Alignment Healthcare (ALHC) Q3 Earnings call transcript Oct 29, 2024

In its recent earnings call, Alignment Healthcare reported a strong third quarter performance, demonstrating robust growth and operational efficiency. The company's focus on population health management and consumer-centric technology has positioned it well in the competitive Medicare Advantage (MA) industry. Here's a closer look at the key takeaways from the earnings call.

Financial Highlights

Alignment Healthcare achieved a 52% year-over-year increase in total revenue to $692 million, with a 62% growth rate excluding ACO REACH. The company's adjusted gross profit reached $81 million, resulting in a consolidated Medical Loss Ratio (MBR) of 88.4%, and an adjusted EBITDA of positive $6 million. This marks the second consecutive quarter where both adjusted gross profit and adjusted EBITDA achieved the high end of the guidance ranges.

Strategic Growth and Competitive Advantage

Alignment Healthcare's strategic focus on population health management and consumer-centric technology has paid off, as evidenced by its consistent Star performance and lower utilization metrics. The company's Care Anywhere clinical model and real-time utilization visibility have enabled it to manage care and control costs while growing membership close to 60% year-over-year. Alignment's ability to seize opportunities in the MA environment, where competitors are struggling to adapt to CMS' higher standards, is a testament to its unique capabilities.

Stars Performance and Future Outlook

Alignment Healthcare's Star ratings are a significant indicator of its competitive positioning. The company boasts a 98% membership in plans rated 4-stars or above for 2025, with 86% of its MA membership in California earning a 4-star or above rating for eight consecutive years. Alignment's California HMO contract, which represents the majority of its MA membership, has maintained a 4-star rating, while its Nevada and North Carolina contracts retain their 5-star ratings for the third straight year. The company's strong Star performance is expected to continue, with significant tailwinds ahead as CMS implements policy changes favoring plans that enroll a greater-than-average portion of low-income and disabled members and demonstrate high clinical quality.

Operational Efficiency and Cost Management

Alignment Healthcare's operational efficiency is a key driver of its financial success. The company has successfully managed its growth while maintaining strong engagement rates and utilization results. Its adjusted SG&A expenses as a percentage of revenue have declined significantly, from 16.2% in 2023 to 10.8% in 2024, reflecting the scalability of its operating model. This improvement, coupled with continued SG&A operating leverage, positions Alignment well for future profitability.

Looking Ahead

Alignment Healthcare's outlook for 2025 is promising, with a focus on profitability and growth. The company aims to maintain its competitive advantage in the MA environment, leveraging its population health management capabilities and consumer-centric technology. Alignment's strategic approach to market expansion, coupled with its strong financial performance, sets it up for continued success in the evolving healthcare landscape.