Alignment Healthcare at KeyBanc Forum: Growth and Strategic Vision

On Wednesday, 19 March 2025, Alignment Healthcare (NASDAQ: ALHC) presented at the KeyBanc Annual Health Care Forum 2025. The company highlighted its robust growth, strategic initiatives, and ability to navigate policy changes. While emphasizing its value-based care model and data-driven insights, Alignment Healthcare also acknowledged industry challenges and the need for continuous improvement.

Key Takeaways

• Alignment Healthcare achieved a 35% year-over-year membership growth, reaching 209,900 members.
• The company projects a revenue target of $3.75 billion for 2025, representing nearly 40% year-over-year growth.
• Alignment Healthcare’s Care Anywhere program has achieved an 82 Net Promoter Score, showcasing its effective care model.
• The company expects an adjusted EBITDA of $47.5 million in 2025, with a 130-basis point margin expansion.
• Alignment Healthcare is confident in its strategic position, despite potential policy changes in Medicare Advantage.

Financial Results

• Membership Growth: 35% year-over-year increase, reaching 209,900 members.
• Revenue Target (2025): $3.75 billion, indicating nearly 40% growth from the previous year.
• Adjusted EBITDA: Expected to reach $47.5 million in 2025, with a margin expansion of 130 basis points.
• Long-term Goals: Aiming for 20% plus annual growth and an adjusted EBITDA margin of 6-7%.

Operational Updates

• Care Model: The Care Anywhere program targets high-risk members, achieving an 82 NPS.
• Data Architecture: Unified system enables quick responses to utilization trends.
• Strategic Relationship: Announced partnership with Sutter Health.
• Quality Metrics: Hospital admissions per thousand are at 149, compared to 200 for a well-managed plan.

Future Outlook

• Growth Strategy: Focus on disciplined bidding to balance growth and profitability.
• Margin Expansion: Driven by MBR improvement and SG&A efficiencies.
• Economic Advantages: Leveraging star ratings and value-based care model for continued success.
• Policy Navigation: Confident in maintaining competitive position regardless of Medicare policy changes.

Q&A Highlights

• Policy Impact: Alignment Healthcare believes its advantage remains intact despite potential policy changes.
• Growth Projections: Aiming for balanced growth and margin expansion, with a focus on profitability.

Alignment Healthcare’s strategic initiatives and financial outlook position it for continued success. For a detailed discussion, refer to the full transcript below.

Full transcript - KeyBanc Annual Health Care Forum 2025:

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: Well, hello and thank you for joining us for the Alignment Healthcare presentation. My name is Matthew Gilmore and I lead healthcare services equity research for KeyBank. Joining me on screen is John Kao, CEO, Thomas Freeman, CFO and we’ve also got Harrison Zhao from investor relations. Alignment is a leading Medicare Advantage plan. It is distinguished in a number of ways, but principally by its purpose built technology platform, AVA, and its integrated value based care capabilities, which will, which we’ll dive into.

This will be a fireside chat. I will be leading the Q and A. We would love your participation. So if you have any questions, feel free to submit them in the dialogue box at any time. So with with all that out of the way, John, Thomas, I really want to thank you for being here and welcome.

John Kao, CEO, Alignment Healthcare: Thank you, Matt. Great to be here.

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: Well, I’m trying to start off these conversations sort of higher level before we, you know, get into financials and maybe even some of the policy things that are, you know, top of mind for investors, but you know, maybe not as much focus for you all specifically. But John, where, you know, where I wanted to start this off is, you know, given my experience, I’ve come to really sort of appreciate Alignments

Thomas Freeman, CFO, Alignment Healthcare: pay

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: by their model and, you know, particularly the integration of your value based care capabilities inside of the health plan versus, you know, an external model. And what that ultimately means for patients across a bunch of different dimensions. And I thought we might just start off at the highest level in terms of getting a little bit of your history, because I think that you know some of your history really informs the strategy, but I that’s where I sort of wanted to start in terms of, you know, what about your history has has informed the strategy here?

