Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

agilon health Reports Fourth Quarter and Fiscal Year 2022 Results


agilon health, inc. (NYSE: AGL), the trusted partner empowering physicians to transform health care in our communities, announced results for the fourth quarter and fiscal year ended December 31, 2022.

Fourth Quarter and Fiscal Year 2022 Results:

"Our strong results in 2022 demonstrate the power of our aligned partnership model to drive consistently better outcomes for patients and physicians," said Steve Sell, chief executive officer. "We are entering 2023 with incredible momentum and the Class of 2024 new partners will expand our national network to 2,700 primary care physicians and 30+ communities."

Outlook for First Quarter and Fiscal Year 2023:

 

 

Quarter Ended

March 31, 2023

 

Year Ended

December 31, 2023

 

Low

High

 

Low

 

High

Medicare Advantage Members2

385,000

 

390,000

 

400,000

 

410,000

ACO REACH Members2

85,000

 

90,000

 

85,000

 

90,000

Total Members Live on Platform2

470,000

 

480,000

 

485,000

 

500,000

Total revenues ($M)

$1,070

 

$1,090

 

$4,280

 

$4,370

Medical Margin ($M)

$160

 

$170

 

$535

 

$560

Adjusted EBITDA ($M)1

$32

 

$37

 

$75

 

$90

1We have not reconciled guidance for Adjusted EBITDA to net income (loss), the most comparable GAAP measure, and have not provided forward-looking guidance for net income (loss) because of the uncertainty around certain items that may impact net income (loss), including stock-based compensation and geography entry costs.

2Membership reflects management's outlook for end of period. agilon's partnered ACO REACH Entities (formerly Direct Contracting) are not consolidated within its financial results.

Adjusted EBITDA contribution from ACO REACH (formerly Direct Contracting) is expected in a range of $5 million to $10 million for 2023.1

Membership Details for the Year Ended 2022

Total members live on the agilon platform increased to 358,600 as of December 31, 2022. Total members live on the platform include 269,500 Medicare Advantage members and 89,000 attributed Direct Contracting beneficiaries. Average Medicare Advantage membership was 272,000 during the fourth quarter and 264,000 for the fiscal year 2022.

Acquisition of mphrX

On February 28, 2023, agilon health completed the acquisition of mphrX, a leading provider of value-based care technology and interoperability solutions. mphrX's Minerva Healthcare Data Platform uses FHIR-based standards to rapidly aggregate, access, and exchange data across healthcare delivery networks. Minerva's integration into agilon's existing technology platform will enable faster onboarding of agilon partners and rapid integration of clinical data, accelerating performance and speed to value for patients and physicians. Management does not anticipate mphrX will have a meaningful impact on agilon's Adjusted EBITDA during 2023.

Webcast and Conference Call:

agilon health will host a conference call to discuss fourth quarter and fiscal year 2022 results on Wednesday, March 1, 2023 at 4:30 PM Eastern Time. The conference call can be accessed by dialing (844) 200-6205 for U.S. participants and +1 (929) 526-1599 for international participants and referencing participant code 553857. A simultaneous webcast can be accessed by visiting the "Events & Presentations" section of agilon's Investor Relations website at https://investors.agilonhealth.com. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call.

About agilon health

agilon health is the trusted partner empowering physicians to transform health care in our communities. Through our partnerships and purpose-built platform, agilon is accelerating at scale how physician groups transition to a value-based Total Care Model for senior patients. agilon provides the technology, people, capital, process, and access to a peer network of 2,200+ PCPs that allow physician groups to maintain their independence and focus on the total health of their most vulnerable patients. Together, agilon and its physician partners are creating the healthcare system we need ? one built on the value of care, not the volume of fees. The result: healthier communities and empowered doctors. agilon is the trusted partner in 25 diverse communities and is here to help more of our nation's leading physician groups and health systems have a sustained, thriving future. For more information visit www.agilonhealth.com and connect with us on Twitter, Instagram, LinkedIn and YouTube.

