Alignment Healthcare (ALHC) 6 Aug 222022 Q2 Earnings call transcript

Company Profile

Participants

John Kao	Founder & Chief Executive Officer
Thomas Freeman	Chief Financial Officer
Ryan Daniels	William Blair
Whit Mayo	SVB Securities
Michael Ha	Morgan Stanley
John Ransom	Raymond James
Jeff Garro	Piper Sandler
Kevin Fischbeck	Bank of America
Sarah James	Barclays

Call transcript

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Operator

Good afternoon, and welcome to Alignment Healthcare's Second Quarter 2022 Earnings Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. Leading today's call are John Kao, Founder and CEO; and Thomas Freeman, 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. with XXXX. these from could discussed ended XX-Q our XX, these detail and our report of to actual in quarterly annual some the our ended in materially including the December XX-K for June differ forward-looking filings fiscal report of on factors section Form for cause that quarter results more Risk Form Description Factors SEC the of year the on statements XXXX are XX,

Although expectations statements no reflect this our we to changes obligation after undertake believe we reasonable, are occur revise to any call. that

can addition, to they will be believe the measures posted is Kao. to and Form June most financial In my is between historical release in in Details on discussing for that in now the found XX, the the measures important press our CEO, relationship measures performance. comparable website evaluating GAAP financial John note quarter please of Founder ended are on and reconciliation and that It measures XX-Q certain non-GAAP the non-GAAP company that be the XXXX. introduce non-GAAP company's these pleasure

John Kao

welcome to appreciate joining quarter earnings our conference you call. I second us. and Hello,

quarter in each are pleased to indicators and line metrics. we for top bottom announce another our full exceeded guidance guidance We across four raised which strong of and performance key year XXXX

total year-to-date our of million XX% $XXX quarter, second revenue of growth revenue our the XX% year-over-year, For bringing represented a year-over-year. growth

XX.X%, MBR as resulting company. in $XX health ahead expectations, was in MBR quarter growing public year-over-year. of the solidly Our XX% Adjusted gross at ended million a our profit to of plan membership members, quarterly XX,XXX of date lowest an second

gross during $XX EBITDA million, quarter. Lastly reflecting positive our profit was outperformance significant the adjusted

platform well, resources. EBITDA adjusted technology success the continued capabilities, the as recent investments market our demonstrating adjusted Our management progress brings local positive in our our second care year-to-date AVA management and of in of quarter EBITDA our positive the

half, investments. plan quality portion full of balance profitability. our first with market year-to-date service ability we solid outperformance confident in financial year to to and our a XXXX I'm our our Following long-term growth a solid new delivery, capacity to towards about and metrics invest initiatives achieve

us quarter, the to a take on discuss, delivering strength is how are reflect to everywhere. all is replicability business and by of provider take our and used The markets. AVA's this investments short the related starting being market engagement hold of The our in providers I of I'd model we tools to outcomes clinical like to As are replicate to moment that teams, allowing the local our in management answer performance. operations

We lower We is doing than levels. care health are to well per seniors addressing again from our that our even income varying we which good, acuities, types the up our can remains management inpatient of ramped new Medicare derived provider delivering XXXX markets, successful Once Across we drove highest fee-for-service portfolio in second ethnicities, AVA XX% the relationships XXX of ran of while business notion and by performance. care this our model for model powered the be equity admissions our across doing geographies, model quarter, for markets. as seniors. by local model the proving believe value

with in enable to made and and The we've investments us partners. members, becoming identifying are we Anywhere of customize operations collaboratively are in need mass We scalable Care these in data our these our best efficient caring resources more care actionable a for precise primary in effective practice fashion. our increasingly most in and workflows deliberate

beginning the to internally we ground are investments market our local addition, refer game in our as In which pay-off. teams, to

processes local and combination irrespective each reproduce against our market-by-market this us of of market consistent the operating consistent management. in systematically game in provider on focus engagement We and market investments We disciplined workflow ground results dynamics. believe to plans are executing the a centralized give with playbook technology,

emphasize consumer. cannot enough the we service of the Lastly, importance delivery our focus on to

member with access we but to our to In richer not definition experience, provide a strive outcomes, benefits all As holistic lower the experience of our care, and our the cost. form members that benefits best-in-class we is continue only also level and in value-based health enhance highest better opinion, of consumer ultimately to improved the overall service. with value at of

approval, for expansion care, suited of eight counties partners. entering in anticipate recent and CMS markets featuring array also our subject products while are XXXX. Turning within our These Florida new Texas, to states a four in we diverse alongside of aligned announcement our well to existing model provider

further reminder, once more state creates this expansion established a a time counties contiguous growth. in capital-efficient over pathway into for As

As Medicare is entire and we of just into be XX% will operating about six over This in long-term think growth approximately beachheads today, the the are million market. XX establishing our eligibles Medicare runway we states aggregate. we the represent XXXX

since Beyond our strengthening XXXX. to ahead the target are our in innovative hires forward about look We and annual to provider investing enrollment products we we period, local geographic as XXXX our expanding presence community in ability and coming expansion, our sharing we team's are relationships, long-term our look more in XX% our through core products our our remain by annual achieve growth again after to execution one confident taking our operational In of the in company the our conclusion, target. encouraged quarters months. best public,

our call over to product map. I'll engagement structurally provider forward. Thomas? performance. turn With path and just we advantaged that, competencies roughly six durable model development XX,XXX are review our an our anticipated states, financial capabilities, Thomas to starting the the innovation XX put on counties to and our With management mark medical a members, present Our