John Kao, CEO, Alignment Healthcare: Yeah. No. Thank you, Matt. It’s great to be here. I would say it starts with the culture of the company, which is, really a care delivery culture.

It’s really not an insurance culture. And that stems from my experience to your point where I worked at companies like FHP, which is a large health plan, PacificCare back in the day, which is also a plan that really worked with providers really well and partnered with providers. And then I went to a company called TriZetto, which is now owned by Cognizant, to learn really about systems and data, and and integration work and workflow processes, kind of the operations of of how the health care system works. Then I worked at a place called CareMore. And I took those skills to go to CareMore and kind of the planned skills that we were gonna work with CareMore, that ultimately sold back in 2011 to the old Anthem, now, Elavance.

But what happened was I thought we would take the health plan skills, the scalability skills, and apply it to a small company that we loved their care model. And really what happened was I was the one that was changed. I was the one that was transformed by taking the CARE model and really having that be all about my ethos. And I think that was the most instrumental thing. And if you took the FHP experience as vertically integrated models, the PacificCare experience was just partnering with providers, having win win situations, TriZetto is all about technology and data and CareMore is all about chronic disease management.

You put all those together, they form the basis of alignment.

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: That’s great. And then, you know, my sense is that when you have, you know, internal value based care capabilities married up with the health plan data that you’re able to respond to patient needs in a differentiated way and, you know, assuming that premise is correct, can you just give us a flavor in terms of how you’re able to deploy your value based care capabilities to your members and how that’s different from, you know, traditional health plan model or or even maybe your experiences at other organizations?

John Kao, CEO, Alignment Healthcare: Yeah. No. I I would say, first and foremost, those care delivery competencies are, to us, core. Core capabilities, that really rest on a foundation of this culture of of serving the senior, doing everything and putting that senior first. Forget about everything else.

Just take care of somebody, either your mom or your dad. Take care of them the right way. Number two, support the doctor. Number three, use data and technology to revolutionize health care. And number four, and I think potentially the most important one, is just you have a serving heart.

Like, you actually need to care about taking care of seniors and making their lives better. And I think if it starts with that level of foundation, then you get into the need to ensure quality control. And why quality control? We always say you got to have high quality at a lower cost. High quality translates into star ratings.

If you take care of seniors clinically, if you take care of their experience, if you do it in an affordable way or for these capabilities, it’s absolutely the most capital efficient way of taking care of seniors. And what happens is the whole thing translates into if you can understand what are those quality measures that not only increase star ratings but have a clinical model that is going to be able to consistently bend the cost curve. That’s kind of the principles of all this. And why is that important to your point? It gives us a unit economic advantage, not only in the star ratings, as we all know that a lot of our competitors’ star ratings have dropped, But you maintain that high level of quality on stars while you’re lowering costs.

So how do you lower in cost? You provide more care, not less care, more care. You just need to apply it to the right people that need the care. It’s really that basic. And the way you do that is philosophically and kind of operationally pretty basic, but really hard to do.

And that’s you have to have a unified data architecture. That data allows us to react in ways that are actionable. And I say this all the time. Last year, we were not immune to high utilization.

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: I mean,

John Kao, CEO, Alignment Healthcare: a lot of people got hit with utilization last year. We just knew exactly where the hotspots were, who the providers were, what members were impacted. And because we manage this as a senior team daily, every single day we go through a market and we track and manage this, we knew exactly what was going on, and we had the problem resolved within sixty days. And so it’s actionable data with no latency. That’s in in contrast to a lot of other people.

They have back end systems that are not integrated, and ours is all a unified data architecture. Everything is in one data lake. Everything is there and the interpretation and the cleansing of that data is done upfront. That gives us the ability to take action. And internally, we use these the whole way we operate, transparency, visibility, control, and then durability.

