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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________
FORM 10-K/A
Amendment No. 1
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2022
or
oTRANSITION 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)
Delaware37-1915147
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
6210 E Hwy 290, Suite 450
Austin, Texas
78723
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code (562) 256-3800
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, $0.01 par valueAGLThe New York Stock Exchange
____________________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
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 x No o
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 for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated fileroNon-accelerated fileroSmaller reporting companyoEmerging growth companyo
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. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act.) Yes o No x
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $4.5 billion.
As of February 24, 2023, there were 413,118,724 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the registrant’s 2023 Annual Meeting of Stockholders have been incorporated by reference into Part III of this Report.

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EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (this “Amendment No. 1”) amends the Annual Report on Form 10-K of agilon health, inc. (the “Company”) for the year ended December 31, 2022, originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 1, 2023 (the “Original Filing”).
This Amendment No. 1 is being filed solely for the purpose of correcting an omission in the audit report on the consolidated financial statements, dated March 1, 2023, of Ernst & Young LLP (“E&Y”), the Company’s independent registered public accounting firm. The audit report inadvertently omitted a reference to the consolidated statements of comprehensive income (loss).
In accordance with Rule 12b-15 under the Exchange Act, we have included the entire text of Part II, Item 8 “Financial Statements and Supplementary Data” in this Amendment No. 1. However, there have been no changes made to the text of such item other than the changes stated in the immediately preceding paragraph. As required by Rule 12b-15 under the Exchange Act, new certifications by our principal executive officer and principal financial officer are being filed as Exhibits 31.3, 31.4, 32.3 and 32.4 to this Amendment No. 1. A new consent of E&Y also is being filed as Exhibit 23.2.
Except as expressly noted, no other changes have been made to the Original Filing. Except as otherwise indicated herein, this Amendment No. 1 continues to speak as of the date of the Original Filing, and the Company has not updated the disclosures contained therein to reflect any events that occurred subsequent to the date of the Original Filing. Furthermore, this Amendment No. 1 should be read in conjunction with the Original Filing and any of the Company's subsequent filings with the SEC.
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agilon health, inc.
Form 10-K/A
For the Fiscal Year Ended December 31, 2022
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PART II
ITEM 8. Financial Statements and Supplementary Data
agilon health, inc.
Index to Consolidated Financial Statements
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of agilon health, inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of agilon health, inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), contingently redeemable common stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedules listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2023, expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Estimating Medicare Advantage risk adjustment revenue
Description of the Matter
As described in Note 2 to the consolidated financial statements, for the year ended December 31, 2022, the Company had $2,704 million in medical services revenue. Medical services revenue primarily consists of capitation fees under contracts with various Medicare Advantage 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 attributed to the Company’s contracted primary care physicians. 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 the Center for Medicare & Medicaid Services (“CMS”) risk adjustment payment methodology and it may take a significant amount of time for such PMPM fees, including the periodic adjustments, to finally get settled. 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.
Auditing the Company’s estimation of variable consideration under the CMS risk adjustment methodology, specifically the CMS risk adjustment accrual, was especially challenging because the calculation involves subjective management assumptions about current members’ health status to determine the risk adjustment payment estimated to be received in the future.
How We Addressed the Matter in Our AuditTo test the estimation of variable consideration under the CMS risk adjustment methodology, our audit procedures included, among others, understanding and evaluating the subjective management assumptions used in management’s CMS risk adjustment accrual calculation. We evaluated the current members’ health status utilizing historical experience of the Company and by comparing a sample of members’ health status assumptions to underlying medical diagnosis data, and other relevant factors. We further reviewed the medical risk adjustment PMPMs on a market by market basis to evaluate consistency in management’s accruals. Additionally, we performed a review of prior period estimates using subsequent health plan data and evaluated management’s related disclosures.
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Valuation of incurred but not reported claims
Description of the Matter
As of December 31, 2022, the Company’s medical claims and related payables totaled $347 million, substantially all of which related to the Company’s estimate for claims that have been incurred but have either not yet been received, processed, or paid and as such, not reported (“IBNR”). As discussed in Note 2 to the consolidated financial statements, management develops its IBNR liability estimate using actuarial methods commonly used by health insurance actuaries that include a number of factors and assumptions, including medical service utilization trends, changes in membership, observed medical cost trends, historical claims payment patterns and other factors.
Auditing management’s estimate of the IBNR liability was complex and required the involvement of actuarial specialists due to the highly judgmental nature of the factors and assumptions used in the measurement process. These assumptions have a significant effect on the valuation of the IBNR liability.
How We Addressed the Matter in Our AuditTo test the IBNR liability, our audit procedures included, among others, testing the completeness and accuracy of data used in the Company’s models by testing reconciliations of underlying claims and membership data recorded in source systems to the actuarial reserve models, and comparing claims to source documentation, including statements and claims data received from health plans. With the assistance of our actuarial specialists, we used the Company’s underlying claims, membership data and generally accepted actuarial methodologies used within the industry to develop an independent range of IBNR estimates and compared those estimates to management’s recorded IBNR liability. Additionally, we performed a review of prior period estimates using subsequent claims development, and we evaluated management’s IBNR disclosures.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2017.
Los Angeles, California
March 1, 2023
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agilon health, inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
December 31,
20222021
ASSETS
Current assets:
Cash and cash equivalents$497,070 $1,040,039 
Restricted cash and equivalents10,610 14,781 
Marketable securities411,901 — 
Receivables, net497,574 293,407 
Prepaid expenses and other current assets, net34,119 18,968 
Total current assets1,451,274 1,367,195 
Property and equipment, net20,050 9,161 
Intangible assets, net67,680 55,398 
Goodwill41,540 41,540 
Other assets, net116,924 112,958 
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 expenses183,364 112,946 
Current portion of long-term debt5,000 5,000 
Total current liabilities535,091 356,960 
Long-term debt, net of current portion38,482 43,401 
Other liabilities83,286 94,295 
Total liabilities656,859 494,656 
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 capital2,106,886 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 
The 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 consolidated balance sheets include total assets that can be used only to settle obligations of the Company’s consolidated VIEs totaling $703.3 million and $420.5 million as of December 31, 2022 and 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 $462.4 million and $282.0 million as of December 31, 2022 and 2021, respectively. See Note 18 for additional details.
See accompanying Notes to Consolidated Financial Statements.
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agilon health, inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
202220212020
Revenues:
Medical services revenue$2,704,396 $1,829,735 $1,214,270 
Other operating revenue3,815 3,824 4,063 
Total revenues2,708,211 1,833,559 1,218,333 
Expenses:
Medical services expense2,399,798 1,647,659 1,021,877 
Other medical expenses196,127 109,487 102,306 
General and administrative (including noncash stock-based compensation expense of $28,381, $292,394, and $6,472, respectively)
218,945 455,821 137,292 
Depreciation and amortization13,772 14,544 13,531 
Total expenses2,828,642 2,227,511 1,275,006 
Income (loss) from operations(120,431)(393,952)(56,673)
Other income (expense):
Other income (expense), net24,725 (4,500)2,465 
Gain (loss) on lease terminations(5,458)— — 
Interest expense(4,525)(6,146)(8,135)
Income (loss) before income taxes(105,689)(404,598)(62,343)
Income tax benefit (expense)(1,640)(886)(865)
Income (loss) from continuing operations(107,329)(405,484)(63,208)
Discontinued operations:
Income (loss) before gain (loss) on sales and income taxes491 (3,463)(20,049)
Gain (loss) on sales of assets, net— 473 20,401 
Income tax benefit (expense)(26)1,687 2,804 
Total discontinued operations465 (1,303)3,156 
Net income (loss)(106,864)(406,787)(60,052)
Noncontrolling interests’ share in (earnings) loss311 300 — 
Net income (loss) attributable to common shares$(106,553)$(406,487)$(60,052)
Net income (loss) per common share, basic and diluted
Continuing operations$(0.26)$(1.09)$(0.20)
Discontinued operations$— $— $0.01 
Weighted average shares outstanding, basic and diluted408,154372,931323,462
See accompanying Notes to Consolidated Financial Statements.
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agilon health, inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Year Ended December 31,
202220212020
Net income (loss)$(106,864)$(406,787)$(60,052)
Other comprehensive income (loss):
Net unrealized gain (loss) on marketable securities, net of tax(5,560)— — 
Total comprehensive income (loss)(112,424)(406,787)(60,052)
Comprehensive (income) loss attributable to noncontrolling interests311 300 — 
Total comprehensive income (loss) attributable to agilon health, inc.$(112,113)$(406,487)$(60,052)
See accompanying Notes to Consolidated Financial Statements.
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agilon health, inc.
