Summary of Alignment Healthcare FY Conference Call (December 03, 2025) Company Overview - **Company**: Alignment Healthcare (NasdaqGS:ALHC) - **Industry**: Medicare Advantage Organization - **Membership**: Over 230,000 members across five states - **Growth Rate**: 46% growth in membership in 2025 - **Margin Improvement**: Expanded margins by 250 basis points in 2025 [3][3] Key Points and Arguments Membership Growth and Retention - **2026 Membership Growth Expectation**: Anticipated growth rate between 20% to 30%, with better-than-expected retention rates potentially pushing it above 30% [6][12] - **Churn Rate**: Historically around 6% to 7% during Annual Enrollment Period (AEP), with the company performing better than the industry average of approximately 16% [11][12] - **Product Design**: Adjustments made based on competitive analysis in various markets, leading to opportunities for growth [10][10] Market Position and Strategy - **California Market**: Represents 84% of membership; the company has room to grow despite approaching 30% to 40% market share in some counties [16][17] - **Expansion Outside California**: Significant growth expected, with a doubling of membership anticipated in states like Nevada, Texas, Arizona, and North Carolina [17][19] Industry Dynamics - **Overall MA Market Outlook**: Expected to be relatively flat due to product exits and competitive dynamics; larger competitors may struggle with medical management infrastructure [21][22] - **Care Delivery Focus**: Emphasis on care delivery capabilities as a core competency, differentiating from competitors who may not manage risk effectively [24][25] Care Delivery Model Enhancements - **Quality Care Initiatives**: Investments in provider relationships and care delivery systems to improve member experience and reduce admissions [30][34] - **Transition of Care Program**: Aimed at ensuring smooth transitions for members post-discharge, with a goal to reduce readmission rates [35][36] Financial Performance and Projections - **Revenue Growth**: Revenue projected to reach $4 billion, with a history of doubling every two years since IPO [29][29] - **MLR (Medical Loss Ratio) Improvement**: Strategies in place to improve new member MLR from approximately 90% at enrollment to low 80s over time [29][29] Regulatory Environment - **Impact of Proposed Rule Changes**: Concerns regarding the elimination of the Health Equity Index reward factor and its potential impact on star ratings for 2027 [41][43] - **Star Ratings**: The company aims to maintain a strong performance in star ratings despite regulatory changes [43][45] Additional Important Insights - **Fee Delegation**: The company has taken over certain functions from Independent Physician Associations (IPAs) to improve care delivery and reduce admissions [37][39] - **Operational Discipline**: Emphasis on maintaining operational discipline in growth strategies to avoid overextending resources [27][28] This summary encapsulates the key insights from the conference call, highlighting the company's growth strategies, market dynamics, and operational focus within the Medicare Advantage sector.

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Group 1 - Alignment Healthcare, Inc. will present at the Piper Sandler 37th Annual Healthcare Conference in New York on December 3 at 10 a.m. EST [1] - The company focuses on empowering seniors to age well and live vibrant lives through its Medicare Advantage offerings [2] - Alignment Healthcare partners with trusted local providers to deliver coordinated care using a customized care model and technology [2] Group 2 - The company emphasizes high-quality, low-cost care for its members, showcasing its commitment to serving seniors [2] - Alignment Healthcare's core values include leading with a serving heart and prioritizing the needs of seniors [2]

Financial Performance - Alignment Healthcare, Inc. reported an EPS of $0.02, significantly surpassing the estimated EPS of -$0.01, resulting in an earnings surprise of 128.57% [1][5] - The company's revenue for the quarter was approximately $993.7 million, exceeding the estimated revenue of about $980.9 million, representing a 1.30% increase over the Zacks Consensus Estimate and a substantial rise from $692.43 million reported in the same period last year [2][5] Strategic Discussion - During the earnings call on October 30, 2025, key executives, including the Founder and CEO John Kao and CFO James Head, discussed the company's financial performance and strategic initiatives, attended by analysts from major financial institutions [3] Valuation Metrics - ALHC has a price-to-sales ratio of about 1.02, indicating that investors are paying $1.02 for every dollar of the company's sales, reflecting a reasonable valuation [4] - The enterprise value to sales ratio is approximately 0.97, suggesting a relatively lower valuation when considering debt and cash [4] - The company has a debt-to-equity ratio of about 2.34, indicating more than twice as much debt as equity, while a current ratio of approximately 1.66 suggests good liquidity to cover short-term liabilities [4]

