Good afternoon, welcome to Alignment Healthcare's fourth quarter 2022 earnings conference call and webcast. All participants will be in a listen-only mode. After today's presentation, there'll be an opportunity to ask questions. In order to do a question during the session, you need to press star one one on your telephone. You'll hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please note that this event 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. 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 that they believe are important in evaluating performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures, our reconciliation of historical non-GAAP financial measures can be found in the press release that is posted on the company's website and on our Form 10-K for the fiscal year ended December 31, 2022. With that, I would now like to hand the conference over to your speaker today, John Kao, Founder and CEO. Please go ahead. Hello, welcome to our fourth quarter earnings conference call. We appreciate you joining us. I'd like to start us off by congratulating our employees for a year of outstanding progress and continued dedication to serving our members. As we approach the 10-year anniversary of our founding, I'd like to take a moment to reflect on our accomplishments together. We've grown our membership from less than 13,000 in 2014 to over 108,000 today, and have grown revenue from just $130 million to an expected $1.7 billion in 2023. During our time together, we have focused on quality in all we do. We have helped improve our members' lives by conducting more than 300,000 face-to-face meetings between our members and our Care Anywhere teams, and completing more than 1.5 million grocery and OTC transactions. Through our Care Anywhere model and partnership with providers, our inpatient utilization outcomes represent a combined total of nearly 24,000 fewer hospital stays relative to traditional Medicare, giving our members precious time with their families and loved ones. This is just the beginning. Turning to today's results, we are pleased to have concluded the year with strong performance, having met or exceeded our outlook range across each of our four key performance indicators for the eighth straight quarter. For the fourth quarter, 2022, our total revenue of $362 million represented 21% growth year-over-year. We ended the quarter with Health Plan membership of 98,400 members, growing 14% year-over-year. Adjusted gross profit was $38.3 million, resulting in an MBR of 89.4%. Our Adjusted EBITDA was -$23.7 million. Concluding the full year, Total Revenue of $1.434 billion grew 23%. Adjusted Gross Profit of $193.6 million resulted in an MBR of 86.5%, and Adjusted EBITDA was a loss of $26.7 million, all well ahead of our initial and updated expectations. Last year, we conveyed expectations for our California market to be slightly Adjusted EBITDA positive in 2022. We are proud to share that we exceeded those expectations and produced an MBR of 86.3%, even as we rapidly brought on new members. This result was driven by ongoing clinical engagement with our provider partners and members through our Care Anywhere clinical teams and greater operating scale. Each one of our new states ran less than 155 inpatient admissions per thousand, a powerful testament to the replicability of our care model. This is similar to our California performance, which has ranged between 155 to 165 admissions per thousand over the past six years, and nearly 40% better than the traditional Medicare, which averages over 250 inpatient admissions per thousand. I'd like to share a few statistics that demonstrate how we are consistently improving outcomes across markets by deploying our Care Anywhere clinical engagement model powered by AVA Insights. Number one, members in our Care Anywhere program show a 32% net reduction in institutional claims expense 12 months after engagement, versus Care Anywhere eligible members who did not enroll in the program. Number two, at-risk members across all chronic condition cohorts saw 47% lower ER visits per thousand versus traditional Medicare, including 58% reduction in ER utilization for members with six or more chronic conditions. Number three, lastly, at-risk members from our year one cohort to our year 6+ cohorts see a 10% improvement in MBR, going from 88% to 78%. The improvement in MBR acts as the funding mechanism for our rich product benefits, and we see even greater opportunity ahead of us as we replicate these results across an increasingly large membership base. These examples and more are described in greater detail on our latest corporate presentation available on our investor relations page. Importantly, they showcase how our AVA-powered Care Anywhere clinical model is making a difference in members' lives while driving our outstanding MBR results in 2022. Furthermore, we are seeing these clinical outcomes materialize not just in our Medicare Advantage members, but also in our fee for service members. CMS recently released data for Direct Contracting performance year 2021 results. Despite having the second lowest weighted average benchmark PMPM in the country, we produced top quartile net savings results. These results underscore the adaptability of our clinical engagement model and our ability to effectively manage costs across Medicare populations. When we first began our DCE efforts in 2021, we balanced the strategic merits of working more collaboratively with our provider partners across a broader portion of their senior panel with a cautious