Good day and thank you for standing by. Welcome to the agilon health First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your host Matthew Gillmor, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone and welcome to agilon health first quarter 2021 earnings conference call. With me this morning is our CEO, Steve Sell and our CFO, Tim Bensley. Following prepared remarks from Steve and Tim, we will conduct a Q&A session. Before we begin, I would like to remind you that our remarks and responses to questions may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business. These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward-looking statements. Additionally, certain financial measures we will discuss in this call are non-GAAP financial measures. We believe that providing these measures helps investors gain a better and more complete understanding of our financial results and is consistent with how management views our financial results. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure is available in the earnings press release and Form 8-K filed with the SEC. With that, I will turn the call over to Steve. Steve?

Thanks, Matt. Good morning, everyone and thank you for joining our first earnings conference call as a public company. I would like to start by welcoming our new shareholders. We really enjoyed meeting many of you last month on the IPO roadshow and appreciate the trust you placed in agilon. We are doing today’s call from Columbus, Ohio, which is home to our founding partner medical group, Central Ohio Primary Care. COPC is the largest independent primary care group in the country, and like all of our partner groups is a leader in their community. In Columbus, as in all of our markets, agilon health is co-located with our partner groups and our employees work each day to enable our physician partners to transform the health of their local community. We take our mission seriously to be the trusted long-term partner of community-based doctors. Today, our partners span 17 diverse geographies and provide integrated total care to nearly 275,000 senior patients on the agilon platform. And while the last 15 months with the COVID pandemic have been extremely difficult for our senior patients, the dedication, innovation and perseverance of our physician partners and our employees has been extraordinary, and I could not be more proud of the positive impact they have made on patients and community health. I will cover four areas in my prepared remarks: first, some background on agilon; second, some highlights on our first quarter results; third, an update on a new program direct contracting; and fourth, our priorities following last month’s IPO. Tim will provide a more detailed review of the numbers in our guidance. And after that, we would be happy to answer your questions. Some background on agilon and our strategy, our focus is enabling primary care doctors to be the agent for transforming…

Thanks, Steve and good morning everyone. As Steve mentioned, we are pleased with our first quarter results. I will review some highlights from our financial statements, then provide an updated view on our cash and debt position post IPO, as well as some details on our guidance for the second quarter and full year 2021. Starting with membership, membership increased by 35% on a year-over-year basis during the first quarter to approximately 165,000, including the recently completed group Medicare Advantage contract, membership at the end of Q1 would have increased 42% to approximately 174,000. Membership growth was driven by a combination of same geography growth, and the impact in three new geographies that went live on the platform in January. Same geography membership growth was 8% for the first quarter, and including the recently completed group contract, same geography membership growth was 15%. Aside from the geography temporarily impacted by the group MA contract transition, all of our geographies grew membership at or above the national trend for MA enrollment growth. Several of our geographies were well above the national trend. As we previously discussed, group Medicare Advantage contracts in one of our geographies shifted from one national payer to another in January. This included about 9,000 patients attributed to our partners. We completed an agreement during the second quarter with a new MA payer covering these members. These members are not included in our first quarter financial results, but will be included in our second quarter results, including retroactive revenue and costs associated with the first quarter. We expect the retroactive revenue associated with the first quarter to be approximately $24 million. Subsequent to the end of the quarter, we launched five direct contracting entities with seven partners covering over 50,000 members. As a reminder, the revenue and costs…

[Operator Instructions] Your first question is from the line of Lisa Gill from JPMorgan.

Thanks so much and good morning. Congratulations on your first public quarter. Steve, I just want to go back to some of the comments around that the medical margin and just understand a couple of things a little bit better. One, can you just maybe bifurcate, the new versus the existing more mature member when we think about the cost of those, those individuals, number one. And number two, I know Tim made a comment around COVID costs. Can you talk about what you saw for COVID costs in the first quarter and then the comments of non-COVID costs coming back? How do we think about the progression of medical costs for the second quarter, third quarter and fourth quarter of this year?

