Good afternoon, and welcome to Alignment Healthcare's first quarter 2026 earnings conference call and webcast. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask questions during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. 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 details in our filings with the SEC, including the Risk Factors section on our annual report on Form 10-K for the fiscal year ended December 31st, 2025. 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 in our Form 10-Q for the fiscal quarter ended March 31st, 2026. I would now like to hand the conference over to CEO, John Kao. Please go ahead, sir. Hello, and thank you for joining us on our first quarter earnings conference call. For first quarter 2026, health plan membership of 284,800 represented year-over-year membership growth of approximately 31%. This supported total revenue of $1.2 billion, which increased 33% year-over-year. Adjusted gross profit of $146 million represented an adjusted MBR of 88.2%, which improved by 20 basis points year-over-year. Meanwhile, adjusted SG&A of $108 million improved as a percentage of revenue by 60 basis points year-over-year to 8.7%. Our adjusted EBITDA was $38 million, which grew by 88% compared to the prior year. This result exceeded the high end of our guidance range and implies an adjusted EBITDA margin of 3.1%. Our results this quarter reflect strong execution across sales and member retention as well as our clinical operations. Our performance and our SG&A ratio also reflects the early outcomes of investments we've made to scale our infrastructure. Progress we are making across each of these areas is giving us even more confidence today that we're on the right path towards our goal of 1 million members. Growing and scaling a business as rapidly as we are in an industry as complex as Medicare Advantage is not a straight line. That being said, we are progressing very nicely as we continue to scale the company and achieve our near-term growth and margin expansion objectives. Importantly, our operational discipline and unique model gives us swift visibility across the organization. This enables us to identify issues quickly and take actions to manage their near-term impact. We focus deeply on continuously identifying opportunities to improve and deploy solutions to create even greater durability across our company. For example, a CMS rule change impacted our observation determination process and drove inpatient admissions per thousand towards the higher end of our expectations in Q1. This process change was resolved by the end of February, but impacted our first quarter inpatient admissions per thousand, which was in the high 150s this quarter. We absorbed this headwind within our Q1 adjusted EBITDA beat and are well positioned as we enter the second quarter. As we build upon our culture of continuous improvement, this year we are scrutinizing and revalidating every aspect of our people, process, technology, and clinical culture to ensure they are positioned to scale. Through this process, we focused on opportunities to deliver more cost efficiencies through claims automation, improvements to our contract management infrastructure, and scalability of our provider data management. For example, just 12 months ago, our claims auto-adjudication rate was less than 15%. Our year-to-date auto-adjudication rate is over 60%, and we expect to drive even higher claims automation as we progress throughout this year. Meanwhile, we are also deploying contract management solutions that leverage AI to create a more dynamic contract management platform and taking the next leap forward in our AVA AI risk stratification models to create even greater precision in our clinical engagement efforts. We are also investing in our talent by adding team members who will drive greater scalability within our technology infrastructure. These are just a few of the actions we are taking to support our near-term results and accelerate progress to our long-term growth and margin objectives. Finally, before I turn the floor over to Jim, I'd like to spend a few minutes discussing the 2027 final rate notice, which was announced earlier this month. At a high level, we are encouraged by the administration's continued pursuit of actions that drive sustainability within the MA program. In a continuation of meaningful policy changes, like the WISeR pilot program, that tackle overspending in traditional Medicare, we also applaud the administration's actions to address overutilization of skin substitute products in fee for service. By taking action to create more accountability across every stakeholder in the healthcare ecosystem, we believe the program will increasingly reward those who deliver true measurable value to members over the long- term. Importantly, these dynamics continue to reinforce a core point. Medicare Advantage is a durable program that is here to stay. In that context, we also believe Alignment is particularly well-positioned to succeed regardless of the rate environment. Our clinical-first approach enables us to deliver high-quality outcomes at a low cost and forms the sustainable competitive moat that sets us apart from our competitors. In closing, our first quarter results reinforce the strength and durability of our model. We are executing with discipline, scaling thoughtfully, and continuing to translate our clinical approach into consistent financial performance. We're continuing to invest in the scalability of our platform, including automation, AI-enabled workflows, and enhancements to our clinical infrastructure, all of which position us to drive further efficiency and growth over time. With a path toward 1 million members and unique opportunity to take share and grow profitably across all of our markets, we believe we are well-positioned for the years ahead. With that, I'll turn the call over to Jim to further discuss our financial results and outlook. Jim? Thanks, John. I'll dive straight into our first quarter results. For the quarter ended March 2026, health plan membership of 284,800 increased 31% year-over-year, driven by strong