Thomas Freeman

John. Thanks,

results. quarter second the to Turning

ranges we As are four the KPIs. each which in John of strong quarter high-end mentioned, deliver across to proud guidance exceeded another of our we our

across see markets. For of year XX,XXX increased health our momentum membership a continue as XXXX, ending positive June XX% our we the to quarter plan compared ago, to

reiterate bringing both growth to $XXX revenue For a growth our XX% the second This XXXX revenue Similar year-over-year final noting that large payments the would midyear are year, standard dollar quarter It's measures. A our contract year-to-date outperformance various not portion in year-over-year. including quarter that Accordingly, includes second happen revenue entirely well these through profit resulted capitation, sweep from total partial last of sweep does of worth our of quarter, our XX% we to part and risk in upside our industry profitability period providers to XXXX. a payments million through payments. in our full the our are and the of represented the the with the every revenue from CMS flow outperformance also comments for share true-up only during as expectations. pool significant received sweep business arrangements our we sweep shared exceeded as our on payments course year. that

Our MBR top the line with coupled outperformance management. in strong quarter was

mentioned, best company. a as John our as yet public quarter fact, In

of the inpatient This profit admissions guidance. of to quarter this million. MBR is adjusted of admissions our hospital per admissions quarter implies reflected utilization contemplated than as in gross Our total including million continued was our seasonal XXX hospital in relative in XX.X%, was COVID a $XX mix $XX SG&A an to X,XXX baseline. run below lower

million, $XX was SG&A an increase year-over-year. our expense, compensation equity-based of XX% Excluding

we a million favorability year. the timing over Our couple SG&A of quarter the included that second of reversing half the anticipate for of back

for that EBITDA our a proud exceeding our positive competitive was report we're first model. EBITDA Notably, to the adjusted million, half expectations $XX million our of our of positive demonstrating quarter. was MBR adjusted $X the Lastly, XXXX differentiation

areas quarters assessing the redeploy to Given first over the year, outperformance we the are two two strength of of our the next results in this quarters.

quarter $XXX the Turning We million with to the cash. sheet. in net ended balance

We capital continue without organic balance to expect and requiring growth strength needs financing. to external fund our sheet our working

Turning to guidance.

and and members, range expect be of $XXX revenue to EBITDA between loss to loss be we $XX profit membership million of $XX adjusted in to range and million million. XX,XXX be quarter, Adjusted third million $XXX XX,XXX of $XX to of the be plan the $XX the For million. between a gross and a to health in million

be year be the a range $XXX billion of gross billion membership range members, in be of we expect $X.XX $XX $X.XXX a EBITDA of health to revenue full and and be $XX loss the profit of to plan loss million. XX,XXX and million and $XXX XXXX, For adjusted to XX,XXX between million in to million to between adjusted

of back raising full and in guidance outperformance the full takes third revenue membership of into our pickups return quarter in X% we the XXXX includes year the full second the We our and On our note quarter, sweep sequestration account guidance. in are revenue second year forecast quarter. reiterating the beginning the our that

through outlook. second feel we and are midyear of subscription-like confident recurring the degree associated our our Now high visibility given revenue the half sweep revenue model, we with about that

utilization potential in fourth expectations period profit gross mindful we raising guidance to new are more the a XXXX We the six our hospital mid-July over BA.X variant adjusted increased the prevalent. next Of our COVID became into range. COVID increase of particularly months as remain XX-day year full census our over has note, narrowing Additionally, the and quarter. for

we levels than today the run this monitor utilization while lower Omicron something continue trend is COVID However, to continuing are to wave. our our with experience

with overall our our COVID-related the utilization. half spike line inclusive modest approximately potential utilization for Our a assumes in historical guidance second baseline runs that in of

new about as We looking market outperformance quality up furthering our XXXX launches. hires ramping our to we our care think well MBR of year-to-date towards initiatives some reinvest are our and as clinical also as

Lastly, previously. inclusive we are factors also EBITDA raising mentioned guidance the of timing adjusted our we SG&A

we thoughtfully profitability year performed that the objectives it first management to and in up. believe that, continue summary, a In longer-term before, upon with wrap like things business growth, we've progress to are half scalability our strong in to our has John of managing are we turn how I'd and objectives. very With to pleased to second the in we As back MBR short-term half. our position we're said build with the

John Kao

Thomas. Thanks,

care strive these health and XXXX our would regardless with of we value or having embedded access, for with journey heart lower released better on themes we data and we've environment, diversity our here points moment centered and our before of employees employees ESG of we members the member our many cornerstone this The improving more visit oversight governance our comprehensive people, serving highlights three impactful to approach members. and health and made pillars, – I begins into bridging come. in responsibly. open in important our towards and all and for on the that, forward report, Lastly, member culture, ESG further, years in equity representation serving yesterday. spend please Alignment. built ESG From our toward close, a positive all gaps, future outcomes social the and let's which alignmenthealthcare.com/esg. key a wealth. call around do are The report efforts social of our both powerful inaugural at of our health reflected have am health With readmissions explore serving to To Operator? and everything for we serving organizational healthier a Environmental strides and to inherently and look to proud focus I factors hospital outcomes appreciative the like and admissions including sustainable sharing focus questions.