attitude toward the long-term economics of the program. With our 21 and 22 performance in mind, we have grown increasingly comfortable that we can generate a positive long-term margin on the ACO REACH book of business, and most importantly, continue to leverage the program as a way to drive more strategic and integrated relationships with providers that complement our MA business. Accordingly, we have continued to invest resources in the ACO REACH program for 2023 and began the year with 7,900 aligned beneficiaries, an increase of 52% year-over-year. Turning to the results of this annual enrollment period, as of January 1, 2023, we had 108,300 Medicare Advantage members, representing approximately 17% growth year-over-year. We previously shared a few highlights from the selling season, including a successful market launch in Fresno, California, with 1,800 new members. Improved performance in Southern California versus 2022, netting 16% growth year-over-year. A 50 basis point improvement in our California AEP voluntary disenrollment rate. Lastly, positive momentum in our states outside of California with membership growth of more than 60% year-over-year. These achievements were a direct result of our ability to replicate our AVA insights and Care Anywhere outcomes, giving us the confidence to create market-leading products. As we continue to target 20% top line growth in 2024, we are focused on four areas this year that we believe are key to driving repeatable market success in future years. First, we are doubling down on our quality and cost initiatives, which has been the foundational element of our playbook for sustaining growth both inside and outside of California. Maximizing stars outcomes as part of these efforts remains a strategic priority for us heading into 2023, as evidenced by the successful AEP in North Carolina, where we achieved our first five-star plan. Second, we are deepening relationships with our provider partners and expanding our network to create greater access for members. We have established a significant geographic footprint and remain focused on going deep in each one of our markets. Third, we are laser focused on creating opportunities to increase the richness of our products heading into 2024 without sacrificing MBR, including looking at how we optimize the allocation of our rebate dollars across benefits. Fourth, we are employing a broader, more balanced distribution strategy. We will continue to invest in our durable relationships with third-party brokers that have consistently delivered, while we will add internal sales agents and a greater online sales presence in areas where we need better performance. While we are pleased with the establishment of our Florida and Texas beachheads and our early traction on provider engagement, we have identified numerous targeted actions to reconfigure our growth strategies, starting with our four pillar playbook with a noted emphasis on distribution. In summary, we have identified key pillars that we believe will elevate us to the next phase of organizational growth and look forward to sharing our progress as we move through the year. Looking ahead to 2023, I feel confident that we are positioned for continued success as we continue to make strides across each of our key value drivers. I'll turn the call over to Thomas to cover the fourth quarter financial results, as well as our outlook for 2023. Thomas? Thanks, John. I'd like to echo how proud we are of the milestones we've achieved, not only in 2022, but throughout our journey over the past 10 years. Now turning to our year-end results. For the year ending December 2022, our Health Plan membership of 98,400 increased 14% year-over-year. Over the course of the year, we added approximately 5,700 net members from January 2022 to December 2022, which is similar to our past experience. Our Total Revenue in 2022 grew 23% to $1.434 billion. Our Adjusted Gross Profit of $193.6 million reflected an MBR of 86.5% for the full year, driven by a continuation of strong medical outcomes in California, while Care Anywhere and our core medical management capabilities began to produce outcomes in our new states as well. SG&A for the year was $295.6 million. Excluding equity-based compensation expense, our SG&A was $223.1 million. Our full year Adjusted EBITDA was negative $26.7 million. This reflects a margin of - 1.9% and represents approximately 90 basis points of improvement year-over-year, even as we grew revenue by over 20%. We reflect on the year, we're proud to note that we ultimately delivered a $97 million revenue beat and a $16 million Adjusted EBITDA beat, both relative to the respective midpoints of our initial 2022 guidance. We aim to strike a continued balance between both our growth and profitability objectives going forward. Turning to the balance sheet, we ended the quarter with $245 million in net cash. This sequential step down in cash compared to the third quarter included the previously discussed timely impact of an early payment from CMS of approximately $117 million, which temporarily inflated the prior quarter ending balance. This had no impact on a full year basis. Moving to our 2023 guidance. For the first quarter, we expect Health Plan membership to be between 109,300 and 109,500 members, Revenue to be in the range of $429 million and $434 million, Adjusted Gross Profit to be between $38 million and $41 million, and Adjusted EBITDA to be in the range of a loss of $17 million to a loss of $14 million. For the full year 2023, we expect Health Plan membership