Good afternoon and welcome to Alignment Healthcare second quarter 2025 earnings conference c all and webcast. All participants will be in a listen only mode. After today's presentation there will be an opportunity to ask questions. Please note that this event is being recorded. Leading today's call are John Kao, Founder and CEO, and Jim Head, 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 sections of our annual report on Form 10-K for the fiscal year ended December 31, 2024. 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 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 quarter ended June 30, 2025. I would now like to turn the call over to John Kao. Sir, you may begin. Hello and thank you for joining us on our second quarter earnings conference call. We are pleased to report another quarter of strong, disciplined execution with results that exceeded the high end of each of our guidance metrics for the second quarter in a row this year. Much like 2024 was a breakout year for membership growth, 2025 is well on its way to becoming a breakout year for Adjusted EBITDA profitability. For the second quarter 2025, our health plan membership of 223,700 members represented growth of approximately 28% year-over-year. Strong health plan membership growth supported total revenue of $1 billion, increasing approximately 49% year-over-year. Adjusted gross profit of $135 million increased by 76% year-over-year. This produced a consolidated MBR of 86.7%, an improvement of 200 basis points over the prior year. Finally, our Adjusted SG&A ratio of 8.8% improved by 160 basis points year-over-year. Taken together, we delivered Adjusted EBITDA of $46 million. This handily surpassed the high end of our guidance range of $10 million to $18 million and produced an Adjusted EBITDA margin of 4.5%, generating 360 basis points of margin expansion year-over-year. Turning to our first half results, our MBR of 87.5% improved by 230 basis points compared to last year and our Adjusted EBITDA margin of 3.4% improved by 390 basis points. In total, our first half Adjusted EBITDA of $66 million exceeded the high end of our initial full year guidance range of $35 million to $60 million. We are proud of our execution towards Adjusted EBITDA profitability, especially in light of rapid membership growth that was seven times higher than the industry and a highly dynamic Medicare Advantage environment that includes the second phase-in of V28 risk model changes. Our first half outcomes continue to validate our business model and further increase our confidence in the 2026 bids we submitted earlier this year. The strength of our financial results reflects our operating principles of transparency, visibility, and control over the medical outcomes and consumer experience for our seniors. This begins with AVA and our unified data architecture, which provides us with real-time operating and financial visibility combined with our approach to comprehensive care management as a core competency. Instead of relying on global capitation, demonstrating our ability to successfully manage rapid membership growth, our second quarter inpatient admissions per thousand ran in the low 140s and outperformed our expectations. This was supported by both new member performance and ongoing clinical engagement with our loyal members, resulting in solid progress toward the embedded earnings potential in each of our member cohorts. Most importantly, our steady execution is highlighting our model's durability as the Medicare landscape continues to evolve. Following our continued momentum across the business in the second quarter and first half, we are raising our guidance ranges across each of our four key metrics. The guidance raise reflects strong fundamental performance across the business, an unchanged Part D outlook, and upside from Sweep payments. Jim will expand on this in his remarks. Building upon our success, we are deepening the durability of our provider relationships by more fully integrating our clinical expertise and medical management capabilities. Our increased support aims to improve chronic condition management, create greater coordination of care, and increase adoption of our AVA technology insights. Through closer alignment with our providers, we are driving increased shared savings and profitability for our partnerships. Each provider success story contributes to our growing track record of referenceable outcomes, and as a result, we are increasingly becoming the preferred solution for providers aiming to grow profitably in Medicare Advantage. Looking ahead, we believe CMS continued focus on improving quality is raising the standard to be successful in Medicare Advantage. The agency's mission to provide seniors with the highest quality of care at the lowest cost rewards senior health companies like ours that stand at the intersection of excellent customer experience, exceptional clinical outcomes, and affordable products and coverage. This is consistent with our core competencies and the strategic framework we have shared with you over the past few years. We believe we are establishing a new paradigm and leading by example with industry-leading star ratings, exceptional member satisfaction, high member retention, world-class medical outcomes, and consistency in our financial performance. The introduction of V28 is further accelerating the importance of our unique capabilities since its initial phase in 2024, and along with star rating declines across the industry, large incumbent MCOs have lost share in Medicare Advantage for the first time since 2014. Meanwhile, we have continued to maintain our high star ratings, take share from incumbents through this period of dislocation, demonstrating our ability to leverage our competitive advantages into profitable growth. Turning to our preparation for 2026, we are well positioned to deliver another year of at least 20% growth and continued year-over-year growth in Adjusted EBITDA. Even following our strong growth over the past few years, we believe we have substantial capacity to take share in existing markets, expand into new counties, and enter new states. With counties we