Alignment Healthcare Reports Third Quarter 2024 Results

Oct 29, 2024
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  • Reports $692.4 million in total revenue, up 51.6% year-over-year
  • Increases Medicare Advantage membership, up 57.7% year-over-year to approximately 182,300 members, beating third-quarter and year-end expectations
  • One of seven Medicare Advantage Prescription Drug contracts nationally to earn 5- out of 5 stars from the Centers for Medicare & Medicaid Services (CMS), with 98% of company’s Medicare Advantage members in plans rated 4-stars or higher for 2025
  • Raises year-end health plan membership and revenue guidance, narrows full-year adjusted gross profit and adjusted EBITDA guidance

ORANGE, Calif., Oct. 29, 2024 (GLOBE NEWSWIRE) -- Alignment Healthcare, Inc. (NASDAQ: ALHC), today reported financial results for its third quarter ended Sept. 30, 2024.

“Alignment Healthcare’s excellent third-quarter results set us apart in Medicare Advantage, proving that we can do well by doing good,” said John Kao, founder and CEO. “A cornerstone of our success is the virtuous cycle of delivering high-quality care while effectively managing costs. This philosophy has resulted in the stars, growth and profitability outcomes we achieved in the third quarter. As CMS continues to focus on the Triple Aim, we are confident we have the right platform to provide the best care at the lowest cost to drive long-term value for both our members and our shareholders. Alignment is Medicare Advantage done right.”

Third Quarter 2024 Financial Highlights
All comparisons, unless otherwise noted, are to the three months ended Sept. 30, 2023

  • Health plan membership at the end of the quarter was approximately 182,300, up 57.7% year over year
  • Total revenue was $692.4 million, up 51.6% year over year. Revenue excluding ACO REACH was $692.2 million, up 62.4% year over year
  • Adjusted gross profit was $80.5 million and loss from operations was $(19.5) million
    • Adjusted gross profit excludes depreciation and amortization of $7.6 million and selling, general, and administrative expenses of $90.9 million (which includes $15.8 million of equity-based compensation). Adjusted gross profit also excludes an additional $1.5 million of equity-based compensation recorded within medical expenses
    • Medical benefits ratio based on adjusted gross profit was 88.4%.
  • Adjusted EBITDA was $5.9 million and net loss was $(26.4) million

Adjusted Gross Profit is reconciled as follows:

 Three Months Ended September 30, Nine Months Ended September 30,
 2024 2023 2024 2023
(dollars in thousands)       
Loss from operations$(19,522) $(29,756) $(79,010) $(85,904)
Add back:       
Equity-based compensation (medical expenses) 1,489   1,733   3,384   6,024 
Depreciation (medical expenses) 46   64   144   194 
Restructuring costs (medical expenses)(1) —   —   796   — 
Depreciation and amortization(2) 7,640   5,497   20,110   15,613 
Selling, general, and administrative expenses 90,871   83,089   269,246   223,696 
Total add back 100,046   90,383   293,680   245,527 
Adjusted gross profit$80,524  $60,627  $214,670  $159,623 
                

(1) Represents severance and related costs incurred as part of a corporate restructuring designed to streamline our organizational structure and drive operational efficiencies.

(2) Includes $0.6 million in impairment expense related to intangible assets that were written off during the quarter.

Adjusted EBITDA is reconciled as follows:

 Three Months Ended September 30, Nine Months Ended September 30,
 2024 2023 2024 2023
(dollars in thousands)       
Net loss$(26,429) $(35,077) $(97,007) $(100,942)
Less: Net loss attributable to noncontrolling interest 16   30   63   134 
Adjustments:       
Interest expense 6,937   5,466   18,055   15,747 
Depreciation and amortization(1) 7,686   5,561   20,254   15,807 
Income taxes (8)  —   14   2 
Equity-based compensation(2) 17,258   13,569   54,896   51,183 
Acquisition expenses(3) 14   81   26   761 
Litigation costs(4) 456   1,950   1,177   1,950 
(Gain) loss on ROU assets(5) —   —   143   (289)
Gain on sale of property and equipment (8) $—   (8)  — 
Restructuring costs(6) —   —   2,363   — 
Adjusted EBITDA$5,922  $(8,420) $(24) $(15,647)
                

(1) Includes $0.6 million in impairment expense related to intangible assets that were written off during the quarter.