execution on sales and retention. Increase in membership supported revenue of $1.2 billion in the quarter, representing 33% growth year-over-year. First quarter adjusted gross profit of $146 million represented an MBR of 88.2%, which reflects an improvement of approximately 20 basis points year-over-year. Our adjusted gross profit performance this quarter was underpinned by strong engagement from our clinical teams. Their disciplined execution held inpatient admissions per thousand within our range of expectations, despite the temporary disruption to our utilization management process that John previously discussed. Meanwhile, the remainder of our medical costs were in line, with supplemental benefit costs and Part D running modestly favorable through the first three months of the year. Moving on to operating expenses, our SG&A discipline and scalability initiatives, such as back-office automation, supported outperformance in our operating cost ratio. For the first quarter, GAAP SG&A was $121 million. Our Adjusted SG&A was $108 million, an increase of 24% year-over-year. Adjusted SG&A as a percentage of revenue declined from 9.4% in the first quarter of 2025 to 8.7% in the first quarter of 2026. This represents approximately 60 basis points of improvement year-over-year and outperformed the midpoint of our implied guidance range by 50 basis points, even as we continued to make focused investments. Taken together, first quarter adjusted EBITDA of $38 million produced an adjusted EBITDA margin of 3.1%, which represents 90 basis points of margin expansion year-over-year. Turning to our balance sheet, we generated strong operating cash flow in the quarter and concluded with $726 million in cash equivalents, and short-term investments. Our liquidity profile remains strong, with ample cash available to the parent company. The funded leverage ratio at the end of Q1 improved to 2.6 x trailing 12-month EBITDA. Turning to our guidance. For the full year 2026, we expect health plan membership to be between 294,000 and 299,000 members. Revenue to be in the range of $5.16 billion to $5.21 billion. Adjusted gross profit to be between $620 million and $650 million. Adjusted EBITDA to be in the range of $138 million to $163 million. For the second quarter, we expect health plan membership to be between 288,000 and 290,000 members. Revenue to be in the range of $1.30 billion to $1.32 billion. Adjusted gross profit to be between $167 million and $177 million. Adjusted EBITDA to be in the range of $50 million to $60 million. As it pertains to our full year guidance, we are increasing our membership growth expectation given continued strength within our sales operations and outperformance in member retention through the open enrollment period. We believe our disciplined approach to sales growth and focus on retention is serving us well this year, particularly as we absorb the impact of the third and final phase-in of V28 in conjunction with the increase in our membership outlook, we are also raising our full-year revenue guidance to approximately $5.2 billion at the midpoint, which reflects 31% growth year-over-year. With respect to our profitability metrics, we are raising the low end of each of our adjusted Gross Profit and adjusted EBITDA guidance ranges by $5 million to reflect confidence in our full year objectives following the strong start to the year. Within our outlook expectations, we continue to assume that inpatient admissions per 1,000 will run higher year-over-year. As a reminder, this is primarily due to changes in our mix of membership. In 2026, we intentionally focused on growth amongst high acuity populations, whom we believe will benefit most from our clinical model. Consistent with past years, we also do not incorporate any assumption for final suite pickup from new members into our outlook assumptions. Taken together, our implied first half guidance reflects confidence that the strong performance we delivered in Q1 will continue into Q2. The midpoint of our guidance implies that approximately 60% of our full year EBITDA will be generated in the first half of 2026. This compares to approximately 55% of the full year EBITDA in the first half of 2025, excluding new member final suites. Further, on that same basis, this represents nearly 100 basis points of first half adjusted EBITDA margin expansion year-over-year. In closing, we continue to deliver upon our promises each quarter as we assess, refine, and scale our core workflows and processes. Each of the transformational projects we are investing in and deploying today are establishing the foundation upon which we can scale to achieve our ultimate potential. Our meticulous and disciplined execution to date leaves us even more encouraged about the opportunities ahead. With that, let's open the call to questions. Operator? Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We ask that you please limit yourselves to one question and one follow-up. One moment while we compile our Q&A roster. Our first question will come from the line of Matthew Gillmor with KeyBanc. Your line is open. Please go ahead. Hey, good afternoon. Maybe following up on the hospital observation issue. It sounds like this was temporary, but can you just walk us through what changed, how it was resolved, and give us some sense for how hospital utilization trended now that it's been resolved? Hey, Matt, it's John. Basically we paid authorizations at full acute rates when we should have paid them at observation rates. It was a workflow problem. We've course corrected it, but it impacted our January numbers, $2 million I think it was. ADK-wise, we were a little bit higher by two days. You know, we wanted to share that with everybody. It's really part of really how we are, you know, kind of looking at every part of our company to just continuously get better. We'll talk about that a little bit more, I think. I don't think it's a, you know, systemic problem. I think it was a one-month blip, and we'll have that course correct. We have it course corrected. Got it. Just to confirm, John, that this is an internal thing that you all