currently serve, our current membership represents just 5% of 4.6 million total MA enrollees. Further expansion into each county within the existing five states would nearly double our reach to an additional 4 million MA enrollees. While additional states in 2027 and beyond could establish our model as the preferred Medicare Advantage platform in the industry, to support our long term growth objectives, we are making investments across the organization much like the investments we made in member experience in 2023 and clinical capabilities in 2024. We are continuing to invest a portion of our strong year to date outperformance in administrative automation and care navigation to drive success in 2026 and beyond. We are continuing to invest in our infrastructure to allow us to scale repeatedly. We believe these investments will continue to widen our relative advantages over competitors in the years to come. Lastly, we recently announced that our Arizona HMO contract was revised from 3.5 to 4 stars for payment year 2026 and are pleased that our commitment to quality for our Arizona members is being recognized. With this latest update, our stars advantages are poised to widen, with 100% of our members in a plan receiving four star or above payment in 2026. Combined with our confidence in our ability to navigate the third and final phase in V28 risk model changes, we believe we are well positioned to achieve our growth and profitability objectives next year. In conclusion, our momentum during the first half is demonstrating that our approach to Medicare Advantage as a care management business is a winning long term strategy. By fully integrating our data visibility, technology insights, clinical expertise, and financial competency, we are sharing the power of a dedicated senior consumer platform as we create the blueprint for the future of Medicare Advantage. Now I'll turn the call over to Jim to further discuss our financial results and outlook. Jim. Thanks John for welcoming me to my first earnings call with Alignment. I'm excited to join an organization that is charting the future of Medicare Advantage and I look forward to engaging with many of you over the coming weeks. Now turning to our results for the quarter ended June 2025, our health plan membership of 223,700 increased 28% year-over-year. Meanwhile, our second quarter revenue of $1.0 billion represented 49% growth year-over-year. Strong revenue growth was driven by continued momentum in new member additions, a year-over-year increase in Part D revenue PNPM, and revenue pickup from the 2024 final sweep, which I'll expand on shortly. Total Adjusted gross profit in the quarter of $135 million grew 76% compared to the prior year. This represented an MBR of 86.7% and improved by 200 basis points year-over-year. The strength of our second quarter MBR and gross profit results were underpinned by strong execution in our provider engagement and clinical initiatives, leading to inpatient admissions per thousand in the low 140s and outperformance in our core medical expenses. Additionally, our Part D MBR was slightly favorable in the first half. With six months of experience, we now have further confidence in our full year expectations for Part D. Lastly, favorability from the 2024 final sweep contributed approximately $14 million to Adjusted gross profit. Gross profit from the final sweep is primarily attributed to a large cohort of new members who joined us in 2024. While the size of the final sweep varies from year to year, this is very much a normal part of our business, which reflects a catch up in payment from CMS for members who were previously under reimbursed in 2024 relative to the severity of their chronic conditions. Excluding the final sweep payment, we still would have outperformed the high end of our guidance range across each of our key metrics in the quarter and would have produced an Adjusted MBR of 87.7% compared to the MBR implied by the high end of our second quarter guidance of 88.3%. Turning to OpEx, Adjusted SG&A in the second quarter was $89 million and declined as a percentage of revenue by 160 basis points year-over-year to 8.8%. This marks a continuation of the outcomes achieved in the first quarter and once again demonstrates our ability to scale our capital light operating model. Our SG&A result also included approximately $6 million of timing benefit, which we expect to reverse in the second half, keeping our full year expectations for SG&A roughly unchanged. Finally, Adjusted EBITDA was $46 million in the quarter. This reflects an Adjusted EBITDA margin of 4.5%, which improved by 360 basis points compared to the second quarter of 2024. Moving to the balance sheet, we ended the second quarter with $504 million in cash, cash equivalents, and investments. Turning to our guidance for the third quarter, we expect the health plan membership to be between 225,000 and 227,000 members, revenue to be in the range of $970 million to $985 million, adjusted gross profit to be between $106 million and $114 million, and Adjusted EBITDA to be in the range of $5 million to $13 million. For the full year 2025, we expect the health plan membership to be between 229,000 and 234,000 members, revenue to be in the range of $3.885 billion to $3.910 billion, adjusted gross profit to be between $452 million and $469 million, and Adjusted EBITDA to be in the range of $69 million to $83 million. Following the strength of our second quarter and first half results, we are increasing our membership guidance in each of our key P&L metrics. Our 2025 sales continue to exceed expectations through the second quarter, supporting our full year membership raise. Continued momentum on new sales is also reflected in our revised outlook of $3.9 billion at the midpoint, which now implies approximately 44% growth year-over-year. Turning to our 2025 profitability expectations, the midpoint of our updated Adjusted gross profit guidance of $461 million was raised by $28 million, which is greater than the magnitude of our second quarter beat. This latest update now implies an MBR of 88.2% for the year, a 40 basis point improvement from our prior annual