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Financial Performance - Alignment Healthcare reported quarterly earnings of $0.02 per share, exceeding the Zacks Consensus Estimate of a loss of $0.07 per share, and improved from a loss of $0.14 per share a year ago, representing an earnings surprise of +128.57% [1] - The company posted revenues of $993.7 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.30%, compared to year-ago revenues of $692.43 million [2] Stock Performance - Alignment Healthcare shares have increased approximately 61.9% since the beginning of the year, significantly outperforming the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.13 on revenues of $975.47 million, and for the current fiscal year, it is -$0.18 on revenues of $3.9 billion [7] - The estimate revisions trend for Alignment Healthcare was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Medical Services industry, to which Alignment Healthcare belongs, is currently ranked in the bottom 42% of over 250 Zacks industries, suggesting potential challenges compared to higher-ranked industries [8]

Financial Data and Key Metrics Changes - Health plan membership reached 229,600 members, reflecting a growth of approximately 26% year over year [4][12] - Total revenue for Q3 2025 was $994 million, an increase of approximately 44% year over year [4][12] - Adjusted gross profit was $127 million, up 58% year over year, resulting in a consolidated Medical Benefit Ratio (MBR) of 87.2%, an improvement of 120 basis points [4][12] - Adjusted SG&A ratio improved to 9.6%, also an improvement of 120 basis points year over year [4][12] - Adjusted EBITDA was $32 million, representing a margin of 3.3% and a 240 basis points expansion compared to Q3 2024 [14] Business Line Data and Key Metrics Changes - Inpatient admissions per thousand were in the low 140s, indicating effective risk management in Medicare Advantage [5][12] - Part D performance modestly outperformed expectations, with growth in utilization trends moderating sequentially [12] Market Data and Key Metrics Changes - 100% of health plan members are in plans rated four stars or above for rating year 2026, compared to a national average of approximately 63% [6][8] - The California HMO contract achieved a four-star rating for the ninth consecutive year, while competitors in the state have about 70% of members in plans rated four stars or higher [6][8] Company Strategy and Development Direction - The company is focused on investments in back office automation, clinical engagement, AVA AI clinical stratification, and STARS durability to differentiate from competitors [5][10] - The strategy for 2026 includes a balanced approach to membership growth and profitability, with expectations of at least 20% year-over-year growth [10][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to manage care effectively, which is crucial in a tightening reimbursement environment [76] - The company is well-positioned for growth despite industry disruptions and anticipates continued strong performance in 2026 [10][76] Other Important Information - The company raised its full-year guidance for adjusted EBITDA to $94 million at the midpoint, up from an initial guidance of $47.5 million [6][15] - Cash and cash equivalents at the end of Q3 were $644 million, positively impacted by the timing of medical expense payments [14] Q&A Session Summary Question: Insights on growth for 2026 and market share opportunities - Management is pleased with growth across California and other states, emphasizing strong provider networks and product mix [20][21] Question: Considerations for M&A or partnerships - The company is discerning in evaluating tuck-in opportunities for supplemental benefits, focusing on margin improvement with minimal execution risk [23][25] Question: Status of risk sharing with physicians in California - Approximately 65% to 70% of the business is in shared risk arrangements, with expectations for more shared risk in the future [28][29] Question: SG&A reinvestment details - SG&A was favorable in Q3, with investments aimed at automation and efficiency improvements across the organization [32][33] Question: Clarification on star ratings and underlying performance - The overall raw star rating score improved significantly, with management confident in the quality of care provided [36][38] Question: Brand investment strategy - The company is establishing a brand to reflect its commitment to quality Medicare Advantage services, aiming to change perceptions of MA [40][42] Question: Retention versus new member acquisition for 2026 - Both gross ads and retention rates are strong, with investments in member experience yielding positive results [45][46] Question: Management of Part D redesign - The company has maintained stability in benefits and is well-prepared for the competitive landscape in Part D [48][49] Question: Future competitive environment and market expansion - The company plans to explore new markets while ensuring that care management capabilities remain strong [80]