Forward-Looking Statements

Statements in this release that are not historical facts 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. Forward-looking statements include, among other things, statements regarding our and our officers' intent, belief or expectation as identified by the use of words such as "may," "will," "project," "expect," "believe," "intend," "anticipate," "seek," "target," "forecast," "plan," "potential," "estimate," "could," "would," "should," and other comparable and derivative terms or the negatives thereof. Examples of forward-looking statements include, among other things: statements regarding timing, outcomes and other details relating to current, pending or contemplated new markets, new partnership structures, financing activities, acquisitions and dispositions, or other transactions discussed in this release; and statements regarding growth opportunities, ability to deliver sustainable long-term value, business environment, long term opportunities and strategic growth plans including without limitation with respect to expected revenue and net income, total and average membership, Adjusted EBITDA, and other financial projections and assumptions, as well as comparable statements included in other sections of this release. Forward-looking statements reflect our current expectations and views about future events and are subject to risks and uncertainties that could significantly affect our future financial condition and results of operations. While forward-looking statements reflect our good faith belief and assumptions we believe to be reasonable based upon current information, we can give no assurance that our expectations or forecasts will be attained. Further, we cannot guarantee the accuracy of any such forward-looking statement contained in this release, and such forward-looking statements are subject to known and unknown risks and uncertainties that are difficult to predict. These risks and uncertainties that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, but are not limited to: 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 payors, or to execute upon our growth initiatives; our ability to execute our 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 payors or to secure Medicare Advantage payments 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; significant reductions in our membership; our ability to obtain additional capital needed to support our business; challenges for our physician partners in the transition to a Total Care Model; inaccuracies in the estimates and assumptions we use to project the size, revenue or medical expense amounts of our target markets; the spread of, and response to, COVID-19, potential new variants of COVID-19 and entirely new pandemics, and the inability to predict the ultimate impact of pandemics 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 under payor contracts; the impact of restrictive or exclusivity clauses in some of our contracts with physician partners that may prohibit us from establishing new risk-bearing entities 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; security breaches, loss of data or other disruptions to our data platforms; 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 payors; the limited terms of our contracts with payors and that they may not be renewed upon their expiration; our reliance on our 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; our dependence on physician partners to accurately, timely and sufficiently document their services and potential regulatory or other liability if any diagnosis information or encounter data are inaccurate or incorrect; 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; 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; the impact on our revenue of CMS modifying the methodology used to determine the revenue associated with MA members; the potential that we may incur future indebtedness; our ability to successfully integrate acquired businesses; our ability to remediate material weaknesses in our internal control over financial reporting or if additional material weaknesses occur in the future; and risks related to other factors discussed under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022. 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.

agilon health, inc.

Consolidated Balance Sheets

In thousands, except per share data

 

 

 

December 31,
2022

 

December 31,
2021

 

 

 

 

 

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

497,070

 

 

$

1,040,039

 

Restricted cash and equivalents

 

 

10,610

 

 

 

14,781

 

Marketable securities

 

 

411,901

 

 

 

?

 

Receivables, net

 

 

497,574

 

 

 

293,407

 

Prepaid expenses and other current assets, net

 

 

34,119

 

 

 

18,968

 

Total current assets

 

 

1,451,274

 

 

 

1,367,195

 

Property and equipment, net

 

 

20,050

 

 

 

9,161

 

Intangible assets, net

 

 

67,680

 

 

 

55,398

 

Goodwill

 

 

41,540

 

 

 

41,540

 

Other assets, net

 

 

116,924

 

 

 

112,958

 

Total assets

 

$

1,697,468

 

 

$

1,586,252

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

Current liabilities:

 

 

 

 

Medical claims and related payables

 

$

346,727

 

 

$

239,014

 

Accounts payable and accrued expenses

 

 

183,364

 

 

 

112,946

 

Current portion of long-term debt

 

 

5,000

 

 

 

5,000

 

Total current liabilities

 

 

535,091

 

 

 

356,960

 

Long-term debt, net of current portion

 

 

38,482

 

 

 

43,401

 

Other liabilities

 

 

83,286

 

 

 

94,295

 

Total liabilities

 

 

656,859

 

 

 

494,656

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit):

 

 

 

 

Common stock, $0.01 par value: 2,000,000 shares authorized; 412,385 and 400,095 shares issued and outstanding, respectively

 

 

4,124

 

 

 

4,001

 

Additional paid-in capital

 

 

2,106,886

 

 

 

2,045,572

 

Accumulated deficit

 

 

(1,064,230

)

 

 

(957,677

)

Accumulated other comprehensive income (loss)

 

 

(5,560

)

 

 

?