guidance. Meanwhile, the $27 million increase in our Adjusted EBITDA guidance to $76 million at the midpoint captures strong performance through the first half of the year and implies a 1.9% Adjusted EBITDA margin for the full year. Our profitability outlook includes the following components in the second half. First, we expect continued stability in our inpatient admission per thousand results, with the second half running modestly higher year-over-year due to changes in our mix of membership. This is consistent with our previous comments. Second, while our first half Part D gross margin ran a few million dollars favorable to expectations, we are keeping our full year assumptions approximately unchanged based on the first six months of our Part D experience. We feel confident that our outlook assumptions accurately reflect underlying cost trends in Part D and continue to expect our Part D MBR will be modestly lower in the second half compared to the first half. Third, we expect the $6 million of SG&A timing favorability we experienced in the first half to reverse in the second half, leaving our full year SG&A expectations roughly unchanged for full year 2025. Our latest guidance implies an Adjusted SG&A ratio of 9.9% reflecting an improvement of 130 basis points year-over-year. Spending a moment on seasonality, we expect the fourth quarter MBR to be higher than the third quarter due to normal seasonality from the combination of lower revenue PM between Q3 and Q4 and regular utilization patterns in Medicare Advantage including the impact of the flu season. Additionally, we continue to expect changes in Part D seasonality due to the Inflation Reduction Act, including a higher MBR in the fourth quarter relative to prior years on operating expenses consistent with normal seasonality. We expect the ramp up of AEP related sales and marketing expenses and staffing and preparation for 2026 growth to increase our second half SG&A, particularly in the fourth quarter. With these factors in mind, we expect Adjusted EBITDA to be higher in the third quarter than in the fourth quarter. Taken together, we are pleased with our first half results and we're well positioned to deliver on our increased full year expectations. With our latest update and our full year outlook, we now expect to be free cash flow positive on a company wide basis in 2025. This is a milestone in our organizational maturity and adds to our position of strength as we plan for 2026. Lastly, I'd like to take a moment to express how energized I am to be part of this mission driven organization. In my first few months, I've been deeply impressed by the expertise of the team, the sophistication of our integrated clinical and technology platform, and the strength of our financial visibility and processes. As I settle into my role as CFO, investors can expect continued consistency in our reserving methodology and financial communication with investors. With that, let's open the call to questions. Operator. Thank you, ladies and gentlemen. To ask the question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q& A roster. Our first question comes from the line of Michael Gilmore with KeyBanc. Your line is open. Hey, good afternoon. Congrats on the great results. John had mentioned your efforts to deepen your provider relationships and to help them better manage costs and that you're becoming a preferred solution for providers that are managing MA costs. Last call, you mentioned some IPA relationships, but I thought you might provide some details there and give us a sense for how this is different from your prior relationships on the provider side. Yeah, hey, it's John. Great question. The historical acute admissions per thousand, if you recall, we've shared in the past, has ranged in the kind of 150 to 160 range. For this past quarter, we were actually closer to the low 140s. We communicated that. That's really a result of us having conversations with our IPAs and medical groups and jointly concluding that we have tools and this care and the data, the tools to give both the plan, us, and the medical group better visibility and control. As we've worked together collaboratively, it's yielding results not only for stars and quality metrics, but also as reflected in utilization management. This whole concept of alignment and creating and operating a financial alignment with these providers is starting to pay off. The result of it is they're sur+ing more, they're making more money, the members are happier, getting more access, and we'll be continuing to do that throughout the entire book of business. It's a meaningful differentiator in this kind of world of V28. I think that what's really interesting is I think that people really appreciate the increased quality and access that this is also yielding. Does that help, Michael? No, it does. I appreciate that. I wanted to see if you could provide just a little bit of color in terms of what you're seeing from a utilization standpoint. Obviously, great to see inpatient really controlled through your efforts, but any comments you'd make on outpatient or any particular areas to note in terms of either success or what's sort of driving trend. I think if you break trend into utilization and rate, you know, John just mentioned we're very, very focused on 80k, but also just kind of the full gamut of clinical spend. As we think about our trends inside how we're managing the business quite actively, we've seen a lot of stability and I would say that's across, you know, kind of. There's always little hot spots, but we're actively managing them. We see it across inpatient, outpatient. I think the notable difference is really in part D, which we talked about on the call, which has a higher trend than the medical side of things. On the medical side of things, when we're working directly with the IPAs and the providers, we've got a pretty good line of sight on utilization and it's trending nicely. Rate always has a little bit of upward trend and it's really tied to Medicare fee for service type rate trend. All in all, we feel pretty good about the visibility we have on utilization. That's great. Thanks a lot, guys. Thank