Alignment (ALHC) Q4 2025 Earnings Call Transcript

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DATE

Feb. 26, 2026 at 5 p.m. ET

Call participants

• Founder and Chief Executive Officer — John Kao
• Chief Financial Officer — James M. Head

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Takeaways

• Health plan membership -- 236,300 members at year-end, up 25%, with ex-California membership doubling to about 38,000 (16% of total).
• Total revenue -- $3.9 billion for the year, a 46% increase.
• Adjusted gross profit -- $495 million, with an MBR of 87.5%, improving by 130 basis points.
• Adjusted EBITDA -- $110 million for 2025, up from $1 million in 2024, with a 2.8% margin and 270 basis points of expansion.
• Adjusted SG&A as percentage of revenue -- 9.7% for 2025, down from 11.1%, a 140 basis point improvement.
• Q4 metrics -- Revenue of $1 billion (up 44%) and adjusted EBITDA of $11 million, both above guidance.
• Cash and investments -- $604 million at year-end, with positive free cash flow in 2025.
• Revolving credit facility -- $200 million facility closed after quarter-end; management does not expect to draw on it in the near term.
• 2026 guidance -- Health plan membership forecast between 292,000 and 298,000; revenue guidance midpoint $5.16 billion (31% growth); adjusted EBITDA forecast of $133 million to $163 million.
• First quarter 2026 expectations -- Membership between 281,000 and 285,000; revenue between $1.21 billion and $1.23 billion; adjusted EBITDA of $26 million to $36 million.
• Membership growth (Jan. 2026) -- 275,300, a 31% increase, with 23% growth in California and over 80% in ex-California markets.
• Adjusted MBR 2026 guidance -- Midpoint of 87.7%, reflecting higher new member mix in LIS, dual eligible, and C-SNP populations, partially offset by member retention and product design changes.
• Seasonality -- Expected lower MBR in the first half, higher in the second half, with Part D profitability more weighted to the first half.
• Chart review exposure -- "Approximately 1% of our total HCC value is derived from chart reviews of any kind," with an even smaller portion from unlinked chart reviews.

Summary

Alignment Healthcare (NASDAQ:ALHC) reported record membership growth, margin expansion, and positive free cash flow, achieving its highest adjusted EBITDA to date. Management credited its clinical and cost management model for navigating industry disruption and V28 risk model changes. 2026 guidance projects continued top-line growth, higher adjusted EBITDA, and a focus on scaling outside California, with quality ratings expected to support further market expansion.

• CEO John Kao stated the company will "pursue measured, sustainable growth," emphasizing provider relationships and operational discipline over absolute member gains.
• Management reported nearly 20% improvement in voluntary disenrollment during AEP, with 80% of gross sales from plan switchers.
• Investment in AI-enabled workflow and technology infrastructure is planned for 2026 to accelerate administrative scalability and financial reporting.
• The company expects further SG&A leverage, with savings targeted toward clinical advancements, new market playbooks, and technology growth.
• All members remain in plans rated four stars or higher, supporting continued Stars payment advantages into 2027.
• Leadership anticipates modestly higher admissions per thousand in 2026 due to new member mix, while maintaining focus on admissions management and quality control.
• Management said, "We do not rely on that that much at all," regarding limited risk from regulatory changes around unlinked chart reviews.
• Operating cash flow strength and the new revolving credit facility position the company to fund ongoing organic expansion without new borrowings.
• Management highlighted readiness to enter new states in 2027 regardless of reimbursement rate outcomes, provided provider engagement targets are met.

Industry glossary

• MBR (Medical Benefit Ratio): Percentage of premium revenue spent on member medical costs, key to health plan profitability analysis.
• Part D: Medicare-approved prescription drug coverage component of Medicare Advantage plans.
• AEP (Annual Election Period): Annual Medicare plan enrollment window, driving membership growth and plan switching.
• Sweep pickup: Process of receiving additional risk-adjustment payments from new member data retroactively, impacting profit metrics.
• LIS (Low Income Subsidy): Medicare program subsidizing prescription costs for qualifying low-income eligible members.
• C-SNP (Chronic Condition Special Needs Plan): Medicare Advantage plan type for members with specific chronic health conditions.
• D-SNP (Dual Eligible Special Needs Plan): Plan for individuals eligible for both Medicare and Medicaid.
• RAF score (Risk Adjustment Factor Score): Metric reflecting the expected cost of care for a plan's members, impacting reimbursement.
• OEP (Open Enrollment Period): Additional opportunity for plan adjustments and member retention outside the annual election window.
• Chart reviews: Retrospective reviews of patient records used to support diagnosis-based risk scores in Medicare Advantage.
• Unlinked chart reviews: Chart reviews lacking supporting claims or encounters, relevant to recent risk adjustment regulatory scrutiny.
• Stars / Star ratings: CMS quality ratings for Medicare Advantage plans, directly influencing bonus payments and marketing benefits.
• ADK (Admissions per thousand): Annualized metric of inpatient hospital admissions per 1,000 covered lives, used to track care effectiveness and cost trend.
• AIVA: Alignment Healthcare's proprietary clinical technology and analytics platform serving care management and stratification.
• Care Anywhere: The company's in-home and virtual clinical care delivery model directed at high-risk polychronic members.

Full Conference Call Transcript

John Kao: Hello, and thank you for joining us on our fourth quarter earnings conference call. For the fourth quarter 2025, health plan membership of 236,300 represented year-over-year membership growth of approximately 25%. This supported total revenue of $1,000,000,000, which grew 44% year over year. During the fourth quarter, we also exceeded the high end of guidance across each of our profitability metrics. Adjusted gross profit of $125,000,000 represented an adjusted MBR of 87.7%. Meanwhile, adjusted EBITDA of $11,000,000 solidly surpassed our guidance range of negative $9,000,000 to negative $1,000,000. For the full year, total revenue of $3,900,000,000 grew 46% year over year.

Adjusted gross profit of $495,000,000 resulted in an MBR of 87.5%, representing an improvement of 130 basis points year over year. Taken together, this year marks a tremendous milestone in the maturation of our company's profitability. We transformed from roughly breakeven, just $1,000,000 in adjusted EBITDA in 2024, to delivering adjusted EBITDA of $110,000,000 in 2025. This reflects an adjusted EBITDA margin of 2.8% and represents 270 basis points of margin expansion year over year. Throughout the course of 2025, we have demonstrated both the strategic and operational advantages of our clinically centric model, which is purpose-built to deliver the highest quality care at the lowest cost.

The data insights provided by our AIVA technology platform combined with our Care Anywhere clinical model provided us with the visibility and control necessary to navigate a year of significant disruption where we overcame the second phase-in of the V28 risk model, a redesign of the Part D program, and broad utilization pressures across the Medicare Advantage industry. And importantly, this allowed us to pursue growth while expanding margins, even as competitors took a step back in 2025. I would like to congratulate our team for their success and recognition by Fortune Magazine for their unwavering commitment to seniors, which named us to its World's Most Admired Companies list for the first time.

We believe our model of lowering costs by delivering more care to seniors, not less, is the MA model of the future, and we are eager to serve more seniors as we continue along our path towards a million members. 2025 also marked an important step in demonstrating the replicability of our model beyond California. We more than doubled our ex-California membership while consistently exceeding our financial expectations throughout the course of the year. As of December 2025, we had approximately 38,000 members across our markets outside of California, representing approximately 16% of our total membership. We have grown confidently outside of California by first leading with quality, which starts with success in Star ratings.

We now have a five-star plan in North Carolina for the third consecutive year, two five-star plans in Nevada, a four-and-a-half-star plan in Texas, and a four-star plan in Arizona. These achievements are further supported by the portability of our Care Anywhere clinical model, which focuses on delivering care to our high-risk polychronic members. By leveraging the strength of our care model, quality of clinical outcomes, and scalability of our health plan operations, we are unlocking the growth potential within these markets. We are now focused on sustaining the momentum of our ex-California markets.

In 2026, we plan to invest in our sales and distribution engine, build deeper relationships with our broker partners, and continue growing with Align provider partners where we have durable relationships. With less than 4% market share across our 23 counties outside of California, we see significant opportunity to take share over the coming years. Turning to our 2026 AEP results, we grew to 275,300 health plan members in January 2026, representing 31% growth year over year. We saw broad growth across each of our markets with 23% growth in California, and more than 80% growth in our ex-California counties. Importantly, we focused on growing responsibly through our bid design and sales strategy.

We drove nearly 20% improvement to our AEP voluntary disenrollment metric and sourced approximately 80% of our gross sales from plan switchers. By taking a balanced approach to growth and profitability this year, we remain mindful of the impact of the final phase-in of V28 while still capitalizing on the growth opportunity in a year of significant disruption. Taken together, we are pleased with the solid growth in California while continuing our rapid expansion outside of California. Our growth this year is adding to our future embedded earnings potential while supporting our near-term operating leverage objectives. Meanwhile, improved operating efficiency across the enterprise is creating additional capacity to reinvest in long-term projects and scalability initiatives.

Each of these factors is giving us confidence in our initial full-year adjusted EBITDA guidance range of $133,000,000 to $163,000,000. This is consistent with our previous expectations for consensus adjusted EBITDA of approximately $145,000,000 to be in the range of our initial 2026 outlook. Jim will expand further on our financial outlook in his remarks. Looking beyond 2026, I would like to spend a few minutes on the 2027 Advance Rate Notice. On a net basis, the announcement appeared to indicate a relatively flat rate environment for the industry. This reflected a combination of underlying cost trends and policy changes.

While we have heard disappointment across the industry, we believe the update is largely consistent with the CMS focus on program integrity and aligning payments with underlying costs. Specifically, we are encouraged that benchmark trends reflect continuing growth in costs within the fee-for-service population. This was partially offset by certain policy adjustments including those related to skin substitutes. As it relates to unlinked chart reviews, we have long supported excluding these records from risk score calculations as part of improving program integrity. Of note, our exposure is limited. Approximately 1% of our total HCC value is derived from chart reviews of any kind. Within that category, an even smaller subset is related to unlinked chart reviews.

For those, we believe we have a clear path to ensuring the diagnoses are supported by a linked claim or encounter over time. Most importantly, the current environment reinforces the importance of our strong clinically led model and core medical cost management competency. We believe this enables us to win in any rate environment, just as we have demonstrated in 2024 and 2025, where the industry experienced tighter reimbursement. And furthermore, we will continue to have Stars payment advantages in 2027 with 100% of our members in plans rated four stars or above.

In closing, we believe we are entering a reimbursement environment that creates a more level playing field with our competitors, which allows our distinct care management model to shine. We are proving the effectiveness of our distinct medical cost advantages with the results we have shared with you over the past two years. While we are pleased with our performance, we are not done yet. 2026 will be a year of continuous improvement where we plan to make targeted investments across our clinical model, new market playbook, and scalability initiatives, including investment in AI workflows to improve administrative efficiency. In doing so, we are balancing our near-term financial objectives with unlocking the embedded potential of our model.