Operator

of Thank line Daniels the [Operator our And you. William Instructions] with first Blair. comes from question Ryan

Ryan Daniels

number guys. and to targeting. markets, regards of a expansion, the this bit to set total to with but members a market expanded you've you're expansions new congrats opportunity the have start Yeah, for seems in Wanted Thanks year. of little pretty me taking ton the the questions, to significant we into about and don't talk how history your of great a on

as So about can XX this think us potential level next enter also we over of you then markets how cash any compare and can years? contrast versus months thinking to prior And you implications help discuss the months? X Thanks. flow new that

John Kao

we Texas five right it's and to happy Hey, really the lot really high that about Yeah, We bar states XXXX. that on, would I we provider win, announced say ending comfortable were in of so we entering dynamic with right talk of going entering it. and pretty looking or have we Florida that that we're six and Ryan, the resources really We Florida. spent could for a John. thought, partners had to be kind really with ensuring Texas competitive and a of terms at potential

term, get want I think or consistent now, a-third as the into membership be with everybody what the of the eligible’s that, are in shared we'll Right going be. represents with to six of in that seniors think, long XX stands of we the little XX-ish the are. it over a bit states to with it where it's we percent XX where we've states over

set beachheads really refer expansions those really get and contiguous focus we'll do We're think, as portability, execution. on up. going we to I what so And focus on to county continue to

every got really of the And proven would and like it, out it still anything contracting. model. our California, I prove in markets as of our really I to the of as but single prove diverse in in to good that of do terms say we that. I network think is And we've we've need opportunities that, and construction, one the are think, about three the I largest prepared engagement, team I the feel feel state,

think from I you flags, this, we always we want that can you I a say support to very parts of very me to each it's growth. we it's market, equally our making and Ryan's And some financial and clinical just Thomas, the sure can not question? I in feel about of have feel prepared speak And and perspective. comfortable product heard important think planting that do grow this teams operators profitably confidence, our

Thomas Freeman

Thomas is Ryan. This here Yeah.

in just on which marketing standpoint, So, will AEP, the launch new order expenses, over hiring an expense and are lot and we along as the year. expenses "zero" financial A lot set two so that of of includes our really was those well piece guidance to John really contemplated some leaders add those guidance a pieces the when in saying. local the both with what to From really to to happens with of G&A that's year marketing as consistent factors sales the half of our live. the the need upcoming the zero clinicians and sort both this go earlier those investment overall of market medical markets year of or year expectations, back and sales around dollars

Ryan Daniels

that with then sweep if community with how regards Is that helpful. your in one as position membership kind your initiative And that unique to the well? that Thanks, maybe you think providers. Super shared specific you you the externally? or to a guys. another is those latter for something kind internal group bolsters and just MA help Okay. of more you And payments that is practitioners, just in share is, can of growth of the and

Thomas Freeman

I one take that well. here. Yeah, can Thomas is as This

the mechanisms. So is approach underlying of contracts value-based care all we our way this have different

contract. look a a obviously, any spectrum or on might a so the be or other the profit one don't contracts some And for share. end provider create end spectrum, the on upside opportunities of And even risk pool our of providers capitation through type risk the either that we at global to global risk often have of downside a

those that focused members kind therefore, we are what which of vary providers provider when so and that, works and And dollars our contract generally members win, But where that organization. which upon win, is dependent win. upon, dependent ensuring from, coming group provider how are really our will sweep we speaking, on

network goal behind of kind and strategic how the contracts. philosophic we that's so And approach the

John Kao

of providers success cornerstone alignment kinds and Yes. to with to of the creates partnering that all with add is sure kind of our are of kind that percent the the of providers. reimbursement we providers, that, premium really And just been has the a just making with

Ryan Daniels

Thanks guys. back the Understood. hop I’ll queue. in

John Kao

Thanks, Ryan.

Operator

And our you. the Mayo with line of question from Securities. Thank comes SVB Whit next

Whit Mayo

were days really my I XXX, in I thought I thanks. XXX prepared low. sort have of heard that your X,XXX comments in that you per say Hey, seems head.

studied, it you low. to just just And kind that. hear I one was interesting so could presume of why So how if and just confirm you've it

there. maybe stop I'll So just

Thomas Freeman

great. Thomas this is Whit, Yes here.

X,XXX dates same better at would second been I time, five heard is baseline. were quarter for straight. seasonal at running correctly, our say, our about historical XXX inpatient So, But of kind now admissions back bit to admissions the which about you we've that as obviously experience years IPO the XXX inpatient well. I a to over X,XXX per And than for XXX, per our think

just monitor but the around better think Medicare is not we're potentially that rates measure quality and we fee-for-service. ER, when making proactive So, of that et couple our health only avoidable seniors' than forms their are how cetera, and industry-leading health also utilization. any I SNF, prevents well-being, sure readmission all all investment with types different you of to towards these And metrics, XX% outcomes or unnecessary making that the improves XX% and

into as yes, So and the was expand maintain we grow us and quarter pleased new efficacy continuing really that markets. core our of to driver model to the of see to that continue

Whit Mayo

No, just helpful. of I programs I'm just Anywhere? wondering, more or Yes. that's any it to Care still the attribute of the I low? if days how low wonder can if there sort to the just X,XXX, so -- like you per reconcile it's trying clinical was was