you. Please stand by for our next question. Our next question comes from the line of Michael Hall with Baird. Your line is open. Thank you. Yeah, I want to focus on SG&A. So 8.8% this quarter looks like your updated guide now implies sub 10% full year. I was just flipping through my Humana model. I don't think they've ever done a full year of sub 10%, and they're roughly 30 times your size in revenue, yet you're outperforming them on SG&A, arguably better cost leverage, scaled economies. As we look ahead, it almost feels like you're setting a new benchmark on SG&A for a Medicare Advantage plan, or rather a new paradigm, like John said. Thinking ahead, what's the path forward? I understand broker commissions, marketing, general corporate costs will always keep you at a certain level, but how durable is this level of SG&A as you continue to scale and grow in the coming years? How much lower could it possibly go over time? And. Are there any parts of your cost structure where there might even be levers where, for example, AI initiatives haven't even made a dent yet and that could drive more opportunity over time? Yeah, hey Mike, it's John. I think the main thing to have clear is we have the benefit of setting up our data architecture with a clean slate. When we talk about having a unified data architecture, it's a really competitive, it's a big deal. It's a big competitive advantage we have relative to some of the incumbent legacy players. That has given us the kind of visibility and control we have. When you have that, you don't need the amount of FTEs, really. You have the data, you have the systems, you don't need to have a bunch of people reconciling all this stuff. I think the secret sauce really with us is sure the data is critical. AVA, as you've heard us talk about, is critical and care anywhere. The clinical model, it's all critical, but it's how the clinical, the operations, and the financial parts of the organization all seamlessly are operationalized from a workflow point of view to your point. In addition to the outstanding financial performance behind the scenes, we've spent a lot of time and energy on streamlining workflows, ensuring that the data can get even better because you need those two foundational pieces to apply the AI or certainly the agency or generative AI. We're looking at that very, very carefully and we're very careful not to be on the bleeding edge of that. To your point, I don't think there's much traction in it because I don't think a lot of the people, the incumbents, have really clean data and really clean workflows. That's an area we're spending time and making investments in. That to your point, I do believe will start paying off in the next couple of years, I think. The other thing we're doing is really investing in training, training and development of this model, which candidly we've had to conclude that we've got to get the best athletes in the industry and then train them because I don't see a lot of people doing Medicare Advantage the way that we're doing it. I do think there's opportunity. Thank you, that's great to hear. In terms of the final risk adjustment sweep benefit this quarter, I was wondering, does that also include the Part D risk adjustment sweep as well? Is that normally a back half of the year type item? If I'm not mistaken, that's usually a bit of a benefit too. Another quick follow up is on bids. Your peers have really commented on 2026 bids over the past couple of weeks, a lot of them assuming trends approaching 10%. I know there's a lot of nuance between your different markets, but curious what you're seeing on trend this year, what you're assuming on trend for your bids next year. With a week left until, I guess, rebate reallocation, has any of your learnings over the past few weeks changed your thinking or whether you'd like to make some adjustments? Thoughts there would be great. Thank you. Why don't I. This is Jim here. I'll just take the final sweep and describe it a little bit more. The $14 million of gross profit we called out was for the 2024 final sweep. That's not any mid-year Part D or Part C sweep, just the 2024 final sweep. We felt like it was wise to call that out just because of the size of it and the fact that it was not in, period. I'll just be very clear, this is a very normal part of our business, particularly as we grow. What we do is we book paid MMR for new members. We're not kind of banking on any uptick because it's not. The members that we had the previous year, they switched over. What happened this year is we had a pretty large cohort come through and the final sweep was a relatively significant magnitude. It's part of our business. Our loyal accruals have always been pretty consistent with our expectations, which is why it doesn't do much in the mid-year sweeps, etc. Excluding the final sweep as we called out, we would have hit all of our metrics, all of our four key metrics for the quarter, and beat the high end of the guidance. What you see from us is the final sweep, not the Part D or the Part C mid-year sweep. Thank you. Please stand by for our next question. Our next question comes from the line of John Ransom with Raymond James. Your line is open. Hey there. Just kind of zooming out to a big picture question. Obviously, healthcare insurance companies are unpopular. I know there's some one size fits all rules around audits from your admittedly kind of small purse. What are you doing to move the conversation around public advocacy? Do you think you're getting any traction in D.C. about this? Hey, John. It's John. We were invited to be one of the witnesses in front of the House Ways and Means Subcommittee on Health last week, or was it a couple weeks ago? Our President, Don Maroney, did a great job presenting just how we think about Medicare Advantage. What's interesting is I think people are absolutely listening. This is all public, it's all videoed and everything. I think they understand what we are doing is different than, I'd call it, the incumbents. I think one of the congressmen referred to us as the good guys. It's consistent with what you and I talked about four years ago when we took the