What Management Said
Read the full Q3 2025 transcript ↗A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is available in the earnings press release and Form 8-K filed with the SEC. For the third quarter, we reported revenue of $1.44 billion, medical margin of -$57 million, and adjusted EBITDA of -$91 million. Allowing us to drive improved medical margin, adjusted EBITDA, and cash flow performance in 2026. While this may result in reduced membership, we're focused on profitable growth and earning the appropriate economics for the value we are delivering.
Approximately 75% of Agilon members are expected to be in 4+ Star plans, an increase from 71% in 2026 payment year. In the quarter, we have also taken steps to optimize our cost structure to align with current market dynamics, including a more balanced near-term growth outlook. Second, I will provide details on our reinstated 2025 guidance and a bridge to our jumping-off point for 2026. And finally, I will discuss the strength of our capital position based on our expectations for 2026 and a more disciplined near-term growth outlook.
As we discussed previously, our decision to take a measured approach to membership growth has resulted in a slight year-over-year decline driven by previously disclosed partner exits in a smaller 2025 class. Total revenue for the third quarter of 2025 was $1.44 billion compared to $1.45 billion in the same period of 2024. Our year-over-year revenue comparison continues to be impacted by lower-than-expected risk adjustment, as well as the impact from market and payer contract exits. The third quarter reflects the impact of lower-than-expected revenue associated with 2025 risk adjustment scores of $73 million, including a nine-month true-up of approximately $50 million for the remaining 28%.
What went well
- ACO REACH adjusted EBITDA of $18 million came in ahead of expectations, including the final 2024 reconciliation
- First-half 2025 medical cost trends restated favorably at approximately 5.7%, with Q1 and Q2 both coming down since last reported
- Restructuring actions completed in Q3 are expected to reduce operating costs by approximately $30 million in 2026 (with more in 2027)
- Enhanced data pipeline (live since Q1) now provides member-level risk scores on approximately 80% of members, including the previously outlier payer
- Reduced new inpatient heart failure diagnosis rates from 18% in 2024 to 5% in 2025; 30-day readmissions below 5% (vs ~20% national) where virtual pharmacy plus transitions-of-care cardiology are active
- 2026 Star Ratings improved: ~75% of members in 4+ Star plans (up from 71%), consolidated average of 4.2 stars, vs 65% MA market
What went wrong
- Lower-than-expected 2025 risk adjustment cut Q3 revenue by $73 million (including a ~$50 million nine-month true-up for the remaining 28% of members); full-year medical margin impact ~$150 million
- Exited markets negatively impacted the quarter by $20 million (~$60 million full-year)
- Medical margin was -$57 million and adjusted EBITDA -$91 million for the quarter
- MA membership declined to 503,000 (from 525,000) and ACO REACH to 115,000 (from 132,000) year over year
- Elevated medical cost trends in inpatient and Part B oncology drugs persisted; company still operating without a permanent CEO
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Revenue (FY2025) | FY2025 | $5.81B-$5.83B (midpoint $5.82B) |
| Medical margin (FY2025) | FY2025 | -$5M to $15M (midpoint $5M) |
| Adjusted EBITDA (FY2025) | FY2025 | -$270M to -$245M (midpoint -$258M) |
| MA membership (FY2025) | FY2025 | 503,000-506,000 |
| ACO Model membership (FY2025) | FY2025 | 113,000-115,000 |
| Year-end cash | FY2025 | ~$310M (incl. ~$65M off-balance-sheet ACO cash) |
| Year-end cash | FY2026 | at least $100M |
| 2026 medical margin jumping-off point | FY2026 | ~$135M (includes ~$150M lower-than-expected 2025 risk adjustment) |
| Operating cost / adjusted EBITDA benefit from restructuring | FY2026 | ~$30M |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | $1.44B vs $1.45B (roughly flat, slightly down) | Lower-than-expected risk adjustment and impact from market and payer contract exits |
| Medical margin | -$57M vs -$58M | Continued elevated cost trends plus risk adjustment and exited-market impacts |
| Adjusted EBITDA | -$91M vs -$96M | Lower geography entry costs and continued operating cost discipline, partially offsetting headwinds |
| MA membership | 503,000 vs 525,000 | Measured approach to growth, previously disclosed partner exits and a smaller 2025 class |
| ACO REACH membership | 115,000 vs 132,000 | Measured membership growth approach |
| ACO REACH adjusted EBITDA | $18M, ahead of expectations | Strong program performance including final 2024 reconciliation |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Disciplined payer contracting | 2025 included a 1% benefit from payer bids | Actively negotiating 2026; prepared to exit specific payers/markets that miss profitability threshold, potentially reducing membership but benefiting medical margin; ~50% of contracts were open for renewal | — |
| Enhanced data pipeline / risk adjustment | — | Live since Q1; member-level risk scores on ~80% of members, now includes the outlier new-2024 payer, giving confidence in the 2026 baseline | — |
| Reducing volatility / exposure | — | Further reducing Part D exposure (potentially below 30%), multi-year contract terms and MAC clauses, narrowing supplemental benefit risk | — |
| Clinical pathways / BOI programs | — | Heart failure, palliative care live; expanding COPD and dementia pilots into more markets in 2026; expected to contribute to 2026 results | — |
| 2026 tailwinds | — | 9% CMS benchmark rate increase, PMPM growth potentially above 9%, favorable payer bids pricing for profitability, $30M cost savings | — |
| Capital / equity actions | — | Plans to pursue a reverse stock split, seeking stockholder approval at the 2026 AGM | — |
| CEO search | — | Ongoing with good candidates; no timeline; Office of the Executive Chairman meeting daily to drive performance | — |
Q&A Summary
Baird: With ACO REACH shown as a negative for next year and risk corridors narrowing to a 10% savings rate, is ~$10-15M of EBITDA impact the right ballpark, and can you offset it?