With that, I will turn the call over to Jim to further discuss our financial results and outlook. Jim?

James M. Head: Thanks, John. I will jump right in with our 2025 results. For the year ending December 2025, health plan membership of 236,300 increased 25% year over year. Growth in membership drove total revenue to $3,900,000,000 for full year 2025, representing 46% growth year over year. Full year adjusted gross profit of $495,000,000 represented an MBR of 87.5%, an improvement of 130 basis points year over year. We ended the year with strong outcomes across all major cost categories. Of note, Part D profitability and supplemental expenses trended in line with our guidance expectations. Meanwhile, our proactive care approach again delivered strong outcomes, leading to inpatient admissions per thousand in the low 140s during the fourth quarter.

Taken together, the strength of our performance across each of these medical cost categories and the durability of our clinical model are giving us confidence in our underlying bid assumptions as we step into 2026. Moving to operating expenses, our operating cost ratios continue to demonstrate significant year-over-year improvement as our operational infrastructure scaled to support our new members. Full year 2025 GAAP SG&A was $443,000,000. Our adjusted SG&A was $385,000,000, an increase of 28% year over year. Adjusted SG&A as a percentage of revenue declined from 11.1% in 2024 to 9.7% in 2025, representing an improvement of approximately 140 basis points. Taken together, we delivered full year adjusted EBITDA of $110,000,000 and an adjusted EBITDA margin of 2.8%.

This represents 270 basis points of margin expansion year over year. Turning to cash flow and our balance sheet, we generated positive free cash flow in 2025 and ended the year with $604,000,000 in cash and investments. Subsequent to the quarter, today, we announced the close of a $200,000,000 revolving credit facility. This facility is simply good housekeeping and further evidence of the maturation of our capital structure. We do not expect to draw on the credit facility in the near term, and our increasing positive free cash flow position allows us to support our organic growth objectives.

Moving to our guidance, for the full year 2026, we expect health plan membership to be between 292,298 members, revenue to be in the range of $5,140,000,000 to $5,190,000,000, adjusted gross profit to be between $615,000,000 and $650,000,000, and adjusted EBITDA to be in the range of $133,000,000 to $163,000,000. For the first quarter, we expect health plan membership to be between 281,285 members, revenue to be in the range of $1,210,000,000 to $1,230,000,000, adjusted gross profit to be between $130,000,000 and $148,000,000, and adjusted EBITDA to be between $26,000,000 and $36,000,000.

As it pertains to our full year expectations, given the strength of our OEP results and continued stability with our retention, we are raising our year-end membership guidance by 2,000 members at the midpoint, relative to the commentary we provided in our January 8-K. Moving to revenue, the midpoint of our initial revenue guidance range of $5,160,000,000 represents 31% growth year over year. The expected year-over-year increase to our revenue is primarily driven by our membership outlook. Meanwhile, our underlying revenue PMPM assumptions are balanced by increases to benchmark rates and the Part B direct subsidy.

This is partially offset by the impact of the final phase-in of V28 risk model changes and mix of growth outside of California, which carries modestly lower per-member revenue. Turning to adjusted gross profit, our $633,000,000 guidance midpoint implies an MBR of 87.7%. The outlook contemplates improvement from the retention of existing members and modifications to our product designs within markets to reflect the current reimbursement environment. These tailwinds are balanced by the third phase-in of V28 and our new member mix, which is disproportionately represented by LIS dual eligible and C-SNP eligible members.

Caring for these complex members is core to our clinical model, but they typically join with higher MBRs in year one as we transition them from an unmanaged setting to our care model. Additionally, as a reminder, we do not incorporate any assumption for sweep pickup from new members in our initial 2026 guidance. In 2025, this pickup was a benefit of approximately $14,000,000 to our full year adjusted gross profit and EBITDA, or roughly 30 basis points to our consolidated MBR. Moving to SG&A, we forecast further improvement in our SG&A expense ratio. We expect to achieve operating expense scale economies resulting from both membership growth and enhancements to administrative workflows.

As John mentioned earlier, we also plan to reinvest a portion of the savings derived from improved operating efficiency towards further advancements in our clinical model, new market activities, and technology infrastructure to prepare for scaling our business and the deployment of AI workflows in the future. Taken together, we expect to deliver adjusted EBITDA of $133,000,000 to $163,000,000, consistent with our preliminary profitability comments provided earlier this year. Turning to our seasonality expectations, we expect a modestly lower MBR in the first half of the year compared to the full year average. Conversely, we expect the second half of the year to be slightly higher versus the full year average.

Our initial view generally reflects the regular seasonality of our Part C MBR experience, combined with a flatter slope to our Part D MBR in 2026. In conclusion, the 2025 execution of our clinical model, the replicability of our results across markets, and the consistency of our operating performance all give us tremendous confidence as we enter 2026. We are excited for the significant growth opportunity in the years ahead and are determined to make the right investments in people, processes, and technology to ensure that we are scaling responsibly. With that, we will now open for questions. Operator?

Operator: Thank you. Ladies and gentlemen, to ask a question, please press 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Michael Ha with Baird. Your line is open.

Michael Ha: Hi, thank you.

Michael Ha: So I want to frame this question by calling out a few numbers first. So over the past two years, Alignment Healthcare, Inc. has seen nearly 50% revenue growth CAGR, I think, almost 500 basis points of margin improvement. Right? Sub-10% G&A. All while improving 100% of members in four-plus-star rated plans. And all this happened in a flat rate environment while trends nationally rose to high single digits. So on the heels of all of this, and with the potential again for another flat rate year in 2027, my question is, simply put, what would prevent Alignment Healthcare, Inc. in 2027 from having a rerun of what you just accomplished in 2024 or 2025?

Because it looks very similar to the set up into 2027.

John Kao: Well, Michael, this is John. You should probably expect my response to be we feel very comfortable with a 20% growth rate. No. We feel good. I mean, the model is working, and it will work irrespective of what happens in the rate universe. You know? And I think that if rates do go back up a little bit in terms of the Advance switching to the Final Notice, I think it will be fine. I think what I am hearing in terms of the amount of potential increase is still going to be pretty short of what we think trend is, at least what the sector thinks trend is. So I think that will be something favorable to us.

And if rates do not go up, I think it could be more favorable to us. And I think we are going to do exactly what we have done year after year, which is be very, very disciplined and find the right balance between growth and margin expansion. I would say that we do not want to get ahead of our skis on terms of growth. We do not want to talk about bids. I do expect, I said this to people beforehand, I think it is still going to be one or two years of people finding the right model to dig out of this kind of post-V28 world.

And I think that there are some folks that grew a lot this past year for AEP. And we chose not to grow at the level some of these other folks grew. We did not just grow to get growth. We wanted durable provider relationships. We wanted to make sure our infrastructure would be able to sustain the level of Stars that we have been able to produce. And the other thing that we are doing is we know how good we are doing in 2025, and I feel very strongly about 2026 as well. We are taking the opportunity and we are not complacent.

We are getting even tougher on ourselves internally from an operational perspective, from a clinical perspective, from an AI deployment perspective. We are just getting stronger to really get to the level of growth we think we can get to over the next three or four years, getting to a number of growth that will be really meaningful for everybody. That is kind of how we are thinking about it. So, Michael, I mean, you called it two years ago, not going to give you the benefit of calling it again quite yet.

Michael Ha: Got it. Helpful. Thank you so much, John. Okay. My next question, the implied MLR for 2026, Jim, I think you mentioned midpoint 87.7. If I were to strip out that sweep payment from 2025, I am seeing maybe 10 bps of MLR improvement year to year. So at first glance, feels a bit conservative since, like, clearly, prior years have grown a lot more and done a lot more MLR improvement. So I am just trying to understand the assumptions embedded in MLR a little bit better. I know you mentioned LIS, C-SNP, C-SNP member mix. How much does that year one member mix impact your year-to-year MLR? What are you assuming on trend in 2026 versus 2025?

Just a general sense on the various components. Thank you.

James M. Head: Yeah, and thanks, Michael. A couple of things. Just in terms of the inputs to the 2026 guide, it is kind of three core inputs that we feel pretty good about, so I want to start with that. Our 2025 experience, how we managed cost and delivered throughout the year, new members delivering, etcetera, that gives us a lot of confidence as we go into the year. We also bid in mid-2025 for 2026, and you would say, okay, how do we feel about that now that we are in January, February and building our model for the year, and it played out very, very nicely in terms of how we thought it was going to happen and happened.

And then finally, John’s point. This is very disciplined growth, and we chose to play in spots where we could win with the products we like, with the cohort of members that we like, and the geographies and the networks that we like. So that is the setup. Now as it pertains to the MBR, you are right. It is about a 10 basis points kind of apples-to-apples improvement because we are stripping out the impact of the sweep last year. I would say three drivers, Michael, that are inputs to why it would not be better. Number one, we are still going through the third phase-in of V28. Okay?

And so we have navigated that very, very nicely as you mentioned. But that is not a tailwind, it is a headwind. The new member mix was disproportionately represented by dual eligible, C-SNP eligible, and LIS members, which is our sweet spot, but they come with a little higher MBR in the beginning, so that is a little bit of a headwind. But the trade-off is we know how to manage these members really well, and there is a lot of long-term opportunity there. So we consciously made that choice, and it was a big portion of our AEP. And then, as I mentioned before, we did not have a sweep.

So I think the V28 and the new members coming in at that, I will call it a heavier mix in terms of special needs, etcetera, is driving that. But we feel very good about where we are at with respect to the visibility we have. And I also throw in Part D. A second year, we did a great job delivering on Part D in 2025 and on our promises, and we have a fair degree of visibility as we go into 2026. So I would say that was another input that was part of the overall mix.

Michael Ha: Perfect. Thank you so much.

Operator: Thank you. Our next question comes from the line of John Paul Stansel with JPMorgan. Your line is open. Great. Thank you for taking the question. I know you called out potentially changing some approaches around your distribution network and broker community.

John Paul Stansel: Can you talk about how you are thinking about that change? And then maybe on the 2027 commentary a little bit, I think there has been an expectation about entry expanding into new states in 2027. Is that indexed at all to needing a better rate in 2027, or is that something that you think you can do in an all-weather environment?

John Kao: No. Hey, John. It is John. Yeah. With respect to distribution, we are going to, and I think that comment was specifically related to some of the ex-California markets including some of the potential new market entry strategies that we are going to be taking into existing states, new markets in existing states, and what we are doing with potentially getting into another state. And so we are at a size now in pretty much each of our markets that we are really kind of a player and relevant. And so I think we have got deeper relationships with brokers and providers.

And a lot of the success that we have been able to achieve in California is starting to take root in these new markets. And that really does start with the providers, and what we have learned also is the brokers are really pretty important in that discussion. And you put that against the backdrop where the receptivity of the brokers is just much greater given the fact that a lot of the incumbents are taking a step back for the last year or two and maybe for the next year or two. I think that creates an opportunity for us. So we are just very intentional about that. With respect to new markets, we are seriously thinking about that.