company public. I think the narrative has to change. It has to change to the principles that we are pushing not only within our company, but pushing for the entire sector and the industry. I'm certainly communicating these kind of principles to AHIP as well. It's really just serve the senior, just really serve the senior. I think what we're trying to tell everybody is you can create a win-win by providing more care, not less care, but more care. The proviso is to provide that care to the right people at the right time. I think that's the win-win opportunity. I think because of that, you're going to see people look at Alignment Healthcare as hope, hope that this industry can get to a point where it will change the public perception. My second question, I'll ring off, is your care model. If we think about value based care, three years ago it was discreetly managing costs among COPD, Type 2 diabetes, some chronic disease. Where does this sit now in terms? Of predictive analytics and deflecting trend among this chronic population? Thanks. Yeah, no, it's a great question. I think it's going to just get more and more personalized care. I think we are looking very carefully at evolving our machine learning algorithms and applying those AI techniques into the next generation of AI. I think that will give us better and faster insights that we can take action faster. I think the reason we're doing so well now is that the whole funding structure is changing. Four years ago you had a lot more premium dollars to play with that you could in fact support effectively two insurance companies in that one supply chain. What I'm talking about is the regulated health plan and then also the value based global cap taking entity. With V28 and a tighter emphasis on quality on stars, the revenue is getting tighter. You can't afford just to pass risk down to a global cap entity. The entities in Medicare Advantage that can manage the risk, manage the risk while maintaining high star ratings, that is you can't just deny care, are going to be the ultimate winners in this space. You're kind of seeing just the very, very nascent beginnings of that with our quarterly communication. The big thing to think through is this is all kind of happening with just 2/3 of V28 going through in 2025. When you've got the final third of V28 playing through in 2026, the organizations that can understand how to do this are going to be the winners. Thank you, sir. Got it, John. Please stand by for our next question. Our next question comes from the line of Jared Haase with William Blair and Company. Your line is open. Yeah. Hey guys. Good afternoon and thanks for taking the questions. John, in the prepared remarks you mentioned administrative automation and care navigation specifically as key focus areas going forward. I was just hoping, you know, if there's additional color, maybe some examples you could share where you see the biggest opportunities for improvement in those areas. I guess the answer to this is probably both, but I'd be curious if you would frame this as we should be thinking about this having a bigger impact on existing member retention or new member growth. Thanks. Yeah, the answer is both and I think it's specifically related to what we've done in terms of our core systems. I think we're again positioning the company to scale. What that means to me is ensuring that workflows are consistent, workflows are automated, and workflows are systematized. We're getting to that point where a lot of our core systems are really tight and there's a high degree of consistency and reliability of our execution. This past year we put in a new EHR, Athena, we put in a new HR system, Workday. I mean, just basic core systems that are going to allow us to scale. We put in Facets, a claim adjudication platform. What we did, which is super interesting, is we don't view that as a core system. We view AVA as our core system. We've been successful in integrating the claims adjudication application into AVA and the team did an amazing job. That will yield better and more accurate claims payment, higher degrees of auto adjudication, which leads to more consistency, ensuring that our concierge processes—and I use concierge very selectively. We really don't do concierge per se as other people do. We really use concierge as a service and care navigate for members. That's evidenced by the fact our denial rates are like less than 2%. That's a data point again that we can actually get great utilization outcomes by being focused on where you provide the care. All of these core systems are going to pay off. They haven't paid off quite yet because we're not big enough, but they're going to help us get big. I'm very confident of that. Got it, that makes sense and that's helpful. Maybe just as a quick follow-up, appreciate all the color you shared on utilization trends. Was just curious, is there anything you can share in terms of your experience on supplemental benefit utilization and expense, and sort of how that tracks relative to your expectations year to date? Last year, if you recall, we had some negative variances on our supplemental card, and we've corrected for all that this year. I would say overall, it's all in line. Okay, great to hear. Thanks. Thank you. Please stand by for our next question. Our next question comes from the line of Craig Jones with Bank of America. Your line is open. Hey, thanks for the question, guys. I want to talk a little. Ask about marketing dollar yield and customer acquisition costs. Some of the other plans are cutting benefits, focusing on shedding members and growing. I was wondering if you've seen a higher yield in your marketing dollars and if so, is that quantifiable, and what kind of margin tailwind it may be driving? Thanks. Yeah, no, it's a really good question. The answer is yes. Really, as we are a couple of months away from AEP, we're going to not get too specific about that and we'll report back on that, I promise. Craig, after AEP, we feel good about AEP. I think our market analysis and competitive analysis, where we think our competitors are going to land, how we think we're positioned. We feel pretty good