Sure, maybe I can start and Tim kind of fill in on that. So, I think we are pleased by continuing to see medical margin improvements in our returning members, those that were with us four quarters ago. And so that improved nicely. There is a dilutive effect that comes in from the new members that are coming on the platform, which is reflected in the quarter and the strong growth has some of the effect on the medical margin. Lisa, in terms of kind of the seasonality, we do expect to see a step up in costs in the back half of the year as the country reopens. The vast majority of that is I would call tied to non-COVID utilization. We are seeing extremely high vaccination rates. With our seniors, we expect that it’s above the national average, which is now almost 58%, in terms of seniors with at least one shot and the low-70s with those at two shots. Many of our communities are higher than that. So, we don’t expect the COVID related costs to be spiking up as much, but there was some of that within the quarter that Tim can talk to.

Yes, absolutely. Hi, Lisa. Good morning. Thanks for the question. Just to amplify a little bit on what Steve said. I think the best way to think about the first quarter is first of all, yes, we are really happy with the overall increase in medical margins of $52 million, up $10 million year-over-year. On a PMPM basis, I think Steve did a good job of walking through the causes of change. We are seeing an increase in medical margin on a PMPM basis for retained members on a year-over-year basis, where that’s obviously diluted by the high, same geography growth, new members coming in as well as the 33,000 new members that we brought in new geographies. So, both of those kind of diluting that number. And then we did see some – continue to see some lower utilization in Q1 versus sort of our 2019 baseline, but still overall COVID utilization or overall utilization in Q1, a bit higher than it was during the first quarter of last year. That’s still a bit of a headwind as well. So, the combination of that kind of drove the first quarter medical margin PMPM change over a year ago. And yes we walked through the rest of the year, a couple of factors, we expect to see utilization sort of start to track back towards that 2019 baseline as we move to the rest of the year. So, probably a bit better in Q2, but sorry to move back towards the 2019 levels in the second half of the year. And so, you can get a pretty good idea of the season utilization of what we expect for medical margin and adjusted EBITDA from the adjusted EBITDA guidance that we have given. I would expect that both medical margin and adjusted EBITDA will decline versus Q1 on an absolute basis in each of the subsequent quarters. But based on the real heavy overlap of COVID, we would expect most of that EBITDA loss to be weighted towards the second half of the year. And one thing to just remember as you are looking at that EBITDA progression and one of the things that I mentioned was, we are going to see some increase in platform support costs starting in the second quarter as well, that will be a driver of that primarily related to the costs associated with being a new public company. You already mentioned, for instance, dealt with significantly higher costs, for instance, for D&O insurance.

Okay, great, thank you.

Your next question is from the line of Justin Lake with Wolfe Research.

Yes. Thanks. Good morning. I wanted to go through the membership numbers in a little bit of detail. So just looking at year end membership of 131,000 that included the 9,000 group MA right, you had that in your membership at the end of the year, correct?

That’s correct, Justin.

Good. So, then if I look at your guidance, you are assuming a little over 50,000 members or patient growth year-over-year? And looks like it’s about evenly split between new markets and kind of same markets, right?

Yes. 33,000 from new markets and the balance from same geography growth.

Okay, yes. You would have to add the 9,000 would be also – would go with same and new markets 33,000. So then, call it 20,000, low-20s. So, that puts you in kind of high teens membership growth at the same market, give or take, I think, can you break that down for us between the existing docs, like you were talking about, just poor market growth and then the benefit from adding new docs that is part of the model…?

Maybe it’s almost half and a half, in terms of what we are seeing for the year, in that sort of bread and butter core agents, people turning 65 choosing Medicare Advantage, or fee for service conversions. And then the other half being with new physicians joining in the existing markets, which we are already in.

Okay, great. And then lastly, can you talk a little bit about the pipeline for 2023. Both in terms of kind of how it looks now versus let’s say the last couple of years. And then the timing that investors should expect for you to be cutting new – those new adds, is that it kind of happen through the year, when do you kind of typically sign those contracts? Thanks.

