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Alignment Healthcare, Inc. (ALHC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered another strong growth and margin quarter: revenue $701.2M (+50.7% YoY), MBR improved to 87.5%, and adjusted EBITDA was positive at $1.4M; FY24 marked ALHC’s first full year of positive adjusted EBITDA as a public company ($1.3M) .
  • Membership ended 2024 at ~189,100 (+58.6% YoY), well ahead of initial targets; AEP momentum carried into January 2025 with 209,900 members (+35% YoY), driven by ex-California markets and industry‑leading Stars performance .
  • 2025 guidance introduced: revenue $3.72–$3.775B (+37.6–39.6% YoY), adjusted EBITDA $35–$60M; Q1 2025 revenue $880–$895M and adjusted EBITDA $2–$10M. Management raised the midpoint of year-end 2025 membership guidance by 2,000 based on early AEP strength .
  • Capital structure improved: $330M convertible senior notes (4.25% due 2029) refinanced higher-cost debt; ALHC paid down $215M of term debt and expects ~$10M lower annual interest expense, supporting 2025 interest of ~ $14M and CapEx of $30–$35M .

What Went Well and What Went Wrong

  • What Went Well

    • Membership and revenue outperformance: Q4 revenue $701.2M (+50.7% YoY), membership 189,100 (+58.6% YoY); “we grew while others pulled back” (CEO) .
    • Margin execution: Q4 MBR 87.5% (lowest quarter of the year), adjusted EBITDA positive in Q4 and FY; “first year of adjusted EBITDA profitability” .
    • Stars and strategic positioning: 95% of CA members in 4+ star plans for PY 2025 and 100% in PY 2026; ~98% of total members 4+ stars in PY 2026—CEO sees multiyear tailwinds from caps/admin weighting and the Health Equity Index .

  • What Went Wrong

    • Higher supplemental benefit expense and atypically high unit cost inflation in 2024 pressured MBR, partially offset by SG&A leverage; new members’ mix was a modest MBR headwind .
    • SG&A seasonality and sales/marketing timing created a Q4 step-up vs earlier quarters (variable commissions attached to outperformance); management still delivered ~330 bps FY24 SG&A leverage YoY ex-ACO REACH .
    • Part D seasonality changes under the IRA flatten intra-year improvement; 1H’25 MBR expected modestly lower vs historical seasonality, with catch-up in 2H .

Financial Results

Quarterly snapshot (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$681.3 $692.4 $701.2
Revenue excl. ACO REACH ($USD Millions)$682.0 $692.2 $700.7
Adjusted Gross Profit ($USD Millions)$76.8 $80.5 $87.9
Adjusted EBITDA ($USD Millions)$6.0 $5.9 $1.4
Medical Benefits Ratio (MBR, %)88.7% 88.4% 87.5%
Diluted EPS ($)$(0.13) $(0.14) $(0.16)
Health Plan Members (000s, end of period)175.1 182.3 189.1

Q4 YoY context

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$465.4 $701.2
Adjusted EBITDA ($USD Millions)$(19.7) $1.4
Diluted EPS ($)$(0.25) $(0.16)

Annual context

MetricFY 2023FY 2024
Revenue ($USD Millions)$1,823.6 $2,703.6
Adjusted Gross Profit ($USD Millions)$208.8 $302.6
Adjusted EBITDA ($USD Millions)$(35.3) $1.3
Net Loss ($USD Millions)$(148.2) $(128.1)
Adjusted SG&A as % of Revenue (ex-ACO REACH)14.4% 11.1%

Balance sheet and cash (12/31/24)

  • Cash & cash equivalents: $432.9M; current investments: $37.8M; total assets: $782.1M .
  • Long-term debt (net): $321.4M (post converts & paydown); total liabilities $681.1M .
  • FY24 operating cash flow: $34.8M .

KPIs

  • Inpatient admissions per 1,000 (at-risk): 151 in Q2; 149 for full-year 2024 (ex-CA 144), underscoring clinical model efficacy .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Health Plan Membership (end)Q1 2025N/A211,000–215,000 New
Health Plan Membership (end)FY 2025Early Jan commentary baseline not disclosed here227,000–233,000 Midpoint raised by 2,000 vs Jan commentary
Revenue ($USD Millions)Q1 2025N/A$880–$895 New
Revenue ($USD Billions)FY 2025N/A$3.720–$3.775 New
Adjusted Gross Profit ($USD Millions)Q1 2025N/A$89–$97 New
Adjusted Gross Profit ($USD Millions)FY 2025N/A$415–$445 New
Adjusted EBITDA ($USD Millions)Q1 2025N/A$2–$10 New
Adjusted EBITDA ($USD Millions)FY 2025N/A$35–$60 New
Interest Expense ($USD Millions)FY 2025 planningN/A~ $14 Planning assumption
CapEx ($USD Millions)FY 2025 planningN/A$30–$35 Planning assumption

