UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The |
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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 August 4, 2021, the registrant had
Table of Contents
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PART I. |
4 |
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Item 1. |
4 |
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4 |
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5 |
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6 |
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8 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
10 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
27 |
Item 3. |
39 |
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Item 4. |
39 |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
42 |
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44 |
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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:
1
2
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)
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June 30, |
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December 31, |
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Assets |
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Current Assets: |
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Cash |
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$ |
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$ |
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Accounts receivable (less allowance for credit losses of $ |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right of use asset, net |
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Goodwill and intangible assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current Liabilities: |
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Medical expenses payable |
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$ |
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$ |
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Accounts payable and accrued expenses |
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Accrued compensation |
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Total current liabilities |
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Long-term debt, net of debt issuance costs |
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Long-term portion of lease liabilities |
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Total liabilities |
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Commitments and Contingencies (Note 12) |
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Stockholders' Equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Alignment Healthcare, Inc. stockholders' equity |
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Noncontrolling interest |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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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)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Revenues: |
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Earned premiums |
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$ |
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$ |
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$ |
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$ |
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Other |
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Expenses: |
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Medical expenses |
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Selling, general, and administrative expenses |
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Depreciation and amortization |
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Total expenses |
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Income (loss) from operations |
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( |
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( |
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Other expenses: |
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Interest expense |
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Other (income) expenses |
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( |
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Total other expenses |
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Income (loss) before income taxes |
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( |
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( |
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Provision for income taxes |
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Net income (loss) attributable to Alignment Healthcare, Inc. |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Total weighted-average common shares outstanding - |
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Net income (loss) per share - basic and diluted |
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$ |
( |
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$ |
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$ |
( |
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$ |
( |
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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)
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Common Stock |
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Shares |
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Amount |
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Additional |
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Accumulated |
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Noncontrolling Interest |
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Total |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net loss attributable to Alignment |
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— |
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( |
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( |
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Noncontrolling interest |
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— |
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Adjustment to issuance cost |
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— |
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( |
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( |
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Equity-based compensation |
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— |
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Balance at June 30, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Common Stock |
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Shares |
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Amount |
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Additional |
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Accumulated |
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Noncontrolling interest |
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Total |
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Balance at March 31, 2020(1) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net income attributable to |
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— |
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Adjustment to issuance cost |
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— |
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Equity-based compensation |
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— |
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Equity repurchase |
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— |
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( |
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( |
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Balance at June 30, 2020 (1) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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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)
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Common Stock |
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Shares |
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Amount |
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Additional |
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Accumulated |
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Noncontrolling interest |
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Total |
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Balance at December 31, 2020(1) |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net loss attributable to Alignment |
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— |
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( |
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( |
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Noncontrolling interest |
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— |
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Issuance of common stock upon |
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Issuance of common stock |
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Issuance of common stock to |
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Equity-based compensation |
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— |
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Equity repurchase |
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— |
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( |
) |
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( |
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Balance at June 30, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Common Stock |
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Shares |
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Amount |
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Additional |
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Accumulated |
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Noncontrolling interest |
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Total |
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Balance at December 31, 2019(1) |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Net loss attributable to Alignment |
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— |
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( |
) |
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( |
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Issuance of common stock at |
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Equity-based compensation |
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— |
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Equity repurchase |
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— |
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( |
) |
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( |
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Balance at June 30, 2020 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
7
Alignment Healthcare, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(Unaudited)
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Six Months Ended June 30, |
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2021 |
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2020 |
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Operating Activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Provision for credit loss |
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Depreciation and amortization |
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Amortization-debt issuance costs and investment discount |
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Payment-in-kind interest |
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Loss on disposal of property and equipment |
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Equity-based compensation and common stock payments |
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Non-cash lease expense |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
) |
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( |
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Prepaid expenses and other current assets |
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( |
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( |
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Other assets |
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Medical expenses payable |
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( |
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Accounts payable and accrued expenses |
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( |
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Accrued compensation |
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( |
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Lease liabilities |
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( |
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Noncurrent liabilities |
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( |
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Net cash used in operating activities |
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( |
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( |
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Investing Activities: |
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Asset acquisition, net of cash received |
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( |
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Purchase of investments |
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( |
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( |
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Sale of investments |
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Acquisition of property and equipment |
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( |
) |
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( |
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Proceeds from the sale of property and equipment |
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Net cash used in investing activities |
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( |
) |
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( |
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Financing Activities: |
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Purchase of noncontrolling interest |
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Equity repurchase |
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( |
) |
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( |
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Issuance of common stock |
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Common stock issuance costs |
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( |
) |
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( |
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Net cash provided by financing activities |
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Net increase in cash |
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Cash and restricted cash at beginning of period |
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Cash and restricted cash at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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Supplemental non-cash investing and financing activities: |
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Acquisition of property in accounts payable |
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$ |
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$ |
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8
The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets to the total above:
|
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June 30, 2021 |
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June 30, 2020 |
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Cash |
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$ |
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$ |
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Restricted cash in other assets |
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Total |
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$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
9
Alignment Healthcare, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(amounts in thousands, except share amounts)
1. Organization
Alignment Healthcare, Inc. (collectively, “we” or “us” or “our” or the “Company”), formerly, Alignment Healthcare Holdings, LLC, is a next generation, consumer-centric health care platform that is purpose-built to provide seniors with high quality, affordable care with a vastly improved consumer experience. Enabled by our innovative technology and care delivery model, the Company focuses on improving outcomes in the Medicare Advantage sector.
The Company’s operations primarily consist of the following:
Reorganization
We historically operated as a Delaware limited liability company under the name Alignment Healthcare Holdings, LLC. On March 17, 2021, Alignment Healthcare Holdings, LLC converted to a Delaware corporation pursuant to a statutory conversion and we changed our name to Alignment Healthcare, Inc. for purposes of completing an initial public offering ("IPO") ("the Reorganization"). As part of the Reorganization, Alignment Healthcare Partners, LP ("the Parent"), the sole unitholder of Alignment Healthcare Holdings, LLC, exchanged its membership units for our common stock and became the sole holder of our shares of common stock. Prior to the closing of the IPO, the Parent merged with and into the Company with Alignment Healthcare, Inc. surviving the merger.
The membership units that were owned by the Parent prior to the Reorganization were converted to our common stock using an approximately
Initial Public Offering
On March 25, 2021, our Registration Statement on Form S-1 for the initial public offering of
We completed an IPO through issuing and selling
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial
10
information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such regulations. These financial statements have been prepared on a basis consistent with the accounting principles applied for the fiscal year ended December 31, 2020 as presented in the Company’s Form S-1, as amended, filed with the SEC. In the opinion of management, all adjustments (consisting of all normal and recurring adjustments) considered necessary for a fair presentation have been included. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto as of December 31, 2020.
The condensed consolidated financial statements include the accounts of the Company, our subsidiaries, and
We have no components of other comprehensive income (loss), and accordingly, comprehensive income (loss) is the same as the net income (loss) for all periods presented.
Use of Estimates
The preparation of the condensed consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements. Our significant estimates include, but are not limited to, the determination of medical expenses payable; the impact of risk adjustment provisions related to our Medicare contracts; collectability of receivables; right of use (“ROU”) assets and lease liabilities valuation; valuation of related impairment recognition of long-lived assets, including goodwill and intangible assets; equity-based compensation expense; and contingent liabilities. Estimates and judgments are based upon historical information and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ materially from those estimates and the impact of any change in estimates is included in earnings in the period in which the estimate is adjusted.
Segments
We have determined that our chief executive officer is the chief operating decision maker (“CODM”). We operate and manage the business as
Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Our current assets and current liabilities approximate fair value because of the short-term nature of these financial instruments. Financial instruments measured at fair value on a recurring basis were based upon a three-tier hierarchy as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities
Level 2 - Other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability
Level 3 - Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date
The fair value of cash was determined based on Level 1 inputs. The fair value of deposits of US Treasury bills, bond, and certificate of deposits, which were included in other assets in the condensed consolidated balance sheets, was determined based on Level 2 inputs. There were
11
Revenue and Accounts Receivable
Earned premium revenue consisted of premium revenue and capitation revenue for the three and six months ended June 30, 2021 and 2020 were as follows:
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Three Months |
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Six Months |
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||||||||||
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2021 |
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2020 |
|
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2021 |
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|
2020 |
|
||||
Premium |
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$ |
|
|
$ |
|
|
$ |
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$ |
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||||
Capitation |
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|
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||||
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$ |
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$ |
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$ |
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|
$ |
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||||
Premium revenue is derived monthly from the federal government based on our contract with the Centers for Medicare and Medicaid Services (“CMS”). In accordance with this arrangement, we assume the responsibility for the outcomes and the economic risk of funding our members’ health care, supplemental benefits and related administration costs. We recognize premium revenue in the month that members are entitled to receive health care services, and premiums collected in advance are deferred. The monthly reimbursement includes a fixed payment per member month (“PMPM”), which is adjusted based on certain risk factors derived from medical diagnoses for our members. The adjustments are estimated by projecting the ultimate annual premium and are recognized ratably during the year, with adjustments each period to reflect changes in the estimated ultimate premium. Premiums are also recorded net of estimated uncollectible amounts and retroactive membership adjustments.
Capitation revenue consists primarily of capitated fees for medical care services provided by us under arrangements with our Third-Party Payors and from CMS related to our Direct Contracting Entities ("DCE").