We are not quite where I want to be quite yet with some of the provider engagement conversations, but I am pretty comfortable we are going to be able to get into a new state. And the rates, I just do not think that matters to us. I think it is going to be whatever it is, and I think we are going to do well in any environment. I really mean that. And again, a lot of this is choosing the right provider partners, which I think we have, in these two distinct new markets.

John Paul Stansel: Great. And then on the RFI from CMS that is still out and about but has received comments at this point, you know, a couple different topics embedded in there. As you have had further discussions with the administration and with your counterparties, how are you thinking about potential incremental changes that could potentially come out of that RFI?

John Kao: TBD. I mean, we submitted our comments like everybody else yesterday. You know, I think from a policy point of view, we will see what they have to say around the reward factors and the HEI. Again, we will see what happens. I think we are going to be okay either way. And I think from a more information gathering purposes, we feel pretty strongly about the C-SNPs remaining as C-SNPs and not really getting linked to any kind of aligned network. And the logic there really is we want there to be choice for the beneficiaries. We do not think that is right. Beneficiaries should be forced into a suboptimal Star rating plan.

It is more of a caped plan. I think they should really have choice, get the right benefits, get the right network, and get the right quality they deserve. But other than that, there are other moving parts that have been asked, what we think about risk adjustment going forward. We do support documentation of the HRAs. We have always supported that. So I think that is a good thing. I think the administration focusing on program integrity and minimizing gaming, all that is the right direction.

But as I mentioned earlier, I do think there is going to be some exposure on rates, and as with previous, like I said before, I think we stand to be a beneficiary of that. But I think they are going to do the right thing on rates. That is what I actually think when the final comes out.

Operator: Please stand by for our next question. Our next question comes from the line of Matthew Dale Gillmor with KeyBanc. Your line is open.

Matthew Dale Gillmor: Hey, thanks for the question. I wanted to start off with the ADK metric in your outlook. Can you provide some more details and unpack what drove the favorability in the fourth quarter? And then also, as we are looking ahead, I would think the ADK metric will probably tick up given the duals mix, but just wanted to get a sense for what the right kind of apples-to-apples comp for ADK that is embedded within the guide.

James M. Head: Right. I will start with how we finished the year. We had an expectation, if you remember in third quarter, Matt, that ADK might tick up. We were not ready to bet on flu season being favorable, and it did come in pretty well. So we ended the year, as we said, in the low 140s. As we go into the new year, the answer is yes. Because of mix, our ADK could pick up a little bit, and that is not because trend is wrong on an apples-to-apples basis. It is because of that. And so I view that as another component of the cost trend that we are pretty maniacally focused on and managing actively.

But it might tick up a little bit over the course of the year. As you are aware, first quarter is usually a little bit higher. So that is just a seasonal issue.

Matthew Dale Gillmor: Great. Helpful. And then, maybe asking about AI investments. You mentioned some investments in the prepared remarks. I think last call, you all talked about AI within Care Anywhere and AIVA. Just wanted to get a flavor for where some of the technology enhancements you have in flight, where they may be directed, and how that might benefit the business over time? Thanks.

John Kao: Yeah. Hey, Matt. It is John. Yeah. It is a great question. We have got 30-some-odd different potential use cases where we could deploy agentic AI. Having the use cases is not our issue. What we are actually doing is to require two foundational actions be at a level where we are satisfied. And the first one is really, as part of this revalidation of everything, it starts with a unified data architecture. It starts with AIVA. And we are just looking at everything. We are making sure all the data ingestion is as tight as we think it is. We are validating everything. We are not assuming anything.

All of which is designed to ensure that we can scale and replicate without any abrasion. We are going to be just that much more efficient scaling. And what that really translates into is we are going to get to cash flow breakeven faster than we would have thought before. We are going to grow and be more aggressive on Stars and benefits even more so than we did before. The second issue is what we are talking about internally is just making sure the end-to-end workflows within each functional area are well documented and, frankly, well understood.

What I mean by that is when you basically double in size every two years, you are bringing in a lot of people, a lot of new people that have to get trained. And so the training is to make sure that all of these different workflows are understood by everybody. And then within the end-to-end workflows, you have got micro workflows. Do you really know what is happening? And then ultimately is the cross-functional workflow processes. And those are very sophisticated workflows that factor in our clinical work processes, our provider contracting work processes, which one of these providers are we delegating, are we not delegating, have our directly contracted networks. All of that is being evaluated right now.

And once I get those done, which we expect to have done midyear this year, you are going to see us start deploying these use cases for agentic AI. The other thing we are doing is we are kind of revisiting the initial stratification model within AIVA, and I think there are going to be tools that we have. Sorry. I went on mute for a second. I was going to say, talking about AIVA, and we are looking at using the new tools to make the stratification model even better for our Care Anywhere members, the 10% of the population we think that account for 78% of the spend.

You are also going to see us have use cases around administrative improvements. I think member service is going to be one of the first ones. I think this will be immediate savings there. I think in our financial reporting, we are going to be able to use AI and look at the raw data and come up with actionable conclusions market by market. I think those are things you are going to see. We are probably not going to lead the market in deploying agentic AI in care delivery. We are going to still rely on our doctors and nurses to do that. Hope that helps.

Matthew Dale Gillmor: It does. Thank you.

Operator: Thank you. Our next question comes from the line of Scott Fidel with Goldman Sachs. Your line is open.

Scott Fidel: Hi. This is Sam on for Scott Fidel. I was just wondering if you could talk about, are you concerned about the MA industry that may have lost too much bipartisan support in Washington? And what can the industry do to position itself better to alleviate the ongoing regulatory pressures on the sector?

John Kao: I think it is to get back to what CMS originally intended MA to be. And I think all the actions that I see going on are exactly consistent with that. Meaning, they want a program that creates value to the end beneficiary. And to define that, you have to have higher quality, better experience, and I think to do that in a way that is the most affordable. And so this is what we always say. You have to have high quality and low cost. And in that environment, the folks that create the highest degree of value ought to be positioned to win.

I think there has been some financial engineering away from that over the past several years. We use an emphasis on coding, global capitation, prior auth, all of which I do not think are going to be sustainable going forward. So I think if people just do what CMS intended them to do, they are going to be in a good place. And I think the benefit differential of MA relative to traditional Medicare I think is going to cause MA to continue to grow, not go down. That is what I think.

And I think for the last forty years, we go through these different phases of whether it is the BBA in the nineties and the ACA in the early two thousands. You can go through those peaks and valleys, MA has always thrived. It has always come through. And I just think I would be very surprised if that trend changed, put it that way.

Operator: Thank you. Our next question comes from the line of Craig Jones with Bank of America. Your line is open.

Craig Jones: Great. Thank you. So I wanted to follow up on what you said about the final rate notice for 2027. You said you think CMS will do the right thing on rates in the final notice. We saw United in its letter to CMS around the Advance Rate Notice thinks that growth rate for 2027 should be closer to 9% to 10% versus the 5% in the Advance Notice. So what do you think that growth rate should be? And then what do you think CMS will actually end up doing when you say do the right thing? Thank you.

John Kao: I think the thing that I have been reading about really is related to the impact of these skin substitutes and how that has been an effective offset to the utilization trends for traditional Medicare. And I think it remains to be seen how they actually manage that specific issue. I am not sure it will get up to the 9% to 10% rate net, but I think it is possible you get to the 5%. And I am not sure that is still enough, frankly, to kind of fully meet the trend. But I have to tell you, I was surprised by the rate notice in the Advance Notice. And, very practically, it was related to the midterms.

That is really how I was thinking about it. And I think there is an opportunity with additional data that is going to be coming in to capture the second half trends. I think they are going to come up with something hopefully to deal with skin substitutes that was a material takeaway, and I think it will be something that will be reasonable. And maybe I should say I am hoping it will be something reasonable because if it is not, I think you are going to get a lot of people that are going to degrade benefits even more, and it is a real issue. And we saw this during BBA, thirty years ago.

Operator: Our next question comes from the line of Ryan M. Langston with TD. Your line is open.

Ryan M. Langston: John, I want to make sure I caught what you said on the chart reviews. Did you say the exposure to total chart reviews is 1% and then even smaller from the unlinked piece?

John Kao: Yeah. For us. Yeah. We do not rely on that much at all is really the message. We do not feel exposed by that change at all.

Ryan M. Langston: Yeah. Okay. And then, is it fair to maybe assume the split is more just 50/50 within that sort of 1%?

John Kao: Not sure I understood that.

James M. Head: I do not think we have raised an unlinked. Yeah. Ryan, I just do not think we are going to get precise about that because it is so immaterial. It is a small number. It is a small number.

Ryan M. Langston: Okay.

Ryan M. Langston: Then I guess just building maybe on John’s question, and John, your remarks about sort of deepening broker relationships. So a direct noncompetitor to you in your markets announced some plan to use MA brokers more like health navigators and get them involved in patient experience. Is that sort of a strategy you think could work for the industry? And maybe just more broadly, how do you believe the payer-broker relationship will or could evolve over time? Thanks.

John Kao: We have been consistent about this. We value our broker partners. We think they do a good job. We think they are generally looking out after the best interest of the beneficiary and are fair. What I do think is going to be interesting is how CMS tries to position itself as a bit of a, if not the actual agent, a little bit more of the FMO. I think that will be interesting. And we are looking at some of that, some of the developments. It is very nuanced, but I think that is going to be interesting, one to watch. Not sure it is going to be implemented anytime soon, but I think that is on their radar.

With respect to your commentary and some of our competitors, I do not know. I think they were very specifically saying that whatever it is, 4% to 6% of premiums going to distribution is a big line item, I think is what was quoted. I am not sure. I am not sure. There are certain parts that they can be additive to a little bit, but I am not sure about that one.

Operator: Thank you. Next question comes from the line of Whit Mayo with Fiori Partners. Your line is open.

Whit Mayo: Hey. Can we go back and talk about the D-SNP growth in some of the non-California markets? Are there any numbers that you can put behind that? And then also maybe just elaborate on the potential opportunity in the coordination-only duals contract in Nevada. Thanks.

James M. Head: Yeah. I will take the growth issue. About 50% of our AEP growth was in the LIS, duals, and C-SNP. And that was both in California, but also outside of California. As you know, we have strong ex-California growth. So that is a real healthy portfolio for us. And we think we can manage that pretty well over time, and there is a lot of embedded value. But, John, I think the second half of the question, maybe I will give it over to you.

John Kao: Yeah. I actually would need to follow up with you on that one. I do not have a good answer for you.

Whit Mayo: Okay.

Whit Mayo: And my follow-up would just be with some of the Stars changes that, if CMS deletes the 12 measures in Stars, is this a good or bad thing for you? I know you had some twos and threes in some of those measures.