(2) Represents equity-based compensation related to grants made in the applicable year, as well as equity-based compensation related to the timing of the IPO, which includes previously issued stock appreciation rights ("SARs") liability awards, modifications related to transaction vesting units, and grants made in conjunction with the IPO.

(3) Represents acquisition-related fees, such as legal and advisory fees, that are non-capitalizable.

(4) Represents litigation costs considered outside of the ordinary course of business based on the following considerations which we assess regularly: (i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) complexity of the case, (iii) nature of the remedies sought, (iv) litigation posture of the Company, (v) counterparty involved, and (vi) the Company's overall litigation strategy.

(5) Represents gains or losses related to ROU assets that were terminated or subleased in the respective period.

(6) Represents severance and related costs incurred as part of a corporate restructuring designed to streamline our organizational structure and drive operational efficiencies.

Outlook for Fourth Quarter and Fiscal Year 2024

 Three Months Ending
December 31, 2024		Twelve Months Ending
December 31, 2024
$ MillionsLowHighLowHigh
Health Plan Membership184,000186,000184,000186,000
Revenue6636782,6652,680
Adjusted Gross Profit(1)6782282297
Adjusted EBITDA(2)(10)5(10)5

_______________________

  1. Adjusted gross profit is a non-GAAP financial measure that is presented as supplemental disclosure, that we define as loss from operations before depreciation and amortization, clinical equity-based compensation expense, clinical restructuring costs and selling, general, and administrative expenses. We cannot reconcile our estimated ranges for adjusted gross profit to loss from operations, the most directly comparable GAAP measure, and cannot provide estimated ranges for loss from operations, without unreasonable efforts because of the uncertainty around certain items that may impact loss from operations, including equity-based compensation expense and depreciation and amortization, that are not within our control or cannot be reasonably predicted.
  2. Adjusted EBITDA is a non-GAAP financial measure that is presented as supplemental disclosure, that we define as net loss before interest expense, income taxes, depreciation and amortization expense, acquisition expenses, certain litigation costs, gains or losses on right of use ("ROU") assets, gains or losses on sale of property and equipment, restructuring costs and equity-based compensation expense. We cannot reconcile our estimated ranges for Adjusted EBITDA to net loss, the most directly comparable GAAP measure, and cannot provide estimated ranges for net loss, without unreasonable efforts because of the uncertainty around certain items that may impact net loss, including equity-based compensation expense and depreciation and amortization, that are not within our control or cannot be reasonably predicted.

Conference Call Details
The company will host a conference call at 5 p.m. EDT today to discuss these results and management’s outlook for future financial and operational performance. A live audio webcast will be available online at https://ir.alignmenthealth.com/. At the start of the conference call, participants may access the webcast at the following link: https://edge.media-server.com/mmc/p/dh2kdfjr. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web links, and will remain available for approximately 12 months.

About Alignment Health
Alignment Health is championing a new path in senior care that empowers members to age well and live their most vibrant lives. A consumer brand name of Alignment Healthcare (NASDAQ: ALHC), Alignment Health’s mission-focused team makes high-quality, low-cost care a reality for its Medicare Advantage members every day. Based in California, the company partners with nationally recognized and trusted local providers to deliver coordinated care, powered by its customized care model, 24/7 concierge care team and purpose-built technology, AVAⓇ. As it expands its offerings and grows its national footprint, Alignment upholds its core values of leading with a serving heart and putting the senior first. For more information, visit www.alignmenthealth.com.

Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include statements regarding our future growth and our financial outlook for the quarter and year ending December 31, 2024. Forward-looking statements are subject to risks and uncertainties and are based on assumptions that may prove to be inaccurate, which could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. Important risks and uncertainties that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: our ability to attract new members and enter new markets, including the need for certain governmental approvals; 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; risks associated with being a government contractor; changes in laws and regulations applicable to our business model; risks related to our indebtedness, including the potential for rising interest rates; changes in market or industry conditions and receptivity to our technology and services; results of litigation or a security incident; and the impact of shortages of qualified personnel and related increases in our labor costs. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2023, and the other periodic reports we file with the SEC. All information provided in this release and in the attachments is as of the date hereof, and we undertake no duty to update or revise this information unless required by law.

 
Condensed Consolidated Balance Sheets
(in thousands, except par value and share amounts)
(Unaudited)
    
 September 30,
2024		 December 31,
2023
Assets   
Current Assets:   
Cash and cash equivalents$340,300  $202,904 
Accounts receivable (less allowance for credit losses of $123 at September 30, 2024 and $0 at December 31, 2023) 138,852   119,749 
Investments - current 40,676   115,914 
Prepaid expenses and other current assets 53,779   44,970 
Total current assets 573,607   483,537 
Property and equipment, net 64,692   51,901 
Right of use asset, net 8,124   9,959 
Goodwill 34,826   34,826 
Intangible Assets, net 4,550   5,252 
Other assets 6,488   6,405 
Total assets$692,287  $591,880 
Liabilities and Stockholders' Equity   
Current Liabilities:   
Medical expenses payable$297,125  $205,399 
Accounts payable and accrued expenses 25,394   23,511 
Accrued compensation 33,951   34,112 
Current maturities of long-term debt 1,613   — 
Total current liabilities 358,083   263,022 
Long-term debt, net of current maturities and debt issuance costs 210,386   161,813 
Long-term portion of lease liabilities 8,191   8,974 
Total liabilities 576,660   433,809 
Stockholders' Equity:   
Preferred stock, $.001 par value; 100,000,000 shares authorized as of September 30, 2024 and December 31, 2023, respectively; no shares issued and outstanding as of September 30, 2024 and December 31, 2023 —   — 
Common stock, $.001 par value; 1,000,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 191,595,786 and 188,951,643 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively 191   189 
Additional paid-in capital 1,091,561   1,037,015 
Accumulated deficit (977,202)  (880,258)
Total Alignment Healthcare, Inc. stockholders' equity 114,550   156,946 
Noncontrolling interest 1,077   1,125 
Total stockholders' equity 115,627   158,071 
Total liabilities and stockholders' equity$692,287  $591,880 
        


 
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
    
 Three Months Ended September 30, Nine Months Ended September 30,
 2024 2023 2024 2023
Revenues:       
Earned premiums$684,496  $450,235  $1,980,146  $1,341,924 
Other 7,937   6,474   22,174   16,319 
Total revenues 692,433   456,709   2,002,320   1,358,243 
Expenses:       
Medical expenses 613,444   397,879   1,791,974   1,204,838 
Selling, general, and administrative expenses 90,871   83,089   269,246   223,696 
Depreciation and amortization 7,640   5,497   20,110   15,613 
Total expenses 711,955   486,465   2,081,330   1,444,147 
Loss from operations (19,522)  (29,756)  (79,010)  (85,904)
Other expenses:       
Interest expense 6,937   5,466   18,055   15,747 
Other income, net (22)  (145)  (72)  (711)
Total other expenses 6,915   5,321   17,983   15,036 
Loss before income taxes (26,437)  (35,077)  (96,993)  (100,940)
Provision (benefit) for income taxes (8)  —   14   2 
Net loss$(26,429) $(35,077) $(97,007) $(100,942)
Less: Net loss attributable to noncontrolling interest 16   30   63   134 
Net loss attributable to Alignment Healthcare, Inc.$(26,413) $(35,047) $(96,944) $(100,808)
Total weighted-average common shares outstanding - basic and diluted 191,361,283   187,328,318   190,423,014   185,493,345 
Net loss per share - basic and diluted$(0.14) $(0.19) $(0.51) $(0.54)
                