Under those arrangements with Third-Party Payors, we receive a PMPM payment for a defined member population, and we are responsible for providing health care services to the member population over the contract period. We are solely responsible for the cost of health care services related to the member population and in some cases, we are financially responsible for the supplemental benefits provided by us to the members. We act as a principal in arranging for and controlling the services provided by our provider network and we are at risk for arranging and providing health care services.
The premium and capitation payments we receive monthly from CMS for our members are determined from our annual bid or similarly from Third-Party Payors under our capitation arrangement. These payments represent revenues for providing health care coverage, including Medicare Part D benefits. Under the Medicare Part D program, our members and the members of our Third-Party Payors receive standard drug benefits. We may also provide enhanced benefits at our own expense. We recognize premium or capitation revenue for providing this insurance coverage in the month that members are entitled to receive health care services and any premium or capitation collected in advance is deferred. Our CMS payment related to Medicare Part D is subject to risk sharing through the Medicare Part D risk corridor provisions.
On April 1, 2021, we launched two DCEs that participate in the CMS Innovation’s Direct Contracting Model. CMS serves as the claim adjudicator for institutional and specialists care, and directly pays for such fee for service claims. The DCEs are responsible for the cost of health care services related to the patient population attributed to the DCE by participating in 100% savings/losses via the risk share model and in some cases, are financially responsible for the supplemental benefits provided to the patients. The DCEs act as a principal in arranging for and controlling services provided directly by its contracts with primary care physicians, as well as services provided by preferred institutional care providers and specialists. Capitation payments for the DCE program are determined from an annual benchmark established by CMS. These payments, that are adjusted for variable considerations, represent revenue for providing health care service, including primary care as well as institutional and specialist care. The DCEs recognize capitation revenue for providing these services in the period in which the performance obligations are satisfied by transferring services to the members. Revenue recognized by the DCEs for the three and six months ended June 30, 2021 was $
Revenue Adjustments
Payments by CMS to health plans are determined via a competitive bidding process with CMS and are based upon the cost of care in a local market and the average utilization of services by the member enrolled. These payments are subject to periodic adjustments under CMS’ “risk adjustment model,” which compensates health plans based on the health severity and certain demographic factors of each individual member. Members diagnosed with certain conditions are paid at a higher monthly payment than members who are healthier. Under this risk adjustment model, CMS calculates the risk adjustment payment using diagnosis data from hospital inpatient, hospital outpatient, and physician treatment settings. The Company and health care providers collect, capture, and submit the necessary and available diagnosis data to CMS within prescribed deadlines. Both premium and capitation revenues (including Medicare Part D) are subject to adjustments under the risk adjustment model.
12
Throughout the year, we estimate risk adjustment payments based upon the diagnosis data submitted and expected to be submitted to CMS. Those estimated risk adjustment payments are recorded as an adjustment to premium and capitation revenue. Our risk adjustment data is also subject to review by the government, including audit by regulators.
Our recognized premium revenue for our Medicare Advantage Plans in California, North Carolina and Nevada are each subject to a minimum annual medical loss ratio (“MLR”) of
Medicare Part D payments are also subject to a federal risk corridor program, which limits a health plan’s overall losses or profit if actual spending for basic Medicare Part D benefits is much higher or lower than what was anticipated. Risk corridor is recorded within premium revenue. The risk corridor provisions compare costs targeted in our bids or Third-Party Payors’ bids to actual prescription drug costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS. Variances exceeding certain thresholds may result in CMS or Third-Party Payors making additional payments to us or require us to refund a portion of the premiums we received. We estimate and recognize an adjustment to premiums revenue related to these provisions based upon pharmacy claims experience. We record a receivable or payable at the contract level and classify the amount as current or long-term in our condensed consolidated balance sheet based on the timing of expected settlement.
Variable consideration estimates related to DCE contract revenue are based on the most likely outcome method and that a significant reversal in the amount of cumulative revenue recognized would not occur.
Receivables, including risk adjusted premium due from the government or through Third-Party Payors, pharmacy rebates, and other receivables, are shown net of allowances for credit losses and retroactive membership adjustments.
Property and Equipment—Net
Depreciation expense is computed using the straight-line method generally based on the following estimated useful lives:
Description |
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Estimated Service Lives (years) |
Computer and equipment |
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Office equipment and furniture |
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Software |
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Leasehold improvements |
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Depreciation expense related to property and equipment used to service our members or at our clinics are included within medical expenses in the condensed consolidated statements of operations.
Medical Expenses and Medical Expenses Payable
Medical expenses include claim payments, capitation payments, pharmacy costs net of rebates, allocations of certain centralized expenses, internal care delivery expenses and various other costs incurred to provide health insurance coverage and care to members, as well as estimates of future payments to hospitals and others for medical care and other supplemental benefits provided.
We have contracts with a network of hospitals, physicians, and other providers and compensate those providers and ancillary organizations based on contractual arrangements or CMS Medicare compensation guidelines. We pay these contracting providers either through fee-for-service arrangement in which the provider is paid negotiated rates for specific services provided or a capitation payment, which represent monthly contractual fees disbursed for each member regardless of medical services provided to the member. We are responsible for the entirety of the cost of health care services related to the member population, in addition to supplemental benefits provided by us to our seniors. We also record claims expenses related to our institutional and specialist care related to our DCE program with CMS as we act as the principal in the transaction.
Capitation-related expenses are recorded on an accrual basis during the coverage period. Expenses related to fee-for-service contracts are recorded in the period in which the related services are dispensed.
Pharmacy costs represent payments for members’ prescription drug benefits, net of rebates from drug manufacturers. Receivables for such pharmacy rebates are included in accounts receivable in the condensed consolidated balance sheet.
13
Medical Expenses Payable
Medical expenses payable includes estimates of our obligations for medical care services that have been rendered on behalf of our members and the members of the Third-Party Payors, but for which claims have either not yet been received or processed, loss adjustment expense reserve for the expected costs of settling these claims, and for liabilities related to physician, hospital, and other medical cost disputes.
We develop estimates for medical expenses incurred but not yet paid (“IBNP”) using an actuarial process that is consistently applied and centrally controlled. Medical expenses payable includes claims reported but not yet paid, estimates for claims incurred but not reported, and estimates for the costs necessary to process unpaid claims at the end of each period. We estimate our medical claims liability using actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. These actuarial methods consider factors, such as historical data for payment patterns, cost trends, product mix, seasonality, utilization of health care services, and other relevant factors. Each period, we re-examine previously established medical expense payable estimates based on actual claim submissions and other changes in facts and circumstances. As the medical expenses payable estimates recorded in prior periods develop, we adjust the amount of the estimates and include the changes in estimates in medical expenses in the period in which the change is identified.
Actuarial Standards of Practice generally require that the medical claims liability estimates be adequate to cover obligations under moderately adverse conditions. Moderately adverse conditions are situations in which the actual claims are expected to be higher than the otherwise estimated value of such claims at the time of estimate. In many situations, the claims amount ultimately settled will be different than the estimate that satisfies the Actuarial Standards of Practice. We include in our IBNP an estimate for medical claims liability under moderately adverse conditions, which represents the risk of adverse deviation of the estimates in our actuarial method of reserving. We believe that medical expenses payable is adequate to cover future claims payments required. However, such estimates are based on knowledge of current events and anticipated future events. Therefore, the actual liability could differ materially from the amounts provided.
We reassess the profitability of contracts for providing coverage to members when current operating results or forecasts indicate probable future losses. A premium deficiency reserve is established in current operations to the extent that the sum of expected future costs, claim adjustment expenses, and maintenance costs exceed related future premiums under contracts without consideration of investment income. For purposes of determining premium deficiencies, contracts are grouped in a manner consistent with the method of acquiring, servicing, and measuring the profitability of such contracts. Losses recognized as a premium deficiency result in a beneficial effect in subsequent periods as operating losses under these contracts are charged to the liability previously established.
Part D Subsidies
We also receive advance payments each month from CMS related to Catastrophic Reinsurance, Coverage Gap Discount, and the Low-Income Member Cost Sharing Subsidy (“Subsidies”). Reinsurance subsidies represent funding from CMS for our portion of prescription drug costs, which exceed the member’s out-of-pocket threshold or the catastrophic coverage level. Low-income cost subsidies represent funding from CMS for all or a portion of the deductible, the coinsurance and co-payment amounts above the out-of-pocket threshold for low-income beneficiaries. Additionally, the Health Care Reform Law mandates consumer discounts of
These Subsidies received in excess of, or less than, actual subsidized benefits paid are refundable to or recoverable from CMS through an annual reconciliation process following the end of the contract year.
Shared Risk Reserve Arrangements
We established a fund (also referred to as “a pool”) for risk and profit-sharing with various independent physician associations (“IPAs”). The pool enables us and our IPAs to share in the financial responsibility and/or upside associated with providing covered medical expenses to our members. The risk pool is based on a contractually agreed upon medical budget, typically based upon a percentage of revenue. If actual medical expenses are less than the budgeted amount, this results in a surplus. Conversely, if actual medical expenses are greater than the budgeted amount, this results in a deficit. We will distribute the surplus, or a portion thereof, to each IPA based upon contractual terms. Deficits are charged to shared risk providers’ risk pool as per the contractual term and evaluated for collectability at each reporting period.
