Alignment Healthcare, Inc.

Good afternoon and welcome to Alignment Healthcare second quarter 2023 earnings conference call and webcast. All participants will be in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. As a reminder, this conference is being recorded. Leading today's call are John Caio, 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 risk uncertainties and reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Descriptions of some of the factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC, including the Risk Factors section of our annual report on Form 10-K for the fiscal year ended December 31, 2022. Although we believe our expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. In addition, please note that the company will be discussing certain non-GAAP financial measures and that they believe are important in evaluating performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found in the press release that is posted on the company's website and in our Form 10-Q for the fiscal year ended June 30, 2023.

Hello, and thank you for joining us.

We are pleased to deliver another strong quarter in which we met or exceeded each of our key performance indicators for the 10th consecutive quarter since our IPO. For the second quarter of 2023, our total revenue of $462.4 million represented 26% growth year over year. We ended the quarter with health plan membership of 112,200 members, growing 17% year over year. Adjusted gross profit of $53.6 million, producing a consolidated MBR of 88.4%, better than our implied outlook range of 88.6%, to 89.1%. Importantly, we delivered at MBR 87.1%, excluding our ACO REACH business. Meanwhile, our adjusted EBITDA was negative 2.1 million, well ahead of our outlook range. As I reflect on our year-to-date results, I'm pleased with the progress we have made across the organization. We continue to improve upon our care model each year, and in the second quarter, inpatient admissions per thousand ran at 151. an improvement from 163 in the first quarter, and one of our best Q2 results in the history of the company. This brings our year-to-date inpatient admissions per thousand to 157, which is in line with the prior year and consistent with our expectations, all while growing well above the industry. While Thomas will drill into more detail during his remarks, I'd like to emphasize that we feel confident in our ability to drive our MBR lower in the second half, and achieve our adjusted gross profit guidance for the full year. Our confidence is underpinned by our successful utilization outcomes driven by Care Anywhere and AVA in the second quarter. We also see further upside as we continue to improve our Care Anywhere engagement rates and execute against our network performance management initiatives. Together with regular Part D seasonality, we believe these factors will deliver our anticipated MBR improvement and the back half of the year and position us for a robust 2024. As we think about our 2024 objectives and our long-term MBR target, we are laser focused on actions to improve our member mix by network and product in 2024. We believe our shared risk networks provide the best clinical experience for members, and as we've shared in the cohort data, create the best MBR opportunity for us over the long term. With this strategic priority in mind, we are designing products to direct growth to our shared risk book of business, making changes to our networks, investing in AVA's external provider capabilities, and enhancing infrastructure to engage and manage these networks. Beyond our gross margin trends, I'd like to highlight the progress our team is making against our sales and retention goals as we laid out at the beginning of the year. During the second quarter, we saw a 50 basis point improvement in our total retention rate year over year. This result was supported by our recently deployed CRM application within AVA and improvements toward insourcing member call center functions. We expect more of the total opportunity to materialize in 2024 following our transition to higher quality supplemental benefit vendors, retention initiatives with our distribution partners, and continued deployment of our call center plan. As we scale up our business, we are actively seeking to improve our mix of internal versus external sales while also making improvements to our sales operations infrastructure. To date, 24% of our sales have been generated internally versus 20% last year, an improvement of 4% year over year. This improved mix is partially a result of our 37% year over year improvement to our lead to sales conversion rates from internal sales channels. These efforts complement our plans to double down on high performing external brokers as we gear up for the upcoming AEP. While still early, I'd like to share some comments on our bids. As we previously discussed, we believe competitors within our markets will be challenged on lower STARS payment and face risk adjustment pressure. With the competitive landscape shifting in our favor in 2024, we are leaning into the opportunity by maintaining or increasing our product richness across each of our markets. This cycle, we also refined our product strategy to more directly address our seniors in a similar fashion to how we think about our clinical operations. This approach curates distinct products that complement the need of two key member types, low utilizing healthy seniors who value immediate savings and high risk seniors with whom we tend to see the greatest level of engagement with our Care Anywhere programs. We are creating clear and more competitive products by simplifying member benefits and concentrating benefit value in high-impact areas that we believe will drive growth. Taken together, we are excited that our product approach, combined with relative tailwinds on STARS and RAP, will decisively set us apart from other plans in the upcoming AEP. Lastly, given our confidence in our existing market growth strategies and our focus on achieving adjusted EBITDA break even, we are limiting our new market expansions to in-state expansions in 2024. However, we are actively engaged in strategic discussions with provider partners and health systems in new and existing states as we plan for 2025. These opportunities center around joint ventures and other innovative ways to deploy our differentiated care anywhere, AVA and other provider engagement capabilities to help solve for the strategic needs of many providers and health systems. We're optimistic about our opportunity set and we look forward to sharing more about our growth pipeline in the future. Before I close, I'd like to thank each and every employee who has helped us further our mission to improve healthcare one senior at a time. Our investments and activities in the first half position us well to deliver on our full-year commitments and achieve our 2024 growth and break-even objectives. With that, I'll turn the call over to Thomas to review our financial performance. Thomas.