10-Q 1 alhc-20230930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40295

 

ALIGNMENT HEALTHCARE, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

46-5596242

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1100 W. Town and Country Road, Suite 1600

Orange, California

92868

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (844) 310-2247

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

ALHC

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of October 30, 2023, the registrant had 189,099,787 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

Financial Information

4

 

 

 

Item 1.

Financial Statements (Unaudited):

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations

5

 

Condensed Consolidated Statements of Stockholders' Equity

6

 

Condensed Consolidated Statements of Cash Flows

8

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

 

 

 

PART II.

Other Information

36

 

 

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

Signatures

39

 

 

 


 

FORWARD-LOOKING STATEMENTS

Throughout this quarterly report on Form 10-Q (this “Quarterly Report”), we make “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements. Forward-looking statements give our current expectations relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning. The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. These statements are based upon management’s current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

our history of net losses, and our ability to achieve or maintain profitability in an environment of increasing expenses;

the effect of our relatively limited operating history on investors’ ability to evaluate our current business and future prospects;

the viability of our growth strategy and our ability to realize expected results;

our ability to attract new members and to successfully enter into new markets;
 
the quality and pricing of our products and services;
 
our ability to maintain a high rating for our plans on the Five Star Quality Rating System;
 
our ability to develop and maintain satisfactory relationships with care providers that service our members;
 
our ability to manage our growth effectively, execute our business plan, maintain high levels of service and member satisfaction or adequately address competitive challenges;
 
our ability to compete in the healthcare industry;
 
the impact of the COVID-19 pandemic or any other pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide on our business, financial condition and results of operations;
the impact on our business of security breaches, loss of data or other disruptions causing the compromise of sensitive information or preventing us from accessing critical information;
 
the impact on our business of disruptions in our disaster recovery systems or management continuity planning;
 
the cost of legal proceedings and litigation, including intellectual property and privacy disputes;
 
our dependence on reimbursements by the Centers for Medicare and Medicaid Services ("CMS") and premium payments by individuals;
 
other risks associated with being a government contractor;
 
the impact on our business of the healthcare services industry becoming more cyclical;
 

 

1


 

our ability to manage acquisitions, divestitures and other significant transactions successfully;
 
our ability to maintain, enhance and protect our reputation and brand recognition;
 
our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;
 
our ability to obtain, maintain, protect and enforce intellectual property protection for our technology;
 
the potential adverse impact of claims by third parties that we are infringing on, misappropriating or otherwise violating their intellectual property rights;
 
the impact of any restrictions on our use of or ability to license data or our failure to license data and integrate third-party technologies;
 
our dependence on our senior management team and other key employees;
 
the concentration of our health plans in a limited number of U.S. states;
 
our management team’s limited experience managing a public company;
our ability to generate sufficient cash flow to service all of our indebtedness and the potential impact of certain affirmative and negative covenants in our term loan agreement on our business;
 
the impact of shortages of qualified personnel and related increases in our labor costs;
 
the risk that our records may contain inaccurate or unsupportable information regarding risk adjustment scores of members;
 
our ability to accurately estimate incurred but not reported medical expenses;
 
the impact of negative publicity regarding the managed healthcare industry;
 
the impact of weather and other factors beyond our control on our clinics, the centers out of which our external providers operate, and the facilities that host our AVA platform (as defined below);
 
the impact on our business of renegotiation, non-renewal or termination of risk agreements with hospitals, physicians, nurses, pharmacists and medical support staff;
 
risks associated with estimating the amount of liabilities that we recognize under our risk agreements with providers;
our ability to respond to general economic conditions, including but not limited to, increased inflation and higher interest rates;
risks associated with an economic downturn, including pressure on governmental budgets and reduced spending for health and human service programs;
 
our ability to develop and maintain proper and effective internal control over financial reporting;
 
the impact of state and federal efforts to reduce Medicare spending;
 

 

2


 

our ability to comply with applicable federal, state and local rules and regulations, including those relating to data privacy and security; and
 
other factors disclosed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report.

All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this Quarterly Report in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

 

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Alignment Healthcare, Inc.

Condensed Consolidated Balance Sheets

(amounts in thousands, except par value and share amounts)

(Unaudited)

 

 

 

September 30,
2023

 

 

December 31,
2022

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

391,643

 

 

$

409,549

 

Accounts receivable (less allowance for credit losses of $91 at September 30, 2023
   and $
0 at December 31, 2022, respectively)

 

 

105,523

 

 

 

92,890

 

Short-term investments

 

 

123,926

 

 

 

 

Prepaid expenses and other current assets

 

 

45,878

 

 

 

42,107

 

Total current assets

 

 

666,970

 

 

 

544,546

 

Property and equipment, net

 

 

47,162

 

 

 

37,169

 

Right of use asset, net

 

 

10,472

 

 

 

5,825

 

Goodwill and intangible assets, net

 

 

40,106

 

 

 

40,288

 

Other assets

 

 

6,082

 

 

 

6,035

 

Total assets

 

$

770,792

 

 

$

633,863

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Medical expenses payable

 

$

203,435

 

 