John Kao: Yeah. We have looked at it. I think it is net neutral. It is kind of the bottom line. If it does get implemented, it is probably not going to actually take root until they took the 2027 anyways, which means it will impact 2029, maybe 2030. But net, I think as of now, we think it is effectively a net neutral. I do think CMS is going to try to simplify that whole Stars program. And so we actually think that is a pretty good thing.

Whit Mayo: Thank you.

Operator: Our next question comes from the line of Jessica Elizabeth Tassan with Piper Sandler. Your line is open. Hi, guys. Thanks for taking the question.

Jessica Elizabeth Tassan: Can you give us a little more detail on the slope of MBR over the year? I think you mentioned typical Part C seasonality and then flattish slope in Part D. So just trying to understand, excluding the sweep in 2025, will calendar 2026 follow kind of a similar seasonal cadence?

James M. Head: Yeah. Ex the sweep. And as you are aware, history has shown itself pretty consistently that Q1 and Q4 are kind of the higher MBRs. And then, not even with the sweep, but just in Q2 is usually our seasonal low, and then it picks up from Q3. So I think it is going to follow a similar pattern, Jess, and I think you are seeing that in our first quarter guidance.

Jessica Elizabeth Tassan: Okay. Great. Thank you. And then just my next one is can you discuss retention during AEP? And then on the lower projected intra-year growth in 2026 from Q1 to Q4, is that a matter of lower gross adds or increased intra-year churn or switching? Just trying to get a sense of basically year one versus tenured membership in the mix of year one versus tenured in 2026.

James M. Head: I will try the second question first, which is the intra-year, and then we can talk about retention. As we come into this year, there was just a lot more movement. Disruption is probably too strong a word because we were not picking up bad stuff, but there was just a lot of movement. And so we are trying to assess whether we picked up most of that movement in AEP or whether it will sustain itself throughout the year. So it is a little bit like we are not ready to bank on a greater AEP opportunity turning into sustained growth throughout the year.

OEP is feeling fine, but we just are not ready to bank it all the way through December. And then as it pertains to retention, I think we talked about it in January at the conference. We felt very good about the retention this year. That was one of the reasons why we had both sales growth, but we also had retention. And that is wonderful for us because of our ability to mature our cohorts and get better MBR. So we are not churning them. We are holding on to the loyal members. So that was it. That turned out to be a nice little boost for us.

Jessica Elizabeth Tassan: Great. Thank you.

Operator: Our next question comes from the line of Andrew Mok with Barclays. Your line is open.

Andrew Mok: Hi. This is Tiffany Yuan on for Andrew. I just wanted to follow up on the Advance Notice. You mentioned your exposure to the unlinked chart review is fairly limited. Can you share what you think your exposure is to the risk model rebasing component relative to the industry?

Andrew Mok: That is really interesting.

Craig Jones: Interesting question.

John Kao: I actually do not think we are as exposed as others for the simple reason that our kind of blended RAF scores are, what are we, Jim? 1.08 or something like that. I mean, it is just—

James M. Head: 1.1. Yes. Yeah. It is below 1.1.

John Kao: You know? And even with the final phase-in of V28, you still have got people coming down from 1.5, 1.6, 2.0 in certain markets, down by 20-some-odd percent. And so I just think we have never relied on it other than to make sure that we are just very accurate and compliant on the coding part, and have focused on the cost management side and the Star side. And I think we are going to be advantaged actually if there are any more tweaks to that.

Operator: Okay. Got it. And then I just wanted to follow up on the MLR seasonality. I appreciate the comments around sort of the blended seasonality, but could you remind us how your Part D MLR specifically progressed through the quarters in 2025? And is your expected 2026 slope consistent with that 2025 experience?

James M. Head: Yeah. It will be slightly different in 2026 than 2025, which is to say that the profitability of Part D is going to be a little bit more weighted to the first half. But this is all in the margins. So I would say at a high level, consistent but slightly more weighted to the first half. And that is just really the construct of risk corridors and how we accrue for contra revenue when we are outside the risk corridor, etcetera. So I would say pretty similar to 2025, a little bit flatter.

Operator: Thank you. Our next question comes from the line of Jonathan Yong with UBS. Your line is open.

Jonathan Yong: Hey. Thanks for taking the question. I think you mentioned that you are still in some provider engagement or negotiations in the new state. What, in your mind, is currently the hang up there? And typically, where are you in terms of when you are thinking about entering a new state? Would you normally be completed at this time, or would it be a little bit further down the road where you would have that completed?

John Kao: It depends. It is a good question, Jonathan. It depends. Really, we are looking for full provider durability, full provider engagement, and I think we are going to get there. It is just, again, our lessons learned over the past several years in terms of entering new markets are causing us to be extra vigilant and to make sure people understand our model, why we are different than everybody else. And even if you work with different health systems and integrated delivery networks and whatnot, a lot of it really relates to the physicians and to creating economic, clinical, and operational alignment with that doctor and/or their MSO. And that is really what I was focusing on.

I think we have got great hospital partners and a lot of good doctors that understand and like what we are saying in terms of the clinical model. We just need, I would like to have a few more. That is all.

Jonathan Yong: Gotcha. Okay. And then just going back to the rate update for 2027, it was not clear to me because I think at the beginning in your prepared remarks, you said that the industry is complaining about what the effective growth rate is. But then it sounded like it was fine for you, but then I believe later on, you said that it is running below trend in terms of what it is. I just want your clarity on—

John Kao: Yeah. The 0.9% net advanced rate notice, I think, is clearly disappointing to the industry. I think there is a little bit of debate over what is causing that low trend. And I think CMS has certainly shared with us that it was really just an actuarial reality when they used different data for more recent dates relative to what was used in the past. So their intention was not a programmatic policy issue, but it was just that the data was different. And that is what led to a little bit lower than expected raw traditional fee-for-service trend.

Then in addition, you deducted the skin substitutes as an offset to that, and ergo, you get this 0.9%, which is a big problem. If that maintains for the rest of the industry, people are going to be rationalizing benefits again. And so my point was I heard somebody say 9% to 10% from one of our competitors. I am just not sure I have seen that number.

And so if you think about the fee-for-service trend data, and let us say you get a portion of the skin substitutes, if not all, but let us say a portion is actually used as an offset that is phased in over time, I think you could see closer to what another analyst was talking about, 5%. I have heard a lot of people talk about 200 to 300 basis points increase—getting 0.9% to increase by 200 to 300 basis points—which gets you to 3% to 4%, 5% increase potentially. But my point was I think that is still lower than the utilization trends that would cause people to be aggressive on benefit designs. That is what I really meant.

My point as it relates to Alignment Healthcare, Inc. is I really think we can win either way because we are the high-quality, low-cost producer. We are not dependent on an external entity to do our medical management. That is something that we are very good at. And what we have also said is the margin that would otherwise go to a third-party value-based provider, we actually reinvest to the individual practitioner and/or to richer benefits. So I just think either way, we are going to be in a really good place. From an industry perspective, I hope they are right, actually, that you are going to get a rate increase of 9% to 10%.

Not sure that is going to happen.

Jonathan Yong: Yep. Okay. Great. Thank you.

Operator: Our next question comes from the line of John Wilson Ransom with Raymond James. Your line is open.

John Wilson Ransom: Hey. Good evening. Just thinking about bending the trend with AIVA. You know, 1.0 was, I think, pop health 1.0 was CHF, COPD, type 2 diabetes. If it is going to become more about bending the trend, what is 2.0 in terms of deploying your assets to do that?

John Kao: Really good question.

John Wilson Ransom: I thought it really was, John, so I appreciate that.

John Kao: Your questions are always so advanced. They really are. So I think two things. It is actually a serious answer. I think that as good as we are, we can do a lot better operationally. And what I mean by that is I think our stratification models can be more precise. I think our workforce management of our clinicians can be more efficient. I think focusing on clinical outcome measures—as what you talked about was just kind of traditional chronic disease management—I think the outcomes measures are going to be more and more important, where we demonstrate not only the efficacy of better utilization but better clinical outcomes. I think that is going to be something we focus on.

In terms of programs, I think transitions of care programs we can do better on. Case management efficacy, we can do better on. Tighter integration with our provider partners from a medical management perspective and potentially on palliative programs, I think we can do better on. And when you combine all these together, I think they all represent small opportunities for us to continue bending the cost curve. The other thing I would say is, and I have alluded to this in the past, this is less of a clinical MLR piece, but an overall MLR piece.

The supplemental benefits right now that we have, whether it be dental coverage or vision coverage or transportation or flex card, those kinds of benefits represent about 5% of overall premium. I think that we are getting big enough now that we are going to be investing in and starting buying some of these captives, these specialty company captives. I think from that, we ought to be able to save on margin because we would be paying ourselves, basically. And if we did a—just picking on a—whatever specialty we do, we will be able to seed it with 300,000-ish seniors, if you know what I mean.

And so I think that is going to be a way where we bend the cost curve. The other thing that we have also talked about is one of the benefits of our performance in 2025 was we were really working closer with these IPAs that we have and taking the technology tools and really helping them do the utilization management for the acute authorizations. And I think we have done a very good job. And we are operationally good with them. We have some work to do, I still think, in terms of some data. But I think by de-delegating that, it has been something that is going to help us and help the member and help the IPA.

And I think that before this past year, we had not done that. And so the full benefits of AIVA and Care Anywhere were not fully realized yet. So I am very optimistic about that part.

John Wilson Ransom: That was quite the answer. My second question is a very simple one. There are studies as long as your arm about is MA a good deal for the taxpayers. If you do apples to apples, risk-adjusted apples to apples, where do you— I mean, you have MedPAC on one hand saying it is terrible. There is the Evolent study on the other hand saying it is a great deal. And there is all over the— you talk to people in DC, what study do you point to? And do you think it is apples to apples a good deal yet for the taxpayers?

John Kao: I think it is a very good deal for the seniors. I think from a tax point of view, the last study I saw is post-V28, it is pretty much apples to apples, is what I saw. And to the extent that plans that are able to remain competitive and still have a reasonable rebate back to that beneficiary are going to be the winners. I think that CMS has been consistent with they want to grow MA. They just want to grow it the right way. They want to minimize the gaming—their words, not mine—and ensure program integrity. On the other hand, they want to have an alternative with what they are referring to as traditional fee-for-service Medicare.

Now, just looking at the value proposition to the beneficiaries, I personally think you are going to get continued growth and market share growth in MA because the rebate dollars, even if they go down, are still material enough in terms of being better than fee for service that people are going to still choose it.

John Wilson Ransom: Thank you.

John Kao: You got it.

Operator: Our next question comes from the line of Raj Kumar with Stephens. Your line is open.

Raj Kumar: Hey. Maybe just one quick one around AEP and just thinking about new member engagement, pertaining to the Care Anywhere platform. Any insight on that and how that is trending relative to this time last year?