Core Insights - Alignment Healthcare reported its second consecutive profitable quarter, achieving a net income of $3.7 million, attributed to better management of medical expenses compared to competitors in the Medicare Advantage market [3][4][6]. Financial Performance - The company’s medical benefit ratio decreased to 87.2%, down from 88.4% in the same quarter last year, indicating improved cost management [3][4]. - Total revenue increased by 43.5% to $993.7 million, driven by growth in Medicare Advantage membership [6]. Membership Growth - Alignment's total health plan membership rose nearly 26% to 228,600 by the end of the third quarter [7]. Market Position - The company continues to operate Medicare Advantage plans in five states and 45 counties, expanding its plan benefit packages from 56 to 68 [8]. - Competitors like Humana and UnitedHealth Group are scaling back in certain markets, while Alignment is confident in its growth strategy [8]. Industry Context - The Medicare Advantage sector is facing challenges with rising medical claims as patients seek delayed treatments post-Covid-19, leading to higher medical cost ratios for larger insurers [5].

Financial Performance - Total revenues for Q3 2025 reached $993.7 million, a 43.5% increase from $692.4 million in Q3 2024[19] - Earned premiums for Q3 2025 were $983.7 million, up 43.8% from $684.5 million in Q3 2024[19] - Net income for Q3 2025 was $3.7 million, compared to a net loss of $26.4 million in Q3 2024[19] - Total revenues for the nine months ended September 30, 2025, reached $2,935,915, a 46.6% increase from $2,002,320 in 2024[37] - Net income for the nine months ended September 30, 2025, was $10,028, compared to a net loss of $97,007 for the same period in 2024[26] - Adjusted EBITDA for the three months ended September 30, 2025, was $32.4 million, a significant increase of 447.8% from $5.9 million in the same period of 2024[150] - Adjusted EBITDA for Q3 2025 was $32.4 million, a significant increase from $5.9 million in Q3 2024, while for the nine months ended September 30, 2025, it reached $98.5 million compared to a loss of $24,000 in the same period of 2024[162] Medical Expenses - Medical expenses for Q3 2025 were $868.0 million, a 41.6% increase from $613.4 million in Q3 2024[19] - Medical expenses for the nine months ended September 30, 2025, were $2,566,067, up from $1,788,446 in 2024, reflecting a 43.4% increase[37] - The medical benefits ratio (MBR) improved to 87.2% for the three months ended September 30, 2025, compared to 88.4% in the same period of 2024[150] Assets and Liabilities - Total assets increased to $1,102.6 million as of September 30, 2025, from $782.1 million at the end of 2024, representing a 41% growth[17] - Current liabilities rose to $611.1 million as of September 30, 2025, compared to $351.8 million at the end of 2024, a 73.7% increase[17] - Long-term debt remained relatively stable at $322.7 million as of September 30, 2025, compared to $321.4 million at the end of 2024[17] - The accumulated deficit decreased to $998.0 million as of September 30, 2025, from $1,008.3 million at the end of 2024[17] Cash Flow - Cash provided by operating activities for the nine months ended September 30, 2025, was $190,302, significantly higher than $43,481 in 2024[26] - The company reported a net increase in cash of $185,236 for the nine months ended September 30, 2025, compared to an increase of $137,745 in 2024[26] - Cash, cash equivalents, and restricted cash at the end of the period totaled $620,178, compared to $342,699 at the end of September 2024[27] - Cash and cash equivalents, along with other current investments, increased to $618.0 million as of September 30, 2025, compared to $340.3 million a year earlier[170] Membership Growth - Health Plan Membership increased to 229,600 as of September 30, 2025, representing a 30% compound annual growth rate across 45 markets and 5 states[139] - Health plan membership increased by 25.9% year-over-year, reaching 229,600 members as of September 30, 2025[150] Expenses - Selling, general, and administrative expenses for Q3 2025 were $110.0 million, up 21.0% from $90.9 million in Q3 2024[19] - Selling, general, and administrative expenses for Q3 2025 were $110.0 million, up 21.1% from $90.9 million in Q3 2024, and for the nine months, they increased to $317.6 million, an 18.0% rise from $269.2 million[172] - Interest expense decreased to $4.0 million for Q3 2025, down 42.0% from $6.9 million in Q3 2024, primarily due to a lower interest rate of 4.25% on convertible notes[174] Regulatory Compliance - The company aims to maintain a minimum Medical Loss Ratio of 85% as part of its compliance with CMS regulations[158] - The company was in compliance with minimum capital requirements as of September 30, 2025, as prescribed by various regulatory authorities[121] - As of September 30, 2025, the company's health plans were in compliance with minimum capital requirements set by regulatory authorities[182] Future Outlook - The company expects to discontinue participation in the ACO REACH model by December 31, 2025, with an immaterial impact on financial results[43] - The company anticipates increased corporate, general, and administrative expenses to support growth initiatives in the future[148] - The company expects to require additional capital resources to support future investments in operations and technology development[179] Other Financial Metrics - The company accrued a potential liability of $913,000 related to a tentative settlement of a class action lawsuit as of September 30, 2025[128] - The company recognized impairment charges of $634 related to goodwill for the nine months ended September 30, 2025, compared to $702 for the same period in 2024[90] - The company recorded a credit loss related to accounts receivable of $286 for the three months ended September 30, 2025, compared to $28 for the same period in 2024[87]

