Alignment Healthcare, Inc. (ALHC) Earnings

Management highlights

- Strong execution across sales, member retention, and clinical operations supported the results. - SG&A ratio improvement reflects early outcomes of infrastructure scaling investments. - Scrutinizing and revalidating people, process, technology, and clinical culture to ensure scalability. - Focusing on cost efficiencies through claims automation, contract management infrastructure improvements, and provider data management scalability. For example, claims auto adjudication rate has increased from less than 15% 12 months ago to over 60% year - to - date. - Deploying AI - enabled contract management solutions and AVA AI risk gratification models. - Investing in talent to enhance technology infrastructure scalability.

Guidance

For full - year 2026, health plan membership is expected to be between 294,000 and 299,000 members. Revenue is expected to be in the range of 5.16 to 5.21 billion. Adjusted gross profit is expected to be between 620 million and 650 million. Adjusted EBITDA is expected to be in the range of 138 to 163 million. For the second quarter, health plan membership is expected to be between 288,000 and 290,000 members, revenue is expected to be in the range of $1.30 to $1.32 billion, adjusted gross profit is expected to be between $167 million and $177 million, and adjusted EBITDA is expected to be in the range of $50 to $60 million. Membership growth expectation is increased due to continued strength in sales operations and outperformance in member retention. Revenue guidance is raised to approximately $5.2 billion at the midpoint. Low ends of adjusted gross profit and adjusted EBITDA guidance ranges are raised by $5 million. Expect inpatient admissions per thousand to run higher year over year, and no assumption for final suite pickup from new members in outlook assumptions.

Segment performance

For first quarter 2026, health plan membership was 284,800 with year - over - year growth of approximately 31%. Total revenue was $1.2 billion, up 33% year over year. Adjusted gross profit was $146 million with an adjusted MBR of 88.2%, improving by 20 basis points year over year. Adjusted SG&A was $108 million, with adjusted SG&A as a percentage of revenue decreasing by 60 basis points year over year to 8.7%. Adjusted EBITDA was $38 million, growing by 88% compared to the prior year.

Risks & headwinds

- CMS rule change impacted observation determination process, driving inpatient admissions per thousand towards the higher end of expectations in Q1, which was an internal workflow issue but has been resolved. - Growing and scaling a business in the complex Medicare Advantage industry is not a straight line. - Risks related to risk adjustment litigation, such as extrapolation methodology litigation.

Analyst Q&A

• Q: Following up on the hospital observation issue, maybe walk us through what changed, how it was resolved, and give us some sense for how hospital utilization trended now that it's been resolved.

  A: John responded that it was a workflow problem where they paid authorizations at full acute rates when should have paid at observation rates, it impacted January numbers, was an internal workflow issue, corrected by end of February, and utilization was tracking as expected otherwise.

• Q: Talk a little bit about 2Q MBR, stripping out sweeps, and what's assumed for year - over - year improvement in the second quarter that is maybe different from the first quarter.

  A: John stated second quarters are usually seasonal better quarters with natural decline in MBR, expecting improvements across all margins in first half, with MBR, SG&A, and EBITDA improvements.

• Q: Just get a little bit more detail on the inpatient issue, including if it's an internal system covering all markets or just California and if there's an opportunity to claw back additional costs.

  A: Scott was told it's an internal corporate function scaling and growing with new systems and workflows, not just an ex - California issue, and unfortunately no opportunity to claw back additional costs.

• Q: How are you feeling about risk adjustment versus expectations given focus on more medically complex members this year.

  A: Jim said loyal population has good line of sight, but on new members (newbies), they book to paid MMR, and will get more info in second quarter on risk adjustment.

• Q: It sounds like this inpatient admit issue is fully resolved, but would you say you knew about it by the time you reported earnings and talk about LIS SNP members impact on cohort maturation into 27.

  A: Michael was told they knew about the issue by end of January, and on LIS SNP members, need to wait for sweep data, but there's opportunity to improve embedded earnings with more time with newbie members.

• Q: How you're thinking about supporting the bridge model for GLP - 1s that launches this summer and new market plans for 27 post - rate announcement.

  A: John said would participate with certain conditions, and will be expanding into new markets, some large markets next year, but not commenting on specific states yet.

• Q: On the GNA, were there any unique dynamics this quarter that might explain the large increase and thoughts on level of conservatism in reserve methodology.

  A: Jim said DCPs reserve bills have some components, reserve methodology is conservative and consistent, not changed, and DCPs pick up a bit but no change in conservatism.

• Q: Alignment is predominantly an HMO business, but leaned more into PPO product this year, walk through rationale, relative attractiveness, and if PPO will be a larger driver of growth.

  A: John said part of the reason is over half the business is globally capitated, and long - term, unit economics may be tough but they think they should be able to succeed with PPO but haven't cracked the code yet.

• Q: Recall last quarter provider engagement negotiations outstanding in some states, has that progressed and does final rate update make difference.

  A: Jonathan was told negotiations part was fine, more around provider engagement model, and in some markets it has progressed, and final rate update may have impact on negotiations.

• Q: Follow up on final rate notice, think if 2 to 3% is where rate notices will continue and what level of unmanaged trend could be managed without cutting benefits.

  A: Craig was told trend nationally is way higher than 2.48%, and for them, need to look at specific geographic impact, and they feel good about their position for 27 bids.

• Q: Tie together ancillary benefits impact on MLR and capital deployment, latest thoughts on deploying capital to bring in - house.

  A: John said supplemental benefits are an opportunity to lower MLR by bringing some in - house, and they are weighing decisions on M&A in ancillary areas which could be a win for 300,000 customers in the future.