Yes. I am happy to do that. And I tried to lay out some of that in my prepared remarks. So, let me start by saying I think the ‘23 pipeline is strong. It’s robust. And we are seeing interest in new cities within our existing states as well as a number of new states which are out there. And I would say that that pipeline has only growing over the course of the last couple of months. And as per usual our current partners have made introductions to a number of folks. Our business development team has done a great job identifying groups. But we are also seeing a higher level of inbound folks that we hadn’t necessarily identified before that are aware of agilon. And the partnership approach that we bring in there, there is a lot of interest in that. So, I think it’s strong. And we are in active dialogue right now with a number of those groups. In terms of kind of the timeline that you asked about, our biz dev team is really focused on signing letters of intent. With these new partners for 2023, new geographies in the back half of this year, we immediately once we have those letters of intent, we will go into implementation because as we have shared, we really like to have up to a full year to be able to implement around that. And then next year, we will be signing definitive agreements with those groups. And our plan is to sort of share that at one time, Justin, in terms of those partners for 2023 and what that associated membership looks like. In the meantime, I think we would point back to what we have shared previously about new geography members at about 40,000 for 2023. And that’s what I would point to. But we will be giving updates on that. And you didn’t ask about 2022. But we have got those six new partners in geographies with 49,000 members that we talked about. And as we move through the back half of this year, we will be signing payer contracts and giving an update on that with our – on our Q4 call in terms of what that looks like, as well. So, that’s kind of how the new markets are rolling out and what that timeline will look like.

And I am sorry, Steve, just you mentioned the – you mentioned you will be signing new player contracts on the 49,000?

Yes.

Should I read that as you are saying that the six groups that you signed up, the 49,000 patients that you have assumed probably had some discount in it for an assumption [ph] you don’t sign up every payer for one-one. But as you roll that forward, you are giving us an update, and there could actually be some upside to that number?

Yes, I think that’s a fair way to get more comfortable with the 49,000. And we will be updating that based on the progression with these payers. We will be at we have 16 payers today, Justin, and we will be adding that quite a few for 2022, given these new geographies that we are going into. And as we get into that we always get more information, more able to refine that.

Thanks guys. I appreciate all the thought.

Yes.

Your next question is from the line of Kevin Fischbeck with Bank of America.

Great, thanks. We have heard a few companies talk about coding being a headwind, I guess, how are you thinking about that in your business? It’s been a headwind at all this year, but has – how do you think about capturing that next year?

Yes. So, I think folks have talked about the challenges of the pandemic, creating some headwind in terms of being able to capture codes. I think it’s a real strength of our model, Kevin, that we have this physician-patient tight relationship. We were able to maintain that through the pandemic, both in terms of in person, and in terms of telehealth. And so we are very strong from an annual wellness visit perspective, very strong from a reassessment perspective. So, as it relates to activity last year, for this year and activity for this year, for next year, we have not seen maybe the headwinds that some others have talked about. Just to remind you, we don’t do in home nurse based assessments for purposes of burden of illness or RAP. And that is an area that I think was much more challenged throughout the pandemic.

Thanks. And I guess the MA contracts that you guys were able to I guess transfer worked well for you this time, I guess, what’s the risk that you miss if there is another large contract that shifts? I guess, a) how much visibility do you have into that when you know about this shift and then b) what’s your track record on being able to keep contracts?

Yes. I mean, I think that group contracts don’t move all that often. We don’t have a ton of group business. So, it’s somewhat limited by that. But when they do move, it’s not uncommon to have this sort of long-term drawn out relationship. I think in terms of our process, in terms of exposure, I think it kind of speaks to the power of our model, right. So, when group contracts move, typically, the receiving payer wants to maintain continuity, particularly for seniors and the power of this sticky patient physician relationship and the multi-payer approach that we have got really allows us to support that in a meaningful way. And so I think as we look out, we did know about this one in advance and we will know about other ones as they approach. But again, Kevin, they don’t happen all that often. But I think, given our approach, we believe that we are in a pretty strong position. Our partners, our leaders in their community and for the group contracts that they have got today, those patients and their sponsors are going to want to keep that relationship.

Alright, great. Thanks.

Thanks, Kevin.

The next question is from Ryan Daniels with William Blair.