caught? Yeah. Yeah. Yeah, exactly. It's an internal workflow issue. It's not a utilization issue. Yeah, utilization I think is fine. Jim's got some insights. Yeah. Okay. All right. Yeah, Matt, I'll jump in on the utilization because I think that's important and there's lots of points of reference out there. Utilization was notwithstanding what John described, which I kind of call a one-time course correction. Utilization was tracking very closely to what we expected. As you're aware, we had admits in the high 150s. Absent that issue that John described, we're probably in the mid 150s, that is pretty much what we thought was gonna happen. The flu is one thing that everybody's talking about. It wasn't a big driver, positive or negative in, you know, in our numbers. We track admits with respiratory problems. We look at our Part B costs, et cetera, it was pretty much in line. We've got our eyes on all those categories, and it felt like things were tracking pretty nicely to what we expected, and we see that in April as well. All right. I appreciate it. I'll leave it there. Thank you. One moment for our next question. Our next question comes from the line of John Stansel with JP Morgan Securities. Your line is open. Please go ahead. Great. Thanks for taking my question. I just want to talk a little bit about 2Q MBR. I mean, stripping out sweeps, it seems like it improves by a pretty decent amount, and yet even after adjusting for $2 million of incremental pressure, that's not going to recur in 1Q. Can you talk about what's assumed for year-over-year improvement in the second quarter that is maybe different from the first quarter? Thanks. Yes. John, second quarter is usually our seasonal better quarter. There's just a natural. Decline in the MBR. That's a good thing and it was expected. I do wanna step back and kind of describe we're laying out, you know, the actuals for first quarter, we're guiding on second quarter, and, you know, it's a pretty strong first half that we're positing. We set a reasonably high bar this year, by the way, but through the first half, we're expecting improvements across all our margins, MBR, SG&A, EBITDA. MBR first half, 40 basis points. SG&A, 40 basis points. EBITDA is, you know, 90-100 basis points. Really strong first half, and that's apples to apples on a pre-suite basis. And we mentioned on the call, 60% of our profits are in the first half versus 55%. All the while, we're making investments in the business to scale it. We're really doing this balancing act of trying to make sure that we're executing very, very well, investing in the future. We're bringing on talented folks across the enterprise. We're making investments in systems and processes. We have our eyes on continuing to improve our execution clinically and get our margins up. This is really a continuation of what we were doing in 2025, and we march into 2026. First half feels very good. Great. Maybe just taking a step back and thinking about some of the changes in the final rate notice, you know, the, I'll call it deferral of a new risk model. How are you thinking about maybe reasons why that didn't make it in? As we think about potentially a new risk model in, say, 2028 or 2029, you know, what we can take away from what was proposed versus what might actually be implemented. Thanks. Yeah. Hey, John. I personally think there is gonna be some changes. I think there's gonna be, you know, more normalization, if you will. I don't think there's enough outcomes feedback that CMS has yet to have initiated it in this past final notice. I think, you know, I actually don't know, but I believe that they're gonna be working on this as a topic of focus in the preliminary notice, the advanced notice coming up, and then we'll see something in 2027 to maybe be implemented, you know, by 2029, something like that. I think CMS has been pretty, you know, consistent with their message of, you know, ensuring that coding is not some form of a gamified, you know, competitive advantage for people, you know. Obviously I think that, you know, I think that's a good thing for the industry, and I think it serves us really, really well. It really puts the purest form of who's got the highest quality at the lowest price point. You know, those organizations should be, you know, rewarded to succeed. That answer your question, John? It definitely did. Thank you. Yep. Thank you. One moment for our next question. Our next question comes from the line of Scott Fidel with Goldman Sachs. Your line is open. Please go ahead. Oh, hi. Thanks. Good evening. Just was hoping to just get a little bit more detail, if you don't mind, just on the inpatient issue that just so we can fully understand this. What I'm hearing from the call was I think Jim had talked about there was a CMS rule change. It sounds like internally, you may have needed to make some adjustments to some of your systems as a result of that, and that is where maybe some of this some of this disruption occurred. One, just wanna sort of confirm that, or if there's another sort of, you know, sort of backdrop to that. Sort of two questions just sort of around that would be, in terms of your markets, is this something that it's an internal system that, you know, sort of covers all of your markets or just California? That was one. Then two, if it led to, you know, you guys paying full acute as compared to observation, is there an opportunity for you to claw back, you know, some of those additional reimbursements that you should not have paid, or is that not something that you're going to have a resolution to? That was my first question, Scott. The answer is unfortunately no. Yeah, no, it's a rule change that requires us to basically make authorizations a little bit more timely basis. The backdrop of it is, we've shared this with you guys in the past, which is we've kind of moved from this world of kind of delegate capitation and delegation. Even in our shared risk businesses, we've had, you know, the certain administrative functions that were delegated to the IPAs. One of the things we've shared with you in the past is we have started de-delegating certain IPAs. That