We record risk-sharing receivables and payables on a gross basis on the condensed consolidated balance sheet. Throughout the year, we evaluate expected losses on risk-sharing receivables and record the resulting expected losses to the reserve. We systematically
14
build and release reserves based on adequacy and its assessment of expected losses on a monthly basis. Credit loss associated with risk share deficit receivables are recorded within medical expense in the condensed consolidated statements of operations. As of June 30, 2021 and December 31, 2020, we recorded a valuation allowance for substantially all of the risk-sharing receivable balance due to collection risk related to the balance. The risk-sharing payable is included within medical expenses payable on the condensed consolidated balance sheet.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash deposits and restricted investments with financial institutions. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. At June 30, 2021 and December 31, 2020, there was $
Industry Tax
Section 9010 of the Patient Protection and Affordable Care Act imposes an annual, nondeductible insurance industry tax (“Industry Tax”), which is levied proportionately across the insurance industry for risk-based products. The Industry Tax was estimated based on a ratio of our net premiums written compared to the US Health insurance total net premiums. The Industry Tax was $
Equity-Based Compensation
Equity-based compensation expense is measured and recognized based on the grant date fair value of the awards. The grant date fair value of stock options is estimated using the Black-Scholes option pricing model. The grant date fair value of Restricted Stock Units (“RSUs”) and Restricted Stock Awards (“RSAs”) is estimated based on the fair value of our underlying common stock.
The Black-Scholes option pricing model requires the use of highly subjective assumptions, including the award’s expected term, the fair value of the underlying common stock, the expected volatility of the price of the common stock, risk-free interest rates, and the expected dividend yield of the common stock. The assumptions used to determine the fair value of the stock-based awards are management’s best estimates and involve inherent uncertainties and the application of judgment. The expected term represents the period the stock-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock option awards granted, it was on the simplified method available under U.S. GAAP. As we do not have trading history, volatility assumptions were developed using the historical volatilities of a set of peer companies, adjusted for debt-equity leverage. Equity-based compensation expense for awards with service-based vesting only is recognized on a graded vesting schedule over the requisite service period of the awards, which is generally
Additionally, prior to the IPO, the Parent had granted its Class B and Class C units to certain of our executives and board members ("Incentive Units") and had also approved the Company’s Stock Appreciation Rights (“SARs”) Plan. Upon the IPO, SARs were modified and concurrently were, partially settled in cash and partially settled with issuance of common stock, a portion of which is restricted as discussed in Note 10 below.
During March of 2021, we also amended certain of our contracts with third-party business partners and agreed to issue shares of common stock at the IPO price, in consideration for the discharge of certain contingent payment obligations under such agreements ("Stock Payment") as discussed in Note 10.
Equity-based compensation is recorded within selling, general and administrative expenses, and medical expenses based on the function of the applicable employee and non-employee.
Noncontrolling interest
Noncontrolling interest represents the portion of equity ownership in a subsidiary that is not attributable to Alignment Healthcare, Inc. The noncontrolling interest in a subsidiary is initially recognized at estimated fair value on April 1, 2021 and is presented within total equity in the Company's condensed consolidated balance sheets. There was
15
Net Income (Loss) per Share
Net income (loss) per share is calculated based on net income (loss) attributable to Alignment Healthcare, Inc.'s shareholders.
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Three Months |
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Six Months |
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2021 |
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2020 |
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2021 |
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2020 |
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Numerator: |
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Net income (loss) attributable to common stockholders |
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$ |
( |
) |
|
$ |
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$ |
( |
) |
|
$ |
( |
) |
|
Denominator: |
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||||
Total weighted-average common shares outstanding - |
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|
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Less: Restricted shares of common stock |
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Total weighted-average common shares outstanding, |
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Net income (loss) per share: |
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Net income (loss) per share - basic and diluted |
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$ |
( |
) |
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$ |
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|
$ |
( |
) |
|
$ |
( |
) |
|
Basic net income (loss) per share is the same as diluted net loss per share for certain periods presented as the inclusion of all potentially dilutive shares would have been anti-dilutive.
In addition to the restricted shares of common stock, we also excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net income (loss) per share as of June 30, 2021 and 2020:
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June 30, |
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2021 |
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2020 |
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Stock options |
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Restricted stock units |
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Total |
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Emerging Growth Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
As described in “Recent Accounting Pronouncements Adopted” and “Recent Accounting Pronouncements Not Yet Adopted” below, we early adopted certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies. We expect to use the extended transition period for any other new or revised accounting standards during the period in which it remains an emerging growth company.
Recent Accounting Pronouncements Adopted
On January 1, 2021, we early adopted Accounting Standards Update (“ASU”) No. 2017-04, Simplifying the Test for Goodwill Impairment. This ASU eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. A goodwill impairment charge would be recognized if the carrying amount of a reporting unit exceeds the estimated fair value of the reporting unit. This guidance did not have a material impact to our condensed consolidated financial statements.
On January 1, 2021, we adopted ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, which provides clarification on determining whether a decision-making fee is a variable interest. This ASU requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the
16
equivalent of a direct interest in its entirety. This guidance did not have a material impact to our condensed consolidated financial statements.
On January 1, 2021, we adopted ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalization implementation costs incurred in a hosting arrangement that is a service contract with the requirement for capitalizing implementation costs incurred to develop or obtain internal-use software. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement. New disclosures are required. This guidance did not have a material impact to our condensed consolidated financial statements.
3. Fair Value
US Treasury bills and certificate of deposits are reported at amortized costs which is equivalent to fair value. The following tables present the carrying value and fair value of these financial instruments as of June 30, 2021 and December 31, 2020:
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June 30, 2021 |
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Fair Value |
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Carrying |
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Level 1 |
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Level 2 |
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Level 3 |
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US Treasury bills |
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$ |
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$ |
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$ |
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$ |
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Bond |
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Certificate of deposits |
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Total |
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$ |
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$ |
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$ |
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$ |
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December 31, 2020 |
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Fair Value |
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Carrying |
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Level 1 |
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Level 2 |
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Level 3 |
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US Treasury bills |
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$ |
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$ |
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$ |
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$ |
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Bond |
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Certificate of deposits |
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Total |
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$ |
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$ |
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$ |
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$ |
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The carrying value of long-term debt represents the outstanding balance, net of unamortized debt issuance costs. As of June 30, 2021, the carrying value and fair value of our long-term debt was $
The fair value of our long-term debt is classified as a Level 3 financial instrument because certain inputs used to determine its fair value are not observable. The fair value was estimated using a discounted cash flow (“DCF”) methodology. The discount rate used in the DCF model was estimated based on a synthetic credit rating analysis for us, and a screening of market data to identify market yields of instruments within the range of identified credit ratings and with otherwise similar features.
Our nonfinancial assets and liabilities, which include goodwill, intangible assets, property, and equipment, are not required to be measured at fair value on a recurring basis. However, on a periodic basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, we assess these assets for impairment.
4. Accounts Receivable
Accounts receivable consisted of the following as of June 30, 2021 and December 31, 2020:
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June 30, |
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December 31, |
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Government receivables |
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$ |
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$ |
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Pharmacy rebates |
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Other receivables |
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Total accounts receivable |
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Allowance for credit losses |
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( |
) |
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Accounts receivable, net |
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$ |
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$ |
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17
The allowance for expected credit losses for accounts receivable is based primarily on past collections experience relative to the length of time receivables are past due. However, when available evidence reasonably supports an assumption that future economic conditions will differ from current and historical payment collections, an adjustment is reflected in the allowance for expected credit losses. We record pharmacy rebates and other receivables based on contractual terms and expected collections and our estimation process for contractual allowances for such balances generally results in an allowance for balances outstanding greater than 90 days or if expected credit risks are known.
Receivables and any associated allowance are written off only when all collection attempts have failed and such amounts are determined unrecoverable. We regularly review the adequacy of these allowances based on a variety of factors, including age of the outstanding receivable and collection history. When circumstances related to specific collection patterns change, estimates of the recoverability of receivables are adjusted. Because substantially all of our receivable amounts are readily determinable and a large portion of our creditors are governmental authorities, our allowance for credit losses is insignificant.
