~~$4.5 million, respectively.

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 June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Platform support costs

$
30,667

$
25,223

$
59,075

$
48,743

% of Revenue

6
%

9
%

6
%

8
%


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Platform support costs	$	36,291		$	30,667		$	70,104		$	59,075
% of Revenue		5	%		6	%		5	%		6	%

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, ~~costs,~~ (v) geography entry costs, (vi) ~~share-based~~stock-based compensation expense, (vii) severance and related ~~expense~~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 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

Medical services revenue constitutes substantially all of our total revenue, accounting for approximately 100% of our total revenues for the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

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 ~~incentive~~compensation expense and (ii) other provider costs. Partner physician ~~incentive~~compensation expense represents ~~incentive~~ 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 ~~amounts payable~~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 ~~for additional incentives that~~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 payments~~ 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, ~~investments to support the development and expansion of our physician partners,~~ management fees paid to our majority shareholder prior to our IPO (pursuant to a consulting agreement, which terminated prior to 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 ~~network equipment,~~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:

•

Equity income (loss) from unconsolidated joint ventures; and

•

Interest income, which consists primarily of interest earned on our cash and cash equivalents and restricted cash and cash ~~equivalents; and~~



~~Equity income (loss) from unconsolidated joint ventures.~~equivalents.

Interest Expense

Interest expense consists primarily of interest expense associated with our outstanding debt, including amortization of debt discounts and costs.

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, and other sanctions relating to the DMHC matter, 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 1112 to the Consolidated Condensed ~~Consolidated~~ Financial Statements.

Results of Operations

The following table summarizes key components of our results of operations (dollars in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Revenues:
Medical services revenue	$	497,678		$	292,495		$	910,090		$	582,309		$	669,184		$	497,678		$	1,321,607		$	910,090
Other operating revenue		1,278			1,099			1,970			2,333			950			1,278			1,972			1,970
Total revenues		498,956			293,594			912,060			584,642			670,134			498,956			1,323,579			912,060
Expenses:
Medical services expense		442,483			220,363			802,837			468,016			587,140			442,483			1,153,348			802,837
Other medical expenses		33,694			34,761			57,355			53,187			49,080			33,694			93,853			57,355
General and administrative		43,013			34,248			79,318			60,832
Stock-based compensation expense		274,548			2,155			276,020			3,176
General and administrative (including noncash stock-based compensation expense of $6,553, $274,548, $10,523, and $276,020, respectively)														51,924			317,561			91,758			355,338
Depreciation and amortization		3,581			3,319			7,008			6,517			3,042			3,581			6,415			7,008
Total expenses		797,319			294,846			1,222,538			591,728			691,186			797,319			1,345,374			1,222,538
Income (loss) from operations		(298,363	)		(1,252	)		(310,478	)		(7,086	)		(21,052	)		(298,363	)		(21,795	)		(310,478	)
Other income (expense):
Other income (expense), net		2,967			(74	)		4,303			48			6,997			2,967			9,266			4,303
Gain (loss) on lease terminations														(5,458	)		—			(5,458	)		—
Interest expense		(1,498	)		(2,080	)		(4,439	)		(4,229	)		(945	)		(1,498	)		(1,816	)		(4,439	)
Income (loss) before income taxes		(296,894	)		(3,406	)		(310,614	)		(11,267	)		(20,458	)		(296,894	)		(19,803	)		(310,614	)
Income tax benefit (expense)		(435	)		(39	)		(451	)		(39	)		(580	)		(435	)		(509	)		(451	)
Income (loss) from continuing operations		(297,329	)		(3,445	)		(311,065	)		(11,306	)		(21,038	)		(297,329	)		(20,312	)		(311,065	)
Discontinued operations:
Income (loss) from discontinued operations		(1,547	)		(4,340	)		(2,898	)		(12,429	)		321			(1,547	)		750			(2,898	)
Income tax benefit (expense)		(65	)		(126	)		(129	)		(275	)		(14	)		(65	)		(14	)		(129	)
Total discontinued operations		(1,612	)		(4,466	)		(3,027	)		(12,704	)		307			(1,612	)		736			(3,027	)
Net income (loss)		(298,941	)		(7,911	)		(314,092	)		(24,010	)		(20,731	)		(298,941	)		(19,576	)		(314,092	)
Noncontrolling interests’ share in earnings (loss)		96			—			169			—			82			96			157			169
Net income (loss) attributable to common shares	$	(298,845	)	$	(7,911	)	$	(313,923	)	$	(24,010	)	$	(20,649	)	$	(298,845	)	$	(19,419	)	$	(313,923	)