And so you gotta have the transparency, to be willing to work with the right providers, make them successful, and you have to have the data to do that. And if you have the data and you see what you should be doing, you have to have the feet on the ground, the boots on the ground, actually do something about it, which is where we have, you know, over 400 employed clinicians that all they do is serve seniors. You take care of them, take care of them more. And that’s why a lot of that leads to our hospital admissions per thousand. I think last year, we did, on a corporate basis, 149 admissions per thousand.

You contrast that to what Milman would say is a well managed plan, which is about 200, and you contrast that to fee for service, which is about $2.50. So it’s like 40% better, and the members are happier. Nobody wants to go to the hospital if they don’t have to.

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: No. That that’s I’m glad you brought up that 80 k metric because it it it kind of brings home almost everything you’re you’re talking about. There’s there’s really not you know, a, like, that metric is incredible in terms of how low you are. But, the fact that you quote it regularly, you know, just in my mind sort of shows, so is the discipline in terms of the data and the operations that are underneath the service. The the one follow-up I wanted to ask on that is, that I I think is still somewhat underappreciated is the fact that there’s medical savings by virtue of the way your company is structured, it actually gets reinvested into benefits.

So can can you talk to that a little bit and then just give us a sense for the long term advantage that that

John Kao, CEO, Alignment Healthcare: Yeah. That’s that’s a great question. And it it’s really important, I think, the investors understand this, is really what you’re asking is the kind of the fundamental calculus of why we think we have a competitive model. And if you have a good care model and it is taking care of people, the trick is you have to be able to have seniors happy. They have to be really happy.

And it’s reflected in Net Promoter Scores, Google ratings and star ratings. And so that’s number one. Got to have the star ratings and consistently have a company culture that is truly invested in serving that senior. It’s not just a departmental function. It’s an entire enterprise philosophy.

So that’s really is number one. Number two is because we use our data and we use the information, lab data, pharmacy data, encounter data, authorization data, admission discharge transfer data from run through our AI models that really stratify who we think are the high risk, frailest members. And usually, that 10% accounts for 80 of the spend. So if you can have a core competency that’s actually taking care of all of these people but have a particular competency in managing that 10%, which again costs 80% of the MLR, you have the ability to take care of those people. And our program that you’ve heard us talk about is Care Anywhere, which is where our employed clinicians take care of this high risk population.

They are not only happy, we have an 82 MPS on that cohort, which is like crazily good. It bends the cost curve. And to your point, if you bend the cost curve consistently, and I’m going to get back to this one calculus point, if you bend the cost curves consistently, CMS doesn’t say you can just take all that in profit, to your point. You really have to reinvest that back into products and benefits. So the lower your cost structure is and while maintaining quality, the ability to invest in richer benefits consistently and not bait and switch members, but give them consistently strong benefits is a key competitive advantage.

Now what happens though is the rest of the industry have relied upon, you know, and I’d call it financial engineering, where you pass the risk off to other groups or medical groups that have taken risk. That all kind of works when you have a lot of latitude coding, if you have a lot of increasing revenue all the time in terms of unique economics. But once there’s a little bit of compression, as we’ve been experiencing over the last couple of years with the tighter two key stars measures and V28 of the risk model, there’s not enough revenue go around because the plan needs to make its margin, the global cap provider, who’s taken, let’s say, 85% of the global cap, that’s like two insurance companies, one regulated, one not regulated, inside that one supply chain. And so when revenue goes down and isn’t compressed, there’s not enough revenue to go around to support two margin profiles. And so what we’ve done really is because we have the competency of managing the care ourselves, the margin that would otherwise go to the global cap provider is reinvested instead to the member.

That’s the magic. And it’s you give a better experience, you have better clinical outcomes, and you have more benefits that you can give to these folks. And the beauty of the model that we have is it’s somewhat independent of what reimbursement what happens with reimbursement. If reimbursement goes down, we have a competitive advantage because our cost structure is lower. Okay?

If reimbursement goes up, the market wins, the sector wins, but we also win. We may not grow as much because of, people getting back into growth, which I think will happen for a couple of years. But our margin profile expands. So either way, because of the model, we win. But that’s a really important concept for investors.