about where we are. I think most of our growth thus far, I would say, has been largely word of mouth in many respects and with really fantastic FMO partners and broker partners who I believe really care about quality outcomes for our members. I think you can see us again as we get bigger and bigger to really develop the brand, which we really haven't done quite yet. I think that will be an underpinning kind of foundational pillar on really getting this to be viral. I'm actually looking forward to that. All right, great, thanks. I look forward to hearing more later in the year. Please stand by for our next question. Our next question comes from the line of Ryan Langston with TD Cowen. Your line is open. Great, thank you. John, it sounds like you're still pretty confident on growing 20%+ next year and beyond. Just wondering, I know it's early, but maybe how you're thinking about that split between California and your other markets and maybe just given some of the commentary, some of the larger plans recently about plan exits, material benefit reductions, maybe you have an opportunity to actually push that a little bit higher. Yeah, I think it's not either or in terms of split, it's the way we look at it is it's both. Meaning, I think our market share in California is still relatively small and I think getting to 20% in California is still something that I think we can achieve. We're starting to get to certain scale in the existing ex-California businesses where I would say the broker community is taking note and to your point, they're pretty sensitive also to some of the publicly made statements by some of our competitors in terms of benefits and whatnot. I feel really good about where we are. I don't think you'll hear us getting off the 20% talk track until we have more visibility into AEP. I think we're just really well positioned, and keep in mind also we've always tried to find that right balance between growth and margin expansion. Obviously in 2024 it was tilted toward growth. I think the 60% growth was, I think we kind of called that outright this year. 28% ish on the growth side, the membership growth side, 49 or 50% on the revenue side. We clearly were focused on margin expansion this year. I think there's another couple of years where we have some of these tailwinds. The other thing to keep in mind is, and I'll go back to the delivery system, there might be plans out there with higher star ratings and whatnot, but their costs are also a function of. A lot. Of the global cap providers, there's going to be tension, I think, between plans and global cap providers. Our relationships with our global cap providers are pretty sound, pretty good, and pretty long term. Even with that, I think we're very well positioned. Got it. Just sort of a quick follow up. I'm sorry if you said this publicly, but given the success you had on the star scores in Arizona, were you actually able to go back and adjust your bids, or do you just sort of keep that excess and maybe kind of reinvest it back into benefits. Yeah, no, the answer is yes. The answer is yes. We've made some modifications to the bids. We were allowed to do that, and we won the case, but we had to make sure we validated all that with CMS before we had any kind of community press release or anything like that. During that same time, we were given the opportunity to modify the bids for 2026. Great. Thanks for all the detail. Appreciate it. You got it. Please stand by for our next question. Our next question comes from the line of Andrew Mok Barclays. Your line is open. Hi, good evening. Wanted to go back to the $14. million out of period benefit in the quarter. I think you grew about 70,000 members last year. I think that implies about $200. At least of annual PMPM benefit across that new base. Is that the right way to think about the true up on a per member basis? Is that something we should be? Backing out of the earnings jump off point for next year? Thanks. I'll start with the second part first. This is a normal course part of our business. We wanted to provide some transparency in a normal course part of our business because it was sizable, and we needed you, the investor, to understand how the quarter came through. It is normal course. As we grow and we take a conservative stance on new members, we anticipate this will continue. We just can't predict the magnitude of it. I think your math is probably a little too simplified, but maybe a different way to think about it is we were very, very close when we do loyal forecasting for RAF. We're very, very close. We could be a couple points off on the new members just because we're being conservative. You could think about a relatively large cohort. I think your number's too high, and then think about it in terms of a marginal%. It's not big numbers, it's marginal%. Nonetheless, it was big enough. It made a difference for us. Got it. The gross adds is probably higher than that number. Maybe just a quick follow up on. The share count since that has a couple of moving pieces with the positive EPS. In the quarter, I think the dilutive. Share count increased from $193 million to $209 million in the quarter. I think that excludes about $7.5 million of anti-dilutive stock options and another $26 million of anti-dilutive converts. Is $243 million shares the right way to think about the fully diluted shares once those instruments are in the money? I'm guessing that's why they're not included in the share count now. Thanks. Yeah, why don't we, rather than do this on the call, we can circle back on the right map. We want to make sure you got the convert right and all the other components right. Okay, sounds good. Thank you. Please stand by for our next question. Our next question comes from the line of Jess Tassen with Piper Sandler. Your line is open. Hi, guys. Thank you for taking the question, and congrats on the extremely strong quarter. As we think about kind of the outside of California markets reaching critical mass, can you give us an update on the margin maturation framework for kind of new member cohorts? Just what does year one look like? two, three, four, five? Any acceleration in the