Thomas Freeman

Yes.

model doctors, standpoint our Care is we with consisting are refer interdisciplinary So is Anywhere. And managers, of as of workers, nurses, a cross-functional spend. portion to portion what who and are for Anywhere the significant types population, care familiar who of on clinicians, taking delivery all social health care other a from who coaches those a high-touch behavioral team that Care less that of the focused of represents case

rule, the that past, most you've costs. actually of the to data about XX% suggest heard our of are top our institutional recently overall members would closer XX-XX in our XX% So,

those AVA center alongside so but capabilities, the in result with that And improved by to delivery been successful and stratify outreach care utilization try members, outcomes historically trying really engage members we've using the health our again home to in model, principally in care downstream. of them to proactively virtual improve our

betting to willing kind make of will over think of efforts really ourselves medical lot that again, the elsewhere. expense times a investment of testament form the a multiple I of reduced it off it's and in upfront that being and on So, pay delivery care

John Kao

Yes.

me, comment. early the efficacy markets, always some to a other newer in it's the been Because model of of more some the of of bit one To Just indicator established an the working it's as markets. working.

And so, helping to the last in performing same of down. is as more entered think come kind model, of with the those years the markets be we've markets couple getting overall I

vantage So I look at it point. from that

Whit Mayo

like That's I a when little upside is we're to on I marketing And you say strategies, of the bid spending of and you Thomas, to as the kind the thinking you're spending more on what I'm Thanks. that season, helpful. money? broker wrong but this MBR some where just think hear presume you're plan past more bit maybe when

Thomas Freeman

Yes.

So, things. a couple of

values. I continue we to of overall that can incremental And up ramping just yield Ryan. then better of or of greater think therefore from investments continuing with we're strides back delivery making and STARS the member member we From that a experience improve think half we're standpoint, to service opportunities quality higher some make new programs see and those with some the our earlier we investments about those invest to has do talking in make continuing to year. to lifetime were that ultimately to some of satisfaction, NPS the around to higher over standpoint, a retention some markets

to future, a making really that go might opportunity that those So, at. again, the but things have across made are that them SG&A, of now. few investments have some here in kind kind of we're and the are within the the strong otherwise comfortable of after And the looking we're on of both it's really board that today, we areas medical those expense we and year-to-date performance back of the

Whit Mayo

Okay. Thanks guys.

Thomas Freeman

Whit. Thanks,

Operator

our And question with line you. comes of Ha Morgan Stanley. Michael Thank the from next

Michael Ha

quarter. the and guys Thanks congrats Hey. on

question just on So, guidance. a

bit million full the about So back the baking conservatism, into Because guys million of I'm guys you sounds cushion a earnings or $X lower confused. account looks costs. redeploy Is excess are mentioned, outperformance, areas implementation quarter, million raise little it it the Thomas guide indication half costs lot an beat new guys there you you But that market it this for? only to incremental year of the guide, are that in year. into carrying new stressing we are on of outperformance. like John, with also more $XX of $X I think raised are like to that should some

any the in Just would on year what's be half great. clarity back the of

Thomas Freeman

take Thomas that. is Yes. I'm happy here. This to

kind So, start of gross to maybe profit the rate. with

half back profit you sort about of year-to-date then kind year, about a if half of being as gross things think that we are we're gross couple the and sort of or of look there think I year-to-date of our mindful at profit. our back MBR of think the the

environment flu we maybe while wave, this something first experienced the at level out either. we had obviously, in looking with two dynamic it's been the not and uptick season remain back half has Omicron utilization mindful is, much the in the summer we the quarter So, the our where And COVID. really recent fourth last just certainly the of of particular over years haven't a around

So to kind utilization something continuing be think thoughtful standpoint. and pure just about of I we're of mindful from a

in just think I we some anticipate of kind from that is would year the the thing year in not half the of kind the the that's around second And second first had half of of first items the thing. recur the sweeps. to of the we the normalization

obviously in would noting the those have XX% MBR period a quarter, the quarter favorable prior second think irrespective otherwise were items. do it's of those worth in been MBR that to the I our contributor second range, While

but second strong year of very of we're kind in back really one-time So the normalizing quarter. for in a quarter that half the the regardless pickup

Michael Ha

And question. commentary. other Got one just that it. I Yes appreciate

reinvesting So unique the this across plans are every marketing this now that board. sense has distribution. the basically And year the into outperformed all seemingly plan care in managed quarter MA

already in how offerings half the decide all, back your my year? is about, strategy and let's your does locked like impact competitive into stay the nimble even So you landscape the question this thinking at or of benefit

Thomas Freeman

Yes.

quarter of of terms of investments. we're the I think about how thinking some AEP kind and the around in

growth-oriented our about we we as when obviously, to So our an the and set budget guidance year, year remain organization. for obviously the thought begin

the in of being some be opportunities wouldn't of is growth investments need outperformance that foremost. normal we think cycle just and really the and of we course those as I again a these by successful so first on driven investment having But normal view cycle. our budgeting already guidance function year-to-date our contemplated based And to

which sure John made not prepared of this period our kind sales from just and marketing investments investment in describing that his the on think we community lot happens days a in but making year, resources engagement of also in bit the our to recently these our for every the remarks more XX the I heard provider are looking of really continuing game Beyond representatives you a enrollment towards ground and season, and some traction the help us AEP just out gain season. year's focus

in sort standpoint. of obviously, the across industry the So a of are bid competitive middle others doing hearing from what we're

towards our to landscape. on did But seeing a in really bit of versus I bids early profitability So with growth XX% a continue out objectives we're to the our market balance the to looking approach, XXXX. comment terms what it's of kind job across nice that strive to and think we