John Kao: Hey, Raj. It is John. Can you just repeat that again? I kind of faded out or you faded out. I did not quite—

Raj Kumar: Sorry about that. Yeah. Just maybe any details around new member engagement and pertaining to the Care Anywhere platform and how that is trending relative to this time last year with the new membership profile?

John Kao: Yeah. Okay. I got it. Yeah. I would say it is about the same. I think there is opportunity for us to be better. We are spending a lot of time again taking advantage of the correct strategic decisions and operational decisions we made two years ago that are really paying off in 2024 and 2025, and I think will also pay off in 2026. That same kind of operational focus of continuous improvement, just not being satisfied with any of it, is going to cause us to get better and better and better. And one of those areas is Care Anywhere engagement. I think we were still at about 65%, which really is not bad.

But I think we have set a target internally. We are trying to get to 75%. And I think some of the new people that we brought in on the member service and member experience side—shout out to that team—is really going to be good for the company and for our beneficiaries. So I am optimistic about that. But year to year, to answer your question, it is about the same.

Raj Kumar: Got it. And then just maybe as a follow-up, just thinking about your ex-California markets and being in them for a while now. And as they have matured, have you seen any divergence in overall trend or even consumer behavior and how maybe that has led to operational nuances in those distinct markets and maybe even any catering or tweaking around AIVA to service those operations in the most optimal manner?

John Kao: That is a very good question. I think the work that we are doing now in terms of what I call operational scaling is really designed to make sure that the providers and the members outside of California get the same level of service they get inside of California. And that is part of our maturation. It is part of our scalability. And we are working really hard on that right now. Again, having very clear member satisfaction, but we are really starting provider satisfaction metrics. And I think the bigger we get, the more critical this area is, particularly outside California. I think we have done a very good job on Stars.

I think we have done a very good job on clinical replicability in terms of the ADK metrics outside of California. I think our provider engagement is something we have to get better at. And I say that to all the providers out there. We are working on it. We are going to get really, really good. And we want five stars from all of you just like we have five stars from the members.

Raj Kumar: Great. Thank you.

Operator: Thank you. Ladies and gentlemen, that is all the time we have for questions. This concludes today’s conference call. Thank you for your participation. You may now disconnect. Good afternoon, and welcome to Alignment Healthcare, Inc.'s fourth quarter 2025 earnings conference call and webcast. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. Leading today's call are John Kao, Founder and Chief Executive Officer, and James M. Head, Chief Financial Officer. Before we begin, we would like to remind you that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act.

These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Descriptions of some of the factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC, including the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended 12/31/2025. Although we believe our expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. In addition, please note that the company will be discussing certain non-GAAP financial measures that we believe are important in evaluating performance.

Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations of historical non-GAAP financial measures can be found in the press release that is posted on our company's website and in our Form 10-K for the fiscal year ended 12/31/2025. I would now like to hand the conference over to John Kao. You may begin.

John Kao: Hello, and thank you for joining us on our fourth quarter earnings conference call. For the fourth quarter 2025, health plan membership of 236,300 represented year-over-year membership growth of approximately 25%. This supported total revenue of $1,000,000,000, which grew 44% year over year. During the fourth quarter, we also exceeded the high end of guidance across each of our profitability metrics. Adjusted gross profit of $125,000,000 represented an adjusted MBR of 87.7%. Meanwhile, adjusted EBITDA of $11,000,000 solidly surpassed our guidance range of negative $9,000,000 to negative $1,000,000. For the full year, total revenue of $3,900,000,000 grew 46% year over year.

Adjusted gross profit of $495,000,000 resulted in an MBR of 87.5%, representing an improvement of 130 basis points year over year. Taken together, this year marks a tremendous milestone in the maturation of our company's profitability. We transform from roughly breakeven, just $1,000,000 in adjusted EBITDA in 2024, to delivering adjusted EBITDA of $110,000,000 in 2025. This reflects an adjusted EBITDA margin of 2.8% and represents 270 basis points of margin expansion year over year. Throughout the course of 2025, we have demonstrated both the strategic and operational advantages of our clinically centric model, which is purpose-built to deliver the highest quality care at the lowest cost.

The data insights provided by our AIVA technology platform combined with our Care Anywhere clinical model provided us with the visibility and control necessary to navigate a year of significant disruption where we overcame the second phase-in of the V28 risk model, a redesign of the Part D program, and broad utilization pressures across the Medicare Advantage industry. And importantly, this allowed us to pursue growth while expanding margins, even as competitors took a step back in 2025. I would like to congratulate our team for their success and recognition by Fortune Magazine for their unwavering commitment to seniors, which named us to its World's Most Admired Companies list for the first time.

We believe our model of lowering costs by delivering more care to seniors, not less, is the MA model of the future, and we are eager to serve more seniors as we continue along our path towards a million members. 2025 also marked an important step in demonstrating the replicability of our model beyond California. We more than doubled our ex-California membership while consistently exceeding our financial expectations throughout the course of the year. As of December 2025, we had approximately 38,000 members across our markets outside of California, representing approximately 16% of our total membership. We have grown confidently outside of California by first leading with quality, which starts with success in Star ratings.

We now have a five-star plan in North Carolina for the third consecutive year, two five-star plans in Nevada, a four-and-a-half-star plan in Texas, and a four-star plan in Arizona. These achievements are further supported by the portability of our Care Anywhere clinical model, which focuses on delivering care to our high-risk polychronic members. By leveraging the strength of our care model, quality of clinical outcomes, and scalability of our health plan operations, we are unlocking the growth potential within these markets. We are now focused on sustaining the momentum of our ex-California markets.

In 2026, we plan to invest in our sales and distribution engine, build deeper relationships with our broker partners, and continue growing with Align provider partners where we have durable relationships. With less than 4% market share across our 23 counties outside of California, we see significant opportunity to take share over the coming years. Turning to our 2026 AEP results, we grew to 275,300 health plan members in January 2026, representing 31% growth year over year. We saw broad growth across each of our markets with 23% growth in California, and more than 80% growth in our ex-California counties. Importantly, we focused on growing responsibly through our bid design and sales strategy.

We drove nearly 20% improvement to our AEP voluntary disenrollment metric and sourced approximately 80% of our gross sales from plan switchers. By taking a balanced approach to growth and profitability this year, we remain mindful of the final phase-in of V28 while still capitalizing on the growth opportunity in a year of significant disruption. Taken together, we are pleased with the solid growth in California while continuing our rapid expansion outside of California. Our growth this year is adding to our future embedded earnings potential while supporting our near-term operating leverage objectives. Meanwhile, improved operating efficiency across the enterprise is creating additional capacity to reinvest in long-term projects and scalability initiatives.

Each of these factors is giving us confidence in our initial full-year adjusted EBITDA guidance range of $133,000,000 to $163,000,000. This is consistent with our previous expectations for consensus adjusted EBITDA of approximately $145,000,000 to be in the range of our initial 2026 outlook. Jim will expand further on our financial outlook in his remarks. Looking beyond 2026, I would like to spend a few minutes on the 2027 Advance Rate Notice. On a net basis, the announcement appeared to indicate a relatively flat rate environment for the industry. This reflected a combination of underlying cost trends and policy changes.

While we have heard disappointment across the industry, we believe the update is largely consistent with the CMS focus on program integrity and aligning payments with underlying costs. Specifically, we are encouraged that benchmark trends reflect continuing growth in costs within the fee-for-service population. This was partially offset by certain policy adjustments including those related to skin substitutes. As it relates to unlinked chart reviews, we have long supported excluding these records from risk score calculations as part of improving program integrity. Of note, our exposure is limited. Approximately 1% of our total HCC value is derived from chart reviews of any kind. Within that category, an even smaller subset is related to unlinked chart reviews.

For those, we believe we have a clear path to ensuring the diagnoses are supported by a linked claim or encounter over time. Most importantly, the current environment reinforces the importance of our strong clinically led model and core medical cost management competency. We believe this enables us to win in any rate environment, just as we have demonstrated in 2024 and 2025, where the industry experienced tighter reimbursement. And furthermore, we will continue to have Stars payment advantages in 2027 with 100% of our members in plans rated four stars or above.

In closing, we believe we are entering a reimbursement environment that creates a more level playing field with our competitors, which allows our distinct care management model to shine. We are proving the effectiveness of our distinct medical cost advantages with the results we have shared with you over the past two years. While we are pleased with our performance, we are not done yet. 2026 will be a year of continuous improvement where we plan to make targeted investments across our clinical model, new market playbook, and scalability initiatives, including investment in AI workflows to improve administrative efficiency. In doing so, we are balancing our near-term financial objectives with unlocking the embedded potential of our model.

With that, I will turn the call over to Jim to further discuss our financial results and outlook. Jim?

James M. Head: Thanks, John. I will jump right in with our 2025 results. For the year ending December 2025, health plan membership of 236,300 increased 25% year over year. Growth in membership drove total revenue to $3,900,000,000 for full year 2025 representing 46% growth year over year. Full year adjusted gross profit of $495,000,000 represented an MBR of 87.5%, an improvement of 130 basis points year over year. We ended the year with strong outcomes across all major cost categories. Of note, Part D profitability and supplemental expenses trended in line with our guidance expectations. Meanwhile, our proactive care approach again delivered strong outcomes, leading to inpatient admissions per thousand in the low 140s during the fourth quarter.

Taken together, the strength of our performance across each of these medical cost categories and the durability of our clinical model are giving us confidence in our underlying bid assumptions as we step into 2026. Moving to operating expenses, our operating cost ratios continue to demonstrate significant year-over-year improvement as our operational infrastructure scaled to support our new members. Full year 2025 GAAP SG&A was $443,000,000. Our adjusted SG&A was $385,000,000, an increase of 28% year over year. Adjusted SG&A as a percentage of revenue declined from 11.1% in 2024 to 9.7% in 2025, representing an improvement of approximately 140 basis points. Taken together, we delivered full year adjusted EBITDA of $110,000,000 and an adjusted EBITDA margin of 2.8%.

This represents 270 basis points of margin expansion year over year. Turning to cash flow and our balance sheet, we generated positive free cash flow in 2025, ended the year with $604,000,000 in cash and investments. Subsequent to the quarter, today, we announced the close of a $200,000,000 revolving credit facility. This facility is simply good housekeeping and further evidence of the maturation of our capital structure. We do not expect to draw on the credit facility in the near term, and our increasing positive free cash flow position allows us to support our organic growth objectives.

Moving to our guidance, for the full year 2026, we expect health plan membership to be between 292,298 members, revenue to be in the range of $5,140,000,000 to $5,190,000,000, adjusted gross profit to be between $615,000,000 and $650,000,000, and adjusted EBITDA to be in the range of $133,000,000 to $163,000,000. For the first quarter, we expect health plan membership to be between 281,185 members, revenue to be in the range of $1,210,000,000 to $1,230,000,000, adjusted gross profit to be between $130,000,000 and $148,000,000, and adjusted EBITDA to be between $26,000,000 and $36,000,000.