CONSOLIDATED STATEMENTS OF CONTINGENTLY REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands)
Contingently Redeemable
Common Stock
Total Stockholders’ Equity (Deficit)
Shares
Amount
Common Stock
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Income (loss)
Noncontrolling
Interests 		Total
Stockholders’ Equity
(Deficit)
Shares
Amount
January 1, 202069,860$281,000 246,743$2,467 $256,643 $(491,138)$— $— $(232,028)
Net income (loss)—— —— — (60,052)— — (60,052)
Issuance of contingently redeemable common stock6,34128,500 —— (460)— — — (460)
Issuance of common stock—— 1,23513 5,537 — — — 5,550 
Repurchase of common stock—— (1,500)(15)(6,727)— — — (6,742)
Exercises and vesting of stock-based awards—— 2,56226 788 — — — 814 
Settlement of stock-based liabilities—— 3343 1,497 — — — 1,500 
Stock-based compensation expense—— —— 6,688 — — — 6,688 
January 1, 202176,201$309,500 249,374$2,494 $263,966 $(551,190)$— $— $(284,730)
Net income (loss)—— —— — (406,487)— (300)(406,787)
Reclassification of contingently redeemable common stock in connection with IPO(76,201)(309,500)76,201762 308,738 — — — 309,500 
Issuance of common stock in connection with IPO, net of offering costs—— 53,590536 1,162,597 — — — 1,163,133 
Issuance of common stock under partner physician group equity agreements upon IPO—— 11,672117 268,350 — — — 268,467 
Exercises and vesting of stock-based awards—— 9,25892 17,994 — — — 18,086 
Stock-based compensation expense—— —— 23,927 — — — 23,927 
January 1, 2022—$— 400,095$4,001 $2,045,572 $(957,677)$— $(300)$1,091,596 
Net income (loss)—— —— — (106,553)— (311)(106,864)
Other comprehensive income (loss)—— —— — — (5,560)— (5,560)
Exercise of stock options—— 11,923119 33,768 — — — 33,887 
Vesting of restricted stock units—— 4044 (4)— — — — 
Shares withheld related to net share settlement—— (37)— (831)— — — (831)
Stock-based compensation expense—— —— 28,381 — — — 28,381 
December 31, 2022—$— 412,385$4,124 $2,106,886 $(1,064,230)$(5,560)$(611)$1,040,609 
See accompanying Notes to Consolidated Financial Statements.
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agilon health, inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
202220212020
Cash flows from operating activities:
Net income (loss)$(106,864)$(406,787)$(60,052)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization13,772 14,670 14,099 
Stock-based compensation expense28,381 292,394 6,688 
Loss on debt extinguishment— 1,590 — 
Loss (income) from equity method investments(10,720)6,766 (514)
Deferred income taxes and uncertain tax positions532 (3,231)(2,809)
Release of indemnification assets553 1,705 3,475 
(Gain) loss on sale of assets, net— (473)(20,401)
Distributions of earnings from equity method investments— 174 — 
Other non-cash items2,973 58 (162)
Changes in operating assets and liabilities:
Receivables, net(204,167)(149,041)(59,381)
Prepaid expense and other current assets(16,620)(3,916)(5,085)
Other assets(205)3,931 (1,977)
Medical claims and related payables107,713 76,339 42,383 
Accounts payable and accrued expenses65,736 19,360 24,922 
Other liabilities(11,892)(1,698)5,610 
Net cash provided by (used in) operating activities(130,808)(148,159)(53,204)
Cash flows from investing activities:
Purchase of property and equipment(15,426)(6,564)(1,775)
Purchase of intangible assets(17,235)(6,862)(575)
Investments in loans receivable and other(6,510)(82,831)(3,847)
Investments in marketable securities(458,265)— — 
Proceeds from maturities and sales of marketable securities and other52,548 7,095 2,058 
Proceeds from sale of business and property, net of cash divested500 (1,344)26,205 
Net cash provided by (used in) investing activities(444,388)(90,506)22,066 
Cash flows from financing activities:
Proceeds from initial public offering— 1,170,942 — 
Proceeds from other equity issuances, net33,056 18,086 34,404 
Repurchase of shares, net— — (6,742)
Proceeds from the issuance of long-term debt— 100,000 — 
Repayments of long-term borrowings and other(5,000)(119,899)(3,041)
Equity and debt issuance costs and other— (14,739)— 
Net cash provided by (used in) financing activities28,056 1,154,390 24,621 
Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents(547,140)915,725 (6,517)
Cash, cash equivalents and restricted cash and equivalents from continuing operations, beginning of year1,054,820 135,178 139,152 
Cash, cash equivalents and restricted cash and equivalents from discontinued operations, beginning of year— 3,917 6,460 
Cash, cash equivalents and restricted cash and equivalents, beginning of year1,054,820 139,095 145,612 
Cash, cash equivalents and restricted cash and equivalents from continuing operations, end of year507,680 1,054,820 135,178 
Cash, cash equivalents and restricted cash and equivalents from discontinued operations, end of year— — 3,917 
Cash, cash equivalents and restricted cash and equivalents, end of year$507,680 $1,054,820 $139,095 
See accompanying Notes to Consolidated Financial Statements.
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agilon health, inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Business
Description of Business
agilon health, inc., together with its consolidated subsidiaries and variable interest entities (the “Company”), through its 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. The Company also operates an independent practice association (“IPA”) in Hawaii. As of December 31, 2022, the Company, through its contracted physician networks, provided care to approximately 269,500 Medicare Advantage ("MA") members enrolled with private health plans in eight states. agilon health, inc. was incorporated in the state of Delaware in April 2017.
The following provides information regarding the Company’s recent strategic partnerships to deliver healthcare services:
•During 2020, the Company entered into a strategic partnership to further expand its operations beginning April 1, 2020 into Wilmington, North Carolina. Additionally, 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 January 1, 2022 into Syracuse, New York.
•During 2021, the Company entered into strategic partnerships to further expand its operations beginning January 1, 2022 into: (i) Grand Rapids and Traverse City, Michigan; (ii) Pinehurst, North Carolina; and (iii) Longview and Texarkana, Texas, along with additional partnerships in the Company’s existing Ohio and Texas markets.
•On April 1, 2021, the Company, in collaboration with seven of its physician group partners, launched five Direct Contracting Entities (“DCE”) that are participating in the Center for Medicare & Medicaid Innovation’s (“CMMI”) Direct Contracting Model.
•Beginning January 1, 2022, the Company also began operating three additional DCEs, in collaboration with five of its physician group partners, which is being redesigned and renamed the Accountable Care Organization Realizing Equity, Access, and Community Health (“ACO REACH”) Model beginning in 2023.
•During 2022, the Company entered into strategic partnerships to further expand its operations beginning January 1, 2023 into: (i) Portland, Maine; (ii) St. Paul, Minnesota; (iii) Charleston, South Carolina; and (iv) Jackson, Tennessee, along with additional partnerships in the Company’s existing North Carolina, Michigan and Texas markets.
See Note 18 for additional discussions related to the Company’s involvement with variable interest entities.
The Company’s largest shareholder is 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 53.6 million 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 $7.8 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 December 31, 2021, the Company provided $76.8 million, net 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 consolidated balance sheets. See Note 8.
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The Company also recognized $2.6 million of expense related to stock options that vested upon the completion of the IPO in 2021 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. 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 Company’s management agreement with CD&R was terminated 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 consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Principles of Consolidation
The consolidated financial statements include the accounts of agilon health, inc., its wholly-owned subsidiaries and VIEs that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated in consolidation.
The Company is required to continually evaluate its VIE relationships and consolidate these entities when it is determined to be the primary beneficiary of their operations. A VIE is broadly defined as an entity that has any of the following three characteristics:
i.the equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support;
ii.substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights; or
iii.the equity investors as a group lack any of the following:
•the power through voting or similar rights to direct the activities of the entity that most significantly impact the entity’s economic performance;
•the obligation to absorb the expected losses of the entity; or
•the right to receive the expected residual returns of the entity.
The Company reassesses the designation of an entity as a VIE upon certain events, including, but not limited to:
i.a change to the terms or in the ability of a party to exercise its kick-out rights;
ii.a change in the capital structure of the entity; or
iii.acquisitions or sales of interests that constitute a change of control.
The Company is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company continuously assesses whether it is (or is not) the primary beneficiary of a VIE. That assessment involves the consideration of various factors, including, but not limited to, the form of the Company’s ownership interest, its representation on the VIE’s governing body, the size and seniority of its investment, its ability and the rights of other variable interest holders to participate in policy making decisions, its ability to manage its ownership interest relative to the other variable interest holders, and its ability to liquidate the entity.
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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 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 adjustment, 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. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates.
Revenue Recognition and Receivables
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 percent of the premium payors receive from the Centers for Medicare & Medicaid 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 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 (“ASC 606”), 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 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 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 at the amount expected to be collected.
Medical Services Expenses and Related Payables
Medical Services Expense
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
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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 claims that have been incurred but have either not yet been received, processed, or paid and as such, not reported.
Such estimates are developed using actuarial methods commonly used by health insurance 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 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 December 31, 2022 and 2021. The Company uses judgment to determine the appropriate assumptions for developing the required estimates.
The Company assesses the profitability of its managed care capitation arrangement to identify contracts where current operating results or forecasts indicate probable future losses. If anticipated future variable costs exceed anticipated future revenues, a premium deficiency reserve is recognized. Premium deficiency reserves as of December 31, 2022 and 2021 were immaterial.
Other Medical Expenses
Other medical expenses include: (i) partner physician compensation expense and (ii) other provider costs. Partner physician compensation expense relates to surplus sharing obligations to the Company’s physician partners. Other provider costs include payments for additional compensation to support physician-patient engagement and other care management expenses.