to be between 113,000 and 115,000 members, Revenue to be in the range of $1.705 billion and $1.730 billion, Adjusted Gross Profit to be between $205 million and $217 million, and Adjusted EBITDA to be in the range of a loss of $34 million to a loss of $20 million. Consistent with our long-term outlook, the midpoint of our 2023 Revenue Guidance represents approximately 20% growth year-over-year. As part of our forecast, we are assuming continued growth of our Health Plan membership throughout 2023, comparable to our experience from January to December in prior years. Our Health Plan Revenue Per Member Per Month forecast contemplates a few moving parts. First, our Returning Member Revenue PMPM is increasing year-over-year, partially offset by new member growth, which on average comes in at lower PMPMs. Second, we will realize the full adverse impact of the return of sequestration, which began phasing in during the second quarter last year and represents a roughly 75 basis point headwind to Revenue PMPMs in 2023 versus full year results in 2022. Additionally, our ACO REACH membership is increasing year-over-year, and we expect total program revenue of approximately $130 million, which represents over 150% growth compared to 2022 DCE revenue. While we don't include ACO REACH beneficiaries in our Health Plan membership count guidance, the associated benchmark revenue is recognized on our income statement and is included in our guidance. Moving to MBR and utilization, we'd like to note a few factors that impact the year-over-year comparison. First, our previously mentioned growth in ACO REACH membership is expected to weigh on our consolidated MBR in 2023. At this time, we are forecasting the program to run close to 100% in 2023, presenting a drag on consolidated MBR of roughly 60 basis points year-over-year, but also creating meaningful operating leverage across our SG&A spend. We remain confident in medical improvement over time as we deploy our AVA and Care Anywhere resources, and continue to view the ACO REACH program as a strategic extension of our relationships with our participating provider partners. It's also worth noting that the MBR implied in our guidance, excluding both ACO REACH medical expense and revenue, is approximately 86.8% at the midpoint. Second, we expect new member growth to increase consolidated MBR by approximately 55 basis points this year and trend down in future years as we engage these new members with our Care Anywhere teams. Consistent with our past cohort experience, we are seeing strong year-over-year improvement in MBR results with our returning members, including continuing to expect non-California inpatient emissions per thousand of less than 165 in 2023. Third, we will realize the full year impact of sequestration this year, which we expect to weigh on our consolidated MBR by approximately 15 basis points. Normalizing for these three factors, our core MBR of 86.4% at the midpoint of our guidance reflects a continuation of strong underlying trends, and we now also expect an incremental $2 million-$4 million of additional embedded earnings power in our ACO REACH members over time as they mature toward our target margins in the future. Lastly, our first quarter guidance contemplates an increase in admissions per thousand, similar to our past seasonal experience. This results in a higher MBR in the first quarter and implies MBR over the remainder of the year will be lower than the full year MBR on average. Overall, we feel confident that we are well-positioned to deliver on our full year Adjusted Gross Profit objectives. We expect to add significant operating leverage in 2023, with $240 million of Operating Expense, implying an SG&A ratio of 13.9%, an improvement of 140 basis points year-over-year. This is a result of our disciplined focus on deriving economies of scale as we continue to grow, along with the additional benefit from growth in our ACO REACH book of business. While we believe the long-term MBR profile of the MA business is more attractive than ACO REACH, the incremental SG&A required to grow our ACO REACH business is significantly less than MA. Lastly, our Adjusted EBITDA outlook range takes each of these factors into account and reflects a margin of -1.5%, a 40 basis point improvement year-over-year, and on pace with our Adjusted EBITDA breakeven objective in 2024. As John mentioned earlier, our California franchise was Adjusted EBITDA positive in 2022, and we expect this to continue in 2023. Our consolidated Adjusted EBITDA loss guidance in 2023, therefore, continues to reflect the investments we're making to support growth in markets outside of California and future expansion initiatives. As we continue to scale, we foresee a high degree of visibility into the leverage we will achieve over our corporate resources, clinical model costs, and public company expenses. Importantly, our strong balance sheet position and operating projections give us confidence that we will not require additional financing to fund our organic growth objectives in the future. I am proud of how we are positioned today, and we look forward to updating you all on our progress throughout the year. With that, let's open the call to questions. Operator? Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. Please stand by while we compile the Q&A roster. One moment, please. Our first question comes from the line of Connor Massari of Morgan Stanley. Your line is now open. Connor Massari? Your line is open. One moment, please. Our question comes from the line of Whit Mayo of SVB. Hey, can you hear me? Yes. Okay, great. Thank you. Hey, John, I just wanted to go back to your prepared comments and kind of unpack some of the initiatives you have around stars, just where you're focused, where you're not particularly happy, where you think you can advance some improvement. You sit pretty close on some of the cut points on your largest H contract and maybe just provide some thinking around, you know, how you're sort of reviewing the rebate dollars. Yeah. Hey, Whit. Great question. We're still one of the first, and I think there may be somebody else that got in the early days of our company's history, got from three stars to four and half stars. That focus was on ensuring that stars was not just a departmental function, but really a corporate initiative and a corporate commitment all the way from our board to me to the entire company. So we've kind of reinstituted that kind of thinking really with enterprise-wide training along all the star measures. I think it's something that we have to do to address just the industry-wide increase in cut points across all the different measures. You know, to be four stars today is, you know, you gotta get better to stay at four stars. I think with respect to the rebate concept, you know, I think we're a good company right now, and we did a good job in 22 stars. I think 23 stars is gonna be harder also. We have to get better along those lines moving toward four and a half to five stars in every one of our markets, and we have to get better on, I mean, our MLR engine. You know, our medical management and clinical operations is really good. Like, really good. I'm really proud of what the team's doing there. There's opportunities for us to improve there as well. All of which I think, you know, address kind of the rebate question, which is really something that I think we have to get better at, to drive the kind of membership growth in MA that we want. It's really across the board with on pretty much everything we do. Just because I think in the 23 measures, you know, we were notified and the industry was notified that the cut points were even gonna be higher, you know. We have to, you know, we have to do it on an enterprise level. I'm encouraged with the feedback from the employees and the call to arms, so to speak, and just really proud of the team for stepping up. Last question for me is just, looking at some of the new markets, North Carolina, Arizona, Nevada, maybe just an update around some of the inroads you're making on physician partnerships and, just engagement efforts, gain sharing strategies, anything that you've learned? Yeah. Yeah. Lots of lessons learned, obviously from Florida and Texas. We really concluded you really need all four, we call them these growth pillars that have to work, and it starts with stars. It starts with quality and stars. What we learned in North Carolina was when you get five s tars, you get a lot of tailwinds as a new market entrant because it brings legitimacy and credibility to your brand in a new market. A lot of the emphasis in Texas, Florida, and all the other markets is now is really getting to that star rating. That's just not enough, though. That combined with the medical management, and AVA Care Anywhere deployment, which again, I'm really proud of how that's being executed. We're running about 155-ish admissions per 1,000 outside of California, which is really one of the core reasons why we're able to beat in 2022 is the performance in these new markets excelled what we expected. Even with that, you gotta have good products. We have pretty good products in all these new markets. Really the key thing that we learned was the distribution strategy has to be more reliable, more controllable, and we're making adjustments to the distribution. You need all four of these components to not just enter a market or grow a market, but really win in a market. I think that's kinda the standard that we're holding ourselves to is, you know, if we get into a market, and we're gonna make investments, we can't just enter. We need to win, which is pretty consistent with pretty much every market that we've entered in California. We need to do the same outside of California. Those are some lessons that we're operationalizing right now as we speak. Yep. Helpful. Thank you. Thank you. One moment for our next question, which comes from the line of Ryan Daniels. Yeah, guys. Thanks for taking the question. With Wolfe Research. Excuse me. Hey, Ryan. How are you? Can you hear me okay? Yeah. Loud and clear. Okay. Perfect. Thanks for taking the questions. First one on ACO REACH. Appreciate all the color there. Nice to see you're gonna push more into it given your experience there. I wanna try to pair the commentary of, you know, the positive experience with experiencing 100% MBR. Is that mostly due to just the rapid growth and kinda newer patients coming in with a much higher MBR contrasted to existing patients that are lower? If so, can you give us any color on the delta between those two groups? Hey, Ryan. This is Thomas here. Happy to take that question. In, in terms of the overall outlook for 23, I think what you're seeing from us is just maybe a prudent sort of expectation setting exercise as we think about the considerable growth we're seeing, where you're right, we're kinda going from 5,000 to 7,900 to start the year. That also includes a pretty significant mix shift just kind of by participating provider, by region, et cetera. It's, it's pretty much a new population for us in many respects. I think, you