As it pertains to our full year expectations, given the strength of our OEP results and continued stability with our retention, we are raising our year-end membership guidance by 2,000 members at the midpoint, relative to the commentary we provided in our January 8-K. Moving to revenue, the midpoint of our initial revenue guidance range of $5,160,000,000 represents 31% growth year over year. The expected year-over-year increase to our revenue is primarily driven by our membership outlook. Meanwhile, our underlying revenue PMPM assumptions are balanced by increases to benchmark rates and the Part B direct subsidy.

This is partially offset by the impact of the final phase-in of V28 risk model changes and mix of growth outside of California, which carries modestly lower per-member revenue. Turning to adjusted gross profit, our $633,000,000 guidance midpoint implies an MBR of 87.7%. The outlook contemplates improvement from the retention of existing members and modifications to our product designs within markets to reflect the current reimbursement environment. These tailwinds are balanced by the third phase-in of V28 and our new member mix, which is disproportionately represented by LIS dual eligible and C-SNP eligible members.

Caring for these complex members is core to our clinical model, but they typically join with higher MBRs in year one as we transition them from an unmanaged setting to our care model. Additionally, as a reminder, we do not incorporate any assumption for sweep pickup from new members in our initial 2026 guidance. In 2025, this pickup was a benefit of approximately $14,000,000 to our full year adjusted gross profit and EBITDA, roughly 30 basis points to our consolidated MBR. Moving to SG&A, we forecast further improvement in our SG&A expense ratio. We expect to achieve operating expense scale economies resulting from both membership growth and enhancements to administrative workflows.

As John mentioned earlier, we also plan to reinvest a portion of the savings derived from improved operating efficiency towards further advancements in our clinical model, new market activities, and technology infrastructure to prepare for scaling our business and the deployment of AI workflows in the future. Taken together, we expect to deliver adjusted EBITDA of $133,000,000 to $163,000,000, consistent with our preliminary profitability comments provided earlier this year. Turning to our seasonality expectations, we expect a modestly lower MBR in the first half of the year compared to the full year average. Conversely, we expect the second half of the year to be slightly higher versus the full year average.

Our initial view generally reflects the regular seasonality of our Part C MBR experience, combined with a flatter slope to our Part D MBR in 2026. In conclusion, the 2025 execution of our clinical model, the replicability of our results across markets, and the consistency of our operating performance all give us tremendous confidence as we enter 2026. We are excited for the significant growth opportunity in the years ahead, are determined to make the right investments in people, processes, and technology to ensure that we are scaling responsibly. With that, let us open the call to questions. Operator?

Operator: Thank you. To ask a question, please press 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press 11 again. First question comes from the line of Michael Ha with Baird. Your line is open.

Michael Ha: Hi, thank you.

Michael Ha: So I want to frame this question by pulling out a few numbers first. So over the past two years, Alignment Healthcare, Inc. has seen nearly 50% revenue growth CAGR, I think, almost 500 basis points of margin improvement. Right, sub-10% G&A. All while improving 100% of members in four-plus-star rated plans. And all this happened in a flat rate environment while trends nationally rose to high single digits. So on the heels of all of this, and with the potential again for another flat rate year in 2027, my question is, simply put, what would prevent Alignment Healthcare, Inc. in 2027 from having a rerun of what you just accomplished in 2024 or 2025?

Because it looks very similar to the setup into 2027.

John Kao: Well, Michael, this is John. You should probably expect my response to be we feel very comfortable with a 20% growth rate. No. We feel good. I mean, the model is working. And it will work irrespective of what happens in the rate universe, and I think that if rates do go back up a little bit in terms of the Advance switching to the Final Notice, I think it will be fine. I think what I am hearing in terms of the amount of potential increase is still going to be pretty short of what we think trend is, at least what the sector thinks trend is. So I think that will be something favorable to us.

And if rates do not go up, I think it could be more favorable to us. And I think we are going to do exactly what we have done year after year, which is be very, very disciplined and find the right balance between growth and margin expansion. I would say that we do not want to get ahead of our skis on terms of growth. We do not want to talk about bids. I do expect, I said this to people beforehand, I think it is still going to be one or two years of people finding the right model to dig out of this kind of post-V28 world.

And I think that there are some folks that grew a lot this past year for AEP. And we chose not to grow at the level some of these other folks grew. We did not just grow to get growth. We wanted durable provider relationships. We wanted to make sure our infrastructure would be able to sustain the level of Stars that we have been able to produce. And the other thing that we are doing is we know how good we are doing in 2025, and I feel very strongly about 2026 as well. We are taking the opportunity and we are not complacent.

We are getting even tougher on ourselves internally from an operational perspective, from a clinical perspective, from an AI deployment perspective. We are just getting stronger to really get to the level of growth we think we can get to over the next three or four years, getting to a number of growth that will be really meaningful for everybody. That is kind of how we are thinking about it. So, Michael, I mean, you called it two years ago. Not going to give you the benefit of calling it again quite yet.

Michael Ha: Got it. Helpful. Thank you so much, John. Okay. My next question, the implied MLR for 2026, Jim, I think you mentioned midpoint 87.7. If I were to strip out that sweep payment from 2025, I am seeing maybe 10 bps of MLR improvement year to year. So at first glance, feels a bit conservative since prior years have grown a lot more and done a lot more MLR improvement. So I am just trying to understand the assumptions embedded in MLR a little bit better. I know you mentioned LIS, C-SNP, C-SNP member mix. How much does that year one member mix impact your year-to-year MLR? What are you assuming on trend in 2026 versus 2025?

Just a general sense on the various components. Thank you.

James M. Head: Yeah. And thanks, Michael. A couple of things. Just in terms of the inputs to the 2026 guide, it is kind of three core inputs that we feel pretty good about. So I want to start with that. Our 2025 experience, how we managed cost and delivered throughout the year, new members delivering, etcetera, that gives us a lot of confidence as we go into the year. We also bid in mid-2025 for 2026, and you would say, okay. How do we feel about that now that we are in January, February and building our model for the year, and it played out very, very nicely in terms of how we thought it was going to happen and happened.

And then finally, John’s point. This is very disciplined growth, and we chose to play in spots where we could win with the products we like, with the cohort of members that we like, and the geographies and the networks that we like. So that is the setup. Now as it pertains to the MBR, you are right. It is about a 10 basis points kind of apples-to-apples improvement because we are stripping out the impact of the sweep last year. I would say three drivers, Michael, that are inputs to why it would not be better. Number one, we are still going through the third phase-in of V28. Okay?

And so we have navigated that very, very nicely as you mentioned. But that is not a tailwind, it is a headwind. The new member mix was disproportionately represented by dual eligible, C-SNP eligible, and LIS members, which is our sweet spot. But they come with a little higher MBR in the beginning, so that is a little bit of a headwind. But the trade-off is we know how to manage these members really well, and there is a lot of long-term opportunity there. So we consciously made that choice, and it was a big portion of our AEP. And then, as I mentioned before, we did not have a sweep.

So I think the V28 and the new members coming in at that, I will call it a heavier mix in terms of special needs, etcetera, is driving that. But we feel very good about where we are at with respect to the visibility we have. And I also throw in Part D. A second year, we did a great job delivering on Part D in 2025 and on our promises. And we have a fair degree of visibility as we go into 2026. So I would say that was another input that was part of the overall mix.

Michael Ha: Perfect. Thank you so much.

Operator: Thank you. Our next question comes from the line of John Paul Stansel with JPMorgan.

John Paul Stansel: Great. Thank you for taking the question. I know you called out potentially changing some approaches around your distribution network and broker community. Can you talk about how you are thinking about that change? And then maybe on the 2027 commentary a little bit, I think there has been an expectation about entry expanding into new states in 2027. Is that indexed at all to needing a better rate in 2027, or is that something that you think you can do in an all-weather environment?

John Kao: No. Hey, John. It is John. Yeah. With respect to distribution, we are going to, and I think that comment was specifically related to some of the ex-California markets including some of the potential new market entry strategies that we are going to be taking into existing states, new markets in existing states, and what we are doing with potentially getting into another state. And so we are at a size now in pretty much each of our markets that we are really kind of a player and relevant. And so I think we have got deeper relationships with brokers and providers.

And a lot of the success that we have been able to achieve in California is starting to take root in these new markets. And that really does start with the providers, and what we have learned also is the brokers are really pretty important in that discussion. And you put that against the backdrop where the receptivity of the brokers is just much greater given the fact that a lot of the incumbents are taking a step back for the last year or two and maybe for the next year or two. I think that creates an opportunity for us. So we are just very intentional about that. With respect to new markets, we are seriously thinking about that.

We are not quite where I want to be quite yet with some of the provider engagement conversations, but I am pretty comfortable we are going to be able to get into a new state. And the rates, I just do not think that matters to us. I think it is going to be whatever it is, and I think we are going to do well in any environment. I really mean that. And again, a lot of this is choosing the right provider partners, which I think we have, in these two distinct new markets.

John Paul Stansel: Great. And then on the RFI from CMS that is still out and about but has received comments at this point, you know, a couple different topics embedded in there. As you have had further discussions with the administration and with your counterparties, how are you thinking about potential incremental changes that could potentially come out of that RFI?

John Kao: It—TBD. I mean, we submitted our comments like everybody else yesterday. You know, I think from a policy point of view, we will see what they have to say around the reward factors and the HEI. Again, we will see what happens. I think we are going to be okay either way. And I think from a kind of just more information gathering purposes, we feel pretty strongly about the C-SNPs remaining as C-SNPs, not really getting linked to any kind of aligned network. And, you know, the logic there really is we want there to be choice for the beneficiaries. We do not think that is right. Beneficiaries should be forced into a suboptimal Star rating plan.

It is more of a caped plan. I think they should really have choice, get the right benefits, get the right network, and get the right quality they deserve. But other than that, there are other moving parts I have been asked, what we think about risk adjustment going forward. We do support documentation of the HRAs. We have always supported that. So I think that is a good thing. I think the administration focusing on program integrity and minimizing gaming, all that is the right direction.

But as I mentioned earlier, I do think there is going to be some exposure on rates, and as the previous, like I said before, I think we stand to be a beneficiary of that. But I think they are going to do the right thing on rates. That is what I actually think when the final comes out.

Operator: Please stand by for our next question. Question comes from the line of Matthew Dale Gillmor with KeyBanc. Your line is open.

Matthew Dale Gillmor: Hey, thanks for the question. I wanted to start off with the ADK metric in your outlook. You provide some more details and unpack what drove the favorability in the fourth quarter? And then also, as we are looking ahead, I would think the ADK metric will probably tick up given the duals mix, but just wanted to get a sense for what the right kind of apples-to-apples comp for ADK that is embedded within the guide.