Goodwill and Amortizable Intangible Assets
Goodwill represents the excess purchase price consideration over the estimated fair value of net assets acquired in a business combination. The Company tests goodwill for impairment annually in the fourth quarter, and on an interim basis when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company first assesses qualitative factors to determine whether it is more likely than not that the carrying value of a reporting unit exceeds its fair value. Qualitative analysis involves assessing situations and developments that could affect key drivers used to evaluate whether the value of goodwill is impaired. The Company’s procedures include assessing its financial performance, macroeconomic conditions, industry and market considerations, various asset-specific factors, and entity-specific events. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing.
In the quantitative assessment, the fair value of the reporting unit is determined primarily by an income approach, utilizing discounted cash flows and a market approach looking at comparable companies and related transactions. An impairment is recognized only to the extent that the carrying value of a reporting unit exceeds its fair value. If the fair value exceeds the carrying amount, goodwill is not considered impaired.
Amortizable intangible assets primarily relate to health plan contracts, trade names, provider networks and noncompete enforcement agreements. Amortizable intangible assets are amortized using the straight-line method over the useful life of these assets, generally between two and 30 years. The Company considers the period of expected cash flows and related underlying data used to measure the fair value of the intangible assets (or the length of time for a noncompete agreement) when selecting a useful life.
Amortizable intangible assets are subject to impairment tests when events or circumstances indicate that the carrying value of the asset, or related asset group, may not be recoverable. The Company compares the carrying value of an amortizable intangible asset (or asset group) to the future undiscounted cash flows generated by the asset (or asset group). The expected future undiscounted cash flows are calculated using the lowest level of identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. When the carrying value of an intangible asset (or asset group)
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exceeds its expected future undiscounted cash flows, an impairment charge is recognized to the extent that the carrying value of the asset (or asset group) exceeds its fair value.
The impairment tests are based on financial projections prepared by management that incorporate anticipated results from programs and initiatives being implemented. If projections are not met, or if negative trends occur that impact the outlook, the intangible assets may be impaired.
Cash, Cash Equivalents, and Restricted Cash Equivalents
Cash and cash equivalents consist of cash on hand and highly liquid financial instruments with maturities of three months or less when purchased, which includes investments in short-term money market funds. The Company maintains its cash on hand in bank deposit accounts which, at times, may exceed federally insured limits. Restricted cash and equivalents primarily consist of amounts used as collateral to secure letters of credit which the Company is required to maintain pursuant to contracts with payors. Such amounts are generally maintained in certificates of deposit to satisfy these obligations and are presented as restricted cash equivalents in the consolidated balance sheets. As of December 31, 2022 and 2021, certificates of deposit totaled $8.2 million and $9.8 million, respectively.
Marketable Securities
The Company's investments in marketable debt 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 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, premium accretion/discount amortization, 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 consolidated statements of operations. The cost of securities sold is based on the specific identification method.
At each reporting period, the Company evaluates available-for-sale marketable securities for any credit-related impairment when the 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 loss for the amount of such decline. As of December 31, 2022, the Company did not record any impairment related to other-than-temporary declines in the fair value of marketable securities. See Note 4 for additional information.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. If acquired through a business combination, property and equipment are recorded at fair value at the date of acquisition. Costs incurred that significantly extend the useful life of the related assets are capitalized, while repairs and maintenance costs are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, except for land, which is not depreciated.
The following represents the estimated useful lives for property and equipment:
Years
Computer equipment and software
3 – 5
Furniture and fixtures
5 – 7
Leasehold improvements are depreciated over the shorter of the assets’ estimated useful life or term of the lease.
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Leases
The Company determines whether a contract contains a lease based on whether it has the right to obtain substantially all of the economic benefits from the use of an identified asset that the Company does not own and whether it has the right to direct the use of that identified asset in exchange for consideration. The Company determines whether an arrangement constitutes a lease at inception. Under ASC 842, a practical expedient was offered to lessees to make a policy election, which the Company elected, to not separate lease and non-lease components, but rather account for the combined components as a single lease component. The Company’s operating leases consist primarily of long-term leases for office space. The Company’s leases do not contain any material residual value guarantees or material restrictive covenants. Right of use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Most leases include one or more options to renew, with renewal terms that can extend the lease. The exercise of renewal options is at the sole discretion of the Company. ROU assets are recognized as the lease liability, adjusted for initial direct costs incurred and tenant lease incentives received. Lease liabilities are recognized as the present value of the future minimum lease payments at the lease commencement date. Since none of the Company’s leases provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. The incremental borrowing rate is a hypothetical rate based on the Company’s understanding of what its credit rating would be to borrow and based on the resulting interest the Company would pay to borrow an amount equal to the lease payments in a similar economic environment over the lease term on a collateralized basis. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
Lease payments may be fixed or variable, however, only fixed payments or in-substance fixed payments are included in the Company’s lease liability calculation. Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments is incurred. Short-term leases (those with terms of 12 months or less) are not recorded as ROU assets or liabilities in the consolidated balance sheets. For short-term leases, the Company recognizes rent expense in the consolidated statements of operations on a straight-line basis over the lease term.
Operating leases are included in other assets, net, accounts payable and accrued expenses, and other liabilities on the Company’s consolidated balance sheets. See Note 6 for additional information.
Issuance Costs
Debt issuance costs related to debt instruments (excluding line of credit arrangements) are deferred, recorded as a reduction of the related debt liability, and amortized to interest expense over the remaining term of the related debt liability utilizing the effective interest method. Debt issuance costs related to line of credit arrangements are deferred, included in other assets, and amortized to interest expense on a straight-line basis over the remaining term of the related line of credit arrangement. Costs incurred in connection with the issuance of common shares are recorded as a reduction of additional paid-in capital.
Contingently Redeemable Common Stock
Prior to the completion of the IPO in April 2021, certain of the Company’s investment agreements with third-party investors could require the Company to repurchase shares in certain limited circumstances. As the redemption feature was outside the control of the Company, the related capital contributions did not qualify as permanent equity and were classified as temporary equity in the mezzanine section of the consolidated balance sheets. Such redemption feature terminated upon the completion of the IPO in April 2021 and accordingly, such common stock was reclassified from temporary equity in the mezzanine section of the consolidated balance sheet to permanent equity.
Net Income (Loss) Per Share
Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common shares by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is calculated by including the effect of dilutive securities using the treasury stock method. The treasury stock method assumes a hypothetical issuance of shares to settle stock-based awards, with the assumed proceeds used to purchase common stock at the average market price for the period. Assumed proceeds include the amount the employee must pay upon exercise and the average unrecognized compensation cost. The difference between the number of shares assumed issued and number of shares assumed purchased represents the dilutive shares. Basic net loss per share is the same
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as diluted net loss per share for the periods presented, as the inclusion of all potential common shares outstanding would have been anti-dilutive.
Stock-based Compensation
Stock-based compensation expense for common stock options is recognized based on the fair value of the award as determined on the grant date using the Black-Scholes option pricing model. Stock-based compensation expense is generally recognized on a straight-line basis over the vesting period. Compensation cost for options that vest based on performance conditions, in addition to the continued service period, is recognized when the related performance condition is deemed to be probable of achievement. The fair value of awards with market conditions are valued using the Monte Carlo simulation model. Forfeitures of stock-based awards are recognized as they occur.
Prior to the IPO, the Company determined the fair value of its shares at the grant dates by considering several objective and subjective factors, including the price paid by investors for common stock, actual and forecasted operating and financial performance, market conditions and performance of comparable publicly traded companies, developments and milestones in the Company, the likelihood of achieving a liquidity event, and transactions involving its common stock. The fair value of the Company’s common stock prior to the IPO was determined in accordance with applicable elements of the practice aid issued by the American Institute of Certified Public Accountants, Valuation of Privately Held Company Equity Securities Issued as Compensation. See Note 14 for additional information.
Income Taxes
Current tax liabilities and assets are recognized for the estimated taxes payable or refundable, respectively, on the tax returns for the current year. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The carrying value of the Company’s net deferred tax assets is based on whether it is more likely than not that the Company will generate sufficient future taxable income to realize the deferred tax assets. A valuation allowance is established for deferred tax assets, which the Company does not believe meet the “more likely than not” threshold. The Company’s judgments regarding future taxable income may change over time due to changes in market conditions, changes in tax laws, tax planning strategies, or other factors. If the Company’s assumptions and, consequently, its estimates, change in the future, the valuation allowance may materially increase or decrease, resulting in a decrease or increase, respectively, in income tax benefit and the related impact on the Company’s reported net income (loss).
The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than likely of being realized and effectively settled. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and that may not accurately forecast actual outcomes. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as additional income taxes.
Fair Value Measurement
The Company’s financial instruments consist of cash and cash equivalents, restricted cash and cash equivalents, marketable securities (see Note 4), receivables, other liabilities, accounts payable, certain accrued expenses, and borrowings which consist of a term loan and a revolving credit facility (see Note 11). The carrying values of the financial instruments classified as current in the consolidated balance sheets approximate their fair values due to their short-term maturities. The Company's cash and cash equivalents are classified within Level 1 of the fair value hierarchy. 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 years ended December 31, 2022 and 2021, there were no material transfers of financial assets or liabilities within the fair value hierarchy.
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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 Company is responsible for determining fair value, as well as for assigning the appropriate level within the fair value hierarchy, based on the significance of unobservable inputs. The Company reviews methodologies, processes and controls of third-party pricing services and performs ongoing analyses of both prices received from third-party pricing services and those developed internally to determine whether they represent appropriate estimates of fair value.