We recorded credit loss related to accounts receivable of $
5. Property and Equipment
Property and equipment consisted of the following as of June 30, 2021 and December 31, 2020:
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June 30, |
|
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December 31, |
|
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Computers and equipment |
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$ |
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$ |
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Office equipment and furniture |
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Software |
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Leasehold improvements |
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Construction in progress |
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Subtotal |
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Less accumulated depreciation |
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( |
) |
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( |
) |
Property and equipment-net |
|
$ |
|
|
$ |
|
||
Depreciation expense for the three months ended June 30, 2021 and 2020 was $
6. Goodwill and Intangible Assets
Intangible assets, including the intangible assets from the acquisition, consisted of the following as of June 30, 2021 and December 31, 2020:
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June 30, 2021 |
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Gross Carrying Value |
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Accumulated Amortization |
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Net Carrying Value |
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Weighted Average Life |
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Goodwill |
|
$ |
|
|
$ |
— |
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$ |
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License (indefinite lived) |
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— |
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Plan member relationships |
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Other |
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|
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$ |
|
|
$ |
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|
$ |
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|
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December 31, 2020 |
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|
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Gross Carrying Value |
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Accumulated Amortization |
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Net Carrying Value |
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Weighted Average Life |
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Goodwill |
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$ |
|
|
$ |
|
|
$ |
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License (indefinite lived) |
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|
|
|||
Plan member relationships |
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|||
18
Amortization expense relating to intangible assets for the three months ended June 30, 2021 and 2020, was $
Remainder of 2021 |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
There were
7. Medical Expenses Payable
The following table is a detail of medical expenses payable as of June 30, 2021 and December 31, 2020:
|
|
June 30, |
|
|
December 31, |
|
||
Claims incurred but not paid |
|
$ |
|
|
$ |
|
||
Capitation payable, risk-sharing payable, and other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Each period, we re-examine previously established outstanding claims reserve estimates based on actual claims submissions and other changes in facts and circumstances. As more complete claim information becomes available, we adjust the amount of the estimates and include the changes in estimates in claim costs in the period in which the change is identified. Substantially, all of the total claims paid by us are known and settled within the first year from the date of service, and substantially, all remaining claim amounts are paid within a
The following table presents components of the change in medical expenses payable as of June 30, 2021 and 2020:
|
|
June 30, |
|
|
June 30, |
|
||
Claims incurred but not paid - beginning balance |
|
$ |
|
|
$ |
|
||
Incurred related to: |
|
|
|
|
|
|
||
Current year |
|
|
|
|
|
|
||
Prior years |
|
|
( |
) |
|
|
( |
) |
Total incurred, net of reinsurance |
|
|
|
|
|
|
||
Payments related to: |
|
|
|
|
|
|
||
Current year |
|
|
|
|
|
|
||
Prior years |
|
|
|
|
|
|
||
Total payments, net of reinsurance |
|
|
|
|
|
|
||
Claims incurred but not paid - ending balance |
|
|
|
|
|
|
||
Other medical expenses payable |
|
|
|
|
|
|
||
Total medical expenses payable |
|
$ |
|
|
$ |
|
||
In March 2020, the COVID-19 outbreak was declared a pandemic. The COVID-19 virus disproportionately impacts older adults, especially those with chronic illnesses, which describes many of the seniors we serve. For the three months ended March 31, 2021, we experienced higher claims costs due to COVID-19 related inpatient admissions. However, for the three months ended June 30, 2021, we saw a decline in COVID-related utilization as vaccination rates improved across our senior population, which was partially offset by higher spend related to non-COVID-19 care as general healthcare utilization trended towards pre-pandemic levels. While COVID had a less significant impact on our second quarter medical expense relative to our first quarter medical expense, we remain cautious of the potential impact of the Delta variant in the future. Cumulatively, the six months incurred claims increased in 2021 due to higher membership. The ultimate impact of COVID-19 to us and our financial condition is presently unknown and we continue to monitor the impact of COVID-19 on our claims reserve estimate.
19
We re-examine previously established outstanding claims reserve estimates based on actual claims submissions and other changes in facts and circumstances. We recognized an unfavorable prior year development, excluding provision for adverse deviation, of $
8. Long-Term Debt
Long-term debt is recorded at carrying value in the consolidated balance sheets. The carrying value of long-term debt outstanding, net of unamortized debt issuance costs, consisted of the following as of June 30, 2021 and December 31, 2020:
|
|
June 30, |
|
|
December 31, |
|
||
Long-term debt |
|
$ |
|
|
$ |
|
||
Less unamortized debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Long-term debt-net of amortization |
|
|
|
|
|
|
||
Less current portion of long-term debt |
|
|
|
|
|
|
||
Long-term debt - net of current portion |
|
$ |
|
|
$ |
|
||
As of June 30, 2021, the total long-term debt balance of $
The term loan matures in , at which time the full balance of the term loan, including the commitment fee and the payment-in-kind balance, will be due.
In addition, the term loan includes financial covenants regarding the maintenance of minimum liquidity of $
9. Income Taxes
There was
We have cumulative NOLs as of June 30, 2021 and December 31, 2020. Given the history of losses, and after consideration for the risk associated with estimates of future taxable income, we established a full valuation allowance against net deferred tax assets at June 30, 2021 and December 31, 2020. As a result of the Tax Cuts and Jobs Act (“TCJA”), the federal NOLs generated in 2018 through 2020 will be carried forward indefinitely and are limited to an
Additionally, an “ownership change” as defined under Section 382 of the Internal Revenue Code, could potentially limit the ability to utilize certain tax attributes including the Company’s substantial NOLs. Ownership change is generally defined as any significant change in ownership of more than 50% of its stock over a three-year testing period. If, as a result of current or future transactions involving our common stock, we undergo cumulative ownership changes which exceed 50% over the testing period, our ability to utilize our NOL carryforwards would be subject to additional limitations under IRC Section 382. We continue to monitor changes in ownership with respect to these income tax provisions.
10. Equity-Based Compensation
2021 Equity Incentive Plan
In connection with the IPO, on March 25, 2021, our Board of Directors adopted the 2021 Equity Incentive Plan (the “2021 Plan”). Under the 2021 Plan, employees, consultants and directors of our company and our affiliates that perform services for us are eligible to receive awards. The 2021 Plan provides for the grant of incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), stock
20
appreciation rights, restricted shares, performance awards, other share-based awards (including restricted stock units) and other cash-based awards. ISOs may be granted only to employees, including officers. All other awards may be granted to employees, including officers, non-employee directors and consultants. The maximum number of shares available for issuance under the 2021 Plan may not exceed
IPO-Equity Awards
Stock options
Stock options generally vest
The following is a summary of the stock option transactions as of and for the three and six months ended June 30, 2021:
|
|
Stock Options Outstanding |
|
|||||||||||||
(amounts in thousands, except shares and per share amount) |
|
Shares Subject to Options Outstanding |
|
|
Weighted- Average Exercise Price per Option |
|
|
Weighted- Average Remaining Contractual Terms (in years) |
|
|
Aggregate Intrinsic Value |
|
||||
Balances as of December 31, 2020 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Options granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options forfeited / expired |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balances as of March 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Options granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options forfeited / expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Balances as of June 30, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable as of June 30, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Aggregate intrinsic value represents the difference between the exercise price of the option and the closing price of our common stock. The aggregate intrinsic value of options exercised for the three months ended June 30, 2021 and 2020 and the six months ended June 30, 2021 and 2020 was $
The weighted-average assumptions used to determine the fair value of stock options granted during the periods presented were as follows:
|
|
Six Months Ended June 30, |
||||
|
|
2021 |
|
|
2020 |
|
Expected term (in years)(1) |
|
|
|
|
N/A |
|
Expected volatility(2) |
|
|
|
|
N/A |
|
Risk-free interest rate(3) |
|
|
|
|
N/A |
|
Dividend yield(4) |
|
|
|
|
N/A |
|
21
Restricted Stock Awards
New restricted stock awards ("RSAs") granted generally vest
|
|
Restricted Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
||
Unvested and outstanding as of December 31, 2020 |
|
|
|
|
$ |
|
||
Converted |
|
|
|
|
|
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
|
|
|
|
||
Unvested and outstanding as of March 31, 2021 |
|
|
|
|
$ |
|
||
Converted |
|
|
|
|
|
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Unvested and outstanding as of June 30, 2021 |
|
|
|
|
$ |
|
||
Restricted Stock Units
Restricted stock units ("RSU") generally vest
The following is a summary of RSU transactions as of and for the three and six months ended June 30, 2021:
|
|
Restricted Stock Units |
|
|
Weighted-Average Grant Date Fair Value |
|
||
Unvested and outstanding as of December 31, 2020 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
|
|
|
|
||
Unvested and outstanding as of March 31, 2021 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
|
|
|
|
||
Cancelled/forfeited |
|
|
( |
) |
|
|
|
|
Unvested and outstanding as of June 30, 2021 |
|
|
|
|
$ |
|
||
Non-Employee Awards
During the three and six months ended June 30, 2021, total payment of $
Pre-IPO equity
Our Parent issued Incentive Units to certain employees, board members, and advisors, which were profits interests issued in Class B and Class C units. As of the IPO, only the time-vesting portion of Class B Incentive Units were fully vested.
22
In 2014, Alignment Healthcare Holdings, LLC’s Board of Directors adopted a Stock Appreciation Rights Plan (“SARs Plan”), under which Alignment Healthcare Holdings, LLC had granted awards in the form of SARs to employees, officers, directors, consultants, and other service providers of the Company.
Stock Appreciation Rights
In conjunction with the IPO, on March 24, 2021, the Company modified the Performance-vesting SARs to be converted into RSAs which vest
The following table is a summary of SARs transactions as of and for the three and six months ended June 30, 2021:
|
|
SARs |
|
|
Balance as of December 31, 2020 |
|
|
|
|
Granted |
|
|
|
|
Canceled |
|
|
( |
) |
Cash settlement or converted into common stock |
|
|
( |
) |
Unvested and outstanding as of March 31, 2021 |
|
|
|
|
Granted |
|
|
|
|
Canceled |
|
|
|
|
Cash settlement or converted into common stock |
|
|
|
|
Unvested and outstanding as of June 30, 2021 |
|
|
|
|
Incentive Units
A portion of Incentive Units vest annually over four years (“Time-vesting Incentive Units”) and the remaining Incentive Units vest upon a change in control (“Performance-vesting Incentives Units”). The IPO was not considered a change in control under the original terms of the Incentive Units. There was no activity related to these Incentive Units for the three months ended June 30, 2021 as these Incentive Units were converted to common stock and RSAs during the three months ended March 31, 2021.