James M. Head: Right. I will start with how we finished the year. We had an expectation, if you remember in third quarter, Matt, that ADK might tick up. We were not ready to bet on flu season being favorable, and it did come in pretty well. So we ended the year, as we said, in the low 140s. As we go into the new year, the answer is yes. Because of mix, our ADK could pick up a little bit, and that is not because trend is wrong on an apples-to-apples basis. It is because of that. And so I view that as another component of the cost trend that we are pretty maniacally focused on and managing actively.

But it might tick up a little bit over the course of the year. As you are aware, first quarter is usually a little bit higher. So that is just a seasonal issue.

Matthew Dale Gillmor: Great.

Matthew Dale Gillmor: Helpful. And then, you know, maybe asking about AI investments. You mentioned some investments in the prepared remarks. I think last call, you all talked about AI within Care Anywhere and AIVA. Just wanted to get a flavor for where some of the technology enhancements you have in flight, where they may be directed and how that might benefit the business over time? Thanks.

John Kao: Yeah. Hey, Matt. It is John. Yeah. It is a great question. We have got a 30-some-odd different potential use cases where we could deploy agentic AI. Having the use cases is not our issue. What we are actually doing is to require two foundational actions be at a level where we are satisfied. And the first one is really as part of this revalidation of everything. It starts with a unified data architecture. It starts with AIVA. And we are just looking at everything. We are making sure all the data ingestion is as tight as we think it is. We are validating everything. We are not assuming anything.

All of which is designed to ensure that we can scale and replicate without any abrasion. We are going to be just that much more efficient scaling. And what that really translates into is going to get to cash flow breakeven faster than we would have thought before. We are going to grow and be more aggressive on Stars and benefits even more so than we did before. The second issue is what we are talking about internally is just making sure the end-to-end workflows within each functional area are well documented and, frankly, well understood.

And what I mean by that is when you basically double in size every two years, you are bringing in a lot of people, a lot of new people that have to get trained. And so the training is to make sure that all of these different workflows are understood by everybody. And then within the end-to-end workflows, you have got micro workflows. Do you really know what is happening? And then ultimately is the cross-functional workflow processes. And those are very sophisticated workflows that factor in our clinical work processes, our provider contracting work processes, which one of these providers are we delegating, are we not delegating, have our directly contracted networks.

All of that is being evaluated right now. And once I get those done, which we expect to have done midyear this year, you are going to see us start deploying these use cases for agentic AI. The other thing we are doing is we are kind of revisiting the initial stratification model within AIVA. And I think there are going to be tools that we have—sorry. I went on mute for a second. I was going to say, talk about AIVA, and we are looking at using the new tools to make the stratification model even better for our Care Anywhere members, the 10% of the population we think that account for 78% of the spend.

You are also going to see us have use cases around administrative improvements. I think member service is going to be one of the first ones. I think this will be immediate savings there. I think in our financial reporting, we are going to be able to use AI and look at the raw data and be able to come up with actionable conclusions market by market. I think those are things you are going to see. We are probably not going to lead the market in deploying agentic AI in care delivery. We are going to still rely on our doctors and nurses to do that. Hope that helps.

Matthew Dale Gillmor: It does. Thank you.

Operator: Thank you. Our next question comes from the line of Scott Fidel with Goldman Sachs. Your line is open.

Scott Fidel: Hi. This is Sam on for Scott Fidel. I was just wondering if you could talk about, are you concerned about the MA has lost too much bipartisan support in Washington? And what can the industry do to improve its standing and position itself better to alleviate the ongoing regulatory pressures on the sector?

John Kao: I think it is to get back to what CMS originally intended MA to be. And I think all the actions that I see going on are exactly consistent with that. Meaning, they want a program that creates value to the end beneficiary. And to define that, you have to have higher quality, better experience, and I think to do that in a way that is the most affordable. And so this is what we always say. You have to have high quality and low cost. And in that environment, the folks that can create the highest degree of value ought to be positioned to win.

I think there has been some financial engineering away from that over the past several years. We use an emphasis on coding, global capitation, prior auth, all of which I do not think are going to be sustainable going forward. So I think if people just do what CMS intended them to do, they are going to be in a good place. And I think the benefit differential of MA relative to traditional Medicare I think is going to cause MA to continue to grow, not go down. That is what I think.

And I think for the last forty years, we go through these different phases of whether it is the BBA in the nineties and the ACA in the early two thousands. If you go through those peaks and valleys, MA has always thrived. It has always come through. And I just think I would be very surprised if that trend changed, put that way.

Operator: Thank you. Our next question comes from the line of Craig Jones with Bank of America. Your line is open.

Craig Jones: Great. Thank you. So I wanted to follow up on the way you said about the final rate notes for 2027. You said you think CMS will do the right thing on rates in the final notice. We saw United in its letter to CMS around the Advance Rate Notice thinks that growth rate for 2027 should be closer to 9% to 10%, versus the 5% in the Advance Notice. So what do you think that growth rate should be? And then what do you think CMS will actually end up doing when you say do the right thing? Thank you.

John Kao: I think the thing that I have been reading about really is related to the impact of these skin substitutes and how that has been an effective offset to the utilization trends for traditional Medicare. And I think it remains to be seen how they actually manage that specific issue. I am not sure it will get up to the 9% to 10% rate net. But I think it is possible you get to the 5%. And I am not sure that is still enough, frankly, to kind of fully meet the trend. But I have to tell you, I was surprised by the rate notice in the Advance Notice. And, very practically, it was related to the midterms.

That is really how I was thinking about it. And I think there is an opportunity with additional data that is going to be coming in to capture the second half trends. I think they are going to come up with something hopefully to deal with skin substitutes that was a material takeaway, and I think it will be something that will be reasonable. And maybe I should say I am hoping it will be something reasonable because if it is not, I think you are going to get a lot of people that are going to degrade benefits even more, and it is a real issue. And we saw this during BBA, thirty years ago.

Operator: Our next question comes from the line of Ryan M. Langston with TD. Your line is open.

Ryan M. Langston: John, I want to make sure I caught what you said on the chart reviews. Did you say the exposure to total chart reviews is 1% and then even smaller from the unlinked piece?

John Kao: Yeah. For us. Yeah. We do not rely on that much at all is really the message. We do not feel exposed by that change at all.

Ryan M. Langston: Yeah. Okay. And then, is it fair to maybe assume the split is more just fifty within that sort of 1%?

John Kao: Not sure I understood that.

James M. Head: I do not think we have raised an unlinked. Yeah. Ryan, I just do not think we are going to get precise about that because it is so immaterial. It is a small number. It is a small number.

Ryan M. Langston: Okay.

Ryan M. Langston: Then I guess just building maybe on John’s question, and John, your remarks about sort of deepening broker relationships. So a direct noncompetitor to you in your markets announced some plan to use MA brokers more like health navigators and get them involved in patient experience. Is that sort of a strategy you think could work for the industry? And maybe just more broadly, how do you believe the payer-broker relationship will or could evolve over time? Thanks.

John Kao: We have been consistent about this. We value our broker partners. We think they do a good job. We think they are generally looking out after the best interest of the beneficiary and are fair. What I do think is going to be interesting is how CMS tries to position itself as a bit of a, if not the actual agent, a little bit more of the FMO. I think that will be interesting. And we are looking at some of that, some of the developments. It is very nuanced, but I think that is going to be interesting, one to watch. Not sure it is going to be implemented anytime soon, but I think that is on their radar.

With respect to your commentary and some of our competitors, I do not know. I think they were very specifically saying that whatever it is, 4% to 6% of premiums going to distribution is a big line item, I think is what was quoted. I am not sure. I am not sure. There are certain parts that they can be additive to a little bit, but I am not sure about that one.

Operator: Thank you. Next question comes from the line of Whit Mayo with Fiori Partners. Your line is open.

Whit Mayo: Hey. Can we go back and talk about the D-SNP growth in some of the non markets? Are there any numbers that you can put behind that? And then also maybe just elaborate on the potential opportunity in the coordination-only duals contract in Nevada. Thanks.

James M. Head: Yeah. I will take the growth issue. About 50% of our AEP growth was in the LIS, duals, and C-SNP. And that was both in California, but also outside of California. As you know, we have strong ex-California growth. So that is a real healthy portfolio for us. And we think we can manage that pretty well over time, and we have a lot of embedded value. But, John, I think the second half of the question, maybe I will give it over to you.

John Kao: Yeah. I actually would need to follow up with you on that one. I do not have a good answer for you.

Whit Mayo: Okay.

Whit Mayo: And my follow-up would just be with some of the Stars changes that if CMS deletes the 12 measures in Stars. Is this a good or bad thing for you? I know you had some twos and threes in some of those measures.

John Kao: Yeah. We have looked at it. I think it is net neutral. It is kind of the bottom line. If it does get implemented, it is probably not going to actually take root until they took the 2027 anyways, which means it will impact 2029, maybe 2030. But net, I think as of now, we think it is effectively a net neutral. I do think CMS is going to try to simplify that whole Stars program. And so we actually think that is a pretty good thing.

Whit Mayo: Yep.

Operator: Our next question comes from the line of Jessica Elizabeth Tassan with Piper Sandler. Your line is open. Hi, guys. Thanks for taking the question.

Jessica Elizabeth Tassan: Can you maybe give us a little more detail on the slope of MBR over the year? You mentioned typical Part C seasonality and then flattish slope in Part D. So just trying to understand, excluding the sweep in 2025, will calendar 2026 follow kind of a similar seasonal cadence?

James M. Head: Yeah. That is ex the sweep. And as you are aware, history has shown itself pretty consistently that Q1 and Q4 are kind of the higher MBRs. And then, not even with the sweep, but just in Q2 is usually our seasonal low, and then it picks up in Q3. So I think it is going to follow a similar pattern, Jess, and I think you are seeing that in our first quarter guidance.

Jessica Elizabeth Tassan: Okay. Great. Thank you. And then just my next one is can you all discuss retention during AEP? And then on the lower projected intra-year growth in 2026 from Q1 to Q4? Is that a matter of lower gross adds or increased intra-year churn or switching? I am just trying to get a sense of basically year one versus tenured membership in the mix of year one versus tenured in 2026.

James M. Head: Yeah. Why do I not try the second question first, which is the intra-year? And then we can talk about retention. As we come into this year, there was just a lot more movement. Disruption is probably too strong a word because we were not picking up bad stuff, but there was just a lot of movement. And so we are trying to assess whether we pick up most of that movement in AEP or whether it will sustain itself throughout the year. So it is a little bit like we are not ready to bank on a greater AEP opportunity turning into sustained growth throughout the year.

OEP is feeling fine, but we just are not ready to kind of bank it all the way through December. And then as it pertains to retention, I think we talked about it in January at the conference. We felt very good about the retention this year. That was one of the reasons why we had very nice— we had both sales growth, but we also had retention. And that is wonderful for us because of our ability to mature our cohorts and get better MBR. So we are not churning them. We are holding on to the loyal members. So that was it. That turned out to be a nice little boost for us. Us.

