Alignment Healthcare reported continued membership and revenue growth in the third quarter, but said medical costs ran higher than expected. The Medicare-focused health plan operator raised its full-year membership and revenue outlook while lowering its adjusted gross profit and adjusted EBITDA forecasts, reflecting the higher medical costs.
CEO John Kao said the company is taking a cautious approach to the fourth quarter. Its revised outlook does not include any benefit from actions underway to address the pressures.
Key details
- Full-year membership and revenue guidance increased: Alignment now expects health plan membership of at least 305,000 and 2026 revenue of at least $5.245 billion.
- Profit outlook reduced: The company expects full-year adjusted gross profit of at least $575 million and adjusted EBITDA of at least $100 million.
- Fourth-quarter targets: For the three months ending Dec. 31, Alignment expects membership of at least 305,000, revenue of at least $1.316 billion, adjusted gross profit of at least $104 million, and adjusted EBITDA of at least negative $28 million.
- Higher medical costs drove the profit revisions: The company said third-quarter medical trends were worse than expected. It attributed the increased membership and revenue outlook to continued sales momentum.
- The profit measures are adjusted figures: Adjusted gross profit and adjusted EBITDA are non-GAAP measures. Alignment said it could not provide projected ranges for the comparable GAAP measures because certain items, including equity-based compensation and depreciation and amortization, are uncertain or not reasonably predictable.
Plain-English implications
The updated outlook points to continued growth in membership and revenue, alongside increased pressure on profitability from medical costs. Alignment’s fourth-quarter forecast calls for a loss on an adjusted EBITDA basis, while its full-year forecast remains positive.