The following table summarizes the equity-based awards activity as if the Series B and C Incentive Units were converted to RSA and common stock at the earliest period presented:
|
|
Equivalent Shares of RSA and Common Stock |
|
|
Balance as of December 31, 2020 |
|
|
|
|
Granted |
|
|
|
|
Canceled |
|
|
|
|
Redeemed |
|
|
( |
) |
Converted into common stock |
|
|
( |
) |
Converted into unvested RSAs |
|
|
( |
) |
Balance as of March 31, 2021 |
|
|
|
|
Granted |
|
|
|
|
Canceled |
|
|
|
|
Redeemed |
|
|
|
|
Converted into common stock |
|
|
|
|
Converted into unvested RSAs |
|
|
|
|
Balance as of June 30, 2021 |
|
|
|
|
23
|
|
Equivalent Shares of RSA and Common Stock |
|
|
Balance as of December 31, 2019 |
|
|
|
|
Granted |
|
|
|
|
Canceled |
|
|
( |
) |
Redeemed |
|
|
|
|
Balance as of March 31, 2020 |
|
|
|
|
Granted |
|
|
|
|
Canceled |
|
|
|
|
Redeemed |
|
|
|
|
Balance as of June 30, 2020 |
|
|
|
|
The following table summarizes unvested equity-based awards activity as if the Series B and C Incentive Units were converted to restricted common stock at the earliest period presented:
|
|
Equivalent Shares of Restricted Common Stock |
|
|
Balance as of December 31, 2020 |
|
|
|
|
Granted |
|
|
|
|
Vested |
|
|
( |
) |
Converted into unvested RSAs |
|
|
( |
) |
Balance as of March 31, 2021 |
|
|
|
|
Granted |
|
|
|
|
Vested |
|
|
|
|
Converted into unvested RSAs |
|
|
|
|
Balance as of June 30, 2021 |
|
|
|
|
|
|
Equivalent Shares of Restricted Common Stock |
|
|
Balance as of December 31, 2019 |
|
|
|
|
Granted |
|
|
|
|
Vested |
|
|
( |
) |
Balance as of March 31, 2020 |
|
|
|
|
Granted |
|
|
|
|
Vested |
|
|
( |
) |
Balance as of June 30, 2020 |
|
|
|
|
Modifications
In conjunction with the Reorganization, the conversion of the Incentive Units into our RSAs was made pursuant to antidilution provisions of the original awards which required the award holders to be kept whole. As a result, there was no incremental compensation cost associated with the conversion.
In conjunction with the IPO, the Company modified the Time-vesting Incentive Units to be converted into RSAs and subject to the same time-vesting conditions upon the IPO, and modified the Performance-vesting SARs and Performance-vesting Incentive Units to be converted into RSAs which vest upon the later of the fourth anniversary of the original vesting commencement date or 50% annually on the first and second anniversary of the IPO.
Historically, no equity-based compensation expense was recognized for the SARs or Performance-vesting Incentive Units as the change in control was not probable.
As a result of the conversion and modification, we determined that the RSAs converted from the Performance-vesting SARs and the Performance-vesting Incentive Units should be remeasured as of the date of the modification (March 25, 2021).
The RSAs converted from the SARs were previously classified as liabilities and subject to remeasurement at fair value each reporting period. After the modification the converted RSAs were classified as equity, and were measured using the IPO stock price which will be recognized over the remaining modified vesting periods.
24
Equity-Based Compensation Expense
We recognized equity-based compensation expense as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(amounts in thousands) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Cash settlement of SARs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Modification charge from performance-based Incentive Units and SARs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total equity-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total equity-based compensation expense was presented on the condensed statement of operations as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(amounts in thousands) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Selling, general and administrative expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Medical expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total equity-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
11. Regulatory Requirements and Restricted Funds
Our health plans or risk-bearing entities are required to maintain minimum capital requirements prescribed by various regulatory authorities in each of the states in which it operates.
Risk-Based Capital Regulatory
The National Association of Insurance Commissioners has adopted rules, which, if implemented by the states, set minimum capitalization requirements for insurance companies, HMOs, and other entities bearing risk for health care coverage. The requirements take the form of risk-based capital (“RBC”) rules, which may vary from state to state. Certain states in which our health plans or risk bearing entities operate in have adopted the RBC rules. Our health plans or risk-bearing entities were in compliance with the minimum capital requirements for all periods presented.
Tangible Net Equity
Our health plan in California is required to comply with the tangible net equity (“TNE”) requirements.
We have the ability to provide additional capital to each of our health plans or risk-bearing entities when necessary to ensure that the RBC and TNE requirements are met.
Certain states regulate the payment of dividends, loans, or other cash transfers from our regulated subsidiaries to our non-regulated subsidiaries and parent company. Such payments may require approval by state regulatory authorities and are limited based on certain financial criteria, such as the entity’s level of statutory income and statutory capital and surplus, or the entity’s level of tangible net equity or net worth, amongst other measures. These regulations vary by state. We were in compliance with the RBC and TNE requirements as of June 30, 2021 and December 31, 2020.
Restricted Assets
Pursuant to the regulations governing our subsidiaries, we maintain certain deposits required by the government authorities in the form of certificate of deposits and Treasury bills as protection in the event of insolvency. The use of funds from these investments is limited as required by regulation in the various states in which we operate, or as needed in the event of insolvency. Therefore, these deposits are reported within other assets on the condensed consolidated balance sheets.
25
We hold these assets until maturity, at which time these assets will renew or are invested in a similar type of investment instrument. As a result, we do not expect the value of these investments to decline significantly due to a sudden change in market interest rates. These investments are carried at amortized cost, which approximates fair value.
12. Commitments and Contingencies
Legal Proceedings
We record a liability and accrue the costs for a loss when an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings. While the liability and accrued costs reflect our best estimate, the actual amounts may materially be different.
We may be involved in various litigation matters in the ordinary course of business. In the opinion of management, the ultimate resolution of legal proceedings is not expected to have a material adverse effect on the condensed consolidated financial statements. Amounts accrued for legal proceedings were
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with our audited financial statements and the accompanying notes as well as “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our prospectus, dated March 25, 2021 (File No. 333-253824) (the “IPO Prospectus”) as well as our unaudited consolidated financial statements and related notes presented herein in Part I, Item 1 included elsewhere in this Quarterly Report. Unless the context otherwise indicates or requires, the terms “we”, “our” and the “Company” as used herein refer to Alignment Healthcare, Inc. and its consolidated subsidiaries, including Alignment Healthcare Holdings, LLC, which is Alignment Healthcare, Inc.’s predecessor for financial reporting purposes.
In addition to historical data, the discussion contains forward-looking statements about the business, operations and financial performance of the Company based on our current expectations that involves risks, uncertainties and assumptions. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed above in "Forward-Looking Statements," and Part II, Item 1A, "Risk Factors.”
Overview
Alignment is a next generation, consumer-centric platform that is revolutionizing the healthcare experience for seniors. We deliver this experience through our Medicare Advantage plans, which are customized to meet the needs of a diverse array of seniors. Our innovative model of consumer-centric healthcare is purpose-built to provide seniors with care as it should be: high quality, low cost and accompanied by a vastly improved consumer experience. We combine a proprietary technology platform and a high-touch clinical model that enhances our members’ lifestyles and health outcomes while simultaneously controlling costs, which allows us to reinvest savings back into our platform and products to directly benefit the senior consumer. We have grown Health Plan Membership, which we define as members enrolled in our HMO and PPO contracts, from approximately 13,000 at inception to over 84,700 today, representing a 32% compound annual growth rate across 22 markets and 3 states. Our ultimate goal is to bring this differentiated, advocacy-driven healthcare experience to millions of senior consumers in the United States and to become the most trusted senior healthcare brand in the country.
Our model is based on a flywheel concept, referred to as our “virtuous cycle”, which is designed to delight our senior consumers. We start by listening to and engaging with our seniors in order to provide a superior experience in both their healthcare and daily living needs. Through our proprietary technology platform, Alignment's Virtual Application ("AVA"), we utilize data and predictive algorithms that are specifically designed to ensure personalized care is delivered to each member. When our information-enabled care model is combined with our member engagement, we are able to improve healthcare outcomes by, for example, reducing unnecessary hospital admissions, which in turn lowers overall costs. Our ability to manage healthcare expenditures while maintaining quality and member satisfaction is a distinct and sustainable competitive advantage. Our lower total healthcare expenditures allow us to reinvest our savings into richer coverage and benefits, which propels our growth in revenue and membership due to the enhanced consumer value proposition. As we grow, we continue to listen to and incorporate member feedback, and we are able to further enhance benefits and produce strong clinical outcomes. Our virtuous cycle, based on the principle of doing well by doing good, is highly repeatable and a core tenet of our ability to continue to expand in existing and new markets in the future.
Recent Developments
Market and Product Expansion
In June 2021, Alignment announced several anticipated 2022 market expansions, pending regulatory approval, including:
In total, Alignment anticipates increasing its number of markets from 22 in 2021 to 38 in 2022 across California (18 markets), North Carolina (15 markets), Nevada (3 markets) and Arizona (2 markets), which in turn will increase the total number of Medicare eligibles in Alignment’s geographies from 5.5 million to 7.0 million.
In addition, Alignment announced multiple product expansions effective January 2022, pending regulatory approval, including:
27
Initial Public Offering
On March 25, 2021, the Company’s Registration Statement on Form S-1 for the initial public offering of 27,200,000 shares of common stock was declared effective by the Securities and Exchange Commission. The Company’s common stock began trading on March 26, 2021 on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “ALHC.”
The IPO closed on March 30, 2021, with the Company selling 21,700,000 shares of common stock and certain selling stockholders selling 5,500,000 shares of common stock, in each case at a price to the public of $18.00 per share. On Tuesday, April 6, 2021, pursuant to a partial exercise of the underwriters’ over-allotment option, certain selling stockholders sold an additional 3,314,216 shares of common stock at the IPO price. In the aggregate, the IPO generated approximately $361.6 million in net proceeds for the Company, which amount is net of approximately $24.4 million in underwriters’ discounts and commissions and offering costs of approximately $4.6 million. We expect to use the net proceeds from the IPO for working capital and general corporate purposes, including continued investments in the growth of our business, and strengthening our balance sheet by potentially repaying debt. We may also use a portion of our net proceeds to acquire or invest in complementary businesses, products, services or technologies.