know us, we tend to be cautious with respect to our comments on our outlook until we get our arms around new members and new groups. That being said, I think we're really very proud of our results in the 2021 outcomes that were released by CMS recently, as Jon mentioned. We were the second lowest benchmark in the country, which obviously means there's not as much opportunity to really bend the cost curve, yet we were still able to produce top quartile results. I think our savings rate for 2021 calendar year was right around something like 6% in terms of how CMS measures that program. I think we feel good about our 2022 results also. I think we have a lot of confidence that this can be an accretive line of business for us and something that we can continue to grow in combination with our MA relationships. I don't think this is something where you're gonna see us grow it, in a really significant or material way, in lieu of MA. In other words, I think our 20% revenue goal for MA kinda stands in the future. This is really, I think, something that could be an incremental and again, accretive opportunity for us as we continue to work with these providers across a broader portion of their senior panel. Okay. That's very helpful. Then as my follow-up, this one's for Jon. As you've discussed your four pillar playbook, one of the things you mentioned, and you discussed this in the Q&A already, is optimizing rebate dollars across benefits. I think in the context of lower potential MA rate increases for 2024, that becomes even more important. You know, I'm curious just how you think about that, maybe specific opportunities there, especially given what might be lower rebate dollars given the rate outlook for 2024. Kind of what is the organization really focused on there? You know, is it gonna differ market by market, or are there certain benefits that you really wanna push the pedal on because you've seen more engagement with consumers, et cetera. Would love some color there. Thanks. Yeah. Hey, Ryan, of course. Great question as usual. you know, I think just the general increase in standards across the board from CMS on star ratings in terms of increased cut points, in terms of reimbursement, I actually think it will be a strategic advantage to us in the long term. We've kind of reiterated that theme, you know, for many of you. The company was built on ensuring that we had high quality at a low cost, and that ultimately will be the formula for the highest value creation for consumers. I think that given some of the, you know, kind of the, call it COVID-related artificial, you know, metrics and stars the past several years and some of the reimbursement for the past several years, I don't think we're sustainable. I think the market's gonna start rationalizing to our favor. That's what I think. Again, have this kind of sustainable benefit design, sustainable coverages, sustainable supplemental benefits. Some of the crazy stuff that we've seen is not gonna be sustainable. I think the tightening is gonna be impacting people that have been, you know, reliant on some of those short-term, you know, subsidies, so to speak. You know, I think that we're all waiting for the, you know, final notice. I think it's gonna be a really interesting bid cycle this year. I think it's gonna be a lot of strategy with respect to how aggressive people are gonna be in sustaining those rebate dollars and the benefits, how much people are gonna pull back. At the end of the day, if you've got the best cost structure, you ought to be in the best position to still add the most value. If you combine that thought with Whit's question, you know, you say, we gotta continue to get better in stars. We gotta continue to get better in MLR medical management. We're good. I'm not saying we're not good. We're good. We just have to get better. That's what's gonna drive that incremental rebate value to consumers. I think a lot of these artificial, you know, kind of engineering strategies are gonna go by the wayside. I appreciate that. I think your color on, you know, using AVA and the results you're achieving, not only in existing markets but new markets, is a pretty powerful testament of how you can do that. Thank you. Thanks. Thank you. One moment, please. Our next question comes from the line of Michael Ha of Morgan Stanley. Your line is now open. Thank you. Thank you. Maybe just to come back on, the last question, piggybacking off of that one on MA advance rate notice, slightly lower than expected. Just wanted to expand on your thoughts on competitive positioning into 2024, because like you said, my thinking is when, you know, when other MA plans may need to slow down or toggle down their benefits to mitigate potential MA rate pressure, I feel like this presents a golden opportunity for the higher quality MA plan to thrive. Your superior star rating care delivery model, do you think that presents a stronger possibility for Alignment to, in 2024, perhaps gain market share to outsize growth? Just general thoughts around that or expanded thoughts on that. Yeah, Michael, this is Thomas. I think what you're describing is definitely an interesting dynamic that we're contemplating as we look out to 2024. I don't think we're gonna comment too specifically on our, you know, our bid strategies or our product strategies with respect to, you know, how we think that impacts, you know, the whole growth versus margin conversation today. And just being very thoughtful about not sharing too much that could adversely impact us from a strategic and competitive