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: Yeah. No, it’s a great bunch of nuggets you threw at us. But why don’t we shift a little bit over to growth and to, you know, profitability. But I, you know, I wanted to start off with, you know, we’re coming off of the AEP period for Medicare Advantage and, you know, you all had a pretty successful period. But I I thought I thought you might start off with, you know, what if are there areas of your product that’s really, you think, you know, resonating in the in the market that’s driving your growth?

And if you give us a flavor, remind us sort of how the growth looked like in terms of growth outside of California versus inside of California, duals, non duals, just a little bit of a flavor for the AEP results would be great.

John Kao, CEO, Alignment Healthcare: Yeah. Yeah. No. We we, we grew through 01/01/2025 up to 209,900 members. That was really a 35% year to year growth rate, oneonetwenty twenty one growth rate.

We ended 2024 with something like 58% growth. That was correct if I’m wrong. I think it’s like 58% net membership growth. And the most proud thing I am for our employees is the the service delivery and the care delivery did not suffer at all. I mean, we were ready for it.

We onboarded these members flawlessly. Our our star ratings held, And people really last time this year, people thought we mispriced and thought we were going to blow up like everybody else. We didn’t. And Matt, we could have grown even more than 58% last year, and we could have grown even more than 35%, but for oneone. But we really thought it was important that we were EBITDA positive.

We really thought it was important for 2024. And so we really took time to exit certain products that were not as profitable as we would like. We doubled down working with the right providers, and we want to support our providers, support our doctors, support our IPAs, and have them make more surplus with working with us. We just announced our our long term strategic relationship with Sutter Health, yesterday. That was a really important deal.

They’re wonderful people to work with. And we have some ideas on how health systems and alignment can work together to solve some of the challenges these large hospital systems are facing with other payers in MA. And we also really terminated certain providers we just didn’t think we could work successfully with. And then we really invested in others that we thought we could grow and double down with. And it’s something that I feel really strongly, not only in 2024, ’20 ’20 ’5, but it also has gone on record saying in 2026 and 2027, I think we’re going to continue to have these unique economic advantages.

And that’s in the form of star ratings. We know what the 26 star ratings are for everybody. We’re at four stars. We have, I think, one player competitor that’s at 4.5 in California. But I think depending upon some of our conversations with CMS, we’re hoping that can also get us up to 4.5%, but we’ll see how that goes.

We’re not relying on that, but we think our case is very, very good. And then V-twenty eight, remember, 2026 is the third phase in of V-twenty eight. And a lot of the mitigation efforts of everybody in the sector is pretty much dried up through the first two years of V28. And so that third year of V28, I think, is going to cause people to to be more margin focused than growth focused, it would be a guess. I’d be surprised.

There might be some people that are going to be aggressive. But we’ve seen in the past, if they go and go do crazy stuff in the marketplace, we would say that’s not sustainable. We’ve been right about that. So we’ve not chased bad business. We want very good profitable growth, and I expect that to also occur in ’twenty six and ’twenty seven.

And so I feel very it’s just like the raw unit economics are in our favor when combined with the business model where we have a competency that I don’t see others really having.

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: Why don’t we jump ahead on the, you know, since you brought up the STARS question, you guys I think have done a really great job articulating, you know, the advantage you have in the next, sort of several payment years. One of the questions I would have is how do you, and I know this will be an evolving conversation, but how are you thinking about using that funding advantage? You know, one course could be we continue to expand margins, but we really double down on growth and capture a bigger long term opportunity. There’s another avenue where you maybe tack more towards margins. And I I appreciate there’s probably not one answer, but I’d I’d love whatever perspective.

John Kao, CEO, Alignment Healthcare: Yeah. Totally. Totally. We we’ve been I mean, from day one, as people have gotten to know us more and more, we’ve been very, very disciplined around our bids. And we always say, we try to find the balanced approach, 50% growth, 50% margin expansion.