See further discussion related to the IPO as described in Note 1, Organization, to Alignment Healthcare, Inc.'s condensed consolidated financial statements.
Factors Affecting Our Performance
Our historical financial performance has been, and we expect our financial performance in the future will be, driven by our ability to:
28
29
Executive Summary
The following table presents key financial statistics for the periods indicated:
|
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
||||||||||||
(dollars in '000's, except percentages) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
||||||
Health plan membership |
|
|
84,700 |
|
|
|
64,400 |
|
|
31.5% |
|
|
|
84,700 |
|
|
|
64,400 |
|
|
31.5% |
|
||
Medical benefits ratio |
|
|
88.0 |
% |
|
|
79.6 |
% |
|
|
8.4 |
% |
|
|
89.6 |
% |
|
|
82.7 |
% |
|
|
6.9 |
% |
Revenues |
|
$ |
308,951 |
|
|
$ |
244,313 |
|
|
|
26.5 |
% |
|
$ |
576,033 |
|
|
$ |
468,946 |
|
|
|
22.8 |
% |
Net income (loss) from operations |
|
$ |
(44,762 |
) |
|
$ |
8,365 |
|
|
N/M |
|
|
$ |
(101,636 |
) |
|
$ |
(1,707 |
) |
|
N/M |
|
||
Adjusted EBITDA(1) |
|
$ |
(4,690 |
) |
|
$ |
16,521 |
|
|
N/M |
|
|
$ |
(18,732 |
) |
|
$ |
14,605 |
|
|
N/M |
|
||
Adjusted gross profit (1) |
|
$ |
37,077 |
|
|
$ |
49,899 |
|
|
N/M |
|
|
$ |
59,682 |
|
|
$ |
81,241 |
|
|
N/M |
|
||
Health Plan Membership
We define Health Plan Membership as the number of members enrolled in our HMO and PPO contracts as of the end of a reporting period. We believe this is an important metric to assess growth of our underlying business, which is indicative of our ability to consistently offer a superior value proposition to seniors. This metric excludes third party payor members with respect to which we are at-risk for managing their healthcare expenditures, which represented approximately 600 members and 7,500 members as of June 30, 2021 and 2020, respectively. It also excludes the ~5,900 traditional Medicare seniors for which we are at-risk for managing their healthcare expenditures through our DCE contracts with CMS.
Adjusted Gross Profit and Medical Benefits Ratio, or MBR
Adjusted gross profit is a non-GAAP financial measure that we define as revenues less medical expenses before depreciation and amortization and equity-based compensation expense. Adjusted Gross Profit is a key measure used by our management and Board to understand and evaluate our operating performance and trends before the impact of our consolidated selling, general and administrative expenses.
Adjusted gross profit is reconciled as follows:
30
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues |
|
$ |
308,951 |
|
|
$ |
244,313 |
|
|
$ |
576,033 |
|
|
$ |
468,946 |
|
Medical expenses |
|
|
274,385 |
|
|
|
194,502 |
|
|
|
525,480 |
|
|
|
387,898 |
|
Gross profit |
|
|
34,566 |
|
|
|
49,811 |
|
|
|
50,553 |
|
|
|
81,048 |
|
Gross profit % |
|
|
11.2 |
% |
|
|
20.4 |
% |
|
|
8.8 |
% |
|
|
17.3 |
% |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity-based compensation (medical expenses) |
|
|
2,457 |
|
|
|
— |
|
|
|
9,023 |
|
|
|
— |
|
Depreciation |
|
|
54 |
|
|
|
88 |
|
|
|
106 |
|
|
|
193 |
|
Total add back |
|
|
2,511 |
|
|
|
88 |
|
|
|
9,129 |
|
|
|
193 |
|
Adjusted gross profit |
|
$ |
37,077 |
|
|
$ |
49,899 |
|
|
$ |
59,682 |
|
|
$ |
81,241 |
|
Adjusted gross profit % |
|
|
12.0 |
% |
|
|
20.4 |
% |
|
|
10.4 |
% |
|
|
17.3 |
% |
We calculate our MBR by dividing total medical expenses excluding depreciation and equity-based compensation by total revenues in a given period. We believe our MBR is an indicator of our gross profit for our Medicare Advantage plans and demonstrates the ability of our clinical model to produce superior outcomes by identifying and providing targeted care to our high-risk members resulting in improved member health and reduced total population medical expenses. We expect that this metric may fluctuate over time due to a variety of factors, including our pace of new member growth given that new members typically join Alignment with higher MBRs, while our model has demonstrated an ability to improve MBR for a given cohort over time.
When we determine, on an annual basis, whether we have satisfied the CMS minimum Medical Loss Ratio (“MLR”) of 85%, adjustments are made to the MBR calculation to include certain additional expenses related to improving the quality of care provided, and to exclude certain taxes and fees, in each case as permitted or required by CMS and applicable regulatory requirements.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) before interest expense, income taxes, depreciation and amortization expense, reorganization and transaction-related expenses and equity-based compensation expense. Adjusted EBITDA is a key measure used by our management and our Board to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operating plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA provides useful measures for period-to-period comparisons of our business. Given our intent to continue to invest in our platform and the scalability of our business in the short to medium-term, we believe Adjusted EBITDA over the long term will be an important indicator of value creation.
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 income (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.
Adjusted EBITDA is reconciled as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
(44,762 |
) |
|
$ |
8,365 |
|
|
$ |
(101,636 |
) |
|
$ |
(1,707 |
) |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
4,329 |
|
|
|
4,192 |
|
|
|
8,577 |
|
|
|
8,352 |
|
Depreciation and amortization |
|
|
3,962 |
|
|
|
3,614 |
|
|
|
7,751 |
|
|
|
7,284 |
|
EBITDA |
|
|
(36,471 |
) |
|
|
16,171 |
|
|
|
(85,308 |
) |
|
|
13,929 |
|
Equity-based compensation(1) |
|
|
30,887 |
|
|
|
350 |
|
|
|
62,674 |
|
|
|
676 |
|
Reorganization and transaction-related expenses(2) |
|
|
593 |
|
|
|
— |
|
|
|
3,601 |
|
|
|
— |
|
Acquisition expenses(3) |
|
|
301 |
|
|
|
— |
|
|
|
301 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
(4,690 |
) |
|
$ |
16,521 |
|
|
$ |
(18,732 |
) |
|
$ |
14,605 |
|
31
Impact of COVID-19 on Our Operations
The severity, magnitude and duration of the current COVID-19 pandemic is uncertain and rapidly changing. As of the date of this Quarterly Report, the extent to which the COVID-19 pandemic may impact our business, results of operations and financial condition remains uncertain. Furthermore, because of our business model, the full impact of the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial condition until future periods.
In response to the COVID-19 pandemic, we took the following actions to ensure the safety of our employees and their families and to address the physical, mental and social health of our members:
The ultimate impact of the COVID-19 pandemic on our business, results of operations and financial condition will depend on certain developments, including: the duration and spread of the outbreak; government responses to the pandemic; its impact on the health and welfare of our members, our employees and their families; its impact on member, industry, or employee events; delays in hiring and onboarding new employees; and effects on our partners and supply chain, some of which are uncertain, difficult to predict, and not within our control. Further, as a result of the pandemic, we have experienced increased challenges in appropriately documenting members’ underlying conditions, lower RAF scores among new members than we have historically experienced, limitations on our ability to engage in outreach to potential new members, abnormal seasonality in our medical expense and increased operational expenditures.
