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 September 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 October 31, 2022, the registrant had 187,260,981 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	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II.	Other Information	36

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		41

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;

•

our ability to generate sufficient cash flow to service all of our indebtedness and the potential impact of certain affirmative and negative covenants in our term loan agreement on our business;

•

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

•

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

•

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

•

the impact of negative publicity regarding the managed healthcare industry;

•

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

•

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)


	September 30, 2022			December 31, 2021
Assets
Current Assets:
Cash	$	567,446		$	466,600
Accounts receivable (less allowance for credit losses of $217 at September 30, 2022 and $111 at December 31, 2021, respectively)		88,220			58,512
Prepaid expenses and other current assets		36,493			27,747
Total current assets		692,159			552,859
Property and equipment, net		35,577			30,358
Right of use asset, net		6,085			7,853
Goodwill and intangible assets, net		37,618			35,116
Other assets		6,104			4,709
Total assets	$	777,543		$	630,895
Liabilities and Stockholders' Equity
Current Liabilities:
Medical expenses payable	$	171,395		$	125,886
Accounts payable and accrued expenses		20,691			16,962
Deferred premium revenue		116,767			469
Accrued compensation		31,411			23,928
Total current liabilities		340,264			167,245
Long-term debt, net of debt issuance costs		160,677			150,620
Long-term portion of lease liabilities		4,458			6,975
Total liabilities		505,399			324,840
Commitments and Contingencies (Note 12)
Stockholders' Equity:
Preferred stock, $.001 par value; 100,000,000 and 0 shares authorized as of September 30, 2022 and December 31, 2021, respectively; no shares issued and outstanding as of September 30, 2022 and December 31, 2021		—			—
Common stock, $.001 par value; 1,000,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 187,263,976 and 187,193,613 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		187			187
Additional paid-in capital		947,295			888,547
Accumulated deficit		(675,338	)		(582,694	)
Total Alignment Healthcare, Inc. stockholders' equity		272,144			306,040
Noncontrolling interest		—			15
Total stockholders' equity		272,144			306,055
Total liabilities and stockholders' equity	$	777,543		$	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 September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenues:
Earned premiums	$	359,978		$	293,275		$	1,071,450		$	869,014
Other		370			191			898			485
Total revenues		360,348			293,466			1,072,348			869,499
Expenses:
Medical expenses		312,850			253,990			923,877			779,470
Selling, general, and administrative expenses		76,452			76,846			212,418			212,910
Depreciation and amortization		4,456			4,080			12,586			11,725
Total expenses		393,758			334,916			1,148,881			1,004,105
Loss from operations		(33,410	)		(41,450	)		(76,533	)		(134,606	)
Other expenses:
Interest expense		4,605			4,414			13,496			12,991
Other expenses (income)		(131	)		(48	)		252			(145	)
Loss on extinguishment of debt		2,196			—			2,196			—
Total other expenses		6,670			4,366			15,944			12,846
Loss before income taxes		(40,080	)		(45,816	)		(92,477	)		(147,452	)
Provision for income taxes		167			—			167			—
Net loss attributable to Alignment Healthcare, Inc.	$	(40,247	)	$	(45,816	)	$	(92,644	)	$	(147,452	)

Total weighted-average common shares outstanding - basic and diluted		182,123,363			177,828,872			180,765,300			169,786,542
Net loss per share - basic and diluted	$	(0.22	)	$	(0.26	)	$	(0.51	)	$	(0.87	)

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 June 30, 2022		187,271,311		$	187	$	928,608	$	(635,091	)	$	—	$	293,704
Net loss attributable to Alignment Healthcare, Inc.		—			—		—		(40,247	)		—		(40,247	)
Issuance of common stock upon vesting of restricted stock units		956			—		—		—			—		—
Forfeitures		(8,291	)		—		—		—			—		—
Equity-based compensation		—			—		18,687		—			—		18,687
Balance at September 30, 2022		187,263,976		$	187	$	947,295	$	(675,338	)	$	—	$	272,144


	Common Stock
	Shares			Amount		Additional Paid-In Capital		Accumulated Deficit			Noncontrolling interest		Total
Balance at June 30, 2021		187,273,782		$	188	$	829,221	$	(489,044	)	$	15	$	340,380
Net loss attributable to Alignment Healthcare, Inc.		—			—		—		(45,816	)		—		(45,816	)
Forfeitures		(22,946	)
Equity-based compensation		—			—		30,511		—			—		30,511
Balance at September 30, 2021		187,250,836		$	188	$	859,732	$	(534,860	)	$	15	$	325,075

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.		—			—		—			(92,644	)		—			(92,644	)
Issuance of common stock upon vesting of restricted stock units		433,440			—		—			—						—
Forfeitures		(363,077	)		—		—			—			—			—
Equity-based compensation		—			—		58,833			—			—			58,833
Repurchase of noncontrolling interest attributable to subsidiary		—			—		(85	)		—			(15	)		(100	)
Balance at September 30, 2022		187,263,976		$	187	$	947,295		$	(675,338	)	$	—		$	272,144


	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.		—			—		—			(147,452	)		—		(147,452	)
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
Forfeitures		(22,946	)
Equity-based compensation		—			—		63,796			—			—		63,796
Equity repurchase		—			—		(1,474	)		—			—		(1,474	)
Balance at September 30, 2021		187,250,836		$	188	$	859,732		$	(534,860	)	$	15	$	325,075

(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)


		Nine Months Ended September 30,