Alignment Healthcare, Inc. Q3 FY2025 earnings call

• Exceeded high end of guidance metrics for Q3 2025, with health plan membership growth, revenue increase, and adjusted EBITDA surpassing high end of guidance.
• 100% of health plan members in plans rated 4 stars or above for 2026, including 5-star contracts in North Carolina and Nevada, and 4.5 stars in Texas.
• Investments in back-office automation, clinical engagement, AVA AI clinical stratification, and Stars durability to improve operations and separate from competitors.
• 2026 AEP approach balances membership growth and profitability, with benefits generally stable to modestly down, and confidence in at least 20% membership growth based on early selling season activity.

For the third quarter 2025, health plan membership was 229,600 members, representing a 26% year-over-year growth. Total revenue was $994 million, up ~44% year-over-year. Adjusted gross profit was $127 million, a 58% year-over-year increase. Consolidated MBR was 87.2%, an improvement of 120 basis points over the prior year. Adjusted SG&A ratio was 9.6%, a 120 basis points improvement year-over-year. Adjusted EBITDA was $32 million. For the full year 2025, revenue is expected to be in the range of $3.93 billion to $3.95 billion, adjusted gross profit between $474 million and $483 million, and adjusted EBITDA between $90 million and $98 million.

• Fourth quarter 2025 guidance: health plan membership 232,500-234,500; revenue $995 million-$1.01 billion; adjusted gross profit $104 million-$113 million; adjusted EBITDA -$9 million to -$1 million.
• Full year 2025 guidance: revenue $3.93 billion-$3.95 billion; adjusted gross profit $474 million-$483 million; adjusted EBITDA $90 million-$98 million. Raised full year guidance due to membership growth.
• Confidence in at least 20% membership growth in 2026 based on early AEP activity.

• Industry disruption in MA, including changes in reimbursement and star standards.
• Uncertainty around CMS policy changes, such as V29 and encounter-based risk adjustment.
• Seasonal flu impact on inpatient admissions and costs in Q4.
• Timing differences in medical expense payments affecting cash flow and days claims payable.

Q: Scott Fidel from Goldman Sachs asks about market share opportunities from industry disruption and M&A considerations.

A: John Kao responds on growth across geographies, confidence in managing risk, and consideration of tuck-in acquisitions for supplemental benefits.

Q: Matthew Gillmor from KeyBanc asks about SG&A reinvestment and Star ratings reconciliation.

A: James Head and John Kao discuss SG&A timing and raw Star rating improvements.

Q: Michael Ha from Baird asks about Star rating reconciliation and brand investment impact on member acquisition costs.

A: John Kao and James Head address Star rating mechanics and brand investment as a long-term growth strategy.

Q: Jessica Tassan from Piper Sandler asks about AEP retention vs. gross new adds and benefit structure.

A: John Kao comments on strong gross adds and retention, and benefits designed for consistency and market-by-market strategies.

Q: Ryan Langston from TD Cowen asks about guidance revision and MA market growth outlook.

A: James Head and John Kao discuss execution success and industry growth dynamics.

Q: Craig Jones from Bank of America asks about V29 and risk adjustment implications, and Star rating cushion from HealthEquity index.

A: John Kao addresses V29 uncertainty and HealthEquity index impact on Star ratings.

Q: Andrew Mok from Barclays asks about flu impact on costs and investment spend allocation.

A: James Head discusses flu cost trends and strategic investment allocation.

Q: Benjamin Mayo from Leerink Partners asks about RADV and market commissionability.

A: James Head comments on RADV uncertainty and commissionability status.

Q: Jonathan Yong from Barclays asks about AEP member makeup and future market expansion.

A: John Kao talks about member makeup in AEP and future market expansion plans.

Q: Ryan Daniels from William Blair asks about replicability of business model and market expansion plans.

A: John Kao discusses replicability translating to MLR performance and future market expansion intentions.