Yes, guys. Thanks for taking the question. Congrats on the first quarter out of the box. Can you speak a little bit more, Steve, to the investments you are making in regards to the referral management program? I assume number one outside of maybe oncology, cardiology is probably a fairly large specialty cost. So a little bit about the potential to drive medical margins and how quickly something like that can be replicated and rolled out throughout the network? Thanks.

Yes, no, thanks for the question, Ryan. I mean, I think it’s a great point. I think, the fact that we are able to develop these programs and run them through our partnerships gives us an ability to affect an awful lot of markets. The specialty referral insight program that we talked about in the remarks was specifically in Akron around cardiology. And when you have a cardiac condition, you are with your cardiologist for a while. And so the ability to increase referrals to these top tier specialists that have substantial come cost savings, it can be as much as $100 per member per month for those cardiology patients is really substantial and that would be across a long period of time. But the insight program provides that primary care doctor at the point of referral information on those top tier specialists and its cost savings but at equivalent or better quality, which is a really important component of it. It’s exportable to other markets, but it’s exportable to other specialties, oncology, GI, just to name a few. And so the components that we are building around this, I think give us that opportunity.

Great. That’s very helpful color. And then little bit off the cuff question, but I am curious with the increased exposure as a public company that you are getting kind of notoriety, is that actually opening up the partner recruiting pipeline at all, where there is more inbound, I think you mentioned? Is that just the market reality of MA or are you actually getting a little bit more inbound interest now given your growth and success in markets? Thank you.

Yes, no, thanks for the follow-up. I think it’s a little bit hard to separate exactly what’s driving that. We are definitely seeing a step up in terms of the inbound activity. Obviously, we have – we do have a higher profile and that could be a part of it, but I think it’s just a reflection of this interest in the move to value specifically for that over 65 Medicare population and for independents who want to remain independent, which is a key differentiator for us. So, I think it’s a combination of those factors that’s driving it, but it’s definitely stepped up in the last couple of months.

Okay, great. Thank you, guys.

Thanks, Ryan.

Thanks, Ryan.

Your next question is from the line of George Hill with Deutsche Bank.

Good morning, guys and thanks for taking the question. I guess I wanted to jump in with one on direct contracting. I wanted to just affirm that any kind of economic impact from direct contracting is still not included in the numbers for fiscal ‘21. But I guess, can you talk about when do you start to include maybe when does it become material? I will start right there? Thank you.

Do you want me to give the macro or you want me to get to answer?

Let me answer this question, then maybe Steve you can come back and give some macro comments about DCE. But yes, so overall, the economic impact of DCE will be in our 2021, we just want to consolidate those results. So, you just see the net impact into the P&L. But to your point, for the full year, we expect the impact of DCE to be relatively slight loss to breakeven. So, you won’t see a big impact in the 2021 results from that, but it will be actually in our results just not a big bottom line impact.

Okay. Can you kind of quantify the top line expectation?

We are not going to consolidate revenue, so there won’t be any top line impact at all from DCE.

And then, Steve would love to kind of…

Yes. Just the context that I would give you is, it’s a new government program, right. So it’s subject to change, the 6-year program, it started last month. So I mean, we are literally in the early days. I think, our initial view on performance was kind of in line with expectations and attribution. But we did talk with the innovation center just this week. And I think they were very clear about this as part of their approach to how they can drive more primary care centric value-based care. And so that’s encouraging for us. And I think they want this to be a successful program from a cost to quality and an access standpoint. So we spent a fair amount of time talking to them about this idea of keeping independent physicians independent, increasing primary care in communities, diverse communities around the country. And so I think that’s just the added context that I would give. And there is the option, as I mentioned, with our DCEs, to add in for January of 2022 and any of the membership numbers that we have talked about do not reflect that.

That’s helpful. Thank you.

Your next question is from the line of Stephen Baxter with Wells Fargo.

Hey, good morning. Thanks for the questions. So, as you look at the payer disclosures in your Q, it looks like the growth for your largest payer was fairly modest sort of well below the same geography growth that you saw. I was wondering if there is anything worth highlighting there about what that payers doing, perhaps that was impacted by this group Medicare Advantage transaction and whether….

Yes.

Sorry go ahead.