Michael Ha

Thank guys. you,

Operator

Thank you. our with comes of line the Raymond Ransom John next James. from question And

John Ransom

Hi, morning. good

the another market at Just question. cut expansion

going the in about book for So of – in overhead investment front-loaded as would $XXX, the and do that $XXX have Florida. business what's let's of of say you're Texas like And a XXXX? think you in XXXX we that How percent What's MLR? revenue Thanks. and do to

Thomas Freeman

year of will the therefore, upon XXXX. to and investment size down or would half talk be the expense accordingly. up the scale the market to which market the think Dependent the I opportunity, maybe zero back we So of just

that's contiguous and If people leveraging well target a market. contrast we're as were extreme lot example smaller frankly I county where capital really towards you And on would of in that sales a in And end both year growth then really so has it MSA. And a half hundreds let's us of a the our from if standpoint you be and the lot see hires. of from deployed and form investments million case, would may and have rural of that county, more standpoint lot be maybe the wouldn't thousands to the probably zero marketing where as see anywhere that. say in probably in other million, where a county given both the that year XX,XXX $X plus spectrum, form to non-clinical $X to of give $X spend deploy marketing expansion, the existing typically an for a clinical you a only eligible in of to sales from county, eligibles, million our you that incremental million zero or a a

we breakeven the by an we're three. But range dependent run to And to into that the really cohort just it kind XX% get market year or often experienced depends have mid ultimately, will maybe on mix of EBITDA we're of what sort on to in about. then XXs upon our so the of trying talking based And members. transition historical as then is XXXX, typically we MBR data

California for Florida been past year. so looking and really and investment we're an cases, underwrite even example And some the kind out the that's county our as our excited next about within it's that to expansions just experience of how of in we but contiguous Texas not

John Ransom

Texas, So and just if we look Medicare I'm were rapidly age. to Florida approaching at

what in I didn't So you lies be if number you be But you're not Texas, two Tampa, if these and just now in from disappointed. have markets. disappointed would years two very would Florida

Thomas Freeman

are So members period. targeted really I getting a typically is what to XX,XXX for over five-year a think MSA given we

mark great think on so, three a we XX,XXX puts of over to want first be to call to I striving that the at think really that least kind over years so or And trajectory X,XXX to X,XXX get towards that it you range five years. I and

John Ransom

entire county county by in or MSA? how a that's like do you state define is And it

Thomas Freeman

Yes.

to and like and example which an we're Clay are counties that's example, an So in as Jacksonville Florida Duval, as market. going contiguous

Jacksonville sort And of would two with as so together. counties view MSA we

John Kao

to breakeven lot of in The John. specific markets John, really have Thomas get And case. the It's that's done for it's that members. of are new that And The better five data entered in us. necessarily of And just that takes years kind really it there. kind that internal we've three markets a metric it's to about kind it. just and like to our of year of situations experienced we've kind in – underwriting all different that we XX,XXX We're not metric shared underwriting is striking. there

distribution I years. I XX,XXX that strategies new internal market, years, there more say provider in Diego would your are of the And an XX,XXX, would mean, what nature that state. shared. do in given that have I you example right relationships, strategies, product three members I I to get mean and didn't if each think so, of the have some our would us the market Our opportunity than question I goals to to in I But is you for kind so. disappointed or setting us hope XX,XXX, of be know expectations for markets again, we the we San aggressive to a members XX,XXX in of outperform? the Sacramento we're two these just couple

… So

John Ransom

You are conservative.

perpetual like So fascination. you know this is my

do who general much County do What So strategy different? that new you marketing. how use? are? you're you're is to most are people you channels you in -- And spend in brand tell how of What let's the say the Duval you

Thomas Freeman

naturally same we the from about of lot So other. use probably heard you a channels

about. think kind representative can ultimately on And leads providers brokers, are do focused that are that of what just to the it's lot So who community these folks of relationships ones people effort can heard community, that tell try local are grassroots the we the are you of story we're whether boots the representatives. external standpoint, with building in on hosting just and who ground, for them. really from Alignment doing a events community creating These a or we

a of other then of would of standpoint, a would TV, kind So very advertising And more you things lot is oriented. lot newspaper, expect. local us see of you a probably radio, from lot of a a channels, digital on an, brand that

John Kao

Yeah.

that. of of state we is a of with as the thing that time partners strategies. distribution positioning of broad was looking we're some of on, of The branding looking and in I out obviously our what very that spending earlier, would acquisition We're John costs relative them markets. at on asking on to we've kind the other we're a kind focusing And something at. been with particularly looking lot kind new is of just as say market. reliance mix FMO efficient we're expanding and and all follow-up successful distribution we're kind learning, at We're the our Michael grow

some and think to at in employed of newer direct strategies. got look the particularly markets, we've I

newer the Carolina. really the going to ones rely think in of us as have some we're help of some made example the great I have are the North to in for on markets of we that ours, that FMOs some e-folks the say have where relied we on or partners these been And some folks well. of grown bigger of mistakes not us

pretty And about. And I so those are feel learned. lessons good

John Ransom

and Commercial, I see conclude I living it Cigna of thinking MA Jimmie build in [indiscernible]. Walker those not see I'm on me strikes see any right. that I'll that an are the I market,

MA might area. I in I've think have product the think consumer ever like worst marketing seen mass marketing, I

bar. waiting So low for We're you. it's a

John Kao

Yeah. No of grassroots find lot of And still referrals. kind think of a I this just service lot think word important. that is delivery us than the investment. of we've you're to from mean delivery just service this where a more side mouth the And brand huge with really any would happening on really grown is thing also envision side. I I I that, going

John Ransom

Thank you.