strategy has been phenomenal for us and the IPA. We just have a good process. There's more and more of the de-delegation of the acute authorization process, or we would call that concurrent review process. It's a competency that we are getting better and better and better at. It's a competency that we need to make sure that we have, the more we scale outside of California. Because I think a lot of the networks that are being constructed are really gonna be with the direct, you know, providers, practices, et cetera, without having an IPA or an MSO like we have in California. I think that's the context. Scott Fidel, you know, given we put this as an example of corrective action and how we get on stuff fast. By the end of January, we saw a little bit of an anomaly in our numbers, and then we went and found the root cause. We knew that we were kind of going through a changeover at the beginning of the year, and we had staffed up and things like that. By February, we had identified it and already corrected it. It was a little bit of a drag on our adjusted gross profit, and we want to call it out. This is the kind of maniacal attention to detail that, you know, John Kao talks about. What you have to do to, you know, successfully execute. We've corrected it. ADK's back exactly where we thought it was gonna be, by the time we got to, you know, February and March. We, you know, kind of perfected that workflow, now we're ready to move ahead. Yep. Last point really is we shared that with you all because we want to signal with you that a lot of the performance we are being able to achieve now was made two years ago on operational decisions. You know, the most obvious one is the SG&A percentage being below 9%. So we're always continually refining all of our workflows. It's a lot of focus of our time everywhere in the company. The message is, we're preparing ourselves to really grow and to support that growth in the same way that we have thus far. You know, that was the one line that I mentioned. It's not gonna be a straight line. I feel really good about this year, guys. I really do. Even for 2027. 28's a little bit far out, but, and, you know, I think, vanity, we've proven to you all we kind of do what we say we're going to do. Got it. Got it. If I could just follow up, and certainly we appreciate you calling it out, certainly, as compared to us being in the dark about it. Thank you for that. Then just to clarify, sort of one, John, it sounds like maybe the skew might have been to some of the outside of California markets, in terms of just how this flowed through just some of the delegation. Then the other follow-up would be, Jim, I know you mentioned sort of there was a separate dynamic around it sounds more like a mix impact on inpatient, from sort of product mix change. Is that sort of D-SNP, or maybe if you could just sort of clarify, or is that sort of the new markets? Just maybe clarify what specific mix change there was that impacted that. Thanks a lot. Scott, it's not just an ex California issue. It really was just a corporate, you know, a corporate function that we're really scaling and growing, putting new systems in, putting in new workflows, all of that. It's really limited to that. It's not just a function of the ex California. Jim. Go ahead, Jim. Yeah. As it pertains to, you know, ADK being slightly higher, that is a mix issue. It's a growth and a mix issue, Scott. In that instance, there's a lot of growth outside of California, and there's a lot of growth in more acute populations. We had planned for that as we came in. If you remember on our fourth quarter call, we talked about it. ADK is gonna be inpatient admissions per 1,000, or ADK is gonna be a little bit higher this year. It's gonna tick up a little bit because we were making an investment in that population that we know has a lot of embedded gross margin. We're willing to make that investment. All of that is baked into our guidance at the beginning of the year and our outlook in the first half. We're kind of tracking as to what we thought was going to happen. Okay. It's new member sort of mix, and then it's sort of some of the new markets and then sort of both of the product sets in terms of sort of traditional HMO and then D-SNP or sort of skewed just towards one of those? No, it's the, you know, we talked about a lot of our AEP growth being in the, C-SNP, LIS, and dual eligible population, like about 50% growth. That's what we're talking about. Okay. Yeah, that's what I was trying to clarify. Okay. All right, perfect. Yeah. Thank you. All of that is exactly tracking just how we expected. That's, you know, the good news is we knew this. We absolutely embrace going after that population because we think we can be very successful with them. Yeah. When you were saying more acute population, you were referring to the SNPs, not that the traditional HMOs new members were more acute. It was more the D-SNP. That's what I was just trying to confirm. Awesome. Okay, thank you. Got it. Yes. Thank you. One moment for our next question. Our next question will come from the line of Whit Mayo with Leerink. Your line is open. Please go ahead. Thanks. Maybe just to follow up on that, how you're feeling about risk adjustment versus expectations, given this focus on the more medically complex members this year? I think I'll break it into two pieces. Our loyal population, which we really have a good line of sight. We're very, very good at predicting that and tracking it. As it pertains to risk adjustment on the new members, we call them the newbies, that's where we're very cautious. We book to the paid MMR, which means what CMS pays us, we'll record as revenues. Now, what that does is provides opportunity for upside in the second quarter when we get the final sweeps. I think that. You'll get more information when we get more information in the second quarter on that. We are probably a little bit different than others in that, we take a cautious stance on our newbies until CMS is giving us, you know, paid files that recognize, you know, that upside. Okay. Maybe just my follow-up. I don't think we've talked about