And the first couple of years, everyone was buying the business and growing at all costs and other stuff. I think we grew 1518% or something like that five years ago. And it’s people go, what are you guys doing? You didn’t grow enough. But I had investors say, John, why don’t you grow at 50% back then and it’s okay if you lose money?

We go, no, we’re not going to keep losing money. We have to be disciplined. And then the next subsequent couple of years, next year, I think we grew at 20 something percent and next year was the 58% and then this year’s, I think, on average, it’s about 30 ish percent. And the five year CAGR for us has been about 30%. But we have to make sure that every year, we’re in a position not to chase bad business.

So if we only grow it, whatever, twenty percent one year, we’ll get it back the next year. It’s that disciplined approach on margin. And again, I think ’twenty six and ’twenty seven, we’re going to continue to have unique economic tailwinds. And the third answer on your question, which is again a very good question, is not either or, but I would say both and. I think we have done a really good job on member retention.

We’ve done a really good job on scaling the care model. We’ve done a very good job on really achieving operating scale economies. I think we’re going to be down to something like 10% somewhere it would be 1010.5% SG and A, which is shocking given our growth. Remember, the commissions in S, the sales and marketing, the commissions are embedded in that number. So our core operating infrastructure is good.

And the reason I say it’s going to be a both and in terms of good growth and margin expansion, really relate to the operating initiatives that we have underway. We really started it two years ago. We made a lot of headway in 2024, and we still have to finish out a lot of these initiatives in 2025. And it’s really all around operational excellence, workflow, business process automation, and and really growing the company up. And I’ll I’ll I’ll I’ll kind of put this in context.

It took us eight years to get to 100,000 members. It took us two years to add another 100,000 members. And so when that flywheel that we talk about gets mature more mature and we keep refining it, that growth flywheel is gonna get spin faster and faster and faster.

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: Got it. Why don’t I let me try to pick on Thomas here for a question too. You know, as we’re talking about sort of the details on that profitability inflection, you know, I I think if I’ve got the numbers right, EBITDA dollars up last year by about 40,000,000 and any cross breakeven. I think the guide for ’25 has something similar. There’s a range, obviously, but, you know, they’re big step up around 40,000,000 plus of EBITDA dollars.

Maybe just talk to us about, you know, sort of one question around this is just talk to us about some of the puts and takes or variable we should be thinking about in terms of the ’25 guide. And then can you give us a flavor for sort of what you guys are thinking of long term in terms of what the business is capable of and kind of the time frame around when that would be achievable?

Thomas Freeman, CFO, Alignment Healthcare: Yeah. Absolutely. So, you know, as John was saying, I think our our goal for ’25 is very similar to that of ’24 in years past where we really want to continue to balance our growth versus profitability goals. So last year was really quite the exclamation point with our Q4 conclusion. We grew close to 60% membership, but to your point, still improved profitability by almost 40,000,000 of EBITDA year over year and officially achieved our adjusted EBITDA breakeven goal for 2024.

As you roll that forward to 2025, I think it’s a very similar setup where our revenue outlook for 2025 is I think at the midpoint right around $3,750,000,000 just under 40% revenue growth year over year for 2025. But conversely, our adjusted EBITDA at the midpoint is about 47,500,000.0 which represents about 130 basis points of EBITDA margin expansion year over year. And that’s really coming through a combination of both MBR improvement and SG and A improvement. And so from an MBR standpoint and kind of the the the puts and takes aspect of your question, obviously there are a few tailwinds year over year that we’re leaning into. The first is we have our our large bolus of year one members from 2024 transitioning into a year two cohort in 2025.

And we also have the support of benefit moderation from ’24 into 2025 as well. I’d say conversely, we have the ongoing impacts of B28 like everyone else. And as John mentioned, I think we feel very confident about our relative advantages as B 28 phases in, but on an absolute basis for 2025, we of course have our own impact that we are navigating. And then I’d say lastly, you know, a lot of change with Part D this year under the Inflation Reduction Act. I think we feel really good so far being, you know, over two thirds of the way through the first quarter about our assumptions there, but particularly on the low end of guidance, that would be a bit of a headwind year over year for us as we think about some of the risks versus opportunities associated with those changes.