John Kao

John. Thanks,

Operator

comes our from Garro with And question you. the Sandler. next Jeff of Piper Thank line

Jeff Garro

on counties, one FY thanks since they're Florida ask more huge but and XXXX is states Hi. targeted Maybe your to expansion in on entrance just to Good afternoon taking the quarter I and the plans. question. Texas the necessarily that guys. for the state. specific want each Congrats biggest aren't

So compelling? that what you the the fostered competition relationships in you those markets them anticipate that can and provider the about you us tell serving populations make

John Kao

Yes Hi John. its Jeff, great That's a question.

-- business this be model ethnicity big successful kind it's is can we irrespective whether the the a whether irrespective local of portable. at income think urban I takeaway of think or it's market rural or level of that

just I we've in one we can hit metrics so in is we what share. to midsized And market markets share win really investments say things and rural California that done about, smaller those or got where some actually win. markets we're not making talked And the think where in just of similar but the doing we're markets we frankly get would -- to or XX-plus of we've in percent focused

same then think profitable we selective be get that contiguous takeaway want we're markets. and to All of of market we growth think kind are of also very and different. learned kind be provider kind of is And California your dynamics it then, obviously massive kind that's and into expand the states. where the are I in point cannot since and to how foothold those we're hospital about once the thinking we've the in we'll that different. every it. two states producing that is massive And applied And those I

our where of kind our we of local all market to processes, of it our set workflows, just is a It's these Health local around kind care mass practices, we be dynamics. operating conversation ergo dashboards So to want our our business. apply a customization this unique. portable systems, best as but all tools of as get all possible, of

-- a and better to bigger competitive of would have when looked win kind that's we is and it. the just kind the these chance think of in so me in the we And we achieve of some dynamic idea. really at market what bottom-line. markets I this And that also we'll just was winning thought there about And all less we targeted have have of bigger cause can markets

and to how we'll go more way it. about some let's markets is of thought That's secondary first conclusion up. work the then think we these I our

Jeff Garro

Alignment any curious love those of I customization. some how seniors. helpful. expectations if And of points about heard insights moderated for a more COVID I've other the the a question dynamics. mass into have the that discussion this peculiarities about the will rating super But of of given certainly lot star for into lapsing you've plans measures of ratings That's cut data from me. outcomes One and shared positive is outcome October you some delivering October? concept for shake out in across the STARS

John Kao

I think accurate. are the there No, that hearing you're Yes. out themes general

as where to five COVID there a think focused lot a that's I our have outcome HEDIS. board you traditionally CAP scores. are relates as and experience. has of by from And of we the across And those think referred of of now CMS stars plans some on on efforts. standards on since scores. of really CMS that And kind historically particularly I for the mean we clinical is clearly really HEDIS years benefit that to focusing the focused quality couple resulting don't measured have member what's But as from it relaxed know really ago, I

therefore, CAPs the be so of differently. differently. paid CAPs XXXX they're is going going and up XXXX beginning doing focus on to And this measures kind being where waiting for in Yes

our predictive these into several And so we're and really entire with areas of they stars. pretty what continue that make for they scores is five we we've partners been improved CAP STARS board. confident to STARS data marketing make provider years more to is particular I to next would good I of we I'm to is but CAP provider in thing feel sure -- to and on them some the And we our where get scores more we there. improve that increase progress working really focusing effort at of And our with lot The we good when and and that mean with can time becoming months downstream next ago we'll it got be stand I science. delegated analytics. pretty us we've good around find sure spent the out a made business, same can the year. and CAP and couple really there partners get scores need the working coming say that helping about data across across are I think us because board. analytics did on HEDIS delegated and

I lot down. have but -- half Joe, a or plans right, as of going I to taking a think full star you're you're So think star get

Jeff Garro

again Thanks for all those comments. for taking question. the Thanks Great.

John Kao

it. got You

Operator

And our you. comes Thank Bank of from Kevin question next America. with Fischbeck

Kevin Fischbeck

Thanks. Great.