RADV in a while. I just wanted to get your take, John, on the 2020 audit methodology that was issued a few weeks ago. Just what's different you see about the 2020 audits versus maybe the 2018 and 2019? Yeah. Well, the big one is, you know, the kind of the ongoing litigation around the extrapolation methodology, which is a huge deal with respect to potential financial exposure. You know, for those of you that don't know, that part of the extrapolation methodology is no longer in the 2020 audits. Not to say that they won't come back down sometime down in the future. We feel very good about that entire process. You know, it's, we've scrubbed that area very tightly and I, and, I'm not worried about that. Okay, thanks. Yep. Thank you. One moment for our next question. Our next question is gonna come from the line of Michael Hall with Baird. Your line is open. Please go ahead. Hi. Thank you. It sounds like this inpatient admit issue is fully resolved, but it sounds like you realized anomalies in end of January. Would you say you knew about it by the time you reported earnings? Secondly, just wanted to ask about the LIS SNP members. It sounds like they were in line this quarter, but I was wondering if you'd actually talk more about, like, higher mix of these members, how it might impact your cohort maturation into 2027. If I'm thinking about it correctly, right, year one and year two, generally largest step up in MLR improvement. Is it more pronounced next year given, you know, higher LIS SNP member mix? Meaning if you're getting, say, like a 30, 40 basis point headwind in MLR this year, does that turn around into a larger tailwind next year? Thank you. Yeah. I can take this, and Jim can provide color commentary. I think we have to wait a little bit in terms of getting the sweep data in. It's kind of linked to the prior question. We got to get the sweep data in on the newbies. I think from an MLR point of view, it's kind of consistent. Depending upon market, it's kind of in the high 80s, low 90s on the newbies that we got, inclusive of the SNP members. I don't think it's like rampant. Your point on the opportunity for we to improve embedded earnings, you know, once we have, you know, more time with these newbie members, particularly the SNP members, is I think is a good call-out. You know, the way I'm looking at this is, you know, when you look at the overall consolidated MLR, we are then kinda looking at, well, how much of the MLR is supplemental benefits? You know, we've kind of shared in the past, it's in that 5%-6% range. Your medical MLR, you know, is kinda 82%, 83%, that's the way we think about it. You say, okay, of that, how much is newbie versus how much is loyal? To your point, the bigger proportion of our membership that becomes bigger and bigger, that becomes loyal, that embedded earnings is gonna get stronger and stronger. When you add on top of that some of these, people process and technology changes that we're making that impact both MLR and SG&A, that's kind of where we're striving to get to. You know, where we just are so good at all this, there's nobody that can compete with us with respect to bids. We start taking this thing out and expanding aggressively. That's kinda how I'm thinking about it. Michael- Got it. Michael, you asked about, kind of were we aware I guess when we did earnings at the end of the fourth quarter earnings call in February, were we aware of what was going on? The answer is yes. You know, when you turn the page every year, there's always a little bit of ambiguity in January, in terms of, you know, how you're predicting the rest of the year. When we did our guidance, et cetera, we understood, we understood the issue and incorporated that into our guidance. I think corrective action is the right way to describe it. We fixed it fast. It didn't take months, it took 30 days to fix it. I think you're seeing in our first half guide that we feel pretty good that we've got, you know, line of sight on the first six months of the year, and things are performing quite well. Great. Thank you. Just a quick clarification, what would MLR have been if you did not have that issue in January? DPPs. Okay. Good. Yeah, I was thinking it's probably maybe 30 basis points higher or something like or 30 basis points lower, something like that. Okay. Got it. Yeah. Got it. If I could ask just one on DCPs. They're up a lot again this quarter. I think like 10 days year-to-year. Last quarter was up six days, which, you know, love to see that. Also noticing paid incurred is tracking well down year-to-year. I know last quarter there was some, I think, timing dynamics around claims payment. I was just wondering, were there any unique dynamics this quarter that might explain the large increase? Just would love to get your thoughts on, like, the level of conservatism in your reserve methodology recently, because it feels like there's a nice cushion. Thanks. Yeah. Michael, I'm tracking, you know, DCPs, reserve build, stuff like that. I'll just say, generally speaking, our reserve methodology is exactly the same. We're conservative and consistent. We haven't really changed our processes or our stance. It's not like we were conservative last year, we're less conservative this year. We're growing fast. That's, you know, that's all part of it. The DCP did tick up a little bit. There is some Part D components in there called CMS Part D type stuff, which makes it a little bit anomalous. Generally speaking, the, you know, the classic IBNR base claims payable has been moving upwards. Over the last three or four quarters or just three quarters, there's been a little bit of volatility in the pace, we're working through that. I wouldn't read into building conservatism, I would certainly not say that we've changed anything and we're less conservative at this point. It feels like it's a good quality of earnings, so to speak, this quarter on that. Got it. Thank you. Thank you. One moment for our next question. Our next question will come from the line of Jessica Tassan with Piper Sandler. Your line is open. Please go ahead. Hi, guys. Thanks for taking the question. I'm