The following table summarizes our results of operations as a percentage of total revenues:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,								Six Months Ended June 30,
	2021			2020			2021			2020			2022				2021				2022				2021
Revenues:
Medical services revenue		100			100			100			100			100		%		100		%		100		%		100		%
Other operating revenue		—			—			—			—			—				—				—				—
Total revenues		100			100			100			100			100				100				100				100
Expenses:
Medical services expense		89			75			88			80			88				89				87				88
Other medical expenses		7			12			6			9			7				7				7				6
General and administrative		9			12			9			10
Stock-based compensation expense		55			1			30			1
General and administrative (including noncash stock-based compensation expense of 1%, 55%, 1% and 30%, respectively)														8				64				7				39
Depreciation and amortization		1			1			1			1			—				1				—				1
Total expenses		160			100			134			101			103				160				102				134
Income (loss) from operations		(60	)		—			(34	)		(1	)		(3	)			(60	)			(2	)			(34	)
Other income (expense):
Other income (expense), net		1			—			—			—			1				1				1				—
Gain (loss) on lease terminations														(1	)			—				—				—
Interest expense		—			(1	)		—			(1	)		—				—				—				—
Income (loss) before income taxes		(60	)		(1	)		(34	)		(2	)		(3	)			(60	)			(1	)			(34	)
Income tax benefit (expense)		—			—			—			—			—				—				—				—
Income (loss) from continuing operations		(60	)		(1	)		(34	)		(2	)		(3	)			(60	)			(1	)			(34	)
Discontinued operations:
Income (loss) from discontinued operations		—			(1	)		—			(2	)		—				—				—				—
Income tax benefit (expense)		—			—			—			—			—				—				—				—
Total discontinued operations		—			(2	)		—			(2	)		—				—				—				—
Net income (loss)		(60	)		(3	)		(34	)		(4	)		(3	)			(60	)			(1	)			(34	)
Noncontrolling interests’ share in earnings (loss)		—			—			—			—			—				—				—				—
Net income (loss) attributable to common shares		(60	)		(3	)		(34	)		(4	)		(3	)	%		(60	)	%		(1	)	%		(34	)	%

Comparison of the Three and Six Months Ended June 30, ~~2021~~2022 to the Three and Six Months Ended June 30, ~~2020~~2021

Medical Services Revenue


	Three Months Ended June 30,		Change		Six Months Ended June 30,		Change		Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
(dollars in thousands)	2021	2020	$	%	2021	2020	$	%	2022			2021			$		%			2022			2021			$		%
Medical services revenue	$497,678	$292,495	$205,183	70%	$910,090	$582,309	$327,781	56%	$	669,184		$	497,678		$	171,506		34	%	$	1,321,607		$	910,090		$	411,517		45	%
% of total revenues	100%	100%			100%	100%				100	%		100	%							100	%		100	%

Medical services revenue increased for the three and six months ended June 30, ~~2021~~2022 due primarily to growth in average membership ~~growth~~ of ~~57%~~37% and ~~46%~~44%, respectively, which was attributable to ~~three~~six new geographies that began to generate revenue in ~~2021~~2022 and growth in our existing geographies. The increase in medical services revenue for the three ~~and~~months ended June 30, 2022 was partially offset by a decline in PMPM capitation rates of 2%. The increase in medical services revenue for the six months ended June 30, ~~2021~~2022 was also driven, to a lesser extent, by an increase in PMPM capitation rates of ~~8% and 7%, respectively~~1%.

