Alignment Healthcare — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue for the quarter ended September 30, 2026, was $1,358.3 million, representing a 36.7% year-over-year increase compared to $993.7 million in the prior year period.
• Health plan membership reached 301,200 at quarter-end, a 31.2% year-over-year increase.
• Adjusted gross profit was $142.2 million, up 11.6% year-over-year, excluding $8.1 million in depreciation and amortization and $136.4 million in selling, general, and administrative expenses.
• Loss from operations was $3.8 million, compared to income from operations of $7.7 million in the prior year period.
• Adjusted EBITDA was $21.8 million, reflecting a margin of 1.6% and a 32.8% year-over-year decline from $32.4 million.
• Net loss for the quarter was $8.1 million, compared to net income of $3.7 million in the prior year period.
• Medical benefits ratio based on adjusted gross profit was 89.5%, an increase of approximately 240 basis points year-over-year.
• Cash and cash equivalents stood at $727.7 million as of September 30, 2026, up from $575.8 million as of December 31, 2025.
• Long-term debt, net of debt issuance costs, was $324.5 million as of September 30, 2026, compared to $323.2 million at the end of 2025.
• Net cash provided by operating activities for the nine months ended September 30, 2026, was $158.4 million, down from $190.3 million in the prior year period.

Guidance and Future Outlook:

• Full-year health plan membership and revenue guidance were raised to reflect continued sales momentum.
• Full-year adjusted gross profit and adjusted EBITDA guidance were lowered to reflect higher medical costs experienced during the third quarter.
• Fourth-quarter guidance (ending December 31, 2026) includes health plan membership of no less than 305,000, revenue of no less than $1,316 million, adjusted gross profit of no less than $104 million, and adjusted EBITDA of $(28) million.
• Full-year 2026 guidance (ending December 31, 2026) includes health plan membership of no less than 305,000, revenue of no less than $5,245 million, adjusted gross profit of no less than $575 million, and adjusted EBITDA of $100 million.
• Management stated the revised guidance does not assume any benefit from actions currently underway.

Business Segments and Product Lines:

• The company reported higher costs within catastrophic cases and skilled nursing categories.
• Elevated appeals and disputes contributed to increased costs.
• Changes in Part D seasonality and timing of clinical investments were cited as factors in the medical benefits ratio.

Market and Competitive Landscape:

• Management noted continued demand for Alignment's products and services.
• The company partners with nationally recognized and trusted local providers to deliver coordinated care.
• The company utilizes its purpose-built technology, AVA, and a 24/7 concierge care team.

Risks and Challenges:

• Medical trends ran higher than expected, impacting profitability.
• Risks include the ability to manage changes in medical costs and healthcare utilization.
• Potential federal reductions in Medicare Advantage (MA) funding and changes in laws and regulations applicable to the business model.
• Risks associated with indebtedness and the need for governmental approvals to enter new markets.
• Risks related to maintaining high ratings on the Five Star Quality Rating System and developing satisfactory relationships with care providers.
• Risks of shortages of qualified personnel and related increases in labor costs.
• Potential impacts from litigation or security incidents.

Management Commentary and Tone:

• John Kao, chairman and CEO, stated that membership and revenue growth demonstrate continued demand, but medical trends ran higher than expected.
• Management described taking a "prudent approach" to the fourth quarter and lowering the outlook based on current headwinds.
• Management expressed confidence in delivering against the revised expectations.
• The stated focus is on execution and taking necessary steps to drive more consistent performance while scaling and delivering profitable growth over the long term.

Other Key Points:

• The company will host a conference call at 5 p.m. EDT on the release date to discuss results and outlook.
• Adjusted gross profit excludes $1.5 million of equity-based compensation recorded within medical expenses.
• Equity-based compensation totaled $17.5 million for the quarter and $49.7 million for the nine months ended September 30, 2026.
• Litigation costs were $0 for the quarter and $0.5 million for the nine months ended September 30, 2026.
• The company reported a gain on sale of property and equipment of $1 million for the nine months ended September 30, 2025, and no such gain in the current period.
• Amortization expense for the nine months ended September 30, 2025, included $0.6 million in impairment expense related to goodwill remeasurement; no such impairment occurred in the current period.