$

170,135

 

Accounts payable and accrued expenses

 

 

25,356

 

 

 

31,980

 

Deferred premium revenue

 

 

146,342

 

 

 

308

 

Accrued compensation

 

 

35,141

 

 

 

27,538

 

Total current liabilities

 

 

410,274

 

 

 

229,961

 

Long-term debt, net of debt issuance costs

 

 

161,595

 

 

 

160,902

 

Long-term portion of lease liabilities

 

 

9,318

 

 

 

3,698

 

Total liabilities

 

 

581,187

 

 

 

394,561

 

Commitments and Contingencies (Note 12)

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Preferred stock, $.001 par value; 100,000,000 and 100,000,000 shares authorized as of
   September 30, 2023 and December 31, 2022, respectively;
no shares issued and
   outstanding as of September 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $.001 par value; 1,000,000,000 shares authorized
   as of September 30, 2023 and December 31, 2022;
188,911,520 and
  
187,280,015 shares issued and outstanding as of September 30, 2023 and
   December 31, 2022, respectively

 

 

189

 

 

 

187

 

Additional paid-in capital

 

 

1,021,363

 

 

 

970,180

 

Accumulated deficit

 

 

(833,049

)

 

 

(732,241

)

Total Alignment Healthcare, Inc. stockholders' equity

 

 

188,503

 

 

 

238,126

 

Noncontrolling interest

 

 

1,102

 

 

 

1,176

 

Total stockholders' equity

 

 

189,605

 

 

 

239,302

 

Total liabilities and stockholders' equity

 

$

770,792

 

 

$

633,863

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


 

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Operations

(amounts in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Earned premiums

 

$

450,235

 

 

$

359,978

 

 

$

1,341,924

 

 

$

1,071,450

 

Other

 

 

6,474

 

 

 

370

 

 

 

16,319

 

 

 

898

 

Total revenues

 

 

456,709

 

 

 

360,348

 

 

 

1,358,243

 

 

 

1,072,348

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Medical expenses

 

 

397,879

 

 

 

312,850

 

 

 

1,204,838

 

 

 

923,877

 

Selling, general, and administrative expenses

 

 

83,089

 

 

 

76,452

 

 

 

223,696

 

 

 

212,418

 

Depreciation and amortization

 

 

5,497

 

 

 

4,456

 

 

 

15,613

 

 

 

12,586

 

Total expenses

 

 

486,465

 

 

 

393,758

 

 

 

1,444,147

 

 

 

1,148,881

 

Loss from operations

 

 

(29,756

)

 

 

(33,410

)

 

 

(85,904

)

 

 

(76,533

)

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

5,466

 

 

 

4,605

 

 

 

15,747

 

 

 

13,496

 

Other expenses (income)

 

 

(145

)

 

 

(131

)

 

 

(711

)

 

 

252

 

Loss on extinguishment of debt

 

 

 

 

 

2,196

 

 

 

 

 

 

2,196

 

Total other expenses

 

 

5,321

 

 

 

6,670

 

 

 

15,036

 

 

 

15,944

 

Loss before income taxes

 

 

(35,077

)

 

 

(40,080

)

 

 

(100,940

)

 

 

(92,477

)

Provision for income taxes

 

 

 

 

 

167

 

 

 

2

 

 

 

167

 

Net loss

 

$

(35,077

)

 

$

(40,247

)

 

$

(100,942

)

 

$

(92,644

)

Less: Net loss attributable to noncontrolling interest

 

 

30

 

 

 

 

 

 

134

 

 

 

 

Net loss attributable to Alignment Healthcare, Inc.

 

$

(35,047

)

 

$

(40,247

)

 

$

(100,808

)

 

$

(92,644

)

Total weighted-average common shares outstanding -
    basic and diluted

 

 

187,328,318

 

 

 

182,123,363

 

 

 

185,493,345

 

 

 

180,765,300

 

Net loss per share - basic and diluted

 

$

(0.19

)

 

$

(0.22

)

 

$

(0.54

)

 

$

(0.51

)

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

5


 

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(amounts in thousands, except par value and share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In Capital

 

 

Accumulated
Deficit

 

 

Noncontrolling Interest

 

 

Total

 

Balance at June 30, 2023

 

 

188,512,765

 

 

$

188

 

 

$

1,007,794

 

 

$

(798,002

)

 

$

1,132

 

 

$

211,112

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(35,047

)

 

 

(30

)

 

 

(35,077

)

Issuance of common stock upon vesting of restricted stock units

 

 

419,130

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Forfeitures

 

 

(20,375

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

13,569

 

 

 

 

 

 

 

 

 

13,569

 

Balance at September 30, 2023

 

 

188,911,520

 

 

$

189

 

 

$

1,021,363

 

 

$

(833,049

)

 

$

1,102

 

 

$

189,605

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In Capital

 

 

Accumulated
Deficit

 

 

Noncontrolling interest

 

 

Total

 

Balance at June 30, 2022

 

 

187,271,311

 

 

$

187

 

 

$

928,608

 

 

$

(635,091

)

 

$

 

 

$

293,704

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(40,247

)

 

 

