SEC Filing | Alignment Healthcare, Inc.

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10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2022


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

For the transition period from to

Commission File Number: 001-40295

ALIGNMENT HEALTHCARE, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	46-5596242
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1100 W. Town and Country Road, Suite 1600 Orange, California	92868
(Address of principal executive offices)	(Zip Code)

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

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

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

ALHC

The Nasdaq Stock Market LLC

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

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

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☐

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

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

As of August 1, 2022, the registrant had 187,258,118 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page

PART I.	Financial Information	3

Item 1.	Financial Statements (Unaudited):	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Stockholders' Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33

PART II.	Other Information	34

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures		37

FORWARD-LOOKING STATEMENTS

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

•

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

•

the impact of the COVID-19 pandemic or any other pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide on our business, financial condition and results of operations;

•

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

•

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

•

our ability to attract new members;

•

the quality and pricing of our products and services;

•

our ability to maintain a high rating for our plans on the Five Star Quality Rating System;

•

our ability to develop and maintain satisfactory relationships with care providers that service our members;

•

our ability to manage our growth effectively, execute our business plan, maintain high levels of service and member satisfaction or adequately address competitive challenges;

•

our ability to compete in the healthcare industry;

•

the impact on our business of security breaches, loss of data or other disruptions causing the compromise of sensitive information or preventing us from accessing critical information;

•

the impact on our business of disruptions in our disaster recovery systems or management continuity planning;

•

the cost of legal proceedings and litigation, including intellectual property and privacy disputes;

•

risks associated with being a government contractor;

•

the impact on our business of the healthcare services industry becoming more cyclical;

•

our ability to manage acquisitions, divestitures and other significant transactions successfully;

•

our ability to maintain, enhance and protect our reputation and brand recognition;

•

our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;

•

our ability to obtain, maintain, protect and enforce intellectual property protection for our technology;

•

the potential adverse impact of claims by third parties that we are infringing on, misappropriating or otherwise violating their intellectual property rights;

•

the impact of any restrictions on our use of or ability to license data or our failure to license data and integrate third-party technologies;

•

our dependence on our senior management team and other key employees;

•

the concentration of our health plans in a limited number of U.S. states;

•

our management team’s limited experience managing a public company;

•

the impact of shortages of qualified personnel and related increases in our labor costs;

•

the risk that our records may contain inaccurate or unsupportable information regarding risk adjustment scores of members;

•

our ability to accurately estimate incurred but not reported medical expenses;

•

the impact of negative publicity regarding the managed healthcare industry;

•

the impact of weather and other factors beyond our control on our clinics, the centers out of which our external providers operate, and the facilities that host our AVA platform (as defined below);

•

our dependence on reimbursements by the Centers for Medicare and Medicaid Services ("CMS") and premium payments by individuals;

•

the impact on our business of renegotiation, non-renewal or termination of risk agreements with hospitals, physicians, nurses, pharmacists and medical support staff;

•

risks associated with estimating the amount of liabilities that we recognize under our risk agreements with providers;

•

our ability to respond to general economic conditions, including but not limited to, increased inflation and higher interest rates;

•

risks associated with an economic downturn, including pressure on governmental budgets and reduced spending for health and human service programs;

•

our ability to develop and maintain proper and effective internal control over financial reporting;

•

the impact of state and federal efforts to reduce Medicare spending;

•

our ability to comply with applicable federal, state and local rules and regulations, including those relating to data privacy and security; and

•

other factors disclosed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report.

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

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

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

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)


	June 30, 2022			December 31, 2021
Assets
Current Assets:
Cash	$	453,234		$	466,600
Accounts receivable (less allowance for credit losses of $177 at June 30, 2022 and $111 at December 31, 2021, respectively)		98,027			58,512
Prepaid expenses and other current assets		34,337			27,747
Total current assets		585,598			552,859
Property and equipment, net		33,405			30,358
Right of use asset, net		6,565			7,853
Goodwill and intangible assets, net		36,249			35,116
Other assets		4,960			4,709
Total assets	$	666,777		$	630,895
Liabilities and Stockholders' Equity
Current Liabilities:
Medical expenses payable	$	173,871		$	125,886
Accounts payable and accrued expenses		14,975			17,431
Accrued compensation		24,868			23,928
Total current liabilities		213,714			167,245
Long-term debt, net of debt issuance costs		153,931			150,620
Long-term portion of lease liabilities		5,428			6,975
Total liabilities		373,073			324,840
Commitments and Contingencies (Note 12)
Stockholders' Equity:
Preferred stock, $.001 par value; 100,000,000 and 0 shares authorized as of June 30, 2022 and December 31, 2021, respectively; no shares issued and outstanding as of June 30, 2022 and December 31, 2021		—			—
Common stock, $.001 par value; 1,000,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 187,271,311 and 187,193,613 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		187			187
Additional paid-in capital		928,608			888,547
Accumulated deficit		(635,091	)		(582,694	)
Total Alignment Healthcare, Inc. stockholders' equity		293,704			306,040
Noncontrolling interest		—			15
Total stockholders' equity		293,704			306,055
Total liabilities and stockholders' equity	$	666,777		$	630,895

See accompanying notes to unaudited condensed consolidated financial statements.