I think you know beyond that, just other kind of points I think are worth keeping in mind. You know, we still have over 50% of our Members in a year one or year two cohort in 2025. So I think one of the major advantages we have is is not just what that looks like in 2025, but to your point, how that supports our kind of multi year margin trajectory. And so, you know, what we have said very consistently is our long term goal is to continue to grow up 20% plus per year and, you know, consistently for I’m gonna say into perpetuity and and from a adjusted EBITDA margin standpoint, we really want to target about six to 7%, which represents about a 4.5 to 5% pretax margin. And the way you can kind of think about that math is sort of the the the golden rule of the North Star is 85% MBR, 10% SG and A, 5% pretax margin.

And I think what’s really so impressive about our story in in in the recent couple years is we’re actually approaching that 10% SG and A mark today even with only having 200,000 lives, not near at the scale of some of our larger national competitors. And then conversely, we’re starting to chip away at that MBR goal while still growing the business at the rates we’ve been growing. So I think we got a lot of tailwinds towards those long term targets and we’ve made a lot of progress in the last last, you know, twelve to twenty four

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: months. That’s great. Let me, you know, in our last five minutes here, let me try to tackle policy and, you know, our our sense of it and, you know, you can obviously disagree, is that, you know, the policymakers remain very supportive of MA. I think there’s been, you know, some scrutiny around what folks have considered to be sort of accepted benefits. And I guess I’m thinking about sort of like reimbursement for golf clubs that sort of thing.

And I think there’s also been some, you know, some scrutiny around risk adjustment coding practices. But I guess sort of the foundational question would just be how do you see Medicare Advantage policy evolving under Trump? And then, the follow-up is, you know, my my view of it was we we really should be focused more about the relative advantage that you have because we can always adjust benefits to the funding environment, but if the relative advantage sustains, you’re still in a great spot to achieve your objectives. So why don’t you try to tackle those, those points? I’d love to hear your perspective.

John Kao, CEO, Alignment Healthcare: Yeah. No. I we agree with your thesis. We think the relative advantage remains intact irrespective of what happens with the policy. We have modeled our entire operating business model based on what one of our board members, Doctor.

Mark McClellan, which you know was really the author of MA two decades ago, really, 2024 02/2004. And that’s just a approach that, you know, solved for the AAA. And it’s just making sure this this notion of value creation with a great care experience, clinical outcomes experience, and a great health care experience at an affordable price are center to everything. And so I think, this administration, and really, I would even give credit to the previous administration to a certain extent, really is they really try to eliminate the gaming with the model and really are pushing people back to what they intended, what CMS intended, which was the AAA, really increase the health and wealth of our seniors, of the beneficiaries. I really think it’s that fundamental.

From a practical basis, we’ll hear about the final rate notice for 2026 in a couple of weeks. I would be surprised if the actual benchmark rates did not go up, I’d be surprised. Just looking at the tail run out heading into the first half of utilization trends in 2024, I think that piece of data is something people are looking at that I think just inherently will increase that trend. And potential mitigants, to offset, so to speak, against the against that benchmark. And as it pertains specifically to V28 or normalization or kind of the coding model, I don’t think there’s going to be sufficient time, obviously, for you know, wholesale changes for 2026.

I think you’re exactly right. People are gonna be looking at, you know, their better datasets that can be applied to coding for 2027. And irrespective of what they do, I think we’re gonna do great because of that relative advantage.

Matthew Gilmore, Healthcare Services Equity Research Lead, KeyBank: Okay. I think this is a great place to conclude the discussion. But John Thomas and Harrison really appreciate you spending some time with us and we can go ahead and conclude. So thank you.

John Kao, CEO, Alignment Healthcare: Thank you, Matt.

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