Medical Services Expense


	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
(dollars in thousands)	2022			2021			$		%			2022			2021			$		%
Medical services expense	$	587,140		$	442,483		$	144,657		33	%	$	1,153,348		$	802,837		$	350,511		44	%
% of total revenues		88	%		89	%							87	%		88	%

Three Months Ended June 30,

Change

Six Months Ended June 30,

Change
(dollars in thousands)

2021

2020

$

%

2021

2020

$

%
Medical services expense

$442,483

$220,363

$222,120

101%

$802,837

$468,016

$334,821

72%
% of total revenues

89%

75%

88%

80%

Medical services expense increased for the three and six months ended June 30, ~~2021~~2022 due primarily to growth in average membership ~~growth~~ of ~~57%~~37% and ~~46%~~44%, respectively, which was attributable to ~~three~~six new geographies that became operational in ~~2021~~2022 and growth in our existing geographies. The increase in medical services expense for the three ~~and six~~ months ended June 30, ~~2021~~2022 was ~~also driven, to~~partially offset by a ~~lesser extent, by an increase~~decline in average medical services expense per member of 23~~8% and 17%, respectively~~%. ~~The increase in average medical services expense reflects, in part, the impact from COVID-19 on healthcare utilization in the prior year periods.~~

Other Medical Expenses


	Three Months Ended June 30,		Change		Six Months Ended June 30,		Change		Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
(dollars in thousands)	2021	2020	$	%	2021	2020	$	%	2022			2021			$		%			2022			2021			$		%
Other medical expenses	$33,694	$34,761	$(1,067)	(3)%	$57,355	$53,187	$4,168	8%	$	49,080		$	33,694		$	15,386		46	%	$	93,853		$	57,355		$	36,498		64	%
% of total revenues	7%	12%			6%	9%				7	%		7	%							7	%		6	%

Other medical expenses ~~remained relatively flat~~increased by $15.4 million, or 46%, for the threemonths ended June 30 ~~2021~~, 2022 compared to ~~2020.~~2021. Partner physician incentive expense ~~declined~~increased by ~~$8.3~~$9.0 million to $26.4 million in 2022 compared to $17.4 million in ~~2021 compared to $25.7 million in 2020.~~2021. Other provider costs increased by ~~$7.2~~$6.5 million to $22.7 million in 2022 compared to $16.2 million in 2021, ~~compared to $9.0 million in 2020,~~ resulting from the increase in the number of geographies and members on our platform. Other provider costs for the three months ended June 30 ~~2021~~, 2022 include ~~$2.8~~$3.6 million of costs related to geographies that will become operational in January ~~2022,~~2023, while other provider costs for the three months ended June 30 ~~2020~~ , 2021 include ~~$1.1~~$2.8 million of costs related to geographies that became operational in ~~2021.~~2022.

Other medical expenses increased by ~~$4.2~~$36.5 million, or 8%64%, for the six months ended June 30 ~~2021~~, 2022 compared to ~~2020.~~2021. Partner physician incentive expense ~~declined~~increased by ~~$8.9~~$25.3 million to $53.8 million in 2022 compared to $28.5 million in ~~2021 compared to $37.4 million in 2020.~~2021. Other provider costs increased by ~~$13.1~~$11.2 million to $40.1 million in 2022 compared to $28.9 million in 2021, ~~compared to $15.8 million in 2020,~~ resulting from the increase in the number of geographies and members on our platform. Other provider costs for the six months ended June 30 ~~2021~~, 2022 include ~~$4.5~~$3.7 million of costs related to geographies that will become operational in January ~~2022,~~2023, while other provider costs for the six months ended June 30 ~~2020~~ , 2021 include ~~$2.1~~$4.5 million of costs related to geographies that became operational in ~~2021.~~2022.