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Operations

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

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenues:
Earned premiums	$	366,180		$	308,739		$	711,472		$	575,739
Other		294			212			528			294
Total revenues		366,474			308,951			712,000			576,033
Expenses:
Medical expenses		307,269			274,385			611,027			525,480
Selling, general, and administrative expenses		61,673			71,150			135,966			136,064
Depreciation and amortization		4,180			3,908			8,130			7,645
Total expenses		373,122			349,443			755,123			669,189
Loss from operations		(6,648	)		(40,492	)		(43,123	)		(93,156	)
Other expenses:
Interest expense		4,490			4,329			8,891			8,577
Other expenses (income)		442			(59	)		383			(97	)
Total other expenses		4,932			4,270			9,274			8,480
Loss before income taxes		(11,580	)		(44,762	)		(52,397	)		(101,636	)
Provision for income taxes		—			—			—			—
Net loss attributable to Alignment Healthcare, Inc.	$	(11,580	)	$	(44,762	)	$	(52,397	)	$	(101,636	)

Total weighted-average common shares outstanding - basic and diluted		181,262,640			176,842,122			180,075,014			165,698,982
Net loss per share - basic and diluted	$	(0.06	)	$	(0.25	)	$	(0.29	)	$	(0.61	)

See accompanying notes to unaudited condensed consolidated financial statements.

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Stockholders' Equity

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

(Unaudited)


	Common Stock
	Shares			Amount		Additional Paid-In Capital			Accumulated Deficit			Noncontrolling Interest			Total
Balance at March 31, 2022		187,414,057		$	187	$	916,594		$	(623,511	)	$	15		$	293,285
Net loss attributable to Alignment Healthcare, Inc.		—			—		—			(11,580	)		—			(11,580	)
Issuance of common stock upon vesting of restricted stock units		48,976			—		—			—			—			—
Forfeitures		(191,722	)		—		—			—			—			—
Equity-based compensation		—			—		12,099			—			—			12,099
Repurchase of noncontrolling interest attributable to subsidiary		—			—		(85	)		—			(15	)		(100	)
Balance at June 30, 2022	$	187,271,311		$	187	$	928,608		$	(635,091	)	$	—		$	293,704


	Common Stock
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Noncontrolling interest		Total
Balance at March 31, 2021		187,273,782	$	188	$	798,346		$	(444,282	)	$	—	$	354,252
Net loss attributable to Alignment Healthcare, Inc.		—		—		—			(44,762	)		—		(44,762	)
Noncontrolling interest attributable to subsidiary		—		—		—			—			15		15
Adjustment to issuance cost estimate related to initial public offering		—		—		(12	)		—			—		(12	)
Equity-based compensation		—		—		30,887			—			—		30,887
Balance at June 30, 2021		187,273,782	$	188	$	829,221		$	(489,044	)	$	15	$	340,380

See accompanying notes to unaudited condensed consolidated financial statements.

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Stockholders' Equity

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

(Unaudited)


	Common Stock
	Shares			Amount		Additional Paid-In Capital			Accumulated Deficit			Noncontrolling interest			Total
Balance at December 31, 2021		187,193,613		$	187	$	888,547		$	(582,694	)	$	15		$	306,055
Net loss attributable to Alignment Healthcare, Inc.		—			—		—			(52,397	)		—			(52,397	)
Issuance of common stock upon vesting of restricted stock units		432,484			—		—			—						—
Forfeitures		(354,786	)		—		—			—			—			—
Equity-based compensation		—			—		40,146			—			—			40,146
Repurchase of noncontrolling interest attributable to subsidiary		—			—		(85	)		—			(15	)		(100	)
Balance at June 30, 2022		187,271,311		$	187	$	928,608		$	(635,091	)	$	—		$	293,704


	Common Stock
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Noncontrolling interest		Total
Balance at December 31, 2020(1)		164,063,787	$	164	$	417,855		$	(387,408	)	$	—	$	30,611
Net loss attributable to Alignment Healthcare, Inc.		—		—		—			(101,636	)		—		(101,636	)
Noncontrolling interest attributable to subsidiary		—		—		—			—			15		15
Issuance of common stock upon initial public offering at $18.00 per share, net of issuance costs of $29,011		21,700,000		22		361,567			—			—		361,589
Issuance of common stock third-party business partners		573,782		1		6,479			—			—		6,480
Issuance of common stock to stock appreciation rights holders		936,213		1		11,509			—			—		11,510
Equity-based compensation		—		—		33,285			—			—		33,285
Equity repurchase		—		—		(1,474	)		—			—		(1,474	)
Balance at June 30, 2021		187,273,782	$	188	$	829,221		$	(489,044	)	$	15	$	340,380

(1)

The consolidated balances as of December 31, 2020 were derived from the audited consolidated financial statements as of that date and were retroactively adjusted, including shares and per share amounts, as a result of the Reorganization. See Note 1 to the condensed consolidated financial statements for additional details.

See accompanying notes to unaudited condensed consolidated financial statements.

Alignment Healthcare, Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(Unaudited)


	Six Months Ended June 30,
	2022			2021
Operating Activities:
Net loss	$	(52,397	)	$	(101,636	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for credit loss		111			46
Loss on sublease		509			—
Depreciation and amortization		8,222			7,751
Amortization-debt issuance costs and investment discount		1,140			1,110
Payment-in-kind interest		2,170			2,054
Equity-based compensation and common stock payments		40,146			51,275
Non-cash lease expense		1,415			1,314
Changes in operating assets and liabilities:
Accounts receivable		(39,609	)		(25,503	)
Prepaid expenses and other current assets