 

Total agilon health, inc. stockholders' equity (deficit)

 

 

1,041,220

 

 

 

1,091,896

 

Noncontrolling interests

 

 

(611

)

 

 

(300

)

Total stockholders' equity (deficit)

 

 

1,040,609

 

 

 

1,091,596

 

Total liabilities and stockholders' equity (deficit)

 

$

1,697,468

 

 

$

1,586,252

 

agilon health, inc.

Consolidated Statements of Operations

In thousands, except per share data

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2022

 

2021

 

2022

 

2021

 

 

(unaudited)

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Medical services revenue

 

$

688,855

 

 

$

461,999

 

 

$

2,704,396

 

 

$

1,829,735

 

Other operating revenue

 

 

919

 

 

 

887

 

 

 

3,815

 

 

 

3,824

 

Total revenues

 

 

689,774

 

 

 

462,886

 

 

 

2,708,211

 

 

 

1,833,559

 

Expenses:

 

 

 

 

 

 

 

 

Medical services expense

 

 

628,163

 

 

 

430,620

 

 

 

2,399,798

 

 

 

1,647,659

 

Other medical expenses

 

 

51,615

 

 

 

22,678

 

 

 

196,127

 

 

 

109,487

 

General and administrative (including noncash stock-based compensation expense of $9,951, $4,414, $28,381, and $292,394, respectively)

 

 

75,207

 

 

 

53,840

 

 

 

218,945

 

 

 

455,821

 

Depreciation and amortization

 

 

3,907

 

 

 

3,621

 

 

 

13,772

 

 

 

14,544

 

Total expenses

 

 

758,892

 

 

 

510,759

 

 

 

2,828,642

 

 

 

2,227,511

 

Income (loss) from operations

 

 

(69,118

)

 

 

(47,873

)

 

 

(120,431

)

 

 

(393,952

)

Other income (expense):

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

14,885

 

 

 

(8,534

)

 

 

24,725

 

 

 

(4,500

)

Gain (loss) on lease terminations

 

 

?

 

 

 

?

 

 

 

(5,458

)

 

 

?

 

Interest expense

 

 

(1,709

)

 

 

(840

)

 

 

(4,525

)

 

 

(6,146

)

Income (loss) before income taxes

 

 

(55,942

)

 

 

(57,247

)

 

 

(105,689

)

 

 

(404,598

)

Income tax benefit (expense)

 

 

(572

)

 

 

(179

)

 

 

(1,640

)

 

 

(886

)

Income (loss) from continuing operations

 

 

(56,514

)

 

 

(57,426

)

 

 

(107,329

)

 

 

(405,484

)

Discontinued operations:

 

 

 

 

 

 

 

 

Income (loss) before gain (loss) on sales and income taxes

 

 

(35

)

 

 

(1,209

)

 

 

491

 

 

 

(3,463

)

Gain (loss) on sales of assets, net

 

 

?

 

 

 

?

 

 

 

?

 

 

 

473

 

Income tax benefit (expense)

 

 

?

 

 

 

1,898

 

 

 

(26

)

 

 

1,687

 

Total discontinued operations

 

 

(35

)

 

 

689

 

 

 

465

 

 

 

(1,303

)

Net income (loss)

 

 

(56,549

)

 

 

(56,737

)

 

 

(106,864

)

 

 

(406,787

)

Noncontrolling interests' share in (earnings) loss

 

 

83

 

 

 

16

 

 

 

311

 

 

 

300

 

Net income (loss) attributable to common shares

 

$

(56,466

)

 

$

(56,721

)

 

$

(106,553

)

 

$

(406,487

)

 

 

 

 

 

 

 

 

 

Net income (loss) per common share, basic and diluted (continuing operations)

 

$

(0.14

)

 

$

(0.14

)

 

$

(0.26

)

 

$

(1.09

)

Weighted average shares outstanding, basic and diluted

 

 

412,103

 

 

 

396,411

 

 

 

408,154

 

 

 

372,931

 

agilon health, inc.

Consolidated Statements of Cash Flows

In thousands

 

 

 

Year Ended December 31,

 

 

2022

 

2021

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$

(106,864

)

 

$

(406,787

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Depreciation and amortization

 

 

13,772

 

 

 

14,670

 

Stock-based compensation expense

 

 

28,381

 

 

 

292,394

 

Loss on debt extinguishment

 

 

?