General and Administrative


	Three Months Ended June 30,		Change		Six Months Ended June 30,		Change		Three Months Ended June 30,						Change						Six Months Ended June 30,						Change
(dollars in thousands)	2021	2020	$	%	2021	2020	$	%	2022			2021			$			%			2022			2021			$			%
General and administrative	$43,013	$34,248	$8,765	26%	$79,318	$60,832	$18,486	30%	$	51,924		$	317,561		$	(265,637	)		(84	)%	$	91,758		$	355,338		$	(263,580	)		(74	)%
% of total revenues	9%	12%			9%	10%				8	%		64	%								7	%		39	%

General and administrative expenses ~~increased $8.8~~decreased $265.6 million, or ~~26%~~84%, for the three months ended June 30 ~~2021~~, 2022 compared to ~~2020.~~2021. Substantially all of the year-over-year decrease in general and administrative expenses is attributable to a $265.5 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. Operating costs to support our live geographies and enterprise functions (platform support costs) increased by ~~$5.5~~$5.6 million to $36.3 million in 2022 compared to $30.7 million in 2021 ~~compared to $25.2 million in 2020~~ due primarily to growth in operating costs incurred to support geographies that became operational in ~~2021, along with additional costs related to our operations as a public company.~~2022. Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 6%5% for the three months ended June 30 ~~2021~~, 2022 compared to 9%6% for the same period in ~~2020.~~2021. Investments to support geography entry ~~increased~~remained relatively flat at $6.6 million in 2022, compared to $6.8 million in ~~2021, compared to $3.7 million in 2020 due to increased costs associated with our geographies that become operational in the following calendar year.~~2021. In aggregate, costs incurred for severance, ~~and~~ fees paid to our majority shareholder ~~remained relatively flat at $5.6~~(pursuant to a consulting agreement, which terminated prior to the IPO), and accruals for unasserted claims and contingent liabilities decreased by $3.1 million primarily as a result of a reduction in ~~2021 compared to $5.3 million in 2020.~~severance.

General and administrative expenses ~~increased $18.5~~decreased $263.6 million, or ~~30%~~74%, for the six months ended June 30, ~~2021~~2022 compared to ~~2020.~~2021. Substantially all of the year-over-year decrease in general and administrative expenses is attributable to a $265.5 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. Operating costs to support our live geographies and enterprise functions (platform support costs) increased by ~~$10.4~~$11.0 million to $70.1 million in 2022 compared to $59.1 million in 2021 ~~compared to $48.7 million in 2020~~ due primarily to growth in operating costs incurred to support geographies that became operational in ~~2021, along with additional costs related to our operations as a public company.~~2022. Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 6%5% for the six months ended June 30 ~~2021~~, 2022 compared to 8%6% for the same period in ~~2020.~~2021. Investments to support geography entry ~~increased~~remained relatively flat at $10.4 million in 2022, compared to $10.0 million in ~~2021, compared to $4.4 million in 2020 due to increased costs associated with our geographies that become operational in the following calendar year.~~2021. 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 ~~increased to $10.2~~decreased by $9.5 million primarily as a result of a reduction in ~~2021, compared to $7.7 million in 2020.~~

~~Stock-based compensation expense~~

Three Months Ended June 30,

Change

Six Months Ended June 30,

Change
(dollars in thousands)

2021

2020

$

%

2021

2020

$

%
Stock-based compensation expense

$274,548

$2,155

$272,393

12640%

$276,020

$3,176

$272,844

8591%
% of total revenues

55%

1%

30%

1%

~~Total stock-based compensation expense~~reserves for the three months ended June 30, 2021 was $274.5 million compared to $2.2 million in 2020. Total stock-based compensation expense for the six months ended June 30, 2021 was $276.0 million compared to $3.2 million in 2020. Substantially all of the increase in 2021 relates to shares issued ~~under partner physician group equity agreements in connection with our IPO~~ ~~in April 2021~~.

~~Total Discontinued Operations~~

Three Months Ended June 30,

Change

Six Months Ended June 30,

Change
(dollars in thousands)

2021

2020

$

%

2021

2020

$

%
Total discontinued operations

$(1,612)

$(4,466)

$2,854

64%

$(3,027)

$(12,704)

$9,677

76%
% of total revenues

(0)%

(2)%

(0)%

(2)%

Total discontinued operations for the three months ended June 30, 2021 generated losses of $1.6 million compared to losses of $4.5 million in 2020. Total discontinued operations for the six months ended June 30, 2021 generated losses of $3.0 million compared to losses of $12.7 million in 2020. As we completed the dispositions of our Southern California, Fresnocertain contingent liabilities and remaining California operations in August 2020, October 2020, and February 2021, respectively, medical margin and general and administrative expenses related to discontinued operations declined during 2021. For additional discussion related to discontinued operations, see Note 11 to our Consolidated Financial Statements.severance.