G&A go of about we assuming. goes in us to to little than half reinvesting that outperformance versus guidance you think expense Can year. much into back of MLR what maybe half back the of is want kind how Just different expense? bit That the the in were a second help reinvestment the back

Thomas Freeman

kind in of down of to in break relates year conservatism in part Yes, at again I'm of that beat of gross obviously, kind the is relative profit this think second is profit Thomas that the we're moving the full that investments I raise, all the to here. the I pieces, back think say is the going quarter you but certainly look COVID if a investment. sure extra not themselves. gross half to sort but of I just would Whereas then SG&A, portion generally

But we're and of in way profitability one, kind making in think two sure kind setting that is of making and general, objectives, ourselves capital a kind in thing so about over ways. on of it also deploying And that we're those I we're next think success very value creation short-term again, you but sure focused can doing mindful up of I three very for years. the plus that our two, right the think

So, find balance we're year-to-date of six how right that where next we're months. about trying to at we're informs and the kind thinking really and that really

Kevin Fischbeck

Okay.

though a you're on building So, where I you're differently to just conservatism QX versus in though changed. that even back and COVID make was changed half view of reason It if conservative. in that it not a understand. QX little necessarily sure hasn't was more core to right be seeing better The want I asking the saying year the hasn't sounds your maybe then. I you're this even -- have on

rather Just throwing that about COVID? line more reason than a worried without there's conservatism be to

Thomas Freeman

new the over there's if anything we Yes, to always that last I learned think since years two pandemic have learn. the something began,

kind of COVID-driven. you you the And year. with runs something I so had mind of like portion the And back we that of our think what where mindful of comments half think with to baseline we were kind experience, may and in overall but been historical that going line similar prior in if that kind would think thoughtful just quarter, assume last look utilization heard we've be to in I our that a back suggested of of that

higher the to lower a and/or driven which utilization unit cost, had either we be lower the with of that And by so COVID, we extent for a outperformance. being total there baseline could utilization comes room versus had percentage

through in second And clearly that the quarter. saw come so you

so half And we'll back see plays how the out.

in time to comfortable I today, all highly of But kind where be environment nothing same the just with the stand think half. we're about concerning. this of we're it and trying respectful very dynamic think today generally feel things I at we thoughtful over back

Kevin Fischbeck

to least to you for And that and if picture. comment know benefits of XXXX then because how any able have you a shaping think talked don't full up I up? peak. at initial you us about of kind competitors it's be is from benefit the about like on their about color but Obviously, it's that XXXX share how hard the might haven't on I you one yet, know your competitor Okay. shaping brokers design reception was seen

John Kao

it's Hey, last I'm brokers I feeling good with Kevin, stand. we John. Yes, just was where very the about week. Yes.

the notion numbers. bids I And all more that. see QX be strategy. to going in grow kind this We're to you're of think, is just of I profitable cold is consistency around discipline costs reflected our think of a kind of going of not -- doing growth at

not-for-profit pretty them kind the rates. of, final behaviors kind And of thoughtful, And by hypothesis is the the call the rates competitor. kind some our given respect to than some are let's XXXX say We with contemplated other, say would competitor I would of just entities. overall of of, better of I

positioned think, the competitors board. to still B think we're be aggressive. going to well to And we're think these see I about our across I you're going Part more thinking very That's this. how but I of -- it's And buybacks. cause kind of

these simply the -- you're be of people do anybody across to be, think see that are margins. anybody think that. produce to is, has have I And very disadvantages just mean, we of any we board. stronger. model think kind the of at to scale going aggressive and economy I on I the being to concept kind get, the I focus going going have because growth bigger see I can bigger think going the of duals. to that eroding think the we're we don't start kind I kind aggressive are I get able don't more consistent that we'll

people the I'm about bids. But, going like So think I I year. aggressive be generally that's think not why -- to are don't to last hearing are yes, I be aggressive. people going stupid like

back are a little people think bit. pulling I

I think more aggressive. think, to big bit where guys are. But we be are some going of feel a about the little I I good

Kevin Fischbeck

you. Thank Great.

John Kao

Yes.

Operator

question with Thank comes [indiscernible] from Sachs. our next you. Goldman And

Unidentified Analyst

network about John. share would around value a share get proposition. to kind been you building back the felt the Florida to that your you wanted into, of go market since key provider Thanks the find assumptions, you do that of and the to Hey, feel that provider markets you're market going Texas part you when able ability put And competitive market? on a together to that's your of new the you've a discussion Have like enable in into expansion. the question. in I for kind partners Yes. differentiation expect going taking of to would

John Kao

key need that the the not first the Remember, capital, trying system talked large hospital really with the of we it's development a tools that mean, And of to of kind really I -- doctors some road, proposition. of we year half I the had do. effort for best really investments that a and by consolidated, don't a provider into one in, really the year resonate beginning smaller the that I got there focus we're trying their engagement out work these love key resulted feel to question. time tell people of really that was a way. do. getting we're getting The with. in There's them. lot comfortable in all an rational lot value we and assistance They And consolidator. just independent I on only get to but either seems you, some what value-based with want finding to and we're of of a love to about option and at what providers. a providers Great meeting care think And or any the just think Yes. practices and lot and provider for

tease practices. and need working doctors? these you to with a for to really understand has root a that's for them? and of with going of to in this lot what is that really that way how networks whole cell exceeded before, my doctors I need taken start. initiative think really has expectations. phone XX trying internally, And engaged So to do I these the numbers mean trying help do like middle-sized our to and in just we're And what every you building of and of members the which we've we're you really I them doctors do kind do we're I've have know that's standard we're not that we single And and done they in XX. our market, these up. by And what go, smaller I to of said our team we XX to We're kind groups. model And biggest many kind need, XX

I'm that. So about happy really

benefits, and very strategy distribution got the very and comfortable mix focus that. I'm with. to and thoughtful we right complement Now, strong and the about that just you which distribution we've complement you then that with execute, And execute been with

that really So engagement of some happens. see year that. really are ago, what happy two one these and good. markets years some we'll But newer the the of I'm markets will about the in mean, and say launched MLRs I I level we

Thomas Freeman

And replicate that is overall it's like itself to just of why the got consistently. this again, XX%. of it's And leads to kind starting -- we like, kind model,

So to growth translate the now we just into got dynamic.