 

 

 

(40,247

)

Issuance of common stock upon vesting of restricted stock units

 

 

956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeitures

 

 

(8,291

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

18,687

 

 

 

 

 

 

 

 

 

18,687

 

Balance at September 30, 2022

 

 

187,263,976

 

 

$

187

 

 

$

947,295

 

 

$

(675,338

)

 

$

 

 

$

272,144

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6


 

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(amounts in thousands, except par value and share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In Capital

 

 

Accumulated
Deficit

 

 

Noncontrolling interest

 

 

Total

 

Balance at December 31, 2022

 

 

187,280,015

 

 

$

187

 

 

$

970,180

 

 

$

(732,241

)

 

$

1,176

 

 

$

239,302

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(100,808

)

 

 

(134

)

 

 

(100,942

)

Issuance of common stock upon vesting of restricted stock units

 

 

1,667,102

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Forfeitures

 

 

(35,597

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

51,183

 

 

 

 

 

 

 

 

 

51,183

 

  Repurchase of noncontrolling interest attributable to subsidiary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60

 

 

 

60

 

Balance at September 30, 2023

 

 

188,911,520

 

 

$

189

 

 

$

1,021,363

 

 

$

(833,049

)

 

$

1,102

 

 

$

189,605

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In Capital

 

 

Accumulated
Deficit

 

 

Noncontrolling interest

 

 

Total

 

Balance at December 31, 2021

 

 

187,193,613

 

 

$

187

 

 

$

888,547

 

 

$

(582,694

)

 

$

15

 

 

$

306,055

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(92,644

)

 

 

 

 

 

(92,644

)

Issuance of common stock upon vesting of restricted stock units

 

 

433,440

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeitures

 

 

(363,077

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

58,833

 

 

 

 

 

 

 

 

 

58,833

 

  Repurchase of noncontrolling interest attributable to subsidiary

 

 

 

 

 

 

 

 

(85

)

 

 

 

 

 

(15

)

 

 

(100

)

Balance at September 30, 2022

 

 

187,263,976

 

 

$

187

 

 

$

947,295

 

 

$

(675,338

)

 

$

 

 

$

272,144

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

7


 

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(100,942

)

 

$

(92,644

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Provision for credit loss

 

 

91

 

 

 

150

 

(Gain) loss on sublease

 

 

(289

)

 

 

510

 

Depreciation and amortization

 

 

15,807

 

 

 

12,735

 

Amortization-investment discount

 

 

(3,349

)

 

 

(8

)

Amortization-debt issuance costs

 

 

1,037

 

 

 

1,616

 

Amortization of payment-in-kind interest

 

 

 

 

 

2,943

 

Equity-based compensation

 

 

51,183

 

 

 

58,833

 

Non-cash lease expense

 

 

1,653

 

 

 

2,151

 

Loss on extinguishment of debt

 

 

 

 

 

2,196

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(12,724

)

 

 

(29,840

)

Prepaid expenses and other current assets

 

 

(3,771

)

 

 

(8,742

)

Other assets

 

 

(119

)

 

 

(137

)

Medical expenses payable

 

 

33,299

 

 

 

45,509

 

Accounts payable and accrued expenses

 

 

(4,613

)

 

 

2,030

 

Deferred premium revenue

 

 

146,034

 

 

 

116,298

 

Accrued compensation

 

 

7,604

 

 

 

7,484

 

Lease liabilities

 

 

(2,622

)

 

 

(3,126

)

Payment-in-kind interest

 

 

 

 

 

(14,122

)

Net cash provided by operating activities

 

 

128,279

 

 

 

103,836

 

Investing Activities:

 

 

 

 

 

 

Purchase of business, net of cash received

 

 

 

 

 

(2,393

)

Purchase of investments

 

 

(281,582

)

 

 

(2,825

)

Maturities of investments

 

 

160,735

 

 

 

2,425

 

Acquisition of property and equipment

 

 

(25,398

)

 

 

(17,317

)

Net cash used in investing activities

 

 

(146,245

)

 

 

(20,110

)

Financing Activities:

 

 

 

 

 

 

Repurchase of noncontrolling interest

 

 

 

 

 

(100

)

Issuance of long-term debt

 

 

 

 

 

165,000

 

Debt issuance costs

 

 

 

 

 

(4,601

)

Repayment of long-term debt

 

 

 

 

 

(143,179

)

Contributions from noncontrolling interest holders

 

 

60

 

 

 

 

Net cash provided by financing activities

 

 

60

 

 

 

17,120

 

Net decrease in cash

 

 

(17,906

)

 

 

100,846

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

411,299

 

 

 

468,350

 

Cash, cash equivalents and restricted cash at end of period

 

$

393,393

 

 

$

569,196

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

13,943

 

 

$

22,447

 

Supplemental non-cash investing and financing activities:

 

 

 

 

 

 

Acquisition of property in accounts payable

 

$

117

 

 

$

290

 

Purchase of business in accounts payable

 

$

 

 

$

375

 

 

 

8


 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total above:

 

 

September 30, 2023

 

 

September 30, 2022

 

Cash and cash equivalents