Today I have the pleasure of hosting John Kao, CEO of Alignment Healthcare, and CFO Jim Head. Why don't we, do you want to do a quick intro or do you want to go straight to Q&A? How do you want to handle it? Let's do Q&A. Q&A. All right. Yeah. Sounds great. Why don't we start with the guide, maybe 2Q. Can you just clear up something for us? Can you explain sort of why this step down in MBR between 1Q and 2Q, sort of what happens in a typical year to drive that improvement, and then maybe what about this year, and the seasonality is different versus 2025? Okay, I'll take that one. Let's start with Q, you know, the Q2 guide in the first half. We came out with a very strong first quarter, as you know. Q2, we also predicted a pretty strong improvement for the first half year-over-year, 60 basis points MBR improvement, 40 basis points SG&A, and then almost 100 basis point in adjusted EBITDA. Very strong performance, 80% growth year-over-year. Now, what Craig is asking about is there's a step down in the MBR between Q1 and Q2, and that is typical. Okay. We have a step down. There's two reasons why there's an annual step down. Number 1, utilization's just different in Q2 versus Q1, so you're gonna see that seasonality. Number 2, Part D influences that step down quite a bit. What folks are looking at right now is the step down is even greater than the past, it's about 140 basis points. In the past, it's been a little bit less. If you strip out you know, just factor in a couple things, the APK or the UM headwind we had in January, just take that out. Part D again this year is influencing the MBR step down, too, and last year we had a little bit of heaviness in Q2 MBR because of some of the other medical costs. Actually, when you kind of harmonize those, it's pretty consistent. We feel pretty good about our second quarter guide and how that's playing out. Okay. Great. Thanks for clarifying that. Jim, maybe to follow up, you know, I think we're about a one year in now. I think maybe this conference last year was kind of your first- Yes Foray into this job. You know, maybe one year in, you know, what surprised you the most and what has you most excited? You know, it's interesting. It's been quite a year in the market, Medicare Advantage, obviously, and that's an understatement. What actually the, you know, call it the underwriting I did when I came in, is I knew this model was different, and I knew the opportunity was distinctive. That hasn't, you know, I only feel better about that a year later. I think what is required to be successful in the market is getting more well defined. You got to have the right model, and you got to execute. I think what John really focuses on, and I've learned very, very quickly, is it is about being operationally focused, visibility, and control, we're just relentless about it. That's probably one of the key learnings in the last year is visibility and control is everything in this business. Okay. Yeah, sounds great. Maybe then let's transition to trend. You've had some historically great visibility there, so it seems like everyone's pretty cautiously optimistic maybe this year. Yeah. Might be, you know, pretty good. You know, maybe what have you seen in trend in 2026 versus 2025? You know, what do you expect going into the year, and kind of how has that trended year to date? I'll start with our guide kind of suggests that we've got a good sense of what the trend is, and this, I'd say in a word, stable. Okay? We've got a clinical model. We're very focused on obviously inpatient admissions as one of the big indicators, and that's been stable. We've had a slightly different book this year because we have some more new members that are probably a little bit more acute, but having said that, the trend versus our expectations has been very stable. As we walk down the various categories of cost, admissions per thousand, inpatient acute, inpatient non-acute, supplementals, Part D, all performing in line with expectations. In some ways our clinical model gives us that stability, and we haven't seen anything different this year. Okay. Yeah, you called a few areas there. Is there anything that, even though it's in line with expectations, maybe has moderated versus last year, or is everything kind of at the same level? We're always mindful that trend can bite. Yeah. If things are moderating, we're not ready to call that, and that's one of the reasons why we just march through the year and deliver and make sure we hit our expectations, 'cause there's always gonna be something that's gonna be different throughout the year. Yeah. No, totally fair. All right, so maybe, you know, let's look back the last few years. You know, it seems like you've had a better sort of visibility on trend, like you mentioned earlier, you know, versus, you know, a lot of your peers. What is it about the tech stack or the model that really enables you to forecast it seems like so much more accurately? It's a bottoms-up build. I mean, we have data at the member level, that kind of aggregate up to the group level, to the market, and then we consolidate it all. We have very detailed, actionable data. When we take that data, we have boots on the ground to actually execute if we see any kind of negative variance, whatever that is, you know, from a financial point of view. It's always starting with the member. We're looking at member satisfaction. We're looking at admissions per thousand. We're looking at readmission rates. We're looking at ER rates. We're looking at all the data that would suggest, you know, kind of prevention, and then quality. High, you know, from day 1, we always said, "High quality, low cost." What does that really mean? It means you got to do good at stars. You got to have good clinical medical management. I think just this notion of transparency, visibility, and control lead to durability. That's something we just live by, and the bigger we get, the kind of the more we have to reinforce that everywhere. I don't think others have the degree of actionable data that we have, partially because their back-end systems require reconciliation, which