Non-GAAP Financial Measures

In addition to providing results that are determined in accordance with 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 ~~incentive~~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 ~~incentive~~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, ~~expense,~~ (v) geography entry costs, (vi) ~~share-based~~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 GAAP measure to network contribution. Net income (loss) is the most directly comparable 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~~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 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 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 ~~condensed~~ consolidated financial statements as an indicator of financial performance or liquidity. Some of these limitations are:

•

Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs;

•

Adjusted EBITDA does not reflect interest expense or the requirements necessary to service interest or principal payments on debt;

•

Adjusted EBITDA does not reflect income tax expense (benefit) or the cash requirements to pay taxes;

•

Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

•

Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and

•

The expenses and other items that we exclude in our calculation of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from similarly titled non-GAAP financial measures.

The following table sets forth a reconciliation of income (loss) from operations to network contribution using data derived from our condensed consolidated ~~condensed~~ financial statements for the periods indicated (dollars in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Income (loss) from operations	$	(298,363	)	$	(1,252	)	$	(310,478	)	$	(7,086	)	$	(21,052	)	$	(298,363	)	$	(21,795	)	$	(310,478	)
Other operating revenue		(1,278	)		(1,099	)		(1,970	)		(2,333	)		(950	)		(1,278	)		(1,972	)		(1,970	)
Other medical expenses		33,694			34,761			57,355			53,187			49,080			33,694			93,853			57,355
Other medical expenses—live geographies(1)		(30,901	)		(33,622	)		(52,817	)		(51,043	)		(45,523	)		(30,901	)		(90,116	)		(52,817	)
General and administrative		43,013			34,248			79,318			60,832			51,924			317,561			91,758			355,338
Stock-based compensation expense		274,548			2,155			276,020			3,176
Depreciation and amortization		3,581			3,319			7,008			6,517			3,042			3,581			6,415			7,008
Network contribution	$	24,294		$	38,510		$	54,436		$	63,250		$	36,521		$	24,294		$	78,143		$	54,436

(1)

The following table sets forth a reconciliation of net income (loss) to Adjusted EBITDA using data derived from our condensed consolidated ~~condensed~~ financial statements for the periods indicated (dollars in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Net income (loss)	$	(298,941	)	$	(7,911	)	$	(314,092	)	$	(24,010	)	$	(20,731	)	$	(298,941	)	$	(19,576	)	$	(314,092	)
(Income) loss from discontinued operations, net of income taxes		1,612			4,466			3,027			12,704			(307	)		1,612			(736	)		3,027
Interest expense		1,498			2,080			4,439			4,229			945			1,498			1,816			4,439
Income tax expense (benefit)		435			39			451			39			580			435			509			451
Depreciation and amortization		3,581			3,319			7,008			6,517			3,042			3,581			6,415			7,008
(Gain) loss on lease terminations														5,458			—			5,458			—
Geography entry costs(1)		9,578			4,865			14,545			6,523			10,175			9,578			14,159			14,545
Severance and related costs		3,788			2,689			4,242			2,691
Management fees(2)		58			353			433			683
Severance and related costs(2)														256			3,788			1,958			4,242
Management fees(3)														—			58			—			433
Stock-based compensation expense		274,548			2,155			276,020			3,176			6,553			274,548			10,523			276,020
EBITDA adjustment related to equity method investments		652			—			652			—
Other(3)		1,517			2,256			5,363			4,336
EBITDA adjustments related to equity method investments														492			652			1,663			652
Other(4)														1,033			1,517			(2,664	)		5,363
Adjusted EBITDA	$	(1,674	)	$	14,311		$	2,088		$	16,888		$	7,496		$	(1,674	)	$	19,525		$	2,088