standpoint in this upcoming bid cycle. All that being said, I think you're exactly right. We certainly know there are some competitors in our markets who have benefited from COVID protections around star ratings. They've benefited from higher than average benchmark increases the last couple of years. In certain cases, I think, have, you know, they've been able to manage some of their benefit offerings, in part because they've done a nice job with risk adjustment. As some of those things change in the future and as CMS continues to try to tighten the dial around risk adjustment, I think the overall impact for some of our competitors could be, you know, worse than the impact on us. It's that relative dynamic that I think is most important in terms of our ability to compete, and as John said, win in every market we're in, not just in 2024, but really over the long term. As John said, it'll be an interesting bid cycle coming up, but I think we feel, you know, optimistic as to what this means for the industry and our relative positioning in the years to come. Thank you. That, that makes sense. Maybe just one more question. Looking at California, great rebound in Southern California, regain your competitive positioning. We've seen SCAN, Kaiser, Centene, a few top players really taking their foot off the gas pedal in terms of benefit investment. Also now the competitive dynamics seems to have flipped in Central and Nor Cal, where we've seen some plans offering really aggressive Part B rebates. Looking forward, how do you view the competitive marketplace in both So Cal and Nor Cal? Do you think So Cal is back to being, you know, a fully rational marketplace? Do you think the aggressive offerings in Nor Cal are sustainable? Also one more question on this. The membership headwind in Central Northern California, how much of that was driven by existing member attrition versus lower than expected new members? Thank you. In terms of the kind of Southern California versus Northern California dynamics, what I would say is, really from a, from a macro standpoint or from a kind of portfolio management standpoint across our geographies, I think there will always be, you know, different competitors who are more aggressive and are kind of more focused on growth in certain years, and other competitors, who are less focused on growth, but are more focused on margin in certain years. I think that's just the reality of the business, and we've sort of seen this dynamic play out time and time again, really over the last, you know, eight, nine, 10+ years that we've been operating here in California. I think to a certain extent, our belief is that we should expect it. We should expect there's always gonna be someone who might be bidding more aggressively than we view is sustainable in the long run. It's on us to make sure that we have the right product strategies, the right market management strategies, you know, the right broker and distribution and provider relationships, such that we have insulated ourselves from some of those anomalies in any given year to still get to our 20% top line growth target on a consistent basis. I don't think it's as simple as, you know, one competitor in one market that's gonna kind of dictate our future performance. I think we have to continue to take control of our own destiny, and that's what you'll see from us in the future. I think your second part of your question was just in terms of, specifically in some of the counties in Northern California where we didn't quite see the growth we had hoped for. It was a bit of a combination, I would say, on both the retention side as well as the incremental new sales side. Great. Thank you. I think it is worth noting and reiterating that that was, again, more than offset from a retention standpoint by our other markets, such that California as a state was actually 50 basis points better in terms of our retention this past AEP versus 2022. Thank you. One moment, please. Our next question comes in line of John Ransom of Raymond James. Your line is open. Hey, good evening, everybody. John, my question for you is the advance notice, part of that, of course, is the ICD-10 changes, which are complicated, lots of codes going away. How do you think about that kind of at a plan level, you know, what calibrations you make and then also what would be downstream at sort of your downstream provider level? Thanks. Hey, John. Good question. Yeah, I think from just a from a systems perspective, I think we're very well in hand. I think the way in which we engage downstream with our providers, the workflow processes, the data ingestion, all of that is just something that we've been working on for, frankly, a couple of years. I'm not really worried about that. I think the advance notice itself, I think is frankly consistent with a lot of the, you know, kind of industry themes that we've been professing over the last several quarters. You know, we're kind of working our way through that right now, with respect to, you know, kind of directional findings. I think that there is this 3% hit to risk adjustments, so to speak. I, you know, based on some of the preliminary analysis that we've looked at, there is a disproportional hit to certain populations that are of color and/or lower income in terms of specific chronic diseases impacting those populations. We're working our way through that. I think that how that gets embedded in our product mix, our rebate strategy, you know, the bids, all of that, I think is gonna be something that we're working on right now, I