timeline to peak margins or new care delivery innovations to take you kind of above and beyond historical peak contribution margins? Anything maybe to flag in this, the 2024 outcomes report or otherwise. Thanks. Yeah, Jess, this is Jim. Thanks for the question. We do track the maturation of our cohorts, you know, and we've talked in the past about year ones being kind of in the 89 and driving much lower over time. As we kind of look at this, it's been actually relatively stable. I think that's one of the hallmarks of our performance this year. I mean, we have executed really well against a dynamic backdrop where we've got 50% of our members in year one or year two cohorts. I think the message underneath that is we're tracking quite well on these early maturities, but there's not a giant distinction in any one given year. For year one, it's been pretty consistent. Got it. Thank you. I was hoping maybe you could just help us understand kind of California's effort to promote these exclusively aligned enrollment or EAE D SNPs. Does this mean anything for Alignment Healthcare? It appears it's not impacting you, obviously, in 2025, but just interested to know what the 2026 expansion of these plans and automatic enrollment could mean for Alignment Healthcare, if anything. Thank you. Yeah, Jess, it's John. We've been managing through this issue for the last three years. At the end of the day, what's happening is members don't want to be forced into Medicaid networks. They're actually choosing to opt out in many cases and to join Alignment. It's actually a point of contention that we have in Washington in that we really want to advocate choice, choice for seniors. To force a senior into a plan through these aligned networks that happens to be caid centric with low stars, low reimbursement, low benefits is not our idea of choice. Frankly, we think the members have kind of voted with their feet and they're working very closely with us, so I don't expect any erosion of that in 2026. Got it. Thank you. Please stand by for our next question. Our next question comes from the line of Jonathan Young with UBS. Your line is open. Congrats on the results there. I'll make sure I don't ask a joke question here, but just going back to the bid component of it, did you guys, I don't know if I heard, I may have missed it, but did you guys mention what you kind of went in with for your 2026 bids in terms of trends given? I think the comment was, you know, everyone else is looking at mid to high single digit or 10% +. Yeah, got it. Yeah, we're specifically not going to comment on anything related to the bids just for competitive reasons. Okay, understood. Given, you know, one of the larger value-based care providers out there is talking about walking away from risk or partial risk contracts due to issues in their business. I wouldn't think that this impacts your California market, but are you seeing more providers taking that tack outside California? Thanks. Are you talking about PPO products specifically? Whether it be PPO or even the HMO where providers just are not able to absorb the risk that they're taking on? Yeah, I don't see that affecting us. I'm not exactly sure what you're referencing, but I think thematically, you're seeing a lot of margin pressure down at the value-based care kind of provider, kind of global cap entity level. I said this for the last couple of years, this model creates inherent abrasion between the plan and the global cap provider when there is compression in premiums. When you take in the tighter stars and the phase-in of V28, there's just not enough money. To. Push down to these global cap providers and they're tightening up on the whole coding thing. That does not surprise me at all. Thus, the differential core competency of actually managing the care and managing the risk is something that we've really focused on with AVA and care anywhere. As I mentioned before, we're now doing that in concert with some of these medical groups that historically were taking global cap. It's kind of a paradigm shift driven by the necessity to be much more integrated, and that's a strategic advantage to us. Not sure I answered your question, but I think thematically that's what I see. Okay, great, thanks. Please stand by for our next question. Our next question comes from the line of Whitmail with Lyric Partners. Your line is open. Hey, thanks. Any updated numbers that you can share? On your membership engagement with new members, with care anywhere? I'm not sure how that compares to prior years. I think we're incrementally better, and we've kind of gotten it up from the 50% range closer to the 60% range. I got to be honest, I'm not happy with that. We should be at least 70% to 75% engaged. Given the, I'd say, some of the operational changes we're making to engage them more, I think that's possible. I think that's for we getting to those kind of metrics. It is possible. It links to how we work with the IPAs and what we delegate to them and what we don't delegate to them. I think there's upside opportunity there. It's a very insightful question, but we're still right around 60%. Okay, last one. John, I know you don't have a perfect crystal ball, but how are you thinking about stars this year for the industry? Thanks. We feel good. We organizationally feel good about where we are, and I don't have visibility to what everyone else is doing. Frankly, that's what we're all waiting for. Kind of the raw scores that we've got, we feel really good about. I think it will be distinctly better than last year. By how much? I'm not sure. I'm pretty comfortable we're going to be at least four, pretty much in all markets. The question is, can we get above that in a few select markets is the way we're looking at it. I don't know what others are doing. Okay, thank you. Yeah. Please stand by for our next question. We have a follow-up question from the line of John Ransom with Raymond James. Your line is open. Hey John, for the record, I've never. Liked Whit because he stole my question. I'm going to improvise a better question than he had, which is specifically on stars. I kid, I love wit, there's all these different