(1)

Represents direct geography entry costs, including investments to develop and expand our platform ~~physician incentive expense, employee-related expenses~~ and ~~marketing.~~costs in geographies that are in implementation and are not yet generating revenue. For the three months ended June 30, 2022 and 2021, ~~and 2020,~~ (i) ~~$2.8~~$3.6 million and ~~$1.1~~$2.8 million, respectively, are included in other medical expenses and (ii) ~~$6.8~~$6.6 million and ~~$3.7~~$6.8 million, respectively, are included in general and administrative expenses. For the six months ended June 30, 2022 and 2021, ~~and 2020,~~ (i) ~~$4.5~~$3.7 million and ~~$2.1~~$4.5 million, respectively, are included in other medical expenses and (ii) ~~$10.0~~$10.4 million and ~~$4.4~~$10.0 million, respectively, are included in general and administrative expenses.

(2)

For the three and six months ended June 30, 2022, includes taxes and related costs on stock option exercises for departed executives of $0.2 million and $1.4 million, respectively.

(3)

Represents management fees and other expenses paid to Clayton Dubilier & Rice, LLC (“CD&R”). prior to our IPO. In connection with our initial public offering, we terminated our consulting agreement with CD&R, effective April 16, 2021. We were not charged a fee in connection with the termination of this agreement.

~~(3)~~(4)

Includes changes in non-cash accruals for unasserted claims, contingent liabilities, and ~~contingent liabilities.~~unrealized (gains) loss on short-term investments.

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 ~~the 2021 Credit Facilities.~~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 ~~equivalents.~~flow needs of our business operations, and attainment of a competitive return. As of June 30, ~~2021,~~2022, we had cash and cash equivalents of ~~$1.1 billion~~$668.6 million and investments in marketable securities of $285.6 million.

On April 19, 2021, we completed the initial public offering of 53,590,000 shares of common stock at the public offering price of $23.00. The net proceeds of the offering were approximately $1.2 billion, after underwriting fees and other offering expenses.

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 ~~2021 Credit Facilities,~~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 ~~the 2021 Credit Facilities~~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 ~~the 2021 Credit Facilities~~our credit facilities restrict agilon management’s ability to pay dividends or make loans to us. The borrower on ~~the Credit Facilities~~our credit facilities is agilon management, aour wholly-owned subsidiary. ~~The 2021 Credit Facilities~~Our credit facilities are guaranteed by certain of our subsidiaries, including those identified as ~~VIEs,~~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):


	Six Months Ended June 30,									Six Months Ended June 30,
	2021			2020			Change			2022			2021				Change
Net cash provided by (used in) operating activities	$	(80,119	)	$	(35,498	)	$	(44,621	)	$	(83,496	)	$	(80,119	)		$	(3,377	)
Net cash provided by (used in) investing activities		(76,338	)		(2,351	)		(73,987	)		(305,480	)		(76,338	)	��		(229,142	)
Net cash provided by (used in) financing activities		1,143,077			31,522			1,111,555			17,815			1,143,077				(1,125,262	)

Net Cash Provided By (Used In) Operating Activities

Net cash used in operating activities was $83.5 million for the six months ended June30, 2022 compared to $80.1 million for the six months ended June30, ~~2021 compared to $35.5 million~~2021. Net cash used in operating activities remained relatively flat for the six months ended June30, ~~2020. The increase in net cash used in operating activities was~~2022 compared to 2021 primarily a result of: (i) the transition of claims payment services back to the health plan for one of our capitation contracts effective January 1, 2021, (ii) higher geography entry costs, and (iii) an increase in general and administrative expenses, including prepayments related to public company insurance, partially offset by lower cash used in our California operations. Additionally, 2020 benefitted from lower claims payments due to reduced utilization as a result of the ~~impact~~increase in medical margin contributed from new and existing geographies, offset by increased provider costs, including partner physician incentive expenses and the timing of ~~COVID-19.~~settlements with payor 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.

