Alignment Healthcare, Inc. (NASDAQ:ALHC) Q4 2022 Earnings Call Transcript

Kevin Fischbeck: I wanted to dig into the EBITDA guidance, and maybe it’s not 100% fair because you just made the comparison more difficult by beating Q4, but it does look like, from an absolute basis, the EBITDA loss is going to be relatively flat year-over-year, and I appreciate the 40 basis points improvement. But ultimately, you’re going to have to show actual EBITDA dollar improvement year-over-year, but I guess, particularly thinking about 2024. So I guess they what — what would you say, is there anything unusual, either in the comparison year-over-year or the impact going on this year that kind of makes less of a dollar EBITDA improvement flow through in this comp?

Thomas Freeman: Kevin, Thomas here. So I think in terms of the year-over-year comparison, to your point, I think we are pleased to see that we are improving in terms of our margin year-over-year. And as we continue to think about that breakeven target in the years to come, I think it’s going to be a combination of both MBR improvement as well as continued operating leverage through the SG&A line item. And I think the kind of beauty of where we stand today is we’ve shown enough consistency with our cohort MBR performance over time, that I think we’re confident that we can continue to replicate those results, not just in California, but now outside of California, where we’re starting to see some of that traction materialize. And I think, on our side, we recognize that the SG&A in terms of the SG&A relative to our size of our revenue and membership, we have to continue to show improvement on to really get to breakeven.

And I think if you compare 2021 to 2022, we didn’t quite have a lot of improvement just continuing to absorb a lot of new expenses as a public company, but we really are starting to show that improvement now as we look out to 2023. So while I think we’ve had a lot of great proof points around our ability to manage MBR and improve MBR, I think the SG&A side of things is where we needed to continue to show the market that we can demonstrate that operating leverage over time, which is how we feel we’re positioned for ’23. So with those 2 things in mind, I think we still feel like we have a good shot at working towards breakeven in the future. I think we got to continue to grow. Obviously, as a part of that recipe as we — and we think about our 2024 breakeven objective.

But all things considered, I think our ’23 guidance sets us up pretty solid for that objective in ’24. And the last thing I’ll say is, it’s, of course, early, and we’ll see how the year plays out. We’re only 2 months in.

Kevin Fischbeck: Okay. And then I guess on the MLR bridge, I guess I followed what you were saying on the puts and takes to get to the kind of the core EBITDA, core MLR number. But I guess the one part that I wasn’t 100% following was just the 55 basis points of pressure from new members in that number? Because doesn’t the 2022 number have a similar 35 basis point headwind in that number as well? So like year-over-year, is that an adjustment to be making?