Segment Reporting
The Company is organized as a single operating and reportable segment based on the manner in which the Chief Executive Officer, who is the chief operating decision maker, evaluates performance and makes decisions about how to allocate resources.
Disposition of California Operations
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, the Company disposed of its Southern California operations for a gross sales 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 $19.1 million. In December 2020, the Company signed a definitive agreement to sell its remaining California operations for a gross sales price of $1.0 million. The sale closed in February 2021. The Company’s decision to exit California and the Medicaid line of business represents a strategic shift that will have a major effect on its operations and financial results. As such, the Company’s California operations are reflected in the consolidated financial statements as discontinued operations. See Note 20 for additional information.
NOTE 3. Concentration of Credit Risk
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. 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 payors constitutes substantially all of the Company’s total revenue for the years ended December 31, 2022, 2021, and 2020.
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The following table provides the Company’s revenue concentrations with respect to major payors as a percentage of the Company’s total revenues:
Year Ended December 31,
202220212020
Payor A25 %26 %38 %
Payor B19 %20 %20 %
Payor C14 %16 %11 %
Payor D10 %11 %*
_____________________________________________________________________
*Less than 10% of total revenues.
The following table provides the Company’s concentrations of credit risk with respect to major payors as a percentage of receivables, net:
December 31,
20222021
Payor A13 %18 %
Payor B20 %21 %
Payor C10 %14 %
Payor D10 %12 %
Payor E11 %*
_____________________________________________________________________
*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):
December 31, 2022
Amortized CostGross Unrealized Gains
Gross Unrealized Losses
Fair Value
Marketable securities:
Corporate debt securities$255,613 $60 $(3,240)$252,433 
U.S. Treasury notes151,873 — (2,306)149,567 
Other9,975 — (74)9,901 
$417,461 $60 $(5,620)$411,901 
For the year ending December 31, 2022, the Company recognized total interest income of $14.5 million, of which $8.1 million was related to its marketable securities investments and $6.4 million was related to interest on cash and cash equivalent balances. At December 31, 2022, substantially all the Company's investment positions were in an unrealized loss position. The Company’s unrealized losses from marketable securities as of December 31, 2022 were caused primarily by interest rate increases. At December 31, 2022, the Company had $407.4 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. Therefore, the Company believes these losses to be temporary. There was no allowance for credit losses on available-for-sale marketable securities at December 31, 2022.
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The following table summarizes the Company’s marketable securities maturity as of December 31, 2022 (in thousands):
YearAmortized CostFair Value
2023$128,537 $127,517 
2024141,385 139,332 
2025147,539 145,052 
$417,461 $411,901 
Fair Value Measurements
The table below summarizes the Company’s financial instruments measured at fair value on a recurring basis (in thousands):
December 31, 2022
Level 1Level 2Level 3
Marketable securities:
Corporate debt securities$— $252,433 $— 
U.S. Treasury notes149,567 — — 
Other9,901 — — 
$159,468 $252,433 $— 
NOTE 5. Property and Equipment, Net
The following table summarizes the Company’s property and equipment (in thousands):
December 31,
20222021
Computer equipment and software$25,186 $12,769 
Furniture and fixtures2,249 2,889 
Leasehold improvements1,996 1,708 
29,431 17,366 
Less: accumulated depreciation(9,381)(8,205)
Property and equipment, net$20,050 $9,161 
For the years ended December 31, 2022, 2021, and 2020, the Company recognized $4.0 million, $2.6 million, and $2.2 million, respectively, in depreciation expense, which is included in depreciation and amortization expense in the consolidated statements of operations.
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NOTE 6. Leases
The Company has operating leases for corporate offices and certain equipment. The following tables provide information regarding the Company’s operating leases for which it is the lessee (in thousands):
December 31,
20222021
ROU asset:
Other assets, net$13,029 $11,739 
Lease liabilities:
Accounts payable and accrued expenses$3,704 $3,307 
Other liabilities9,885 7,904 
Total operating lease liabilities$13,589 $11,211 
Year Ended December 31,
202220212020
Operating lease costs$5,106 $4,832 $4,152 
Short-term lease costs— — 29 
Variable lease costs1,044 965 949 
Total lease costs$6,150 $5,797 $5,130 
Year Ended December 31,
Supplemental Cash Flow Information202220212020
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows from operating leases$4,960 $4,409 $4,495 
ROU asset obtained in exchange for new lease liability:
Operating leases$8,200 $5,116 $363 
December 31,
Weighted Average Lease Term and Discount Rate20222021
Weighted average remaining lease term (years):
Operating leases65
Weighted average discount rate:
Operating leases5.47 %8.15 %
The following table summarizes future minimum lease obligations under non-cancelable operating leases as of December 31, 2022 (in thousands):
Year
Amount
2023$3,840 
20242,444 
20252,348 
20262,223 
20271,140 
Thereafter3,955 
Undiscounted minimum lease payments payable15,950 
Less: imputed interest(2,361)
Present value of lease liability$13,589 
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NOTE 7. Goodwill and Amortizable Intangible Assets
Goodwill
As of December 31, 2022 and 2021, goodwill of $39.0 million was allocated to the Company’s Hawaii reporting unit, which has a negative carrying amount of net assets as of December 31, 2022 and 2021. The Company completed the required annual goodwill impairment test during the fourth quarters of 2022 and 2021, and no impairment was recognized.
Amortizable Intangible Assets
The following table summarizes the Company’s amortizable intangible assets as of December 31, 2022 (dollars in thousands):
Useful Life
(Years)		Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Value
Health plan contracts15$39,700 $(16,983)$22,717 
Trade names
15-30
20,300 (4,342)15,958 
Provider networks
10-15
8,400 (3,593)4,807 
Noncompete enforcement agreements
1-5
59,669 (36,100)23,569 
Other
4-15
2,700 (2,071)629 
$130,769 $(63,089)$67,680 
The following table summarizes the Company’s amortizable intangible assets as of December 31, 2021 (dollars in thousands):
Useful Life
(Years)		Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Value
Health plan contracts15$39,700 $(14,336)$25,364 
Trade names
15-30
20,300 (3,665)16,635 
Provider networks
10-15
8,400 (3,033)5,367 
Noncompete enforcement agreements
2-5
37,599 (30,355)7,244 
Other
4-15
2,700 (1,912)788 
$108,699 $(53,301)$55,398 
For the years ended December 31, 2022, 2021, and 2020, the Company recognized $9.7 million, $11.9 million, and $11.4 million, respectively, in amortization expense which is included in depreciation and amortization expense in the consolidated statements of operations.
The following table summarizes the estimated annual amortization for each of the five succeeding fiscal years and thereafter as of December 31, 2022 (in thousands):
YearAmount
2023$8,800 
20247,777 
20257,162 
20266,905 
20276,359 
Thereafter30,677 
$67,680 
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NOTE 8. Other Assets
The following table summarizes the Company’s other assets (in thousands):
December 31,
20222021
Loans to physician partners$69,383 $76,821 
Health plan deposits11,728 11,523 
Equity method investments17,352 6,690 
Right of use asset13,029 11,739 
Other5,432 6,185 
$116,924 $112,958 
See Note 6 for additional discussions related to right of use asset and Note 18 for equity method liabilities related to the Company's DCE 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. These loans mature between 2026 and 2031 with nominal interest compounding annually and no prepayment penalties. Such loans are stated at the amount expected to be collected.
NOTE 9. Medical Claims and Related Payables
Medical claims and related payables include estimates for amounts owed for claims incurred for services provided to members by various providers. Changes in amounts reported for medical claims related to prior years result from claims being paid at amounts different than originally estimated. Liabilities are continually reviewed and re-estimated as information regarding actual claim payments becomes known. This information is compared to the originally established liability at year end. The following table presents the components of changes in medical claims and related payables (in thousands):
December 31,
202220212020
Medical claims and related payables, beginning of the year$239,014 $164,161 $121,779 
Components of incurred costs related to:
Current year2,387,374 1,645,137 1,026,940 
Prior years12,424 2,522 (5,063)
Discontinued operations - current year— 1,234 85,732 
Discontinued operations - prior years34 (2,099)(1,543)
2,399,832 1,646,794 1,106,066 
Claims paid related to:
Current year(2,051,036)(1,416,404)(870,979)
Prior years(247,873)(151,128)(94,868)
Discontinued operations - current year— (1,234)(80,754)
Discontinued operations - prior years(189)(3,175)(17,083)
(2,299,098)(1,571,941)(1,063,684)
Medical claims and related payables, end of the year$339,748 $239,014 $164,161 
Beginning and ending balances of medical claims and related payables disclosed above for December 31, 2020, include $1.1 million and $1.3 million, respectively, that are presented as current liabilities held for sale and discontinued operations. As of December 31, 2021 and 2020, medical claims and related payables also include $0.2 million and $4.1 million, respectively, of claims liabilities associated with certain divested California businesses for which the
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Company has retained the liability for claims incurred prior to the date of divestiture. Ending balance of medical claims and related payables disclosed above for December 31, 2022, includes $7.0 million that is recoverable from other parties under risk sharing arrangements and is presented as prepaid expenses and other current assets, net in the consolidated balance sheets.