Financial Performance - Third quarter 2025 revenue reached $993.7 million, representing a 43.5% increase year-over-year[6] - Adjusted gross profit for the third quarter was $127.5 million, with an adjusted EBITDA of $32.4 million[7] - For the fourth quarter of 2025, the company projects revenue between $995 million and $1,010 million[4] - The adjusted EBITDA guidance for the fourth quarter is expected to range from $(9) million to $(1) million[4] - Total revenues for the three months ended September 30, 2025, were $993.7 million, a 43.5% increase from $692.4 million in the same period of 2024[17] - Earned premiums for the nine months ended September 30, 2025, reached $2.91 billion, compared to $1.98 billion for the same period in 2024, reflecting a 46.8% growth[17] - Net income for the three months ended September 30, 2025, was $3.7 million, a significant recovery from a net loss of $26.4 million in the same period of 2024[17] - Basic net income per share for the three months ended September 30, 2025, was $0.02, compared to a loss of $0.14 per share in 2024[17] Membership and Ratings - Health plan membership at the end of the quarter was approximately 229,600, up 25.9% year-over-year[7] - The company has 100% of its members in plans rated 4 stars or higher for the second consecutive year, including two 5-star contracts in Nevada and North Carolina[6] Assets and Equity - The total assets as of September 30, 2025, were $1,102.6 million, compared to $782.1 million as of December 31, 2024[14] - Total stockholders' equity increased to $161.9 million as of September 30, 2025, from $100.9 million at the end of 2024[15] - Cash and cash equivalents at the end of the period on September 30, 2025, totaled $620.2 million, an increase from $342.7 million at the end of September 30, 2024[20] Medical Expenses - Medical expenses payable increased to $528.8 million from $289.8 million year-over-year[15] - Medical expenses for the three months ended September 30, 2025, were $868.0 million, up from $613.4 million in 2024, representing a 41.6% increase[17] - The company reported a Medical Benefits Ratio (MBR) calculated by dividing total medical expenses by total revenues, although specific MBR figures were not provided[25] Cash Flow and Operations - The company experienced a net cash provided by operating activities of $190.3 million for the nine months ended September 30, 2025, compared to $43.5 million in 2024[19] - Adjusted EBITDA is used by the company to assess operating performance, although specific figures for this measure were not disclosed in the provided content[21] - The company plans to continue evaluating acquisition opportunities as part of its growth strategy, leveraging non-GAAP financial measures for internal assessments[21]