curious to know how you're thinking about supporting the bridge model for GLP-1s that launches this summer. I know the economics are separate from Part D, but just in terms of getting people who can benefit on the drug and adherent retaining them into 2027 and possibly capturing some trend benefits. Just interested to know how you're thinking about that launch this summer. The kind of voluntary pilot is what you're asking about? Yes. Yeah. We actually said we would participate with certain conditions. I think you guys know that they didn't get the, you know, the 80% that they wanted, and so they're kind of extending that time period. That kind of gets into, you know, a little bit of our product strategy for the 2027 bids, which I'd like to not discuss at this point. Is kind of how I'm thinking about it. I'm not sure I answered you, Jess. It's all right. I can, I can come back in a few months. Maybe just on 2027, to the extent that you guys are willing to comment, it sounds like the message for 2026 is we're really happy with the growth, for 2027, sustained growth. Can you just update us on new market plans for 2027 post rate announcement? Are you still planning to add at least one market? Yeah. Um, and then just- Yeah ... whether you guys consider the 2027 rates adequate, and if not, should we just expect kind of marginal benefit cuts to offset whatever the delta might be or other ways? Yeah. Yeah. You know, just the, you know, the other kinds of questions we're getting are, "Gee, you know, with only 2.48% net, you know, are you guys gonna just like grow like crazy again like you did in 2025?" Basically. Again, I don't wanna comment on any bid tactics. I will say just for competitive reasons, I will say that we will be expanding into new markets, some large markets next year. I'm not gonna comment yet where and/or if we're getting new states. I think again, we think about all of this as a portfolio of assets and I think it's fair to say for we to expand where we have risk-based capital in a capital efficient way is probably still the best way for we to grow, whether that be California, Texas, North Carolina, you know, Vegas, you know, we're doing great, you know, et cetera. I think the other part of what's driving our decisioning is again, this discussion around the operational framework. Can it support the level of growth in the new markets? I think the answer is yes, given our performance. I probably wanna see another year of outcomes. I think we can continue getting the growth. I think you'll see us getting good margin expansion. I think you'll start seeing that in some of the discussions around 2027. We'll talk about that in the fall, so after, you know, after the bids are in. All right. Great. Thank you. Yep. Thank you. One moment for our next question. Our next question will come from the line of Ryan Langston with TD Cowen. Your line is open. Please go ahead. Hi, good evening. Just on the G&A, I appreciate the comments on, you know, the benefits from investments and some automation. Was there any impact from timing in the first quarter that might sort of reverse out in the rest of the year? Should we maybe expect that level of performance to kind of carry through the back half of the year? I think there is always a little bit of timing in the first quarter where you wanna make sure that you've got cushion to, you know, for hiring, spending, things like that. I think it was there was just a lot of good performance across all the categories, even beyond labor, for instance. Now, as it pertains to whether we're gonna pass that along, it's early in the year and this, as John and I have been talking about, we're really, you know, making investments in the business. I suspect that we're not gonna just turn that into a, you know, a beat on the year just yet. On the other hand, it gives us a little bit of comfort that we can continue to make investments in the business. obviously we're monitoring this holistically from a margin perspective, you know, percentage of revenues and whether we're gonna meet our commitments. obviously it's nice to have an really good start, but that doesn't mean we're ready to give it all back and put it into the margin. Okay. Then can you just maybe talk a little bit about capital expenditures for 2026 and beyond? I mean, is there sort of an opportunity or maybe even a desire to push that up a little bit, just given where the free cash flow generation is now? Thanks. Yeah. Our capital expenditures are largely software development. You know, we do have a little bit of hardware and, we've got, you know, kind of a roadmap set up where we, you know, this year we're probably in the $40 million spend range. It's a little bit, we're coming out of the blocks a little bit softer than that will accelerate, and it's well within our means. On the other hand, if we have the dollars, we also need to make sure that we've got the, you know, the right projects, the right bandwidth, and we're getting the right returns out of it. That is a little bit more of the constraint versus, you know, quality and the returns versus whether we have the capital for it. We feel pretty good about 40. My guess is that could tick up a little bit, but as we accelerate our revenues, it's certainly gonna come down as a percentage of revenues over time. Yeah. Just to add to that, I mean, we have not shared with you all, and, you know, we, you know, won't on this call, we will likely have more transparency on the next call around how we're deploying AI. I think the opportunities for us in terms of our clinical operations, our provider data, our stars, our MLR. Like, every part of the company can benefit from that, and we'll continue to drive down the SG&A in particular, and the MLR, I think. What we've had to do to maximize the benefit of AI and the tools that are available to us, which I think are just amazing, is make sure we understand and validate all of the data. I think we have the best data in the industry, we're going to get that even better. I think our workflows, our end-to-end provider workflows, our end-to-end member workflows, our end-to-end stars workflows, all