Jessica Elizabeth Tassan: Great. Thank you.

Operator: Our next question comes from the line of Andrew Mok with Barclays. Line is open.

Tiffany Yuan: Hi. This is Tiffany Yuan on for Andrew. I just wanted to follow up on the Advance Notice. You mentioned your exposure to the unlinked chart review is fairly limited. Can you share what you think your exposure is to the risk model rebasing component relative to the industry? That is an interesting question.

John Kao: I actually do not think we are as exposed as others for the simple reason that our kind of blended RAF scores are, what are we, Jim? 1.08 or something like that. I mean, it is just—

James M. Head: 1.1. Yes. Yeah. It is below 1.1.

John Kao: And even with the final phase-in of V28, you still have got people coming down from 1.5, 1.6, 2.0 in certain markets, down because 20-some-odd percent. And so I just think we have never relied on it other than to make sure that we are just very accurate and compliant on the coding part. And have focused on the cost management side and the Star side. And I think we are going to be advantaged, actually, if there are any more tweaks to that.

Tiffany Yuan: Okay. Got it. And then I just wanted to follow up on the MLR seasonality. I appreciate the comments around sort of the blended seasonality, but could you remind us how your Part D MLR specifically progressed through the quarters in 2025? And is your expected 2026 slope consistent with that 2025 experience?

James M. Head: Yeah. It will be slightly different in 2026 than 2025, which is to say that the profitability of Part D is going to be a little bit more weighted to the first half. But this is all in the margins. So I would say at a high level, consistent but slightly more weighted to the first half. And that is just really kind of the construct of the risk corridors and how we accrue for contra revenue when we are outside the risk corridor, etcetera. So I would say pretty similar to 2025, a little bit flatter.

Operator: Thank you. Our next question comes from the line of Jonathan Yong with UBS. Your line is open.

Jonathan Yong: Hi. Thanks for taking the question. I think you mentioned that you are still in some provider engagement or negotiations in the new state. What, in your mind, is currently the hang up there? And typically, where are you in terms of when you are thinking about entering a new state? Would you normally be completed at this time, or would it be a little bit further down the road where you would have that completed?

John Kao: It depends. It is a good question, Jonathan. It depends. Really, we are looking for full provider durability, full provider engagement, and I think we are going to get there. It is just, again, our lessons learned over the past several years in terms of entering new markets is just causing us to be extra vigilant and to make sure people understand our model, why we are different than everybody else. And it really—even if you work with different health systems and integrated delivery networks and whatnot—a lot of it really relates to the physicians and to create economic, clinical, and operational alignment with that doctor and/or their MSO. And that is really what I was focusing on.

I think we have got great hospital partners and a lot of good doctors that understand and like what we are saying in terms of the clinical model. We just need, I would like to have a few more. That is all.

Jonathan Yong: Gotcha. Okay. And then just going back to the rate updates for 2027, it was not clear to me because I think at the beginning in your prepared remarks, you said that the industry is complaining about what the effective growth rate is. But then it sounded like it was fine for you, but then I believe later on, you said that it is running below trend in terms of what it is currently closed. So I just want your clarity on—

John Kao: Yeah. The 0.9% net advanced rate notice, I think, is clearly disappointing to the industry. I think there is a little bit of debate over what is causing that low trend. And I think that CMS has certainly shared with us that it was really just an actuarial reality when they used different data for more recent dates relative to what was used in the past. So their intention was not a programmatic policy issue, but it was just that the data was different. And that is what led to a little bit lower than expected raw traditional fee-for-service trend.

Then in addition, you deducted the skin substitutes as an offset to that, and ergo, you get this 0.9%, which is a big problem. If that maintains for the rest of the industry, people are going to be rationalizing benefits again. And so my point was I heard somebody say 9% to 10% from one of our competitors. I am just not sure I have seen that number. And so if you think about the fee-for-service trend data, and let us say you get a portion of the skin substitutes, if not all—but let us say a portion is actually used as an offset—then it is phased in over time.

I think you could see closer to what another analyst was talking about, 5%. I have heard a lot of people talk about 200 to 300 basis points increase, getting 0.9% to increase to 200 to 300 basis points, which gets you to 3% to 4%, 5% increase potentially. But my point was I think that is still lower than the utilization trends that would cause people to be aggressive on benefit designs. That is what I really meant. My point as it relates to Alignment Healthcare, Inc. is I really think we can win either way because we are the high-quality, low-cost producer. We are not dependent on an external entity to do our medical management.

That is something that we are very good at. And what we have also said is the margin that would otherwise go to a third-party value-based provider, we actually reinvest to the individual practitioner and/or to richer benefits. So I just think either way, we are going to be in a really good place. From an industry perspective, I hope they are right, actually, that you are going to get a rate increase of 9% to 10%. Not sure that is going to happen.

Jonathan Yong: Yep. Okay. Great. Thank you.

Operator: Yeah. Thank you. Our next question comes from the line of John Wilson Ransom with Raymond James. Your line is open.

John Wilson Ransom: Hey. Good evening. Just thinking about bending the trend with AIVA. You know, 1.0 was, I think, pop health 1.0 was CHF, COPD, type 2 diabetes. If it is going to become more about bending the trend, what is 2.0 in terms of deploying your assets to do that?

John Kao: Really good question.

John Wilson Ransom: I thought it really was, John, so I appreciate that. No. It is—

John Kao: Your questions are always so advanced. They really are. So I think two things. It is actually a serious answer. I think that as good as we are, we can do a lot better. Operation. And so what I mean by that is I think our stratification models can be more precise. I think our workforce management of our clinicians can be more efficient. I think we are focusing on clinical outcome measures—as what you talked about was just kind of traditional chronic disease management—I think the outcomes measures is going to be more and more important.

Where we demonstrate not only the efficacy of better utilization, but better clinical outcomes, I think that is going to be something we focus on. And in terms of programs, I think transitions of care programs we can do better on. Case management efficacy, we can do better on. Tighter integration with our provider partners from a medical management perspective and potentially on palliative programs, I think we can do better on. And when you kind of combine all these together, I think they all represent small opportunities for we continue bending the cost curve.

The other thing I would say is, and I have alluded to this in the past, this is less of a clinical MLR piece, but an overall MLR piece. The supplemental benefits right now that we have, whether it be dental coverage or vision coverage transportation or flex card, those kinds of benefits represent about 5% of overall premium. And I think that we are getting big enough now that we are going to be investing in and starting buying some of these captives, these specialty company captives. I think from that, we ought to be able to save on margin because we would be paying ourselves, basically.

And if we did a—you know, just picking on a—or whatever specialty we do, we will be able to seed it with 300,000-ish seniors, if you know what I mean. And so I think that is going to be a way where we bend the cost curve. The other thing that we have also talked about is, one of the benefits of our performance in 2025 was we were really working closer with these IPAs that we have and taking the technology tools and really helping them do the utilization management for the acute authorizations. And I think we have done a very good job. And we are operationally good with them.

We have some work to do, I still think, in terms of some data. But I think by de-delegating that, it has been something that is going to help us and help the member and help the IPA. And I think that before this past year, we had not done that. And so the full benefits of AIVA and Care Anywhere were not fully realized yet. So I am very optimistic about that part.

John Wilson Ransom: That was quite the answer. My second question is a very simple one. There are studies as long as your arm about is MA a good deal for the taxpayers. If you do apples to apples, risk-adjust apples to apples. Where do you—I mean, you have MedPAC on one hand saying it is terrible. There is the Evolent study on the other hand saying it is a great deal. And there is all over the—you talk to people in DC, what study do you point to? And do you think it is apples to apples a good deal yet for the taxpayers?

John Kao: I think it is a very good deal for the seniors. I think from a tax point of view, the last study I saw is post-V28. It is pretty much apples to apples, is what I saw. And to the extent that plans that are able to remain competitive and still have a reasonable rebate back to that beneficiary are going to be the winners. And I think that CMS has been consistent with they want to grow MA. They just want to grow it the right way. They want to minimize the gaming, their words, not mine, and ensure program integrity.

On the other hand, they want to have an alternative with what they are referring to as traditional fee-for-service Medicare. Now I just think, looking at the value proposition to the beneficiaries, I personally think you are going to get continued growth and market share growth in MA, because the rebate dollars, even if they go down, they are still material enough in terms of being better than fee for service that people are going to still choose it.

John Wilson Ransom: Thank you.

John Kao: You got it.

Operator: Our next question comes from the line of Raj Kumar with Stephens. Your line is open.

Raj Kumar: Hey. Maybe just one quick one around AEP and just thinking about new member engagement, pertaining to the Care Anywhere platform. Any insight on that and how that is trending relative to this time last year?

John Kao: Hey, Raj. It is John. Can you just repeat that again? I kind of faded out or you faded out. I did not quite—

Raj Kumar: Yeah. Sorry about that. Yeah. Just maybe any details around new member engagement and pertaining to the Care Anywhere platform and how is that trending relative to this time last year with the new membership profile?

John Kao: Yeah. Okay. I got it. Yeah. I would say it is about the same. I think there is opportunity for us to be better. We are spending a lot of time again taking advantage of the correct strategic decisions and operational decisions we made two years ago that are really paying off in 2024 and 2025, and I think will also pay off in 2026. That same kind of operational focus of continuous improvement, just not being satisfied with any of it, is going to cause us to get better and better and better. And one of those areas is Care Anywhere engagement. I think we were still at about 65%, which really is not bad.

But I think we have set a target internally. We are trying to get to 75%. And I think some of the new people that we brought in on the member service and member experience side—shout out to that team—is really going to be good for the company and for our beneficiaries. So I am optimistic about that. But year to year, to answer your question, it is about the same.

Raj Kumar: Got it. And then just maybe as a follow-up, just thinking about your ex-California markets and being in them for a while now. And as they have matured, have you seen any divergence in overall trend or even consumer behavior and how maybe that has led to operational nuances in those distinct markets and maybe even any catering or tweaking around AIVA to service those operations in the most optimal manner.

John Kao: That is a very good question. I think the work that we are doing now in terms of what I call operational scaling is really designed to make sure that the providers and the members outside of California get the same level of service they get inside of California. And that is part of our maturation, part of our scalability. And we are working really hard on that right now. Again, having very clear member satisfaction, but we are really starting provider satisfaction metrics. And I think the bigger we get, the more critical this area is, particularly outside California. I think we have done a very good job on Stars.

I think we have done a very good job on clinical replicability in terms of the ADK metrics outside of California. I think our provider engagement is something we have to get better at. And I say that to all the providers out there. We are working on it. We are going to get really, really good. And we want five stars from all of you just like we have five stars from the members.

Raj Kumar: Great. Thank you.

Operator: Thank you. Ladies and gentlemen, that is all the time we have for questions. This concludes today’s conference call. Thank you for your participation. You may now disconnect.

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