Unidentified Analyst

now? you business line is And Obviously, the performing breakeven quick a guys sneak That's really the follow-up. I in well. helpful. to time about thinking could How if are maybe just

opportunities You large of have some ahead you. growth

path wondering, line to about and how all? the time just thinking changed breakeven if at you're the has So

John Kao

that. You or want you to take that give want that? me I'll you to take

measured philosophy that, can I important. ability is I breakeven feel strategy long-term frankly ever of the also our longer-term was growth, and talk but really more our about to breakeven. getting whole approach think IPO'd, which it the right getting EBITDA than confident XX% Getting a we about to to and I I since why matters. is approach achieve more mean, still

can variety And reasons. of getting growth these so the on really I that's don't focused else and And one if a do of XX-plus maintain that thing. is of I us percent and can so XXXX think certainly compelling for think get we're think by for argument that that, MLRs, there there really kind anybody we maintain something kind is I whole and

hence business just further to it's prove everybody So from differentiate our us else, model.

not very I'm I to referred more get thing second Thomas raise to to having raise in the there is more sensitive any mean, what to just of want without The to capital. sheet. capital. balance needing terms I

into that's we of kind get was But we investors to -- so Texas kind to which and we more something in earlier, and market about now as states new what but to adding but six in XXXX management soon going high of there, EBITDA, kind of I can Thomas know big counties with of just TAMs positive taking do kind leverage Florida. million of in to seniors get like -- because prove this thing new and are think existing I want XXXX something the that to We to the existing of important we're think new MLR so cash need we big. And because inferred share that. as flow growth I to And be more not infrastructure be on And only to of rates think we in bars it it's the each out states the these the still got and building states, do as in head contiguous to -- or that's these that, our of out. kind going $XX positive. that. are I we're -- was we're think execute markets, And and hit as is making and by so the EBITDA possible. prove, XXXX, we're investments just and that can going is the these we're improvements implication about or We get going to pretty so to terms

do I all that co-branding any really, delivery really large with these what and I in opportunities, just have Scripps systems we've wonderful more means of about see new of us I'm is, that not with want hospitals and Sutter, announced, And to past and to of kind with we going and partner joint kind of strong in-state also to saying in-state kind high. the and ventures, to and not Seeders couple XXXX. this I'm be different growth case. in-state partnerships states we're want be you're years guess, providers them. to standard underwriting so It's to saying got internally partner big is just Hoag think And like going good us that going that pretty

our more that You I through markets. of that can each of see helps. think Hope

Unidentified Analyst

Great. Thanks -- comments. the Thanks for yes.

John Kao

but about long-winded, It’s that. Yes. sorry

Operator

our you. next the with line Barclays. of question from Sarah James comes Thank And

John Kao

Hey, Sarah.

Sarah James

Hi.

bit quarter a Just wanted better. little this to understand

of to adjustments out-of-period of your and X.X% experience you about peers to is of One And talked cost in back business? related guys restatement reach a margin profile that change Did any your trends there any having payments. ACO view X Jan that? of retroactive

Thomas Freeman

Hey Sarah, this is here. Thomas

so, did this the so same information CMS or X.X% we of quarter. So, from of terms get past the in sort

we sort when our were a had adjustment sort full retrospective implemented that thinking of our on of However, we reflecting the sort about where guidance last first year of quarter trend is us. on also were year, for experience CMS

we in mind a of And guidance conservative a little approached more posture. so from with our bit that

thought as we anticipated about incorporated, in previous other words And we actually had that, our so guess of some I or guidance.

expectations, impact same much So really was performance. in but of not at we cause of sort it on did experience it, therefore an and the the quarter's with did line time

Sarah James

was. And guidance XQ, there's help it. gross on I'm if can you a then consensus there? or little in bridge XQ the where it going MLR assumptions bit on anything if off new profit, XQ other seasonality from down And Got margin to wondering with deductible assumptions was the from wear than

Thomas Freeman

do Yes I'm happy that. to

earlier. you heard So I hopefully think

those or of the period suites the prior kind benefit favorability XX% and out one-time range the from of you the second take if whatnot, quarter. sort items some for So in the of we're

a second that higher as third line about that hospitalization. bit of of year. Obviously, again, where thinking to that And non-COVID run sort quarter portion has back baseline. we which comes a than you're so launching a better COVID, opposed has than using were baseline assuming And to kind with with a do do also quarter the with in with unit off cost half point the utilization expecting of as of a to of to or lot

sort earlier of of a that medical also COVID in we amount the into of discussing really that were to some earlier. were headwind expense discussing that's addition So we investment minimal falls

Sarah James

conservative Great. people see out put nice to guidance. It’s

appreciate Thank you. that. So

Thomas Freeman

Thanks, Sarah.

Operator

and for you you. Thank conclude Thank [Technical gentlemen, Difficulty] Ladies does that disconnect. Difficulty] [Technical

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