32
Results of Operations
The following table sets forth our consolidated statements of operations data for the periods indicated:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earned premiums |
|
$ |
308,739 |
|
|
$ |
243,956 |
|
|
$ |
575,739 |
|
|
$ |
468,222 |
|
Other |
|
|
212 |
|
|
|
357 |
|
|
|
294 |
|
|
|
724 |
|
Total revenues |
|
|
308,951 |
|
|
|
244,313 |
|
|
|
576,033 |
|
|
|
468,946 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical expenses |
|
|
274,385 |
|
|
|
194,502 |
|
|
|
525,480 |
|
|
|
387,898 |
|
Selling, general and administrative expenses |
|
|
71,150 |
|
|
|
33,698 |
|
|
|
136,064 |
|
|
|
66,485 |
|
Depreciation and amortization |
|
|
3,908 |
|
|
|
3,526 |
|
|
|
7,645 |
|
|
|
7,091 |
|
Total expenses |
|
|
349,443 |
|
|
|
231,726 |
|
|
|
669,189 |
|
|
|
461,474 |
|
Income (loss) from operations |
|
|
(40,492 |
) |
|
|
12,587 |
|
|
|
(93,156 |
) |
|
|
7,472 |
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
4,329 |
|
|
|
4,192 |
|
|
|
8,577 |
|
|
|
8,352 |
|
Other (income) expenses |
|
|
(59 |
) |
|
|
30 |
|
|
|
(97 |
) |
|
|
827 |
|
Total other expenses |
|
|
4,270 |
|
|
|
4,222 |
|
|
|
8,480 |
|
|
|
9,179 |
|
Income (loss) before income taxes |
|
|
(44,762 |
) |
|
|
8,365 |
|
|
|
(101,636 |
) |
|
|
(1,707 |
) |
Provision for income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss) |
|
$ |
(44,762 |
) |
|
$ |
8,365 |
|
|
$ |
(101,636 |
) |
|
$ |
(1,707 |
) |
The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenues for the periods indicated:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
(% of revenue) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earned premiums |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total revenues |
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical expenses |
|
|
89 |
|
|
|
80 |
|
|
|
91 |
|
|
|
83 |
|
Selling. general and administrative expenses |
|
|
23 |
|
|
|
14 |
|
|
|
24 |
|
|
|
14 |
|
Depreciation and amortization |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Total expenses |
|
|
113 |
|
|
|
95 |
|
|
|
116 |
|
|
|
98 |
|
Income (loss) from operations |
|
|
(13 |
) |
|
|
5 |
|
|
|
(16 |
) |
|
|
2 |
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
Other (income) expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total other expenses |
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
Loss before income taxes |
|
|
(14 |
) |
|
|
3 |
|
|
|
(18 |
) |
|
|
0 |
|
Provision for income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss) |
|
|
(14 |
)% |
|
|
3 |
% |
|
|
(18 |
)% |
|
|
0 |
% |
33
Comparison of the Three and Six Months Ended June 30, 2021 and 2020
Revenues
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earned premiums |
|
$ |
308,739 |
|
|
$ |
243,956 |
|
|
$ |
64,783 |
|
|
|
26.6 |
% |
Other |
|
|
212 |
|
|
|
357 |
|
|
|
(145 |
) |
|
(40.6) |
|
|
Total revenues |
|
$ |
308,951 |
|
|
$ |
244,313 |
|
|
$ |
64,638 |
|
|
|
26.5 |
% |
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earned premiums |
|
$ |
575,739 |
|
|
$ |
468,222 |
|
|
$ |
107,517 |
|
|
|
23.0 |
% |
Other |
|
|
294 |
|
|
$ |
724 |
|
|
|
(430 |
) |
|
(59.4) |
|
|
Total revenues |
|
$ |
576,033 |
|
|
$ |
468,946 |
|
|
$ |
107,087 |
|
|
|
22.8 |
% |
Revenues. Revenues were $309.0 and $244.3 for the three months ended June 30, 2021 and 2020, respectively, an increase of $64.6 million or 26.5%. Revenues were $576.0 million and $468.9 million for the six months ended June 30, 2021 and 2020, respectively, an increase of $107.1 or 22.8%. For both periods, the increase was driven primarily by growth in Alignment’s Health Plan membership in 2021 as compared to 2020, which resulted in Health Plan premium revenue growth of 31.5% year over year for the quarter ended June 30, 2021, and 30.6% for the six months ended June 30, 2021. Health Plan premium revenue growth was further offset by a reduction in capitation revenue from third party payors.
Expenses
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical expenses |
|
$ |
274,385 |
|
|
$ |
194,502 |
|
|
$ |
79,883 |
|
|
|
41.1 |
% |
Selling, general and administrative expenses |
|
|
71,150 |
|
|
|
33,698 |
|
|
|
37,452 |
|
|
|
111.1 |
% |
Depreciation and amortization |
|
|
3,908 |
|
|
|
3,526 |
|
|
|
382 |
|
|
|
10.8 |
% |
Total expenses |
|
$ |
349,443 |
|
|
$ |
231,726 |
|
|
$ |
117,717 |
|
|
|
50.8 |
% |
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical expenses |
|
$ |
525,480 |
|
|
$ |
387,898 |
|
|
$ |
137,582 |
|
|
|
35.5 |
% |
Selling, general and administrative expenses |
|
|
136,064 |
|
|
|
66,485 |
|
|
|
69,579 |
|
|
|
104.7 |
% |
Depreciation and amortization |
|
|
7,645 |
|
|
|
7,091 |
|
|
|
554 |
|
|
|
7.8 |
% |
Total expenses |
|
$ |
669,189 |
|
|
$ |
461,474 |
|
|
$ |
207,715 |
|
|
|
45.0 |
% |
Medical Expenses. Medical expenses were $274.4 million and $194.5 million for the three months ended June 30, 2021 and 2020, respectively, an increase of $79.9 million, or 41.1%. Medical expenses were $525.5 million and $387.9 million for the six months ended June 30, 2021 and 2020, respectively, an increase of $137.6 million, or 35.5%. For both periods, the increase was driven primarily by growth in Alignment’s Health Plan membership in 2021 as compared to 2020. In addition, the increase for the three and six months ended June 30, 2021 was partially due to $2.5 million and $9.0 million, respectively, of equity-based compensation recorded to medical expenses due to the issuance of shares related to the IPO. Overall, medical expenses grew at a higher rate than total revenues due to a combination of mix shift of membership away from Alignment's third-party payor members from 2020 to 2021, and the impact of COVID-19 on utilization in 2021. For January and February 2021, we experienced an increase
34
in inpatient admissions due to COVID-related hospitalizations. The ultimate impact of COVID-19 to us and our financial condition is presently unknown and we continue to monitor the impact of COVID-19 on our claims reserve estimate.
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $71.2 million and $33.7 million for the three months ended June 30, 2021 and 2020, respectively, an increase of $37.5 million, or 111.1%. Selling, general and administrative expenses were $136.1 million and $66.5 million for the six months ended June 30, 2021 and 2020, respectively, an increase of $69.6 million, or 104.7%. For both periods, the increase was primarily due to equity-based compensation of $28.4 million and $53.7 million for the three and six months ended June 30, 2021, respectively. Excluding the equity-based compensation in the second quarter of 2021, our selling, general and administrative expenses increased 28.1% from the second quarter of 2020. Excluding the equity-based compensation for first half of 2021, our, selling, general and administrative expenses increased 25.2% from the first half of 2020. The remaining increase was driven by ongoing investments and expenditures in sales and marketing to drive the growth of Alignment’s Health Plan membership, continued hiring of employees to support that growth, and investments related to the IPO.
Depreciation and Amortization. Depreciation and amortization expense was $3.9 million and $3.5 million for the three months ended June 30, 2021 and 2020, respectively, an increase of $0.4 million, or 10.8%. Depreciation and amortization expense was $7.6 million and $7.1 million for the six months ended June 30, 2021 and 2020, respectively, an increase of $0.6 million, or 7.8%. For both periods, the increase was primarily due to the amount and timing of our capital expenditures and the associated depreciation relative to 2020.
Other Expenses
Interest expense. Interest expense was $4.3 million and $4.2 million for the three months ended June 30, 2021 and 2020, respectively, an increase of $0.1 million or 3.3%. Interest expense was $8.6 million and $8.4 million for the six months ended June 30, 2021 and 2020, respectively, an increase of $0.2 million or 2.7%.
Other income (expenses). Other (income) expenses were ($0.1) and $0.0 for the three months ended June 30, 2021 and 2020, respectively, a decrease of $0.1 million. Other (income) expenses were ($0.1) and $0.8 million for the six months ended June 30, 2021 and 2020, respectively, a decrease of $0.9 million. The decrease in expenses was primarily due to losses on the disposal of assets in 2020 that did not recur in 2021.
Liquidity and Capital Resources
General
On March 25, 2021, the Company’s Registration Statement on Form S-1 for the initial public offering of 27,200,000 shares of common stock was declared effective by the Securities and Exchange Commission. The IPO closed on March 30, 2021, with the Company selling 21,700,000 shares of common stock and certain selling stockholders selling 5,500,000 shares of common stock, in each case at a price to the public of $18.00 per share. In the aggregate, the IPO generated approximately $361.6 million in net proceeds for the Company, which amount is net of approximately $24.4 million in underwriters’ discounts and commissions and offering costs of approximately $4.6 million. We expect to use the net proceeds from the IPO for working capital and general corporate purposes, including continued investments in the growth of our business, and strengthening our balance sheet by potentially repaying debt. We may also use a portion of our net proceeds to acquire or invest in complementary businesses, products, services or technologies. See further discussion related to the IPO as described in Note 1, Organization, to Alignment Healthcare, Inc.'s condensed consolidated financial statements.
Prior to the IPO, we have financed our operations principally through private placements of our equity securities, revenues, and a loan agreement with CR Group (“CRG”). As of June 30, 2021, we had $494.6 million in cash. We may incur operating losses in the future due to the investments we intend to continue to make in expanding our operations and sales and marketing and due to additional general and administrative costs we expect to incur in connection with operating as a public company. As a result, we may require additional capital resources to execute strategic initiatives to grow our business.
We believe that our liquid assets, together with anticipated revenues from our operations, will be sufficient to fund our operating and capital needs for at least the next 12 months. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary because of, and our future capital requirements will depend on, many factors, including our growth rate, the timing and extent of spending to expand our presence in existing markets, expand into new markets and increase our sales and marketing activities. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that
35
additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected.
Certain states in which we operate as a CMS licensed Medicare Advantage company may require us to meet certain capital adequacy performance standards and tests. The National Association of Insurance Commissioners has adopted rules which, if implemented by the states, set minimum capitalization requirements for insurance companies, HMOs, and other entities bearing risk for healthcare coverage. The requirements take the form of risk-based capital (“RBC”) rules, which may vary from state to state. Certain states in which our health plans or risk bearing entities operate have adopted the RBC rules. Other states in which our health plans or risk bearing entities operate have chosen not to adopt the RBC rules, but instead have designed and implemented their own rules regarding capital adequacy. Our health plans or risk-bearing entities were in compliance with the minimum capital requirements for all periods presented.