measures. As you drill down into the multiple. Measures, where did you see the opportunity to continue to improve and maybe give yourself even more cushion against any sort of surprise? On the negative side, it's CAPS. I mean, we're like five stars on pretty much everything except CAPS. If you put in context the operations of transparency, visibility, and control, those concepts lead to durability. We've delegated a lot of the things that are related to care coordination and access to care, which really is something that our IPAs are accountable for and responsible for. We're working with them now to implement a much more cohesive care routing and care navigation, pre-service capability. For example, if an individual wants to see a specialist, the cardiologist is 90 days out. We have to give that beneficiary an alternative and say, here's a preferred provider that's got a five star card, now they're a five star cardiologist that you can see in a week. That kind of integration with what we do with the IPAs in California, I think, will yield better star ratings across the board and yield even more surpluses to some of these providers. Everybody wins for the benefit of that beneficiary. When you're grading these providers, we always have this debate about what's quality in healthcare. How do you, like, qualitatively, do you think your five star, four star scores, do you think those really get the job done in terms of defining this? Elusive concept of quality? You know, that's kind of a trick question, J.R. I mean, it's. You're right. I mean, it kind of is. I think there are enough loopholes in it that create some problems. I think it's going to be something that CMS looks at, I really do. The question specifically was, how and what are they going to do to look at quality? We're spending time in Washington making sure they have the benefit of knowing what and how we are doing Medicare Advantage relative to everybody else. This gets back to your last question. They're listening because I think they view us as differential and they view us, you know, we built this business based on what Dr. McClelland intended it to be, which is very simply to provide the highest quality at the lowest cost, thereby giving the best value for beneficiaries. You and I, we're at the end of an hour long call kind of riffing, but I'm amazed frankly that. The advocates can't answer the simple question, is it cheaper? I mean, we know beneficiaries love it. You have extra benefits, but there's a. Lot of conflicting data about it. A good deal for the taxpayers. If you can't clearly say that it's not, it just opens up all. Kind of room for people on both. Sides of the political aisle to say, we need to keep cutting this. That to me is where the advocacy has fallen short a bit as we have MEDPAC saying one thing, we have another study saying another thing. I'm amazed the industry has not coalesced around a simple message. About the relative costs. Yeah, yeah. No, I think V28 took a meat cleaver to that question. I think the date and the data lags, right? I mean, it lags, yeah. The specific data that's lagging is the data related to the supplemental benefits. I think CMS, they want more data to say that, you know, if you're providing a supplemental fit, it is yielding some kind of health benefit for the beneficiary. I think that's if you kind of carve out the dollars that are being attributed to supplementals, it's not. The cost is not more. I'm getting the hook. John, thank you. Me too. See ya. Thanks. Please stand by for our next question. Our next question comes from the line of John Stanfeld with J.P. Morgan. Your line is open. Great. Thanks for fitting me in. Can you speak, I think, about what was driving the Part D favorability in the first half? I think in the first quarter you talked about non-low income subsidies being a kind of a pressure point. It would be great just to hear about what's driving the favorability. It sounds like it flips. In your expectations for the second half, what's driving the rehearsal of the favorability? Thanks. Yeah. It's pretty consistent with what Thomas had talked about in Q1. We had been pretty prudent in terms of taking a stance for the full year. In some ways we were outperforming based on a low bar that we had set in terms of what we were forecasting and what our guidance was. There's a little bit of just making sure we got it right, was a little bit of how we outperformed, and there was a little bit of favorability. In Q2 we called out, you know, a couple million. I think as it pertains to the second half, we just want to make sure that we are not surprised on the downside by any, you know, kind of gross drug cost escalation. We talk a little bit about the trend there. This is just being, I think we're saying we want to make sure we've got enough cushion in the second half to deliver on the full year. We're sticking with our full year. A little bit of the favorability is getting moved into the back to provide cushion against the things that we typically have talked about, which is there are certain classes of drugs that have trended higher and there's utilization in a couple of the, you know, the non low income populations where they got a smaller maximum out of pocket. Utilization can bite you there. I think it's really just making sure we're being cautious. Again, our Part D margin is very, very consistent. That's different from others. It's consistent with our overall MBR. As we navigate this interesting year, our first year with post IRA, I think we're feeling pretty good that we can deliver on the kind of the overall forecast that we had. Great. I know it's recent, but with the national average monthly benchmarks out. On Monday, any kind of really first cut thoughts there on what it means for 2026? Yeah, we're just not going to comment on bids. I think it's the benchmarks that came out were, I think, in a lot of ways predicted by many in the industry. We're just not going to comment on how we think about it in terms of bids. I think the benchmark, it called a no surprise to the industry. Thank you, ladies and gentlemen. I'm showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.