Won't size it yet. The risk adjustment rebaselining is actually more meaningful. Several ACO REACH program changes mean lower economics though still good margin; some ACOs are being moved to the MSSP program for 2026 because economics are better there.
Jefferies: On potential further payer/market exits, are market exits on the table or just specific payers, and what order of magnitude?
Too early and midstream on contracting. Taking a disciplined approach; where economics don't make sense they don't have to do business with a payer. Members may move to another payer or a care coordination fee arrangement. Any membership reduction would benefit medical margin and EBITDA. Can't size it.
Truist: Any update on the CEO search and internal vs external candidates?
Good candidates coming forward; process open to all; feel good about pace and timing but no forecast of a conclusion. Executive Chairman is 100% focused on performance, with the Office of the Executive Chairman meeting daily.
Truist: Anything to call out in Q3 medical cost trends, high or cooling, and color into Q4?
Same issues as prior quarters: inpatient and Part B oncology drug spend running a bit high. First-half trends restated favorably (a little over mid-5%); Q3 booked conservatively in the low 6s given limited paid-claims visibility.
TD Cowen: Is there a minimum cash required at the REACH entities, and what's in the 2026 year-end cash balance?
$172M in REACH entities at quarter-end; after Q4 settlements roughly $65M, which is included in the ~$310M year-end balance. No requirement to hold the dollars there; it's a tax efficiency, and the cash is accessible if needed.
TD Cowen: Why were the remaining 28% of members' risk scores lower than expected, and implications for 2026?
Driven mainly by one payer new in 2024 with no 2023 data, making estimation harder. That payer is now on the enhanced data pipeline; the company can now calculate member-level risk scores (couldn't a year ago) that correlated highly with CMS mid-year and final scores, giving a solid foundation for 2026.
Wolfe Research: What is CMS estimating for fee-for-service trend in 2025 in ACO REACH, and what benefit-design changes are you seeing in payer bids?
Latest fee-for-service cost trend is 8.5%. Bid design differs by payer, but broadly across the network payers are pricing for margin via maximum out-of-pockets and other levers, expected to be a tailwind into 2026.
Bank of America: What savings do you expect from palliative and heart failure programs in 2025, and are they a one-time boost or annual accretion?
Programs implemented late 2024/early 2025 with a ramp period; some benefit accrues to 2026. Won't give specific PMPM savings. They are permanent programs that will continuously derive value and be iterated on, with enriched data and AI to identify undetected burden of illness.
Citi: Are you altering how you contract on the provider side, particularly risk sharing?
Not changing provider contracts. The reference was to the $30M of operating savings, part of which came from taking a fresh look at physician incentive alignment; that piece was relatively small. About half the $30M is corporate overhead, half market operating costs.
Barclays: Is benefit misalignment concentrated in regional vs national plans, and how much membership is already contracted for 2026?
It's a market-by-market item, more nuanced than by plan size; bid information drives the economics request. About 50% of contracts were open for renewal; general business terms reached on a substantial portion but hard to pin exactly; more will be worked through in Q4 with an update at year-end. Physician partners are actively at the negotiating table.
More on agilon health, inc.
Reported 2025-11-04 · figures from the agilon health, inc. Q3 2025 earnings call.
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