mean, we're already planning for 2024, so to speak. I don't know if that answered your question, John. Well, I guess the follow-up is, I mean, what we've heard is that, you know, while it's a 3% hit that certain, you know, provider groups with certain profile, it might be a much bigger hit than that, and then others will be just fine. I guess it gets down to, at a very simplistic level, are you treating what you're coding for or are you just coding? You know, if, you thought about your physician partners and thought, well, you know, this group may be in a little bit of trouble, that group's gonna be fine, or if that's kind of, too in the weeds at this point. Yeah, no, I'm not sure we think about it that way, but I mean, we are looking at all the changes to the demographic changes, the non-demographic changes, the impact on different HCCs. you know, but, you know, we are seeing some. Again, this is all public stuff and disproportionate impact to diabetes and vascular disease, in particular, certain conditions that relate to, like I said, you know, lower income and, you know, people of color, so to speak. It will be built into the product strategies and the product designs. Overall, you know, we've heard people, to your point, you know, in that, you know, 3%, 4% range, we've heard people say something, you know, significantly higher. You know, it's such a kind of strategic number with respect to how you embed your bid strategies and, it, you know, it's something that we wanna make sure we are, you know, very clear on. Obviously, we don't want to, we don't wanna talk about any competitive dynamics. Got you. Thanks so much. Yeah, you got it, John. Thank you. One moment for our next question. This question comes to the line of Kevin Fischbeck of Bank of America. Your line is now open. Great, thanks. I wanted to dig into the EBITDA guidance. Maybe it's not 100% fair because you just made the comparison more difficult by beating Q4. It does look like from an absolute basis, you know, the EBITDA loss is gonna be relatively flat, you know, year-over-year, and I appreciate the 40 basis points improvement. You know, ultimately, you're gonna have to show actual, you know, EBITDA dollar improvement year-over-year, but I guess particularly if you're thinking about 2024. I guess, like, what would you say? Is there anything unusual either in the comparison year-over-year or the impact, anything going on this year that kind of makes less of a dollar EBITDA improvement, flow through in this comp? Hey, Kevin. Thomas here. 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. As we continue to think about that break-even target in the years to come, I think it's gonna be a combination of both MBR improvement as well as continued operating leverage through the SG&A line item. 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. I think on our side, you know, 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 break even. 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. We really are starting to show that improvement now as we look out to 2023. 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 2023. With those two 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 think about our 2024 breakeven objective. All things considered, I think our 2023 guidance sets us up pretty solid for that objective in 2024. The last thing I'll say is, you know, it's, of course, early, and we'll see how the year plays out. We're only two months in. 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. 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, you know, 55 basis point headwind in that number as well? Year-over-year, is that, is that an adjustment to be making? Yeah, that's. Yeah. The 55 is actually the incremental. To your point, there's the current 2022 new member MBR embedded in our overall 2022 results. Really, we're measuring the expected new member MBR in 2023 versus the new member MBR in 2022. It's really an incremental 55 sort of year-over-year in terms of a consolidated headwind. As we reflect on kind of where the growth is that we've seen so far and our expectations for the year, I would say based on the distribution of members by market, by product, by provider group, the corresponding new member revenue PMPMs across those different variables and our expected MLR for each of those different, again, groups, markets, and products, we are expecting our new member MBR to be slightly higher this year than 22. Again, that being said, I think what is most important to us is not necessarily where the new members come in at year one, where they typically don't really produce much contribution margin anyway. What we're more focused on is our ability to manage those new members and improve those MBRs over time. I think it's something we still feel really strongly, and kind of confident about today. Okay, it's not the number of members, it's where the members are that's causing that year-over-year delta. That's right. It's a bit of a mix when you consider geography, product and provider. Okay. All right. That makes sense. Thank you. Thank you. One moment for our next question. This question comes to the line of Lisa Gill of J.P. Morgan. Your line is now open. Yeah. Hi, good afternoon. This is Cal Sternick for Lisa. A couple of clarifications, ACO REACH. Hey, John. Hey, Thomas. Well, given what the margin profile of the business is over the long term, apologies if I missed that, and then, in terms of the membership growth, I know you said it's not gonna preclude you from hitting your 20%+ MA target, how