• Health Plan Membership: 189,100 members, increased 59% year-over-year.
• Q4 2024 Revenue: $701 million, grew approximately 51% year-over-year.
• Full Year 2024 Revenue: $2.7 billion, 48% growth year-over-year.
• Adjusted Gross Profit (Q4 2024): $88 million, with a consolidated MBR of 87.5%.
• Adjusted Gross Profit (Full Year 2024): $303 million, MBR of 88.8%.
• Adjusted EBITDA (Q4 2024): Positive $1 million, 400 basis points margin expansion year-over-year.
• Adjusted EBITDA (Full Year 2024): Positive $1 million, 200 basis points margin expansion year-over-year.
• SG&A (Full Year 2024): $371 million, adjusted SG&A $301 million, 23% increase year-over-year.
• Cash and Investments: $471 million at year-end, including proceeds from convertible senior notes.
• 2025 Guidance - Revenue: $3.72 billion to $3.78 billion.
• 2025 Guidance - Adjusted Gross Profit: $415 million to $445 million.
• 2025 Guidance - Adjusted EBITDA: $35 million to $60 million.
• 2025 Guidance - Health Plan Membership: 227,000 to 233,000 members.

• Warning! GuruFocus has detected 2 Warning Sign with ALHC.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Alignment Healthcare Inc (NASDAQ:ALHC) achieved a 59% increase in health plan membership, surpassing initial guidance by over 25,000 members.
• Total revenue for the fourth quarter of 2024 grew by approximately 51% year-over-year, reaching $701 million.
• The company reported its first year of adjusted EBITDA profitability as a public company, with a positive adjusted EBITDA of $1 million.
• ALHC's ex-California markets experienced over 100% growth, with Nevada achieving over 10,000 members.
• The company is well-positioned for future growth, with 98% of members in plans rated 4 stars or above for the 2026 payment year, significantly outperforming the industry average.

Negative Points

• The company faces challenges from the second phase-in of the V28 risk model changes, which could impact margins.
• There is a modestly higher utilization volume expectation due to the mix of membership, which could affect profitability.
• ALHC's adjusted SG&A expenses increased by 23% year-over-year, which may impact operating leverage.
• The company anticipates changes in MBR seasonality due to the Inflation Reduction Act, potentially affecting financial performance.
• ALHC's growth strategy involves significant investment in clinical resources, which could increase operational costs.

Q & A Highlights

Q: Can you explain the key assumptions behind the 2025 adjusted EBITDA guidance and what factors might lead to achieving the high end versus the low end of the range? A: Robert Freeman, CFO, explained that the guidance reflects confidence in their 2024 performance and outlook for 2025. Key variables include the impact of the Inflation Reduction Act on Part D, utilization rates, and membership growth. The low end of the range includes more conservative assumptions, particularly regarding Part D changes. Overall, they feel confident in their range, especially with 50% of members in year 1 or 2 cohorts.

Q: How do you expect membership growth to split between California and non-California markets in 2025? A: Freeman noted that while ex-California markets are expected to grow faster, California will still drive over 50% of total net member growth due to strong AEP results. Engagement with new members in non-California markets is consistent with California, with no significant differences in engagement levels.

Q: Why does your MLR guidance for 2025 show a decrease compared to peers who are expecting increases? A: Freeman highlighted that their model's ability to manage care and engage members allows them to control MLR effectively. While peers face challenges with Stars changes and utilization, Alignment's 2024 MLR was only up 130 basis points year-over-year despite 59% membership growth. For 2025, they anticipate some headwinds but also benefits from maturing member cohorts and modest benefit trims.

Q: What are your thoughts on the 2026 CMS rate bonus and its impact on your competitive position? A: Freeman stated that the changes provide a buffer for maintaining a 4-star rating and offer a tailwind towards achieving higher star ratings. Competitors are expected to face challenges, with only one remaining at or above 4 stars in 2026, providing Alignment with a significant growth opportunity.

Q: How is cohort maturation progressing, and are there any concerns impacting this dynamic? A: Freeman expressed confidence in cohort maturation, noting that engagement levels are strong, and the transition from year 1 to year 2 is progressing well. The large membership growth in the latter half of 2024 provides a tailwind for 2025 and beyond, with engagement driving improved MLR performance.

Q: Can you elaborate on the modestly higher utilization assumption in your 2025 guidance? A: Freeman explained that the higher utilization assumption is due to an increase in duals membership, which typically has higher utilization rates. They expect admissions per 1,000 to be slightly up year-over-year but are mindful of the changes in membership mix.

Q: How does your Part D MLR experience differ from peers, and what are your expectations for 2025? A: Freeman noted that their Part D MLR typically improves throughout the year, and they expect a similar pattern in 2025, albeit with a flatter slope. Differences with peers may be due to their broader stand-alone Part D offerings, which Alignment does not have.

Q: What drove the higher G&A in Q4, and how should we think about G&A progression in 2025? A: Freeman attributed the higher Q4 G&A to increased sales and marketing spend and higher commission costs due to membership outperformance. For 2025, they expect continued control over SG&A relative to membership growth, with confidence in managing operating leverage.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.