 

 

 

1,590

 

Loss (income) from equity method investments

 

 

(10,720

)

 

 

6,766

 

Deferred income taxes and uncertain tax positions

 

 

532

 

 

 

(3,231

)

Release of indemnification assets

 

 

553

 

 

 

1,705

 

(Gain) loss on sale of assets, net

 

 

?

 

 

 

(473

)

Distributions of earnings from equity method investments

 

 

?

 

 

 

174

 

Other non-cash items

 

 

2,973

 

 

 

58

 

Changes in operating assets and liabilities:

 

 

 

 

 

Receivables, net

 

 

(204,167

)

 

 

(149,041

)

Prepaid expense and other current assets

 

 

(16,620

)

 

 

(3,916

)

Other assets

 

 

(205

)

 

 

3,931

 

Medical claims and related payables

 

 

107,713

 

 

 

76,339

 

Accounts payable and accrued expenses

 

 

65,736

 

 

 

19,360

 

Other liabilities

 

 

(11,892

)

 

 

(1,698

)

Net cash provided by (used in) operating activities

 

 

(130,808

)

 

 

(148,159

)

Cash flows from investing activities:

 

 

 

 

Purchase of property and equipment, net

 

 

(15,426

)

 

 

(6,564

)

Purchase of intangible assets

 

 

(17,235

)

 

 

(6,862

)

Investment in loans receivable and other

 

 

(6,510

)

 

 

(82,831

)

Investments in marketable securities

 

 

(458,265

)

 

 

?

 

Proceeds from maturities and sales of marketable securities and other

 

 

52,548

 

 

 

7,095

 

Proceeds from sale of business and property, net of cash divested

 

 

500

 

 

 

(1,344

)

Net cash provided by (used in) investing activities

 

 

(444,388

)

 

 

(90,506

)

Cash flows from financing activities:

 

 

 

 

Proceeds from initial public offering

 

 

?

 

 

 

1,170,942

 

Proceeds from other equity issuances, net

 

 

33,056

 

 

 

18,086

 

Proceeds from the issuance of long-term debt

 

 

?

 

 

 

100,000

 

Repayments of long-term debt

 

 

(5,000

)

 

 

(119,899

)

Equity and debt issuance costs and other

 

 

?

 

 

 

(14,739

)

Net cash provided by (used in) financing activities

 

 

28,056

 

 

 

1,154,390

 

Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents

 

 

(547,140

)

 

 

915,725

 

Cash, cash equivalents and restricted cash and equivalents from continuing operations, beginning of period

 

 

1,054,820

 

 

 

135,178

 

Cash, cash equivalents and restricted cash and equivalents from discontinued operations, beginning of period

 

 

?

 

 

 

3,917

 

Cash, cash equivalents and restricted cash and equivalents, beginning of period

 

 

1,054,820

 

 

 

139,095

 

Cash, cash equivalents and restricted cash and equivalents, end of period

 

$

507,680

 

 

$

1,054,820

 

agilon health, inc.

Key Operating Metrics

In thousands

(unaudited)

MEDICAL MARGIN

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2022

 

2021

 

2022

 

2021

Medical services revenue

 

$

688,855

 

 

$

461,999

 

 

$

2,704,396

 

 

$

1,829,735

 

Medical services expense

 

 

(628,163

)

 

 

(430,620

)

 

 

(2,399,798

)

 

 

(1,647,659

)

Medical margin

 

$

60,692

 

 

$

31,379

 

 

$

304,598

 

 

$

182,076

 

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 per member per month (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.

GENERAL AND ADMINISTRATIVE COSTS, INCLUDING PLATFORM SUPPORT COSTS

 

 

Three Months Ended
December 31,

Year Ended
December 31,

 

2022

2021

2022

2021

Platform support costs

$

41,613

$

30,899

$

146,481

 

$

123,521

Geography entry costs(1)

 

19,434

 

7,872

 

43,890

 

 

20,583

Severance and related costs

 

?

 

7,763

 

2,470

 

 

12,861

Management fees(2)

 

?

 

?

 

?

 

 

433

Stock-based compensation expense

 

9,951

 

4,414

 

28,381

 

 

292,394

Other(3)

 

4,209

 

2,892

 

(2,277

)

 

6,029

General and administrative

$

75,207

$

53,840

$

218,945

 

$

455,821

_____________

(1)

Represents direct geography entry costs, including investments to develop and expand our platform and costs in geographies that are in implementation and are not yet generating revenue.