Term Loan
On August 21, 2018, we entered into a term loan with CRG for $80 million, with an option to borrow up to an additional $20 million (as amended, the “Term Loan”). In April 2019, we amended the Term Loan to increase its borrowing capacity by $75 million and drew down $35 million in May 2019. The Term Loan was subject to a commitment fee of $6.8 million and we incurred debt issuance costs of $3.6 million. The Term Loan matures in June 2023, at which time the full balance of the Term Loan, including the commitment fee and the payment-in-kind balance, will be due.
The commitment fees are deferred as part of debt issuance costs and are amortized to interest expense over the term using the effective interest method. The debt issuance costs are being amortized to interest expense over the term using the effective interest method.
The Term Loan bears interest at a rate of 10.25% payable on a quarterly basis. We have the option to pay a portion of the interest in cash with the remaining portion of the interest added to the principal balance as a payment-in-kind. The payment-in-kind is also subject to a commitment fee of 5%. The cash and payment-in-kind interest rates were 7.75% and 2.50%, respectively, through April 2019, and then converted to 7.50% and 2.75%, respectively. In 2019 and 2020, we utilized our option to pay the quarterly interest payments in both cash and payment-in-kind. As of June 30, 2021, the payment-in-kind balance was $10.0 million.
Our total long-term debt balance of $152.0 million as of June 30, 2021 included the principal balance of $135.0 million, the initial commitment fee of $6.8 million, and the payment-in-kind interest on the principal balance of $10.0 million. The payment-in-kind interest on the principal balance is also subject to the commitment fee which was $0.2 million as of June 30, 2021. The amount was included in the long-term debt balance.
In addition, the Term Loan includes financial covenants regarding the maintenance of minimum liquidity of $6.0 million of operating cash, as defined, on a consolidated basis, at least $10 million in its cash accounts on a daily basis and minimum consolidated revenue amounts in the calendar years through 2022. As of June 30, 2021, we were in compliance with the financial covenants. The Term Loan is guaranteed by certain of our wholly owned subsidiaries and collateralized by all unrestricted assets.
Cash Flows
The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated:
|
|
Six Months Ended June 30, |
|
|||||
(dollars in thousands) |
|
2021 |
|
|
2020 |
|
||
Net cash used in operating activities |
|
$ |
(61,556 |
) |
|
$ |
(8,332 |
) |
Net cash used in investing activities |
|
|
(10,867 |
) |
|
|
(7,375 |
) |
Net cash provided by financing activities |
|
|
360,130 |
|
|
|
130,606 |
|
Net change in cash |
|
|
287,707 |
|
|
|
114,899 |
|
Cash and restricted cash at beginning of period |
|
|
207,811 |
|
|
|
86,484 |
|
Cash and restricted cash at end of period |
|
$ |
495,518 |
|
|
$ |
201,383 |
|
36
Operating Activities
For the six months ended June 30, 2021, net cash used in operating activities was $61.6 million, an increase of $53.2 million compared to net cash used in operating activities of $8.3 million for the six months ended June 30, 2020. Significant changes impacting net cash provided by operating activities for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 were as follows: Increase in net loss offset by adjustments for non-cash items such as equity-based compensation and common stock payments.
Investing Activities
For the six months ended June 30, 2021, net cash used in investing activities was $10.9 million, an increase of $3.5 million compared to net cash used in investing activities of $7.4 million for the six months ended June 30, 2020. The increase primarily relates to incremental capital expenditures related to information technology and infrastructure projects and asset acquisition.
Financing Activities
For the six months ended June 30, 2021, net cash provided by financing activities was $360.1 million, an increase of $229.5 million compared to net cash provided by financing activities of $130.6 for the six months ended June 30, 2020. The increase primarily relates to proceeds from the IPO in the first quarter of 2021 which was higher than the funding received in the first half of 2020.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations disclosed in our IPO Prospectus.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2021.
JOBS Act
We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.
In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We intend to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
As described under Note 2 to our consolidated financial statements “Summary of Significant Accounting Policies – Recent Accounting Pronouncements Adopted” and “Recent Accounting Pronouncements Not Yet Adopted”, we early adopted certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies. We expect to use the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of our wholly-owned subsidiaries and three variable interest entities (“VIEs”) in California and North Carolina that meet the
37
consolidation requirements for accounting purposes. All intercompany transactions have been eliminated in consolidation. Noncontrolling interest is presented within the equity section of the condensed consolidated balance sheets.
There have been no significant changes in our critical accounting estimate policies or methodologies to our condensed consolidated financial statements. For a description of our policies regarding our critical accounting policies, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in the IPO Prospectus.
Recent Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements “Summary of Significant Accounting Policies—Recent Accounting Pronouncements Adopted” for more information.
38
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation. We do not hold financial instruments for trading purposes.
Inflation Risk
Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures:
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of June 30, 2021.
Changes to our Internal Controls over Financial Reporting:
There were no material changes in our internal control over financial reporting during the six months ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As a result of the COVID-19 pandemic, certain employees began working remotely in March 2020. We have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment, in part because our internal control over financial reporting was designed to operate in a remote working environment. We are continually monitoring and assessing the COVID-19 situation to determine any potential impact on the design and operating effectiveness of our internal controls over financial reporting.
39
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 12, Commitments and Contingencies – Legal Proceedings, to Alignment Healthcare, Inc.'s Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report.
Item 1A. Risk Factors.
Except as set forth below, there have been no material changes to the risk factors disclosed in the IPO Prospectus.
We have no experience serving as a Direct Contracting Entity with CMS and may not be able to realize the expected benefits thereof
The CMS Center for Medicare and Medicaid Innovation recently announced a direct contracting model set to begin in 2021 to create value-based payment arrangements directly with Direct Contracting Entities (“DCEs”), which is part of CMS’ strategy to drive broader healthcare reform and accelerate the shift from original Medicare toward value-based care models. A key aspect of direct contracting is providing new opportunities for a variety of different DCEs to participate in value-based care arrangements in Medicare fee-for-service. Our participation in the DCE program began on April 1, 2021 and we were assigned ~5,800 seniors in traditional Medicare. However, we have no experience serving as a DCE and may not be able to realize the expected benefits thereof. In particular, we may be unable to achieve risk-like patient economics on original Medicare patients. Members that we are assigned under the direct contracting model may not be profitable to us initially or at all. In addition, our management team has and may further invest considerable time and resources in adapting to the direct contracting model. The direct contracting model may not be successful and may ultimately be discontinued, including as a result of decreased political support for value-based care or the direct contracting model, or may be unable to expand our total addressable market in the manner that we expect. Our existing DCE contracts are subject to review by CMS each year and such contracts are not guaranteed to be renewed in 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities during the three-months ended June 30, 2021.
Use of Proceeds
On March 25, 2021, the Company’s Registration Statement on Form S-1 for the initial public offering of 27,200,000 shares of common stock was declared effective by the Securities and Exchange Commission. The Company’s common stock began trading on March 26, 2021 on Nasdaq under the ticker symbol “ALHC.” The IPO closed on March 30, 2021, with the Company selling 21,700,000 shares of common stock and certain selling stockholders selling 5,500,000 shares of common stock, in each case at a price to the public of $18.00 per share. On Tuesday, April 6, 2021, pursuant to a partial exercise of the underwriters’ over-allotment option, certain selling stockholders sold an additional 3,314,216 shares of common stock at the IPO price. In the aggregate, the IPO generated approximately $361.6 million in net proceeds for the Company, which amount is net of approximately $24.4 million in underwriters’ discounts and commissions and offering costs of approximately $4.6 million. The IPO commenced on March 25, 2021 and terminated upon the partial exercise of the underwriters’ over-allotment options as described above. The representatives of the several underwriters of the IPO were Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC.
There has been no material change in the use of proceeds described in the IPO Prospectus. We may also use a portion of our net proceeds to acquire or invest in complementary businesses, products, services or technologies.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
40
Item 5. Other Information.
None.
41
Item 6. Exhibits.
Exhibit Number |
|
Description |
3.1 |
|
|
3.2 |
|
|
4.1 |
|
|
10.1 |
|
|
10.2 |
|
|
10.3 |
|
|
10.4 |
|
|
10.5 |
|
|
10.6 |
|
|
10.7+ |
|
|
10.8+ |
|
|
10.9+ |
|
|
10.10+ |
|
|
10.11+ |
|
|
10.12 |
|
|
10.13 |
|
|
10.14+ |
|
|
10.15+ |
|
|
10.16+ |
|
|
10.17+ |
|
42
10.18+ |
|
|
31.1* |
|
|
31.2* |
|
|
32.1** |
|
|
32.2** |
|
|
101.INS* |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** Furnished herewith
+ Indicates management contract or compensatory plan.
43
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Company Name |
|
|
|
|
|
Date: August 9, 2021 |
|
By: |
/s/ John Kao |
|
|
|
John Kao |
|
|
|
Chief Executive Officer |
|
|
|
|
Date: August 9, 2021 |
|
By: |
/s/ Thomas Freeman |
|
|
|
Thomas Freeman |
|
|
|
Chief Financial Officer |
44
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Kao, certify that:
Date: August 9, 2021 |
|
By: |
/s/ John Kao |
|
|
|
John Kao |
|
|
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas Freeman, certify that:
Date: August 9, 2021 |
|
By: |
/s/ Thomas Freeman |
|
|
|
Thomas Freeman |
|
|
|
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Alignment Healthcare, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Kao, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
Date: August 9, 2021 |
|
By: |
/s/ John Kao |
|
|
|
John Kao |
|
|
|
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Alignment Healthcare, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas Freeman, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
Date: August 9, 2021 |
|
By: |
/s/ Thomas Freeman |
|
|
|
Thomas Freeman |
|
|
|
Chief Financial Officer |