of that is getting documented molecularly now so that we can apply the AI tools on top of that, and that's where the CapEx is going towards. Got it. Thank you. Yeah. Thank you. One moment for our next question. In fairness to everyone, please limit yourselves to one question and one follow-up. Our next question will come from the line of Justin Lake with Wolfe Research. Your line is open. Please go ahead. Hi, this is Dylan on for Justin. From a trend perspective, some of your peers have talked about a moderation beyond weather and flu. Have you seen any early signs there? Also curious on the churn rate you're seeing early in 2026 compared to 2025. Thanks. Well, this is Jim. I'll take the second question first. Churn meaning retention. I, we're actually tracking really nicely on retention. That's been one of the helpful components of our membership growth, year to date, OEP, et cetera. We feel pretty good about that. As it pertains to trends, I had mentioned earlier on, in the Q&A, you know, flu and other trends, we track them, and they're not jumping out as anything anomalous per se. That's our book of business and how we think about things. I will say that we look across the major categories of medical spend, and the trends seem very consistent for us. Obviously the rate environment, you guys know pretty well. It's low- single digits. What we haven't talked about on the call here is Part D, which is tracking very nicely this year. We had a little bit of outperformance in Q1 in the margins. That was a good thing. We're not ready to, you know, kind of turn that into a full year expectation increase, but Part D is doing really, really nice. That's, you know, over the last couple of years, that's been a big watch out, so we feel pretty good about that. Trend-wise. We just have a different kind of rhythm than some of the other commercially focused or some of the other MCOs. I don't think it's just because, you know, it's our footprint. I think it's because we are. It's the way we've set up our utilization management. I think it's the way we work with our providers. There's some capitation there that cushions us along the way. Not necessarily global cap, but some of the capitation is absorbing some of those, you know, flu season trends, et cetera. Thank you, and one moment for our next question. Our next question will come from the line of Andrew Mok with Barclays. Your line is open, please go ahead. Hi, good evening. Alignment is predominantly an HMO business, but you leaned a little bit more into the PPO product this year. Can you walk us through the rationale behind that decision? How are you thinking about the relative attractiveness of the PPO product, given some of the recent, you know, plan exits across the market? Do you expect PPO to become a larger driver of your growth over time? Thanks. Yeah. Hey, Andrew, John. Part of the reason we were willing and able to do it last year and for this year is that over half of the business is globally capitated. That factored into the way we think about things. I think that the logic around stratifying members, caring for the members through our Care Anywhere program, you know, kind of positioning that part of the kind of the call it the clinical part of the business, is something that should and could work for us as we think about extending the product, particularly outside of California. I don't think we have figured out the secret sauce yet, frankly. I think that, I think the only way to deal with that is, you know, probably gonna be with higher member premiums going in the future. We are not going to be, I don't think, talking about, again, 27 bids. You know, I think long- term from a industry perspective, that whole part of the world was supported by high RAS scores. I just don't think that's gonna happen going forward. I think the unit economics are gonna be pretty tough for people. If anybody can do it should be us. Candidly, I, you know, I don't think we've cracked that code quite yet. Great. Thank you. Thank you, and one moment for our next question. Our next question comes from the line of Jonathan Yong with UBS. Your line is open. Please go ahead. Hey, thanks. Second question. I recall last quarter we talked about, you still had some provider engagement negotiations outstanding in some states that you were thinking about entering. Has that progressed any further? Does the final rate update make any difference in terms of those negotiations? You were negotiating when the advance came out, and then obviously the final's out. Does that change that negotiation process? Thanks. No, no. Yeah, I know exactly what you're talking about. I wouldn't characterize it as negotiation. I think the negotiations part was fine. It was more around the engagement, the provider engagement model. In some markets, the answer is yes, then, you know, we'll share with you where we're expanding to. In some markets, the answer is no. I think that will also have, you know, a, you know, what would kind of dictate, you know, where we expand into certain markets or new states. I think the negotiations part is really interesting, is the delivery system, I can get on a whole thing on delivery systems if you guys want, they really need an alternative. They want an alternative to a payer that's willing to move market share to them, you know, without the kind of high denial rates some of the larger folks have. That's not to say that we're not good at it. It's just we're actually, the model is very different. That, though, requires a high degree of engagement with the clinically integrated networks that are typically owned by these integrated delivery networks, these large, you know, monoliths now that are becoming somewhat monopolistic, but that's a whole different topic. It's really important we find the right doctors and practices we can work with. We're, you know, we're leaning into that significantly as we think about more scale outside of California. Great. Great, thanks. Just to follow up, just on the denial portion of it. Given the MCOs, broadly speaking, are reducing the amount of prior auths, et cetera, and presumably denials, does