(2)

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)

Includes non-cash accruals for unasserted claims and contingent liabilities.

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.

agilon health, inc.

Non-GAAP Financial Measures

In thousands

(unaudited)

NETWORK CONTRIBUTION

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2022

 

2021

 

2022

 

2021

Income (loss) from operations

 

$

(69,118

)

 

$

(47,873

)

 

$

(120,431

)

 

$

(393,952

)

Other operating revenue

 

 

(919

)

 

 

(887

)

 

 

(3,815

)

 

 

(3,824

)

Other medical expenses

 

 

51,615

 

 

 

22,678

 

 

 

196,127

 

 

 

109,487

 

Other medical expenses?live geographies(1)

 

 

(38,653

)

 

 

(18,704

)

 

 

(172,276

)

 

 

(97,498

)

General and administrative

 

 

75,207

 

 

 

53,840

 

 

 

218,945

 

 

 

455,821

 

Depreciation and amortization

 

 

3,907

 

 

 

3,621

 

 

 

13,772

 

 

 

14,544

 

Network contribution

 

$

22,039

 

 

$

12,675

 

 

$

132,322

 

 

$

84,578

 

_____________

(1)

Represents physician 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 December 31, 2022 and 2021, costs incurred in implementing geographies were $13.0 million and $4.0 million, respectively. For the years ended December 31, 2022 and 2021, costs incurred in implementing geographies were $23.9 million and $12.0 million, respectively.

ADJUSTED EBITDA

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2022

 

2021

 

2022

 

2021

Net income (loss)

 

$

(56,549

)

 

$

(56,737

)

 

$

(106,864

)

 

$

(406,787

)

(Income) loss from discontinued operations, net of income taxes

 

 

35

 

 

 

(689

)

 

 

(465

)

 

 

1,303

 

Interest expense

 

 

1,709

 

 

 

840

 

 

 

4,525

 

 

 

6,146

 

Income tax expense (benefit)

 

 

572

 

 

 

179

 

 

 

1,640

 

 

 

886

 

Depreciation and amortization

 

 

3,907

 

 

 

3,621

 

 

 

13,772

 

 

 

14,544

 

(Gain) loss on lease terminations

 

 

?

 

 

 

?

 

 

 

5,458

 

 

 

?

 

Geography entry costs(1)

 

 

32,396

 

 

 

11,846

 

 

 

67,741

 

 

 

32,572

 

Severance and related costs(2)

 

 

?

 

 

 

7,763

 

 

 

2,470

 

 

 

12,861

 

Management fees(3)

 

 

?

 

 

 

?

 

 

 

?

 

 

 

433

 

Stock-based compensation expense

 

 

9,951

 

 

 

4,414

 

 

 

28,381

 

 

 

292,394

 

EBITDA adjustments related to equity method investments(4)

 

 

749

 

 

 

(571

)

 

 

3,737

 

 

 

1,736

 

Other(5)

 

 

(3,391

)

 

 

2,642

 

 

 

(16,144

)

 

 

5,293

 

Adjusted EBITDA

 

$

(10,621

)

 

$

(26,692

)

 

$

4,251

 

 

$

(38,619

)

_____________

(1)

Represents direct geography entry costs, including investments to develop and expand our platform and costs in geographies that are in implementation and are not yet generating revenue. For the three months ended December 31, 2022 and 2021, (i) $13.0 million and $4.0 million, respectively, are included in other medical expenses and (ii) $19.4 million and $7.9 million, respectively, are included in general and administrative expenses. For the years ended December 31, 2022 and 2021, (i) $23.9 million and $12.0 million, respectively, are included in other medical expenses and (ii) $43.9 million and $20.6 million, respectively, are included in general and administrative expenses.

(2)

For the year ended December 31, 2022, includes taxes and related costs on stock option exercises for departed executives of $2.0 million. For the three months and year ended December 31, 2021, includes taxes and related costs on stock option exercises for departed executives of $5.4 million.

(3)

Represents management fees and other expenses paid to 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.

(4)

Includes direct geography entry costs of $0.1 million and $1.3 million for the three and twelve months ended December 31, 2021, respectively.

(5)

Includes interest income and non-cash accruals for unasserted claims and contingent liabilities.

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 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 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, (v) geography entry costs, (vi) 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 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.


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