0001628280-26-031270
SEC filingRevenue fell 7% YoY due to market exits, but medical margin and net income improved sharply on disciplined contracting.
For the three months ended March 31, 2026, total revenue decreased 7% to $1.42 billion from $1.53 billion in the prior-year period. The decline was driven by a 13% reduction in average MA membership, reflecting previously disclosed market exits finalized on January 1, 2026, and payor exits resulting from a disciplined, profitability-focused contracting approach. This was partially offset by more constructive 2026 rates from CMS funding, higher premium yield, increased risk adjustment expectations, and more favorable percentage-of-premium terms from payor contract negotiations.
Medical services expense fell 9% to $1.27 billion, outpacing the revenue decline, due to lower membership and positive claims development from the second half of 2025. However, average medical services expense per member increased 5% due to higher cost trends. Other medical expenses rose 7% to $85.8 million, driven by a $14.5 million increase in partner physician incentive expense from higher margins, partially offset by an $8.9 million decrease in other provider costs.
Gross profit improved 28% to $65.0 million, and medical margin (a non-GAAP measure) grew 16% to $148.9 million. Net income surged 304% to $48.9 million, benefiting from a $19.0 million gain from discontinued operations (release of a contingent obligation from the Hawaii sale), a $10.5 million reversal of stock-based compensation, and a $6.8 million increase in other income. Adjusted EBITDA more than doubled to $53.8 million.
The company operates as a single reportable segment focused on Medicare Advantage. The key operating metric is MA membership, which declined 13% year-over-year to 426,300 members at quarter end. Average MA membership was 423,700 during Q1 2026. The company also serves 109,500 attributed CMS ACO Models beneficiaries. The revenue decline was entirely attributable to membership contraction, while margin improvement came from better contract terms, disciplined underwriting, and cost management.
Management emphasized a disciplined approach to growth, prioritizing profitability over membership expansion. The company expects platform support costs to decrease as a percentage of revenue over time as physician partners add members and revenue grows. The company believes existing cash, equivalents, restricted cash, marketable securities ($303 million combined), and borrowing capacity under the Credit Facility ($90 million revolving, reduced from $100 million) will be sufficient for at least the next 12 months. Key risks include potential operating losses, negative cash flows, and the need for additional capital to fund growth initiatives. The company also highlighted the recent appointment of Tim O'Rourke as CEO and President, effective May 7, 2026.
As of March 31, 2026, Agilon Health held $140.0M in cash and cash equivalents, $71.6M in restricted cash, and $91.4M in marketable securities (primarily U.S. Treasury notes). Total liquidity (cash + marketable securities) was $303.0M. The company had $30.0M in total debt ($14.7M current, $15.3M long-term) under its credit facility, with $20.8M available on the revolver. Medical claims and related payables rose to $1,015.3M from $895.3M at year-end 2025, reflecting growth in risk-bearing membership. Consolidated VIE assets were $1.06B and VIE liabilities $1.23B, underscoring the off-balance-sheet risk inherent in the physician network model.
No purchase commitments or long-term contractual obligations were disclosed in the Notes. Legal contingencies include multiple securities class actions and derivative lawsuits, but no estimated loss range is provided. The company had $31.2M in outstanding surety bonds for health plan risk-bearing capital contributions.
No share buybacks or dividends were declared. The company repaid $3.5M of long-term debt during the quarter and incurred $3.1M in capex for property, equipment, and software. Stock-based compensation was $6.3M (down from $16.7M a year ago). The reverse stock split in March 2026 did not alter capital allocation strategy.
Agilon operates as a single reportable segment: a Medicare-centric, globally capitated line of business. The CODM uses consolidated net income as the profit measure. Key expense categories regularly provided are medical services expense ($1,269.6M), other medical expense ($85.8M), and platform support costs ($37.6M). Geographic mix is not disclosed beyond the total member count of 426,300 Medicare Advantage members and physician partnerships in multiple states.
Operating cash flow (CFO) of $23.7 million in Q1 2026 marked a significant turnaround from the prior year's outflow of $32.0 million. The improvement was driven by a sharp increase in net income ($48.9 million vs. $12.1 million) and a reduction in working capital drag (net change of -$8.4 million vs. -$38.8 million). Non-cash adjustments remained sizable, with stock-based compensation of $6.3 million and depreciation/amortization of $6.8 million. Losses from equity method investments added $11.7 million back, while gains on asset sales reduced CFO by $19.0 million.
Capital expenditures (capex) were $3.1 million, down from $3.8 million, reflecting modest investment intensity. Free cash flow (CFO minus capex) was $20.6 million, a strong positive swing from negative $35.8 million in Q1 2025. No share repurchases or dividends were paid; financing cash flows were negative $5.1 million due to $3.5 million in debt repayments and $1.6 million in debt issuance costs.
Overall, cash generation improved markedly, with CFO covering capex and debt repayments comfortably. The company ended the quarter with $211.6 million in cash, up from $173.7 million at the start of the period.