Net Cash Provided By (Used In) Investing Activities

Net cash used in investing activities was $305.5 million for the six months ended June30, 2022 compared to $76.3 million for the six months ended June30, ~~2021 compared to $2.4 million for~~2021. During the six months ended June30, ~~2020. The increase~~2022, we made investments in ~~net cash used~~marketable securities of $285.1 million and funded investments of $20.9 million, including capital expenditures for our technology platform and loans we provided to our physician partner groups in ~~investing activities was primarily a result~~connection with taxes payable on shares distributed to them upon completion of ~~providing~~the IPO under the partner physician group equity agreements. During the six months ended June30, 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 $67.8 million.

Net Cash Provided By (Used In) Financing Activities

Net cash provided by financing activities was $17.8 million for the six months ended June30, 2022 compared to $1.1 billion for the six months ended June30, 2021~~compared to $31.5 million for~~. During the six months ended June30, ~~2020~~2022, we received net proceeds of $20.3 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. ~~During the six months ended June 30, 2020, we~~ ~~raised net proceeds of~~ ~~$32.7 million~~ ~~from private sales of our common stock~~.

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 ~~“2021 Credit~~“Credit Facilities”). The ~~2021~~ Credit Facilities include: (i) a $100.0 million senior secured term loan (the ~~“2021 Secured~~“Secured Term Loan Facility”) and (ii) a $100.0 million senior secured revolving credit facility (the ~~“2021 Secured~~“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 ~~2021~~ 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 ~~2021~~ 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 ~~2021~~ Secured Term Loan Facility. The maturity date of the ~~2021~~ Credit Facilities was extended to February 18, ~~2026, with mandatory periodic payments.~~

~~The proceeds from the 2021 Secured Term Loan Facility were used to refinance our outstanding indebtedness under the~~ ~~prior term loan and unsecured debt, with the remaining $30.1 million used for working capital and other general corporate purposes.~~2026.

At our option, borrowings under the ~~2021 Secured~~ 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 ~~2021 Secured~~ 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 ~~Notes 7 and 14~~Note 8 to the Condensed Consolidated Financial Statements for additional information about our outstanding debt.

Equity

As of June 30, ~~2021,~~2022, we had ~~390.9~~408.2 million shares of common stock outstanding. On April 19, 2021, we completed the initial public offering of 53,590,000 shares of common stock at the public offering price of $23.00. The net proceeds of the offering were approximately $1.2 billion, after underwriting fees and other offering expenses. See Note 910 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 $28.4 million, ~~$23.2 million,~~ to ~~$41.9~~$85.2 million at June 30, ~~2021~~2022 when compared to December 31, ~~2020.~~2021. There have been no other material changes, outside of the ordinary course of business and indebtedness, to our commitments during the six months ended June 30, ~~2021~~2022.

~~Off-Balance Sheet Arrangements~~

~~We had no material off-balance sheet arrangements as of~~ ~~June 30, 2021~~.

Critical Accounting Policies and Estimates

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. generally accepted accounting principles. 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 ~~Prospectus~~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 ~~2021 other than as disclosed in Note 2 to the Condensed Consolidated Financial Statements.~~2022.

Recent Accounting Pronouncements

~~For the impact of~~There are no new accounting standards ~~see Note 2~~that have been issued and we have not adopted that are material to ~~the Condensed Consolidated Financial Statements.~~us as of June 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 ~~2021~~ Credit Facilities. Indebtedness under the ~~2021~~ 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 by less than $1.0 million for the six months ended June 30, 2021.~~expense.

We held cash, cash equivalents, ~~and~~ restricted cash equivalents, and marketable securities of ~~$1.1 billion~~$969.2 million as of June 30, ~~2021,~~2022, consisting of bank deposits, certificates of deposits, ~~and~~ money market ~~funds.~~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 ~~believe that we~~ do not have any material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash, cash equivalents and restricted cash equivalents.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 June 30, ~~2021~~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.

3635

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See the “Legal Proceedings” section of Note 89 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 ~~Prospectus.~~fiscal year ended December 31, 2021. There have been no material changes to the risk factors disclosed in the ~~Prospectus.~~Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)

~~Unregistered Sales of Equity Securities~~None.