NOTE 10. Other Liabilities
The following table summarizes the Company’s other liabilities (in thousands):
December 31,
20222021
Other long-term contingencies$62,931 $71,344 
Lease liabilities, long-term9,885 7,904 
Equity method liabilities - DCEs4,657 6,380 
Other5,813 8,667 
$83,286 $94,295 
As of December 31, 2022 and 2021, the Company had contingent liabilities of $62.9 million and $71.3 million, respectively, related to unasserted claims. While the Company intends to vigorously defend its position in the event of any assertion of such claims, it has established a liability for the potential exposure, including interest and penalties. Additionally, the Company estimated the range of reasonably possible losses in excess of reserves accrued on the consolidated balance sheet as of December 31, 2022 to be $0 to $52.9 million.
See Note 18 for equity method liabilities related to the Company's DCE investments.
NOTE 11. Debt
Credit Facility
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 Facilities”). The 2021 Credit Facilities include: (i) a $100.0 million secured term loan (the “2021 Secured Term Loan Facility”) and (ii) a $100.0 million senior secured revolving credit facility (the “2021 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 February 18, 2026.
As of December 31, 2022, the Company had $43.8 million outstanding under the 2021 Secured Term Loan Facility and availability under the 2021 Secured Revolving Facility was $38.8 million, as the Company had outstanding letters of credit totaling $61.2 million, of which $37.2 million was for the Company's DCE investments, see Note 18 for additional discussion related to DCEs. 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. No amounts have been drawn on the outstanding letters of credit as of December 31, 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
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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 Facility amount of 0.50% (stepping down to 0.375% on and following October 1, 2023). The Company must also pay customary letter of credit fees. As of December 31, 2022, the weighted average effective interest rate on the 2021 Secured Term Loan Facility was 6.04%.
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 such as: (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 December 31, 2022, the Company was in compliance with all covenants under the 2021 Credit Facilities.
The following table summarizes the Company’s stated term loan maturity and scheduled principal repayments as of December 31, 2022 (in thousands):
Year
Term Loan
2023$5,000 
20246,250 
202510,000 
202622,500 
43,750 
Debt costs(268)
$43,482 
Unsecured Debt
As of December 31, 2020, the Company had a $20.0 million unsecured credit agreement with a lender affiliated with CD&R (the “unsecured debt”), which was repaid in 2021 with the proceeds from the 2021 Secured Term Loan Facility as discussed above.
NOTE 12. 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. 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 COVID-19. Future developments, such as the severity and duration of new COVID-19 variants, COVID-19’s impact on the U.S. economy, consumer behavior and health care utilization patterns, and the timing, scope, and impact of legislation as well as other federal, state, and local governmental responses to the pandemic could introduce new uncertainties to care patterns and the Company's business. During the year ended December 31, 2022, overall care was near normal baseline levels, with certain areas of care at or approaching seasonal baselines, and other areas below. Future care patterns and acuity may temporarily rise due to missed regular care.
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
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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 consolidated financial statements.
CMS and the U.S. Department of Health and Human Services (“HHS”) Office of Inspector General perform audits of selected MA contracts related to risk adjustment diagnosis data. In these Risk-Adjustment Data Validation Audits (“RADV audits”), the government reviews medical records to determine whether physician medical record documentation and coding practices are compliant, which can result in the recovery of payments from managed care organizations if errors are identified and influence the calculation of premium payments by CMS to MA plans. On January 30, 2023, CMS released a final rule, announcing it may use extrapolation for payment years 2018 forward, for both RADV audits and Office of Inspector General audits and eliminated the application of a fee-for-service Adjuster in Part C contract-level RADV audits of Medicare Advantage organizations. The Company's payors are subject to audit by government health plans, including, but not limited to, CMS, in connection with the MA program. The Company is currently unable to predict the results of RADV audits on its financial condition, operating results, or cash flows.
Contractual Obligations
The following table summarizes the Company’s contractual obligations, excluding operating leases (see Note 6) and debt service obligations (see Note 11), as of December 31, 2022 (in thousands):
Total20232024-20252026-2027More than
Five Years
Capital commitments(1)
$134,835 $112,092 $17,243 $5,500 $— 
_____________________________________________________________________
(1)Represents capital commitments to physician partners to support physician partner expansion and related purposes.
NOTE 13. Common Stock
Common Stock
As of December 31, 2021, the Company’s authorized capital stock consisted of 2.0 billion shares of common stock, par value $0.01 per share. Every holder of record of common shares entitled to vote at a meeting of stockholders is entitled to one vote for each share outstanding.
During the year ended December 31, 2022, the Company issued approximately 12.3 million shares of common stock primarily in connection with exercises and vesting of stock-based awards.
During the year ended December 31, 2021, the Company issued approximately 9.3 million 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 46.6 million shares. On April 15, 2021, the underwriters exercised their option to purchase an additional 7.0 million shares of common stock. On April 19, 2021, the Company’s sale of an aggregate of 53.6 million shares of common stock was completed, see Note 1.
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.
During 2020, the Company issued and sold approximately 1.2 million shares of common stock to certain officers and directors at a purchase price of $4.49 per share and received aggregate proceeds of $5.6 million.
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In August 2020, the Company issued approximately 333,800 shares of common stock to settle provider compensation liabilities of $1.5 million.
Also in 2020, the Company repurchased 1.5 million shares of common stock for $6.7 million and issued approximately 2.3 million shares of common stock in connection with exercises and vesting of stock-based awards.
Contingently Redeemable Common Stock
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 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 consolidated balance sheets. The common stock that was 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. 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 consolidated balance sheet to permanent equity, see Note 1.
NOTE 14. Stock-Based Compensation
The Company offers certain employees the ability to purchase common shares of the Company and/or receive common stock options under its Amended and Restated Stock Incentive Plan (the “Plan”) that was approved by the stockholders. In connection with the IPO, the Company’s Board of Directors approved the Omnibus Incentive Plan. As of December 31, 2022, the Company is authorized to grant 83.0 million shares related to employee stock options, of which 36.0 million shares remain available for grant as of December 31, 2022. Shares granted are not transferrable, except upon the employee’s death, repurchase by the Company, or with the Company’s consent.
The Omnibus Incentive Plan provides for the grant of stock options, restricted stock awards, restricted stock units ("RSUs"), performance-based awards, and other awards. Stock options expire 10 years after the date of grant and forfeiture of awards is recognized as it occurs. The stock options granted under the Plan generally consist of: (i) stock options that vest in four equal annual installments, subject to the employee’s continued service until the applicable vesting date (the “Base Options”), and (ii) stock options that vest if CD&R realizes a certain return on its investment, subject to the employee’s continuous employment through such date and beyond, in certain grants (the “Upside Options”).
Stock Options
Base Options. Compensation cost for Base Options is recognized on a straight-line basis generally over the requisite vesting period of four years. The fair value of each Base Option was estimated on the date of grant using the Black-Scholes option pricing model. Expected volatilities are based on the historical equity volatility of comparable publicly traded companies. The expected term of Base Options is calculated via the simplified method and reflects the midpoint between the vesting date and the end of the contractual term, as our historical share option exercise experience does not provide a reasonable basis upon which to estimate the expected term. The risk-free rates utilized for periods throughout the contractual life of Base Options are based on U.S. Treasury security yields at the time of grant.
The assumptions used for the Black-Scholes option pricing model to determine the fair value of Base Options granted are as follows:
December 31,
202220212020
Risk-free interest rate
1.94% -4.18%
0.75% - 1.58%
0.43% - 1.68%
Expected dividends$— $— $— 
Expected volatility
48.66% -64.29%
58.95% - 63.33%
59.39% - 63.47%
Expected term (in years)6.256.256.25
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The Company’s outstanding Base Options consisted of the following (shares in thousands):
Shares
Weighted-
Average
Exercise
Price		Weighted-
Average
Remaining
Contractual Term
(in years)		Aggregate
Intrinsic
Value
(in thousands)
Stock options outstanding as of January 1, 202217,201$4.26 
Granted99522.80 
Exercised(6,776)1.70 
Forfeited(782)10.62 
Stock options outstanding as of December 31, 202210,638$7.15 6.6$109,236 
Expected to vest as of December 31, 20224,293$12.04 7.9$29,284 
Exercisable as of December 31, 20226,345$3.85 5.9$79,952 
The weighted-average grant-date fair value of Base Options granted during the year ended December 31, 2022, 2021, and 2020 was $13.83, $13.10, and $2.70, respectively, per option. The total intrinsic value of Base Options exercised for the years ended December 31, 2022, 2021, and 2020 was $140.8 million, $196.3 million, and $8.2 million, respectively. During the years ended December 31, 2022 and 2021, the Company recognized $9.5 million and $8.1 million, respectively, of stock-based compensation expense related to Base Options. During the year ended December 31, 2020, the total stock-based compensation expense related to Base Options was $6.5 million, of which $0.2 million is recorded in income (loss) from discontinued operations in the consolidated statements of operations.
As of December 31, 2022, the Company had $23.4 million of total unrecognized compensation cost related to non-vested Base Options, which is expected to be recognized over a weighted-average period of approximately three years.
Additionally, the Company recognized $2.6 million of expense related to stock options that vested upon the completion of the IPO in April 2021, which are included in general and administrative expenses in the statements of operations.