takes 30-45 days. You know, we actually have data that we can look at, on a daily basis, and then we meet daily as a management team, and identify hotspots if there are any, negative variances if there are any, on a PMPM basis, and, you know, we put action plans together to address it. You know, there's no other way you can run this business. Yeah, no, that makes sense. All right, maybe switching to the final rate notice. You know, the 2027 rate notice came in about 2.5% better than the preliminary, which was, you know, great to see, and a lot of that was due to that delay of the new risk adjustment data. While it sounds like this is going to be helpful for 2027, and potentially just we're delaying this until 2028, right? With that 1.8% headwind that got delayed, you know, if it were implemented in 2028, how would that, you know, hit Alignment? Would it be more or less? You know, any color you can add there? Yeah, it our read was that the they didn't implement the recalibration because of the whole skin substitute double-dipping, so I thought that was appropriate. You know, I think the overall rate increase of 2.48 heading into the year is something we think we're probably gonna do better, and it just kind of, this whole area around risk adjustment and kind of unlinked chart reviews, I think, was worth 1.53. I think our, the inherent nature of our care delivery model, our care centricity, I think we're gonna do better than that, so I think that's fundamentally an advantage for us. It's still less than overall trend, it, you know, I think that, I think it's gonna continue to put pressure on a lot of our competitors. I think as we found out, as you all have found out and learned starting in 2024, 2025, and then I would even suggest 2026, that plays to our advantage because we're the lowest cost producer. The business model was built on, you have to be successful irrespective of what happens to the rates. The rates go up, all boats rise in a rising tide. Rates go kind of are flattish or go down, you know, we're gonna have a competitive advantage. Having said that, to the second part of your question, you know, we were in D.C. last week spending a lot of time with all the guys. You know, it's unclear to me if there's gonna be any material change to the risk model, and that's different than what I've said in the past. You know, they were pretty, they were not saying one way or the other, so they were being pretty coy about it. There was suggestions that there's just not enough time to actually implement the full magnitude of the risk changes that I think they know and they want to do. I think it'll be interesting, you know, heading into next year. What I've said in the past is I would have thought there would be some material changes coming in this new technical notice that, you know, that usually we get November, December. You get comments on the advanced rate in January, and you get the final in kind of April, and I was thinking there was going to be some material changes. I'm not sure there is. Even, so maybe we don't get the, you know, the full big, you know, I think it's inferred risk model. Implied, inferred diagnosis, yeah. Even like some kind of, say, middle step, you know, around health risk assessments or link chart reviews, anything like that. Yeah. Anything there that? Yeah. Or? May, there may be, you know, to me that is not, you know, wholesale change, you know? I know the discussions have been, you know, this is a 22-year-old program now. You know, when they initiated this risk adjustment and they look at the fee-for-service data, you know, Medicare Advantage represented like 10% of the market share of all seniors. Now you're 52%, 53%. The fundamental data, you know, I think it, that fact pattern would suggest it is time to kind of retool this. I just don't know if they're gonna have enough time to implement it. Having said that, we actually agree with their logic that, like, the plan shouldn't be spending as much time on this topic, is my humble opinion. As we found out, it creates all kinds of opportunities for misalignment and gaming, if you will. This, this notion of kind of inferred diagnosis, looking at the actual data, both fee for service and MA data, then having the new AI tools that are out there infer diagnosis and then pay people on that, I think is the right way to go. I just don't know that's gonna happen operationally. If you're, if you're kind of left with kind of this current state, you know, the first thing I would think is focus on this, you know, extend the logic on this discussion on program integrity, right? You've heard a lot of them say that. Focus on program integrity. I think they've beaten that one to the ground. I don't think there's much, you know, blood to squeeze out of that rock much more for the plans. Think about what they're doing. Pharmacy, right? They're going after pharmacy. They're trying to create value for the consumer in pharmacy. Fraud, waste, and abuse, right? There's all this stuff you're reading about in hospice, home health, all this stuff. They're looking hard at all that. Implement program integrity through the entire supply chain, you know? If you got these health systems and, you know, kind of integrated delivery networks that represent 50%-60% of your costs in your MLR, you'll start looking at billing. You know, apply the same degree of program integrity throughout the supply chain to ensure accurate billing. Hold everybody to the same standard. Accurate billing, and I think you're gonna find a lot of opportunity so that the trend and this whole topic, the next topic you're gonna hear about is affordability. What that means is, okay, look down into the supply chain. We kind of looked at the plans, V28, you know, kind of linking, charts, et cetera. All that I think is the exact thing they should have done. Start looking down the supply chain. Who's looking at billing accuracy of the integrated delivery networks? You know? I told them, I said, "What if we gave you a basket full of RAF scores, HCC codes, and said, 'You guys figure it out?'" Right? The same kind of RADV intensity that