From April 1, 2021 through April 14, 2021, we issued 52,000 shares of our common stock for $198,000 in total consideration in connection with the exercises of stock options previously granted to our directors, officers, and employees under our prior stock incentive plan.

Between March 2018 and February 2021, we entered into partner physician group equity agreements pursuant to which our anchor physician partners were entitled to receive shares of common stock conditioned on completion of our IPO with a total value of $268.5 million. On April 19, 2021, such anchor physician partners received 11,672,483 shares of common stock pursuant to our partner physician group equity agreements for a total of $268.5 million.

The foregoing transaction(s) did not involve any underwriters, any underwriting discounts or commissions, or any public offering. We believe the offers, sales, and issuances of the above securities were exempt from registration under the Exchange Act (or Regulation D or Regulation S promulgated thereunder) by virtue of Section 4(a)(2) of the Securities Act, because the issuance of securities to the recipients did not involve a public offering, or in reliance on Rule 701 because the transactions were pursuant to compensatory benefit plans or contracts relating to compensation as provided under such rule. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us or otherwise, to information about us. The issuances of these securities were made without any general solicitation or advertising.

(b)

~~None~~None.

(c)

None.

Item 6. Exhibits


Exhibit Number		Description
~~3.1~~		~~Amended and Restated Certificate of Incorporation of agilon health (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed April 19, 2021).~~

~~3.2~~		~~Amended and Restated By-laws of agilon health (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed April 19, 2021).~~

~~10.1~~		Registration Rights Agreement, by and among agilon health, inc. and CD&R Vector Holdings, L.P., dated as of April 16, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed April 19, 2021).

~~10.2~~		Stockholders Agreement, by and among agilon health, inc. and CD&R Vector Holdings, L.P., dated as of April 16, 2021 (incorporated by reference to Exhibit 10.2 the Current Report on Form 8-K filed April 19, 2021).

~~10.3~~		Termination Agreement, by and between Agilon Health Holdings, Inc., Primary Provider Management Co., Inc. and Clayton, Dubilier & Rice, LLC, dated as of April 16, 2021 (incorporated by reference to Exhibit 10.3 the Current Report on Form 8-K filed April 19, 2021).

31.1		Certification by Steven J. Sell, agilon’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a-14(a).*

31.2		Certification by Timothy S. Bensley, agilon’s Principal Financial Officer, Pursuant to Securities Exchange Act Rule 13a-14(a).*

32.1		Certification by Steven J. Sell, agilon’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350.**

32.2		Certification by Timothy S. Bensley, agilon’s Principal Financial Officer, Pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350.**


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).*

* Filed herewith.

** Furnished herewith.

† Identifies each management contract or compensatory plan or arrangement.

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: August 4, ~~2021~~2022		agilon health, inc.

		(Registrant)

		/s/ TIMOTHY S. BENSLEY
		Timothy S. Bensley
		Chief Financial Officer
		(Principal Financial Officer)


	Contingently Redeemable Common Stock		Total Stockholders’ Equity
			Common Stock		Additional Paid-In	Accumulated	Total Stockholders’ Equity
	Shares	Amount	Shares	Amount	Capital	Deficit	(Deficit)
April 1, 2020	76,201	$309,500	246,924	$2,469	$257,254	$(507,237)	$(247,514)
Net income (loss)	—	—	—	—	—	(7,911)	(7,911)
Issuance of common stock, net	—	—	1,023	10	4,591	—	4,601
Exercise of stock options and other, net	—	—	335	3	310	—	313
Stock-based compensation expense	—	—	—	—	2,231	—	2,231
June 30, 2020	76,201	$309,500	248,282	$2,482	$264,386	$(515,148)	$(248,280)


	June 30, 2021		December 31, 2020
Direct contracting entities	$	2,603	$	0
Other		9,394		8,502
	$	11,997	$	8,502


	Total
Medical services revenue	$	163,984
Medical services expense		(152,154	)
Other medical expenses(1)		(7,156	)
Net income		1,840