Notes: Guidance implies FY25 midpoint adjusted EBITDA of $47.5M and ~130 bps margin expansion YoY, driven by cohort maturation and SG&A leverage, partially offset by IRA-related Part D seasonality and V28 phase-in headwinds .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Stars advantage98% of MA members in 4+ star plans for PY 2025; NV/NC 5‑star; multiyear Stars tailwinds flagged (caps/admin reweight, HEI) .95% of CA members 4+ stars in PY 2025, 100% in PY 2026; ~98% of all members 4+ stars in PY 2026; HEI could add ~0.25 bonus .Strengthening competitive moat.
Technology/AVAUnified data platform AVA driving replicability, SG&A leverage .400+ clinical staff leverage AVA for outcomes/cost control; model built for new MA paradigm .Scaling execution.
Cohort maturationEngagement ramp and cohort improvement expected to aid margins .~50% of members in Year 1/2; embedded GP opportunity ~$600M as cohorts mature (Y1 $90 PMPM → Y5+ $230 PMPM) .Margin tailwind intensifying.
IRA/Part DPart D tailwind expected in 2H; Q2 Part D in line .Flatter Part D seasonality in 2025; 1H modestly lower, 2H higher vs prior years; no unusual spikes seen vs peers .Managed headwind/timing.
UtilizationIP admits per 1,000 at 151 in Q2; strong control through Q3 .FY24 at 149; ex‑CA at 144, better than consolidated .Improving.
SG&A leverageQ2 adj. SG&A 10.4% of revenue ex‑REACH; strong scale .FY24 adj. SG&A 11.1% (ex‑REACH) vs 14.4% in 2023; ~330 bps improvement .Sustained leverage.
Ex‑California growthDoubling membership ex‑CA and strong Stars in NC/NV .AEP: >100% growth ex‑CA; Nevada >10k; each other ex‑CA 5–8k .Accelerating.
Capital structure—$330M converts issued; paydown reduces annual interest by ~$10M; $471M cash & investments YE .Lower cost of capital.

Management Commentary

  • “2024 was a milestone year that proved health plans can win by providing more care, not less… we enter 2025 positioned for success” – John Kao, CEO .
  • “Q4 MBR of 87.5% marked our lowest MBR quarter of the year… we delivered positive adjusted EBITDA for the full year” – Management .
  • “Approximately 98% of all Alignment members are in plans that will be rated 4 stars or above in payment year 2026… we see multiple years of meaningful Stars tailwinds ahead” .
  • “Embedded gross profit of approximately $600 million just within our existing membership base” from cohort maturation .
  • “We are raising the midpoint of our year-end health plan membership guidance by 2,000… early 2025 sales momentum is strong” .

Q&A Highlights

  • 2025 profitability range drivers: conservative IRA Part D assumptions at low end, cohort maturation, admissions/utilization and growth pacing; confidence in range with ~50% of members in Y1/Y2 .
  • Growth mix: ex-CA to grow faster in % terms (e.g., Nevada), but CA still >50% of net adds; ex-CA engagement and utilization in line/better than CA .
  • MLR vs peers: ALHC’s 2024 MBR up ~130 bps despite ~59% growth; peers saw far larger increases even with little/no growth—management cites Stars, clinical model, balanced benefits .
  • 2025 cash items: interest expense ~ $14M; CapEx $30–$35M .
  • Rate notice: CEO expects potential upside vs preliminary 5.93% benchmark given utilization run-out and ACO/FFS adjustments, but positioned well either way .

Estimates Context

  • Wall Street consensus from S&P Global (EPS/revenue) was unavailable at retrieval time due to SPGI rate-limit errors; therefore, explicit “vs. consensus” beats/misses are not included here. Where estimate comparisons are critical, please note that S&P data could not be accessed for this report window (no values shown).

Key Takeaways for Investors

  • Membership and revenue momentum remains robust with operational discipline: Q4 revenue rose to $701.2M, MBR improved to 87.5%, and FY24 adjusted EBITDA turned positive .
  • Multiyear Stars tailwinds (PY 2026 and beyond) plus cohort maturation underpin a path to sustained margin expansion and profitable growth through 2025–2028 .
  • 2025 guidance implies ~40% revenue growth and ~$35–$60M adjusted EBITDA with ~130 bps margin expansion at midpoint; Q1 seasonal MBR dynamics within plan due to IRA .
  • Capital structure actions (converts, debt paydown) lowered cost of capital and interest burden, supporting earnings power and liquidity for growth .
  • Execution edge in ex‑California markets (NV/NC) validates replicability; continued CA leadership benefits from superior Stars funding and clinical model .
  • Near-term watch items: IRA/Part D seasonality (flatter in 2025), benefit spend discipline, and cohort engagement ramp; management indicates prudent assumptions embedded .
  • Narrative that moves the stock: durable Stars advantage, embedded gross margin opportunity (~$600M), and strengthening profitability trajectory with improving capital efficiency .

Sources: Q4/FY24 press release and 8‑K (results and guidance) , Q4 earnings call (prepared remarks and Q&A) –, prior quarters Q2/Q3 press releases and 8‑Ks for trend context – – – –, convertible notes press release .