was applied to the plans or, you know, whatever, 3% margins, should be applied to the hospitals with their 20% margins. That's what's coming next. All right. Well, that'll be fun to watch. Maybe let's pivot to, you know, expanding outside of California now. You've got about 20% of your members there outside of California. Your total enrollment I think just about doubled, nice share gains. You've talked previously about wanting to use free cash flow to fund growth. We got the free cash flow now, how should we think about, you know, growth outside of California from here on out? We're happy with the growth. We're making sure that we get the same kind of margin and kind of embedded earnings from the mix of members that we have ex-California. I think it'll pay off. You know, we were intentional about capturing share with respect to C-SNP, D-SNP members this year. Those have been the most profitable for us, I think largely because of the care model. I feel good about it. You know, we it's kind of natural just to think that our ex-California MLRs are higher than California just because of the amount of new growth that we've had this past year. I think consistent with what we experienced inside California, that cohort maturation and the embedded earnings will start paying off in future years. Right. I think that the deployment of capital and, which we have and because of the free cash flow, still has to kind of be bumped up against certain filters that I think about, which do we have the right providers that understand our model, want to work with this model, and know or not? We're gonna be entering markets in 2027 where we found those like-minded providers. Also, interestingly enough, health systems that want us, they like our model, they like the care delivered, they like the fact that that yields market share gains, so we can push market share to them. They don't like some of the big guys. That's cracked the door open for us to really provide an alternative for them. The main thing is the doctors, the PCPs. We still think the PCP is very central to the equation, and we don't think we have to own them to get them to behave and aligned way with us. Okay, maybe to follow up there on the, on the PCP relationship outside of California. The California is, you know, more of the delegated model. You know, what are the differences been when you're contracting, partnering with these providers outside of California? You know, what's the, you know, any dynamics there you could give us on them? Yeah. No, it's a great question. The markets outside of California, we are the IPA. We're the ones engaging with the individual practices themselves and helping them with Star gap closures and risk adjustment gap closures and integration of our Care Anywhere clinical model. That's why you get 5 Stars on all these ex-California markets. You know, and we've been challenged in CAHPS inside California. That's number 1. Number 2 is inside California, you have these IPAs, right? These medical groups that are either taking global cap, and we've shared that it's about 25% or 30% of our business in California. 75%- 80% of our business, 75% of our business is kind of shared risk or directly contracted. Even when you have a shared risk deal with an IPA, there's margin implications that accrue to the benefit of the IPA. Outside of California, because we're the IPA, there's more margin opportunity for us. Right? We're doing all the work, and thus have the ability to drive margin expansion and richer benefits. There's no middleman taking a piece of the pie. I think the Star Ratings and the MRA kind of engagement are two proof points for you that ex-California businesses are businesses that we can do better at. Now we're taking all of our care models, and the utilization metrics and the ADK metrics in these new markets are also pretty good. We just need some time for the maturation of the cohort, you know, RAF scores and, you know, kind of ADK to come down even more, just given the growth that we've had. I think the key for us is finding the like-minded doctors, you know, and the, you know, this, you know, this grand experiment about, you know, kind of global cap value-based providers in, it was kind of your parlance. Some of, you know, it's, you know, jury's still out if there's enough money in that supply chain, you know, with V28. You know, I think it's V28, when you can't do the coding that some of these guys have done and, or have bought providers to incentivize them to do the coding, to get the coding to support a global cap arrangement, when that kind of financial engineering doesn't exist anymore, it puts a lot of pressure on those guys. In that kind of world, our model stands to be even better because it's a more durable model. Right. That's great to hear about the longer term margin capture opportunity outside of California. Maybe in the near term as you are ramping, is there any incremental OpEx I should be thinking about around startup costs, marketing, anything as you g et to break even? That's really embedded in the investments we're making back into the business. Right. When we talk about SG&A, we do, you know, we are incorporating investments back in the business, investments in people, like yesterday, investments in our process, in technology, and things like that. We're trying to balance between giving investors better SG&A as a percentage of sales versus firming up our foundation for the future. It's always gonna be part of our philosophy. Following up on people, Mr. Chairman, do we want to, add any color on the new hires? Yeah. Yeah. This whole idea of AVA Health Partners, that is the IPA kind of really enterprise wide, but really focused ex-California. We do have, you know, members that we directly contract with inside California. That's what, that's the primary focus of Mark Kent, who's a great guy, you'll get to know him. Very experienced in this. He's run IPAs. He understands the payer side, he understands the provider side. You know, nothing fazes him. He's gonna be great. That's kind of linked to kind of this ex-California management and growth discussion. Shane