Upside Options. Upside Options vest if CD&R realizes a certain return on its investment, subject to the employee’s continuous employment through such date and beyond, in certain grants. During the year ended December 31, 2020, the Company did not recognize any stock-based compensation expense related to Upside Options as achievement of the underlying performance condition was not probable. During the year ended December 31, 2021, the Company recognized $8.5 million of stock-based compensation expense as a result of the satisfaction of a performance condition associated with Upside options. During the year ended December 31, 2022, the Company recognized $1.7 million of stock-based compensation expense related to Upside Options. The fair value of Upside Options was estimated on the date of grant using the Monte Carlo simulation model.
The Company’s outstanding Upside Options consisted of the following (shares in thousands):
Shares Weighted-
Average
Exercise Price		Weighted-
Average
Remaining
Contractual Term
(in years)		Aggregate
Intrinsic
Value
(in thousands)
Stock options outstanding as of January 1, 202214,428$6.21 
Exercised(5,147)4.35 
Forfeited(114)14.80 
Stock options outstanding as of December 31, 20229,167$7.16 5.9$85,160 
Expected to vest as of December 31, 20222,335$11.38 7.5$13,072 
Exercisable as of December 31, 20226,832$5.71 5.4$72,088 
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The weighted-average grant-date fair value of Upside Options granted during the years ended December 31, 2021 and 2020 was $1.72 and $1.58, respectively, per option. No Upside Options were granted in 2022. As of December 31, 2022, the Company had $3.2 million of total unrecognized compensation cost related to non-vested Upside Options, which is expected to be recognized over a weighted-average period of approximately two years.
Restricted Stock Units
Restricted stock awards, including restricted stock units and performance stock units are granted subject to certain restrictions. Conditions of vesting are determined at the time of grant. The fair market value of restricted stock units, both time vesting and those subject to specific performance criteria, are expensed over the period of vesting. Restricted stock units, which vest based solely upon passage of time and requisite service generally vest over the requisite period of four years. Performance stock units, which are restricted stock units that vest dependent upon attainment of various levels of performance that equal or exceed threshold levels, generally vest in their entirety at the end of the relevant performance period, generally three years. The number of shares that ultimately vest can vary from 0% to 200% of target depending on the level of achievement of the performance criteria. The fair value of restricted stock units and performance stock units are determined based on the closing market price of the Company's shares on the grant date. The value of the shares withheld to settle tax withholding obligations is dependent on the closing market price of the Company’s common stock on the trading date prior to the relevant transaction occurring.
The following table summarizes employee restricted stock award activity, including performance stock units, for the year ended December 31, 2022 (units in thousands):
Restricted
Stock
Units
Weighted-Average Grant-Date Fair Value
Unvested as of January 1, 20221,125$18.41 
Granted1,32021.89 
Vested(404)9.77 
Forfeited(219)22.49 
Unvested as of December 31, 20221,82222.35 
For the years ended December 31, 2022, 2021, and 2020, the Company recognized $9.6 million, $4.7 million, and $0.2 million, respectively, of stock-based compensation expense related to RSUs. The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2022, 2021, and 2020 was $21.89, $23.56, and $4.49, respectively. The total fair value of RSUs vested during 2022 was $9.2 million. As of December 31, 2022, the Company had $30.1 million of total unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of approximately three years.
Non-Employee Awards
Certain of the Company’s agreements provide for the granting of certain stock-based instruments to third parties (the “Physician Partners Equity Awards”). The Company's Board of Directors approved 9.7 million shares to be granted as Physician Partners Equity Awards, of which 3.2 million shares remain available for grant as of December 31, 2022. The fair market value of restricted stock units, both time vesting and those subject to specific performance criteria, are expensed over the period of vesting. Restricted stock units, which vest based solely upon passage of time and requisite service generally vest over the requisite period of two years. Performance stock units, which are restricted stock units that vest dependent upon attainment of various levels of performance that equal or exceed threshold levels, generally vest in their entirety at the end of the relevant performance period, from one to four years. The number of shares that ultimately vest can vary from 0% to 125% of target depending on the level of achievement of the performance criteria. The fair value of restricted stock units and performance stock units are determined based on the closing market price of the Company's shares on the grant date. No shares are withheld to settle tax withholding obligations of the physician partners.
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The following table summarizes Physician Partners Equity Awards activity, including performance stock units, for the year ended December 31, 2022 (units in thousands):
Restricted
Stock
Units
Weighted-Average Grant-Date Fair Value
Unvested as of January 1, 2022292$25.95 
Granted5,20621.93 
Vested(38)25.95 
Unvested as of December 31, 20225,46022.12 
For the years ended December 31, 2022 and 2021, the Company recognized $7.6 million and $0.2 million, respectively, of stock-based compensation expense related to Physician Partner Equity Awards. The weighted-average grant-date fair value of Physician Partner Equity Awards granted during the years ended December 31, 2022 and 2021 was $21.93 and $25.95, respectively. As of December 31, 2022, the Company had $113.9 million of total unrecognized compensation cost related to Physician Partner Equity Awards, which is expected to be recognized over a weighted-average period of approximately four years.
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. Various of the Company’s agreements provided for the vesting of certain stock-based instruments to third parties (physician partners) at the time of an initial public offering, or upon the occurrence of certain events deemed a “change of control” in the Company or certain of the Company's subsidiaries (“Change of Control Event”). The stock-based instruments granted to third parties were accounted for as non-employee awards for which compensation cost was recognized upon achievement of the underlying performance condition of a Change of Control Event. As the instruments were liability-classified, the amount of shares ultimately issued and related compensation cost was measured on the vesting date. A Change of Control Event is not deemed probable until consummated.
NOTE 15. Income Taxes
The Company applied the intra-period tax allocation rules to allocate income taxes between continuing operations and discontinued operations as prescribed by U.S. GAAP, where the tax effect of income (loss) before income taxes is computed without regard to the tax effects of income (loss) before income taxes from the other categories. Income tax expense (benefit) from continuing operations consisted of the following (in thousands):
Year Ended December 31,
202220212020
Current:
Federal$113 $— $— 
State997 1,289 856 
1,110 1,289 856 
Deferred:
Federal288 (166)38 
State242 (237)(29)
530 (403)9 
Income tax expense (benefit)$1,640 $886 $865 
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The principal items accounting for the difference between taxes computed at the U.S. statutory rate and taxes recorded consisted of the following (in thousands):
Year Ended December 31,
202220212020
Computed tax at US federal statutory rate of 21%
$(21,211)$(84,966)$(13,129)
Increase (decrease) in taxes resulting from:
State taxes, net of federal impact723 715 840 
Stock-based compensation(47,868)(44,088)— 
Nondeductible compensation23,570 4,054 — 
Unrecognized tax benefit— 238 (71)
Permanent differences(155)1,336 850 
Valuation allowance45,234 122,599 12,443 
Other, net1,347 998 (68)
Income tax expense (benefit)$1,640 $886 $865 
The net deferred tax liability comprises the tax effect of temporary differences between U.S. GAAP and tax reporting related to the recognition of income and expenses. The net deferred income tax liabilities are included in other liabilities in the consolidated balance sheets. Components of the net deferred tax liability consisted of the following (in thousands):
December 31,
20222021
Deferred income tax assets:
Net operating and capital losses$293,221 $237,877 
State taxes260 332 
Accrued expenses15,920 19,828 
Transaction costs736 811 
Stock-based compensation6,314 4,331 
Lease liabilities3,285 2,610 
Interest limitation4,226 5,850 
Intangible assets— 4,022 
Other, net1,156 111 
Total deferred income tax assets$325,118 $275,772 
Deferred income tax liabilities:
Property and equipment$— $(203)
ROU assets(3,155)(2,728)
Intangible assets(6,220)(11,032)
Investments in partnerships and affiliates(2,238)(1,402)
Total deferred income tax liabilities$(11,613)$(15,365)
Valuation allowance(314,166)(260,571)
Net deferred income tax liabilities$(661)$(164)
The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. In making this assessment, the Company is required to consider all available positive and negative evidence to determine whether, based on such evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized in future periods. As of December 31, 2022 and 2021, the Company believed that it is more likely than not that its deferred tax assets in excess of deferred tax liabilities will not be realized. Accordingly, the Company has provided a valuation allowance of $314.2 million and $260.6 million on the Company’s deferred tax assets as of December 31, 2022 and 2021,
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respectively. The increase in valuation allowance of $53.6 million recorded in current year activities is primarily attributable to current year losses. The net deferred tax liability as of December 31, 2022 principally relates to deferred tax liabilities associated with long-term investments in partnerships and affiliates, which are expected to reverse against net operating losses which can only offset 80% of taxable income.
As of December 31, 2022, the Company has federal and state net operating losses of $1.2 billion and $676.1 million, respectively. As of December 31, 2021, the Company has federal and state net operating losses of $1.0 billion and $570.3 million, respectively. As of December 31, 2022, $1.2 billion of the total federal net operating losses are carried forward as indefinite-lived net operating losses. The remaining net operating losses are carried forward and will expire beginning in 2027 if unutilized. Utilization of these operating loss carryforwards may be subject to an annual limitation based on changes in ownership, as defined by Section 382 of the Internal Revenue Code of 1986, as amended. As of December 31, 2022, $32.3 million and $32.7 million of the Company’s federal and state net operating loss carryforward, respectively, are attributable to prior acquisition transactions and are subject to Section 382 limitations. The Company’s analysis indicates that none of the acquired net operating loss carryforwards will expire unutilized solely as a result of the Section 382 limitations. As of December 31, 2022, the Company has both federal and state capital loss carryforward of $0.8 million, which will expire in 2026 if unused.