 
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
  
 Nine Months Ended September 30,
 2024 2023
Operating Activities:   
Net loss$(97,007) $(100,942)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Provision for credit loss 123   91 
Loss (gain) on right of use assets 135   (289)
Gain on sale of property and equipment (8)  — 
Depreciation and amortization 20,254   15,807 
Amortization-investment discount (2,084)  (3,349)
Amortization-debt issuance costs 978   1,037 
Equity-based compensation 54,896   51,183 
Non-cash lease expense 1,360   1,653 
Changes in operating assets and liabilities:   
Accounts receivable (19,226)  (12,724)
Prepaid expenses and other current assets (8,809)  (3,771)
Other assets 77   (119)
Medical expenses payable 91,726   33,299 
Accounts payable and accrued expenses 2,835   (4,613)
Deferred premium revenue (116)  146,034 
Accrued compensation (161)  7,604 
Lease liabilities (1,492)  (2,622)
Net cash provided by operating activities 43,481   128,279 
Investing Activities:   
Purchase of investments (75,524)  (281,582)
Sale of property and equipment 14   — 
Maturities of investments 152,755   160,735 
Acquisition of property and equipment (32,134)  (25,398)
Net cash provided by (used in) investing activities 45,111   (146,245)
Financing Activities:   
Proceeds from long-term debt 50,000   — 
Debt issuance costs (512)  — 
Payment of employment taxes related to release of restricted stock (350)  — 
Contributions from noncontrolling interest holders 15   60 
Net cash provided by financing activities 49,153   60 
Net increase (decrease) in cash 137,745   (17,906)
Cash, cash equivalents and restricted cash at beginning of period 204,954   411,299 
Cash, cash equivalents and restricted cash at end of period$342,699  $393,393 
Supplemental disclosure of cash flow information:   
Cash paid for interest$15,602  $13,943 
Supplemental non-cash investing and financing activities:   
Acquisition of property in accounts payable$112  $117 
        

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, 2024 September 30, 2023
Cash and cash equivalents$340,300  $391,643 
Restricted cash in other assets 2,399   1,750 
Total$342,699  $393,393 
        

Non-GAAP Financial Measures
Certain of these financial measures are considered “non-GAAP” financial measures within the meaning of Item 10 of Regulation S-K promulgated by the SEC. We believe that non-GAAP financial measures provide an additional way of viewing aspects of our operations that, when viewed with the GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business. These non-GAAP financial measures are also used by our management to evaluate financial results and to plan and forecast future periods. However, non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. Non-GAAP financial measures used by us may differ from the non-GAAP measures used by other companies, including our competitors. To supplement our consolidated financial statements presented on a GAAP basis, we disclose the following non-GAAP measures: Medical Benefits Ratio, Adjusted EBITDA and Adjusted Gross Profit as these are performance measures that our management uses to assess our operating performance. Because these measures facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes and in evaluating acquisition opportunities.

Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as net loss before interest expense, income taxes, depreciation and amortization expense, acquisition expenses, certain litigation costs, gains or losses on right of use ("ROU") assets, gains or losses on sale of property and equipment, restructuring costs and equity-based compensation expense.

Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA in lieu of net loss, which is the most directly comparable financial measure calculated in accordance with GAAP.

Our use of the term Adjusted EBITDA may vary from the use of similar terms by other companies in our industry and accordingly may not be comparable to similarly titled measures used by other companies.

Medical Benefits Ratio (MBR)
We calculate our MBR by dividing total medical expenses, excluding depreciation, equity-based compensation and clinical restructuring costs, by total revenues in a given period.

Adjusted Gross Profit
Adjusted gross profit is a non-GAAP financial measure that we define as loss from operations before depreciation and amortization, clinical equity-based compensation expense, clinical restructuring costs and selling, general, and administrative expenses.

Adjusted gross profit should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted gross profit in lieu of loss from operations, which is the most directly comparable financial measure calculated in accordance with GAAP.

Our use of the term adjusted gross profit may vary from the use of similar terms by other companies in our industry and accordingly may not be comparable to similarly titled measures used by other companies.

Investor Contact
Harrison Zhuo
hzhuo@ahcusa.com

Media Contact
Priya Shah
mPR, Inc. for Alignment Health
alignment@mpublicrelations.com