Hochradel, really Chief Operations Officer, scale experience with claim systems, experience with provider data, experience with, you know, end-to-end provider engagement at scale, from Elevance Health. He's joining us. Those are two key hires. The third person that you may not have heard of, but he's really our current chairman of the board, Joseph Konowiecki. Joseph has been just the strategic leader. I asked him, I said, "Joseph, I really want you to leverage your experience and to help us grow and scale this business." I asked him to do that, and he graciously accepted. To make sure that the governance structure maintained its integrity, I agreed to be chairman. I think the message to really the investment community is we're all in. We're all in. I've shared with you know, 300,000 lives, $5 million in revenue, $150 million EBITDA is to me a proof of concept. It's literally a proof of concept. We are now looking at strengthening all the foundational pieces we have in place and making them better to scale. You know, attitudinally, incentive-wise, you know, I'm all in, Jim's all in, our board's all in to get this to the next level, and that's really the signaling of that. It's a very positive thing that I think you should all think about. It's we all recommitting and committing to take this to the next level. You know, I've said we're gonna get to at least a million members. You know, you all are asking by when. I'm gonna say, I'm not gonna tell you, but we're gonna get there. Sorry. It's a very positive thing. All right. Well, that's great to hear. Maybe let's hit on AI really quick. You know, it's everywhere. You've had this AVA tech stack for a while. It's been, you know, kind of revolutionary, right, in the model. You know, maybe give us some use cases, you know, where you are in that, you know, AI evolution, you know. How much of this is sort of enhancing what you've already built in AVA versus, you know, ground up kind of tools? Yeah. We you've probably noticed we've been intentionally quiet about AVA for the last couple of quarters. We're doing that because of the intensity of work we are focusing on rebuilding the tech stack. Taking what we have, which I still think is best in class, and even making it better. We're not talking much about the details 'cause we don't want anybody to know what we're doing. That's the net of it. We will share with you all the applications very shortly. The stuff, the new technologies and the new models can do for us it's staggering, both on MLR and G&A. I think the machine learning predictive analytical tools we have in terms of Care Anywhere in our stratification model, still pretty good. I think the new large language models are going to help us in all of the workflows that provide faster, more accurate, more timely data. That data is going to help us have better outcomes within the predictive analytics. I think you're just going to see the deployment of use cases everywhere in the company, and you're going to start hearing us start using the word AI first soon. I'll give you a glimpse of that. I think the opportunities there are going to be dramatic. You know, I'll, you know, resuscitate a phrase I heard from somebody a couple years ago, which is there's a lot of low hanging fruit that we're going after, and there's watermelons rolling around on the ground. Remember that one? Well, I'm telling you, these AI tools are gonna help us get those watermelons, and I think that will be reflected in better MLR and even tighter GNA, all of which are foundational for the vids. I don't honestly, I don't know if there's anybody that can catch us once we get a pull all this together. All right. Well, that leads me, I think, what would probably be our final question here. You know, your 26 guys got you know, from the EBITDA perspective, kind of already in line with your national peers. You're growing faster than most of them. You know, they kind of talk about margins in the 2%-4% range now long-term, it's maybe 3%-5%. Previously, you're already at 3%. You know, you're still subscale. What is it, you know, how do you, how are you driving these, you know, structural advantages from a tech stack over your peers? You know, how high can these margins go longer term? I think we've said 5%-6%, right, Harrison? Yeah. You know, you gotta remember, you got this 85% rule thing hanging out there, right? You gotta hit that 85%. I think on a GAAP basis, closer to, like, 83 and a half. I think there's margin opportunity for us. Because of that, you know, the way we get to the 85% are two ways, which is you gotta have richer benefits, better supplemental benefits that foster growth, and/or deeper partnership with providers, pay providers more. There's different ways you can do that just strengthen. The key word should be durability. Durability, right? If you have great networks, great provider partners, and they're going to want to partner with you, which is what's happening in California. They all want to work with us because we're growing market share. That dynamic, I think you'll start seeing kind of get more and more real ex California the more we grow. You know, for those of you that have been with us from the beginning, it's going to be more of the same. It's going to be balanced growth and margin, opportunistic depending upon what we see market by market. I think there's going to be the next generation of technology that we embed in our workflows. And we're getting people that have both the missional aspect that is very important to us, and will always be central to our culture, but also have scale experience. I'll close on with this one point, Craig, which is I think we're proving that you can be mission-oriented and provide great returns for your shareholders. I can tell you our private equity guys, Warburg and GA, are really pretty happy with their financial outcomes. I think that when we get to where we want to be with all these changes that we've just talked about, you're gonna be really happy with this as well. All right. Well, thank you. I think that's all the time we have. Thank you. Thanks, Craig. Thanks, guys.