Unrecognized Tax Benefits
As of December 31, 2022, the Company had unrecognized tax benefits of $5.2 million, $0.9 million of which, if recognized, would impact its effective tax rate. As of December 31, 2021, the Company had unrecognized tax benefits of $5.9 million, $1.5 million of which, if recognized, would impact its effective tax rate. As of December 31, 2020, the Company had unrecognized tax benefits of $8.9 million, $7.1 million of which, if recognized, would impact its effective tax rate.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):
December 31,
202220212020
Balance at beginning of the year$5,919 $8,914 $10,839 
Additions related to current year35 2,636 384 
Additions (reductions) related to prior years(137)— 565 
Reductions related to settlements with taxing authorities(605)(5,631)— 
Reductions related to the lapse of applicable statute of limitations— — (2,874)
Balance at end of the year$5,212 $5,919 $8,914 
As of December 31, 2022, the Company recorded a liability for unrecognized tax benefit of $1.6 million, inclusive of $0.7 million of accrued interest and penalties. As of December 31, 2021, the Company recorded a liability for unrecognized tax benefit of $2.1 million, inclusive of $0.6 million of accrued interest and penalties. As of December 31, 2020, the Company recorded a liability for unrecognized tax benefit of $10.0 million, inclusive of $2.9 million of accrued interest and penalties. As of both December 31, 2022 and 2021, $4.3 million of unrecognized benefits were reflected as a reduction in deferred tax asset balances. The unrecognized tax benefit of $1.6 million is subject to a tax indemnification agreement between the prior owners of some of the Company’s California subsidiaries and the Company. Thus, the Company does not bear significant risk for these uncertain tax positions, as any assessment on future tax examinations is expected to be recovered from the prior owners. The indemnification assets are reflected in other assets in the consolidated balance sheets. During the year ended December 31, 2022, the Company reversed $0.6 million of tax liability and $0.1 million of accrued interest on unrecognized tax benefits due to payments of an amended state return related to the period ended June 30, 2016. During the year ended December 31, 2021, the Company reversed $5.6 million of tax liability, $1.1 million of accrued interest and $1.1 million of accrued penalties on unrecognized tax benefits and realized a tax benefit of $1.8 million attributable to discontinued operations due to the settlement of the IRS exam for the period ended June 30, 2016. During the year ended December 31, 2020, due to expiration of the 2015 state statute of limitations, the Company reversed $2.9 million of tax liability, $0.6 million of accrued interest and $0.6 million of accrued penalties on unrecognized tax benefits and realized a tax benefit of $4.1 million attributable to discontinued operations. The tax benefit from the statute expiration was offset by $0.6 million, $0.6 million, and $0.1 million of additional accruals for taxes, interest, and penalties, respectively, on uncertain tax positions during 2020 resulting in a net tax benefit of $2.8 million attributable to
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discontinued operations. It is reasonably possible that during the next 12 months the Company may realize a $0.5 million decrease in its liability for uncertain tax positions, inclusive of $0.1 million related to the reversal of interest and penalties on uncertain tax positions, as a result of closing of the tax years.
The amount of income taxes the Company pays is subject to ongoing audits. The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of the relevant risks, facts, and circumstances existing at the time. However, future results of operations may include favorable or unfavorable adjustments to the estimated tax liabilities in the period the assessments are made or resolved. The Company operates in several taxing jurisdictions, including U.S. federal and multiple U.S. states. The statute of limitations has expired for all tax years prior to 2019 for federal and prior to 2016 for various state tax purposes. However, the net operating loss generated on the Company’s federal and state tax returns in prior years may be subject to adjustments by the federal and state tax authorities.
For additional discussion regarding income taxes and unrecognized tax benefits related to discontinued operations, see Note 20.
On August 16, 2022, the Inflation Reduction Act was signed into law. The Inflation Reduction Act includes various tax provisions, which are effective for tax years beginning on or after January 1, 2023. For tax years beginning after December 31, 2021, the Tax Cuts & Jobs Act of 2017 eliminated the option to deduct research and development expenditures as incurred and instead required taxpayers to capitalize and amortize them over five or 15 years beginning in 2022. These changes in tax laws did not have a material impact on the Company’s results of operations for the years ended December 31, 2022 and 2021. The Company will continue to monitor possible future impact of changes in tax legislation.
NOTE 16. 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):
Year Ended December 31,
202220212020
Numerator
Income (loss) from continuing operations$(107,329)$(405,484)$(63,208)
Noncontrolling interests’ share in (earnings) loss from continuing operations311 300 — 
Net income (loss) attributable to common stockholders before discontinued operations(107,018)(405,184)(63,208)
Income (loss) from discontinued operations465 (1,303)3,156 
Net income (loss) attributable to common stockholders$(106,553)$(406,487)$(60,052)
Denominator
Weighted average shares outstanding, basic and diluted408,154372,931323,462
Net income (loss) per share attributable to common stockholders
Net income (loss) per common share from continuing operations, basic and diluted$(0.26)$(1.09)$(0.20)
Net income (loss) per common share from discontinued operations, basic and diluted$— $— $0.01 
Basic net income (loss) per share is the same as diluted net income (loss) per share for the years ended December 31, 2022, 2021, and 2020 as the inclusion of all potential common shares outstanding would have been anti-dilutive. The following table provides the potential shares of common stock that were excluded from the calculation of
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diluted net income (loss) per share attributable to common stockholders because their effect would have been anti-dilutive (in thousands):
December 31,
202220212020
Stock options - service only condition10,63817,20123,646
Stock options - market and performance condition(1)
9,16714,42817,675
Restricted stock units7,282894110
_____________________________________________________________________
(1)Market and performance conditions were satisfied during 2021.
NOTE 17. Supplemental Cash Flow Information
The following table provides supplemental cash flow information (in thousands):
Year Ended December 31,
202220212020
Supplemental cash flow information:
Interest paid$3,672 $4,824 $7,086 
Income taxes paid (refunded), net5,313 1,819 2 
Supplemental disclosure of non-cash financing activities:
Reclassification of contingently redeemable common stock in connection with IPO— 309,500 — 
Issuance of common stock under partner physician group equity agreements upon IPO— 268,467 — 
Offering costs accrued at end of period— 295 — 
Non-cash investment in unconsolidated subsidiaries190 763 — 
Settlement of stock-based liabilities— — 1,500 
Settlement of loans receivable with services provided— — 2,047 
The following table summarizes cash, cash equivalents and restricted cash equivalents from continuing operations (in thousands):
December 31,
20222021
Cash and cash equivalents$497,070 $1,040,039 
Restricted cash and equivalents10,610 14,781 
Cash, cash equivalents and restricted cash equivalents$507,680 $1,054,820 
NOTE 18. Variable Interest Entities
Consolidated Variable Interest Entities
agilon health, inc.’s consolidated assets and liabilities as of December 31, 2022 and 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.
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agilon health, inc.’s consolidated assets and liabilities include VIE assets and liabilities as follows (in thousands):
December 31,
20222021
Assets(1)
Cash and cash equivalents$155,819 $104,741 
Restricted cash equivalents10,610 13,210 
Receivables, net492,077 276,590 
Prepaid expenses and other current assets, net15,515 7,046 
Property and equipment, net1,567 1,147 
Intangible assets, net17,347 7,220 
Other assets, net10,371 10,580 
Liabilities(1)
Medical claims and related payables300,798 195,812 
Accounts payable and accrued expenses159,526 81,702 
Other liabilities2,059 4,521 
_____________________________________________________________________
(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 consolidated financial statements as discontinued operations.
Risk-bearing Entities. At December 31, 2022, the Company operates 28 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 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 December 31, 2022, the Company had nine 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 these VIEs. The Company's maximum loss exposure as a result of the Company’s involvement with the VIEs cannot be quantified as the Company has the obligation to provide ongoing operational support to the unconsolidated VIEs, as needed.
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Equity Method Investments
The following table summarizes the Company’s equity method investments (in thousands):
December 31,
20222021
Equity method investments - Other(1)
$8,329 $6,690 
Equity method investments - DCEs(1)
9,023 — 
Equity method liabilities - DCEs(2)
(4,657)(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 eight 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, which are recognized as equity income (loss), are as follows (in thousands):
Year Ended December 31,
20222021
Medical services revenue$1,071,302 $437,081 
Medical services expense(991,565)(424,816)
Other medical expenses(1)
(52,041)(12,219)
Income (loss) from operations14,294 (6,737)
Net income (loss)(2)
10,556 (7,143)
_____________________________________________________________________
(1)For the years ended December 31, 2022 and 2021, includes physician compensation expenses of $27.1 million and $1.0 million, respectively.
(2)Included in Other income (expense), net in the consolidated statement of operations.