Yes, hey, Stephen. Yes, thanks. It’s Tim. Yes, 100%, it doesn’t have the – that is that payer doesn’t have the $24 million retro revenue in it. So, when you put that revenue back in, that payer is on par with the rest of the growth numbers on the base.

Got it. Yes, I was – go ahead.

Well, Steve, I mean, I guess just the only other thing I would call out is we are up to 16 payers now. That number is going to go up again in 2022. So just as kind of a trend, I think you are going to see, continue to see kind of a dilutive effect from regional payers that are coming on. I think we have fantastic partnerships with the nationals and we will continue to grow with those, but it’s going to be a balance in terms of what that looks like.

And just specifically, you are talking about payer A in the release, if you put that $24 million retroactive and it was – it would be about a 25% growth for that payer in the quarter.

Perfect. Yes, that makes a lot more sense. And then you mentioned that you don’t have a lot of group membership. I was wondering if you could talk about that a little bit and why that’s the case, whether there is any structural barriers there and whether it could be more of an opportunity for you over time?

Well, I think one is groups of minority in the country. And so that’s probably the biggest part of that. And so that’s what I was trying to call out is I don’t think it’s a big part of the membership overall and then two if group contracts don’t move all that, that often. So that was really the point.

Got it. Okay. And then just one clarifying question on the pipeline for 2022. So appreciate the color on the 49,000 members and some of the dynamics you were talking about in earlier question, should we think about the 49,000 members as those are the existing members today or as we think about what that will look like a year from now, is there also consideration that, that would move higher as it relates to same market growth or those practices recruiting physicians in this calendar year? Thanks.

Yes. I mean, like I said, I think we are comfortable with the 49,000 members. Those are members that are with those practices today, in which our physician partners are seeing those. And they would be obviously eligible for attribution, need to get all those payer contracts done and we will refine that. And let you know if there is some additional opportunity within that as we go forward. And then there is also these partners are constantly growing within their communities and that can happen during implementation as well. So that could be effective.

Got it. Thank you very much.

Okay. Your next question is from the line of Sandy Draper with Truist Securities.

Thanks so much and good morning. Lot of questions have been asked. Maybe just an expense question, rearview mirror looking, but also forward, last year, the new geography or geography entry costs were heavily weighted towards the fourth quarter. There was a pretty meaningful step up. When we are thinking about the new geographies you are already planning going to 2022 are – should we really think about the weighting towards the fourth quarter every year and that’s where the bulk of the costs are? And is it really dependent on number of geographies? Could you actually have situation where fewer geographies whatever reason there is more costs? Just trying to think about longer term how to be thinking about those geography entry costs? Thanks.

Yes, it’s a little – Sandy, thanks for the question. It’s a little bit different for each geography and – but probably more, our relationship with the number of members that we are bringing on than the number of geographies. It’s not really not really dependent on the number of new partners as much as the number of members in each partner. Most of our new – our implementation costs are really the AWB incentives that we are paying to kind of get the system up and going during implementation. I think one of the things that drives it is just how much implementation times you have. We are actually in pretty decent shape this year with a longer implementation time for most of those new members that will be – or most of those new geographies and partners that will be coming on board in January 2022. So, you would expect that those implementation costs or new geography costs this year will be more spread over the quarters than back loaded into the second half of the year.

Okay, great.

And I think there was some COVID effect last year that made it a little bit more lumpy. It was just tough to be on the ground with partners earlier in 2020 during those implementations and so that was probably some of the effect of that and getting.

And even the timing of when…

Yes, correct.

It should be – we are out there early this year in implementation with most of those partners. And so you would expect it to be or we would expect it to be more evenly spread than back half loaded as it was last year.

Okay, that makes a lot of sense. That’s very helpful. Thanks, again and congrats on a good first quarter.

Sure. Thanks, Sandy.

Thanks, Sandy.

At this time, there are no further questions. I will now turn the call back to Steve Sell for any closing remarks.

Great. I would just say thanks for the good questions in the discussion. We are obviously excited about our quarter and excited what’s in front of us. And we look forward to speaking with each of you soon. So thanks, everyone.

Thank you for joining today’s conference call. You may now disconnect.