should we think about the growth trajectory of that business going forward? I know there's a much different SG&A load associated with ACO REACH, but are there any material incremental investments you need to make to grow that membership? Hey, Cal, this is Thomas here. In terms of the EBITDA comment, I think our belief today is that the ACO REACH book of business is probably in the low to mid-single digits in terms of the EBITDA margin opportunity. I think, you know, we'll continue to learn as we continue to grow that, in recognizing that it is a new program, and our experience so far has been limited to a pretty small population in a pretty concentrated geography. I think as we continue to expand that like we are in 23, adding new providers in California, Florida, Arizona and Nevada, I think we'll start to get more of a broader set of experience that we can draw on that will inform our view of the longer term margin opportunity. I'd say that's kind of our current thinking today. In terms of the incremental investments required to grow this business, the reason that it's not too significant from an SG&A investment standpoint is because the providers we're partnering with are already providers that we are working with on our MA books of business. We haven't had to create a massive or significant new business development infrastructure because these are providers and partners that we're already talking to kind of day to day, week to week as a part of our MA operations. From a sort of shared services and from a fixed cost standpoint, you know, the only real incremental resources we're deploying are in the medical expense line as we bring on more, you know, nurses, case managers, et cetera, to deploy a lot of our Care Anywhere programs for this population. If you compare the kind of core operational aspects of ACO REACH versus MA, you know, we don't have to do claims payment, we don't have to do member services, sales and marketing commissions, UM credentialing, the list goes on. All these things that we have to do for MA that are obviously capital intensive in terms of SG&A, we really don't have to do for ACO REACH, that's why we're able to grow it in such a capital efficient manner. Okay, great. Thanks. Thank you. One moment for our next question. This question comes from the line of Nathan Rich of Goldman Sachs. Your line is now open. Great. Thanks, good afternoon. Thomas, I wanted to follow up on the MBR comments that you made in response to Kevin's question. I guess, what I wanted to try to get at is I think if we make the adjustments for all of the year-over-year items that you mentioned, it seems like it's implying the MBR for returning members is gonna be roughly flat year-over-year. I guess, is that roughly right? If so, are there any factors you'd kind of highlight in driving that? I guess I would've thought you'd maybe see some improvement on the MBR for this membership base. Just be curious to get your thoughts there. Hey, Nathan. Thomas here. I think we might look at that a little bit differently to the way you described it. I think we do expect improvement on our returning members or our loyal members. That's pretty consistent with what we've shared in terms of our historical cohort data. We're not seeing anything today that would cause us to deviate from our prior experience. I think when you kind of think about the bridge we shared earlier, again, what we're saying with the new members is that the new members in 2022 and the impact of those members on 2022 is consistent with the impact on 2023, plus an additional 55 basis points on top of that. If you were to actually kind of take that 2023 number and we were to break it down between all the loyal and new members, you would see an expectation of the loyal or the returning members improving in 2023 versus 2022. I think we feel pretty good about how those trends are shaping up, both from a revenue standpoint as well as from a medical cost standpoint. Okay, great. Just a quick follow-up. I guess for 2023, is there anything from an EBITDA cadence standpoint that we should be aware of? I guess, you know, it seemed like the 1Q EBITDA guidance was maybe a little bit lower than we would've expected relative to the full year. I just wanted to ask if there's anything from a cadence standpoint. I think in terms of MBR, you know, our guidance for Q1 reflects what we saw in January utilization, where, similar to, you know, prior experience, it typically is a higher utilization month, and that was very much the case this past January, though, we're pleased to share that the February utilization has come back down, relative to January. I think if you were to look at our guidance for the first quarter of last year, in terms of the implied MBR, it would actually look pretty similar to the guidance that we put out today in terms of the MBR. You know, that being said, I recognize we of course beat our guidance last year in MBR, and we'll see how this quarter plays out. I think the seasonality we're contemplating around MBR is fairly consistent with how we might think about a normal operating environment. In terms of the SG&A, you know, the last couple of years, we typically had about 55% of our SG&A hit in the back half of the year as opposed to the first half of the year, which is the ramping up of the sales and marketing spend, as well as the kinda year zero market spend around the third and the fourth quarter. I would expect sort of a similar cadence around SG&A this year as well. Great. Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.