this make it harder to contract within that context? Thanks. No, it's, you know, it's gonna be really interesting. I think it's where is the emphasis? I think a lot of the AHIP discussions and what CMS is pushing the large plans is really around commercial. I think there's a little bit also that the exchanges in CAID and CARE are dragged into that as well. You know, our denial rates are like less than 2%. You know, I won't name names, but some of the larger ones are, you know, 13%-15%. You know, some of the data we pulled, that Harrison pulled and shared with us just a few weeks ago was really interesting, and I'd encourage you all to get that. It's all publicly available. I do think we need to, as an industry, talk about, and I think you guys need to understand this part, is, you know, when I get every single health system CEO and CFO say that Medicare Advantage pays them 85% or 86% of traditional Medicare, the inference is the plans are denying care or, you know, kind of playing insurance games. In fact, I would posit that we think about that statement differently, meaning from our experience, we are paying the health systems 100% of what they deserve to be paid. When we talk about the same degree of program integrity that was applied to MA as it relates to coding for the, for the insurers, we got to start looking at program integrity on hospital billing practices in the context of this affordability discussion. If 100% of the claims and authorizations we get from hospitals and systems is acute as opposed to observations, you can ask the question: how are we going to make sure that everybody's aligned on the accuracy of those billings that are submitted to the plans? You got to look at the denominator also. The denominator is traditional Medicare. Well, traditional Medicare isn't editing any of their submissions, I would posit. We got to just kinda deal with that issue. That is a, that's gonna be a policy issue. If you heard the hospital CEOs, you know, in front of Congress the other day, I think it was earlier this week, it was all the plans. Everything's bad about the plans. I would just reject that. We are paying the hospitals 100% contractually what they should, and our denial rates are very low. That's kinda my soapbox on that. Thanks so much. Thank you. One moment for our next question. Our next question will come from the line of Craig Jones with Bank of America. Your line is open. Please go ahead. Great. Thank you. I wanted to follow up on the final rate notice. Chris Klomp was out with some comments after the final rate notice was published that he was happy with that 2.5% number, as it is roughly in line with, you know, where general inflation comes in, and thought that should be a target for just healthcare spend increases going forward. Do you think that 2%-3% is where we will continue to see, you know, these rate notices going forward? If that's the case, what kind of, you know, what level of unmanaged trend, I guess, could you manage without having to cut benefits if that's where the rate notice comes in? It's a pretty insightful question there. I think overall trend nationally as an industry is way higher than 2.48%. I think the default scenario for a lot of the plans is going to modulate the delta through, you know, kind of either tougher unit economics with the providers or to your point, benefit reductions. I think for us, you gotta look at the specific geographic impact of some of this information. So, you know, I think it's public out there that when you look at the data region by region, for example, you know, L.A. County's rate increases are closer to 6%. So obviously that stands to benefit us significantly. Those are the kind of factors we're considering now, and I've shared this with you in the past, that we're doing our business plans now market by market in preparation for the bids. I feel, I feel pretty good about where we're positioned, you know, for 27 bids. Yeah, trend is- Okay. Thank you. No way trend is gonna be at 2.48%. There's just no way. I mean, I love Chris. I have a lot of respect for him, but, you know, the trend is a lot higher, which gets to and speaks to affordability, which gets back to hospital billing. Thank you. One moment for our next question. Our last question will come from the line of Ryan Daniels with William Blair. Your line is open. Please go ahead. Yeah, guys, thanks for taking the final one here to close the evening. John Kao, you talked a little bit about ancillary benefits and the impact on MLR, and Jim Head, you've talked about capital deployment. Let's tie those two together and get your latest thoughts on maybe deploying some capital to bring some of that in-house, especially as you approach that 300,000 member number and think about going into new markets. Is that another strategy along with AI to kind of help the cost profile of the organization? Thanks. Absolutely, Ryan. You know, the supplemental benefits, if you kinda look at the larger we get, and a lot of our larger competitors have those captives, we could call them, whether it be a behavioral health HMO, you know, dental PPO, you know, vision PPO, transportation. I mean, all that stuff right now we pay external vendors. Mm-hmm. It's an opportunity for us to lower MLR by bringing some of that in-house. I've kind of alluded to that in the past where if we focus kind of M&A dollars, it could be in those areas which are, you know, relatively low risk, low capital, high return. You know, and whether it's a dental PPO or a dental HMO even, those are some of the decisions we're weighing right now. You'd seed that company, you know, if we bought it something or if we started something, you'd seed it with 300,000 customers. That's pretty good, you know, win for everybody. Obviously that is not something we're embedding into any of our thinking for the first half guidance. That would be an additional upside for us in the future. Great. Thank you. Yep. Thank you. This will conclude today's question- and- answer session. Ladies and gentlemen, this will also conclude today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day. Thank you.