Alignment Healthcare Q2 Earnings Call Highlights

Key Points

• Strong second-quarter performance: Membership rose 31% year over year to 294,100, while revenue increased 32% to $1.3 billion. Adjusted EBITDA grew to $68 million, with the medical benefit ratio improving to 86.3%.
• Full-year outlook raised: Alignment increased its membership forecast to 298,000–301,000 and raised the low ends of its adjusted gross profit and adjusted EBITDA ranges to $630 million and $145 million, respectively.
• Investments will weigh on near-term seasonality: Planned spending on clinical operations, automation, AI and future market launches is expected to reduce the share of EBITDA generated in the second half of 2026, while supporting targeted 2027 enrollment growth of roughly 20%.

Alignment Healthcare NASDAQ: ALHC reported second-quarter growth in membership, revenue and adjusted EBITDA, while raising the low end of its full-year profitability outlook and increasing its membership expectations for 2026.

Chairman and CEO John Kao said health plan membership reached 294,100 at the end of the second quarter, up approximately 31% from a year earlier. Revenue rose 32% year-over-year to $1.3 billion. The company reported adjusted gross profit of $183 million and adjusted EBITDA of $68 million, representing year-over-year increases in profitability and margins.

“This quarter marks our lowest MBR as a public company,” Kao said, referring to the medical benefit ratio. The company’s adjusted MBR was 86.3%, an improvement of roughly 40 basis points from the prior-year period. Adjusted EBITDA margin expanded 60 basis points year-over-year to 5.1%.

First-Half Results Support Full-Year Outlook

Alignment generated $106 million in adjusted EBITDA during the first half, up 60% from the prior-year period. Chief Financial Officer Tim Head said the first-half performance put the company on track to achieve its full-year adjusted EBITDA guidance midpoint of $154 million.

The company generated $111 million in operating cash flow during the first half and ended the quarter with $702 million in cash equivalents and short-term investments. Its funded leverage ratio improved to 2.2 times trailing 12-month EBITDA, according to Head.

For the full year, Alignment now expects:

• Health plan membership of 298,000 to 301,000 members;
• Revenue of $5.20 billion to $5.23 billion;
• Adjusted gross profit of $630 million to $650 million; and
• Adjusted EBITDA of $145 million to $163 million.

The revised guidance raises the company’s membership outlook following what management described as continued strength in sales execution. Alignment also lifted the low end of its adjusted gross profit outlook by $10 million and the low end of its adjusted EBITDA range by $7 million.

For the third quarter, the company forecast membership of 295,500 to 297,500, revenue of $1.30 billion to $1.32 billion, adjusted gross profit of $148 million to $158 million, and adjusted EBITDA of $20 million to $30 million.

Investments Expected to Affect Second-Half Seasonality

Management said it expects approximately 30% of full-year adjusted EBITDA to be generated in the second half of 2026, compared with about 40% in the second half of the prior year. The shift reflects a flatter expected Part D medical benefit ratio trend as well as planned investments in clinical operations and other capabilities during the third quarter.

Head said third-quarter spending will include investments in Care Anywhere clinical operations, earlier hiring for anticipated market growth, automation, artificial intelligence and preparation for market launches in 2027. He said the investments could total an additional double-digit number of millions of dollars across clinical and SG&A categories during the second half, with a greater weighting in the third quarter.

Management said those expenditures are included within its 2026 financial commitments and are intended to generate returns in future periods. The company expects a seasonally higher MBR in the third quarter than in the prior year, in part due to clinical investment, new-member mix and Part D trends.

“All these investments we’re making have returns, and we want to keep it inside the guardrails of what we’re committing to,” Head said.

Care Model and AI Focus

Kao said the company continues to invest in its Care Anywhere clinical teams and its AVA artificial intelligence-powered member stratification model. He said the newest version of the model can dynamically identify the 10% of members that account for nearly 70% of hospital admissions over the following 30 days.

The company is also using disease-state registries and automation tools to support more proactive member engagement. Kao said Alignment’s approach to AI is based on clinical expertise and includes a governance framework focused on responsible use, human accountability and equitable treatment of members.

Alignment said about half of its members remain in their first or second year with the company, creating what management views as embedded earnings potential as cohorts mature. Kao said the midpoint of 2026 guidance implies $640 million in adjusted gross profit, while the embedded gross-profit potential of current membership has risen to approximately $880 million.

Management said its newer markets outside California carry a higher MBR because of their younger membership cohorts, but it expects margins to improve as those members mature and engage with the company’s care programs. Kao said Alignment’s mature California business is performing well and that the company is pleased with year-to-date results in its non-California markets.

Growth Plans for 2027 and Beyond

Alignment said it plans meaningful market expansions within its existing state footprint in 2027, while broader state expansion is expected in 2028. Kao said the company is building operational capabilities that can support various provider contracting arrangements, including globally capitated, shared-risk and directly contracted models.

The company is also increasing its clinical infrastructure and administrative capabilities to support growth. Kao said these efforts are designed to create “scale and portability” across markets and allow Alignment to manage medical risk while supporting providers.

Management said it expects to target roughly 20% enrollment growth in 2027. It also noted that 50% of new members added in 2026 were C-SNP eligible, D-SNP eligible or dual eligible, categories that may have higher acuity and initially higher medical costs. The company said it intentionally invested in those populations because it believes its care model can improve health outcomes and reduce costs over time.

About Alignment Healthcare (NASDAQ:ALHC)

Alignment Healthcare, Inc NASDAQ: ALHC is a health care company specializing in value-based care for Medicare Advantage beneficiaries. The company leverages an integrated care model that combines in-home clinical services, telehealth capabilities and digital health tools to manage chronic conditions, improve outcomes and enhance patient experience.

At the core of Alignment Healthcare's approach is a proprietary technology platform that aggregates real-time clinical and claims data to support preventive care, risk stratification and personalized care plans.

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