The combined summarized balance sheet of the Company’s DCEs are as follows (in thousands):
December 31,
20222021
Current and total assets$70,625 $80,890 
Current and total liabilities67,343 88,033 
NOTE 19. Related Party Transactions
Significant Stockholders
Prior to the IPO, the Company maintained a consulting agreement with CD&R, for which it paid advisory consulting fees on a quarterly basis. For the years ended December 31, 2022, 2021 and 2020, the Company paid $0.2 million, $0.8 million and $1.5 million, respectively, to CD&R in advisory consulting fees, in addition to certain expense reimbursements. These are recorded in general and administrative expense in the accompanying consolidated statements of operations. In connection with the IPO, the Company and CD&R terminated the consulting agreement, effective April 16, 2021. The Company was not charged a fee in connection with the termination of this agreement.
Unsecured Debt
See Note 10 for details on the issuance of unsecured debt to a fund affiliated with CD&R.
Equity Method Investments
For the years ended December 31, 2022, 2021, and 2020, the Company incurred expenses of $9.6 million, $8.4 million, and $6.7 million, respectively for provider services delivered by Population Health, LLC, which is accounted for
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under the equity method based on 49% equity ownership interest held by the Company. As of December 31, 2022 and 2021, the Company had an outstanding payable to Population Health, LLC of $1.2 million and $1.0 million, respectively.
The Company is reimbursed for expenses paid on behalf of the DCEs. As of December 31, 2022 and 2021, the Company had an outstanding receivable from the DCEs of $6.9 million and $0.5 million, respectively.
NOTE 20. Discontinued Operations
Discontinued operations is 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, the Company disposed of its Southern California operations for a gross sales 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 $19.1 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 consolidated balance sheets. In December 2020, the Company signed a definitive agreement to sell its remaining California operations for a gross sales price of $1.0 million. The sale closed in February 2021.
The Company’s decision to exit California and the Medicaid line of business represents a strategic shift that will have a major effect on its operations and financial results. As such, the Company’s California operations are reflected in the consolidated financial statements as discontinued operations. Net income (loss) from discontinued operations for the year ended December 31, 2020 includes $3.7 million of severance related to the sale of the Company’s California operations.
The results of discontinued operations are as follows (in thousands):
Year Ended December 31,
202220212020
Revenues:
Medical services revenue$511 $6,408 $155,108 
Other operating revenue14 36 188 
Total revenues525 6,444 155,296 
Expenses:
Medical services expense34 (865)84,189 
Other medical expenses— 2,739 57,546 
General and administrative— 5,919 30,341 
Depreciation and amortization— 126 568 
Income (loss) from operations491 (1,475)(17,348)
Other income (expense), net— (1,851)(2,351)
Gain (loss) on sales of assets, net— 473 20,401 
Interest expense— (137)(350)
Income (loss) before income taxes and noncontrolling interests491 (2,990)352 
Income tax benefit (expense)(26)1,687 2,804 
Net income (loss) from discontinued operations attributable to common shares$465 $(1,303)$3,156 
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The following table provides significant non-cash operating items for discontinued operations that are included in the consolidated statements of cash flows (in thousands):
Year Ended December 31,
20212020
Non-cash operating activities from discontinued operations:
Depreciation and amortization$126 $568 
Stock-based compensation expense— 217 
Deferred income taxes and uncertain tax positions(1,697)(2,809)
Release of indemnification assets1,705 3,475 
Other non-cash items— (1,212)
There were no non-cash operating activities from discontinued operations for the year ended December 31, 2022.
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. During the years ended December 31, 2021 and 2020, the Company released $1.7 million, and $2.8 million, respectively, of indemnification assets in discontinued operations in the consolidated statements of operations as the corresponding pre-closing liabilities were released as a result of closing certain tax years (see below). No amounts were released during 2022.
Unrecognized Tax Benefits
As of December 31, 2022 and 2021, the Company has recorded a liability for unrecognized tax benefits of $1.6 million and $2.1 million, respectively, inclusive of accrued interest and penalties on unrecognized tax benefits. The liability, if reversed, would result in a tax benefit attributable to discontinued operations. During the year ended December 31, 2021, due to expiration of the 2016 U.S. federal statute of limitations, the Company reversed $5.6 million of tax liability, $1.1 million of accrued interest and $1.1 million of accrued penalties on unrecognized tax benefits and realized a tax benefit of $1.8 million attributable to discontinued operations.
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Schedule I: Condensed Financial Information Of Registrant
agilon health, inc.
(Parent Company Only)
CONDENSED BALANCE SHEETS
(in thousands, except per share data)
December 31,
20222021
ASSETS
Prepaid expenses and other current assets, net$467 $481 
Total current assets467 481 
Investment in wholly owned subsidiary977,883 1,015,564 
Loans receivable69,383 76,614 
Total assets$1,047,733 $1,092,659 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Other liabilities$953 $763 
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 capital2,106,886 2,045,572 
Accumulated deficit(1,064,230)(957,677)
Total stockholders' equity (deficit)1,046,780 1,091,896 
Total liabilities and stockholders’ equity (deficit)$1,047,733 $1,092,659 
See accompanying Notes to the Condensed Financial Statements.
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agilon health, inc.
(Parent Company Only)
CONDENSED STATEMENTS OF OPERATIONS
(in thousands)
Year Ended December 31,
202220212020
Equity in net income (loss) of subsidiary$(107,281)$(406,936)$(60,052)
Interest income728 449 — 
Net income (loss) attributable to common shares$(106,553)$(406,487)$(60,052)
See accompanying Notes to the Condensed Financial Statements.
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agilon health, inc.
(Parent Company Only)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. Description of agilon health, inc.
agilon health, inc., formerly Agilon Health Topco, Inc., (“Parent”) was incorporated in Delaware and indirectly owns 100% of the equity interest in agilon health management, inc. (“agilon”). Parent has no significant operations or assets other than its indirect ownership of the equity of agilon. Accordingly, Parent is dependent upon distributions from agilon to fund its obligations. However, under the terms of the agreements governing agilon’s borrowings, agilon’s ability to pay dividends or lend to Parent is restricted. While certain exceptions to the paying of dividends or lending funds restrictions exist, these restrictions have resulted in the restricted net assets (as defined in Rule 4-08(e)(3) of Regulation S-X) of Parent’s subsidiaries exceeding 25% of the consolidated net assets of Parent and its subsidiaries. agilon has no obligation to pay dividends to Parent.
Condensed statements of cash flows have not been presented, as agilon health, inc. did not have any cash as of, or for the years ended December 31, 2022, 2021 and 2020; see Note 3 for issuance of common stock.
NOTE 2. Basis of Presentation
The accompanying condensed Parent-only financial statements include the amounts of Parent and its investment in agilon under the equity method, and do not present the financial statements of Parent and agilon on a consolidated basis. Under the equity method, Parent’s investment in agilon is stated at cost plus contributions and equity in undistributed income (loss) of agilon less distributions received since the date of acquisition.
These condensed Parent-only financial statements have been prepared using the same accounting principles and policies described in the notes to the agilon health, inc. consolidated financial statements, with the only exception being that Parent accounts for its subsidiaries using the equity method. These condensed Parent-only financial statements should be read in conjunction with the agilon health, inc. consolidated financial statements and their accompanying notes.
NOTE 3. Equity
A discussion of Parent’s contingently redeemable common stock and stockholders’ equity activities for the years ended December 31, 2022, 2021 and 2020 can be found in Note 13 in “Notes to the Consolidated Financial Statements” of the consolidated financial statements of agilon health, inc.
There were no cash dividends paid to Parent from agilon’s consolidated subsidiaries for the years ended December 31, 2022, 2021 and 2020.
Supplemental Cash Flow Information
The following table provides supplemental cash flow information (in thousands):
Year Ended December 31,
202220212020
Supplemental disclosure of non-cash financing activities:
Reclassification of contingently redeemable common stock in connection with IPO— 309,500 — 
Issuance of common stock under partner physician group equity agreements upon IPO— 268,467 — 
Non-cash investment in unconsolidated subsidiaries190 763 — 
Settlement of stock-based liabilities— — 1,500 
NOTE 4. Stock Incentive Plan
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A discussion of Parent’s Stock Incentive Plan for the years ended December 31, 2022, 2021 and 2020 can be found in Note 14 in the section, “Notes to the Consolidated Financial Statements” of the consolidated financial statements of agilon health, inc.
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PART IV
ITEM 15. Exhibits, Financial Statement Schedules
(a)The following documents are filed as part of this Amendment No. 1 on Form 10-K/A:
1.Consolidated Financial Statements
Our consolidated financial statements are included in Part II, Item 8-Financial Statements and Supplementary Data of this Amendment No. 1 on Form 10-K/A.
2.Financial Statement Schedules
The following Consolidated Financial Statements are included in Part II, Item 8- Financial Statements and Supplementary Data of this Amendment No. 1 on Form 10-K/A.
Schedule I—Registrant’s Condensed Financial Statements
3.Exhibits
The information called for by this paragraph is set forth in Item 15(b) below.
(b)The documents listed in the Exhibit Index of this Amendment No. 1 on Form 10-K/A are filed, furnished, or incorporated by reference in this Amendment No. 1 on Form 10-K/A, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
Exhibit
Number		Description
23.2
31.3
31.4
32.3
32.4
104Cover Page Interactive Data File (embedded within the Inline XBRL document).*
_____________________________________________________________________
*Filed with this report.
**Furnished with this report.

(c)
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: August 8, 2023
agilon health, inc. (Registrant)
/s/ STEVEN J. SELL
Steven J. Sell,
Chief Executive Officer and President
(Principal Executive Officer)

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