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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.
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Accelerated filer |
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Non-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 October 30, 2023, the registrant had
Table of Contents
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Page |
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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 |
25 |
Item 3. |
35 |
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Item 4. |
35 |
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PART II. |
36 |
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Item 1. |
36 |
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Item 1A. |
36 |
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Item 2. |
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Item 3. |
36 |
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Item 4. |
36 |
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Item 5. |
36 |
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Item 6. |
37 |
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39 |
FORWARD-LOOKING STATEMENTS
Throughout this quarterly report on Form 10-Q (this “Quarterly Report”), we make “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements. Forward-looking statements give our current expectations relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning. The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. These statements are based upon management’s current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:
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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September 30, |
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December 31, |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable (less allowance for credit losses of $ |
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Short-term investments |
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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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Deferred premium revenue |
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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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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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( |
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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 September 30, |
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Nine Months Ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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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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Loss from operations |
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( |
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( |
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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 expenses (income) |
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( |
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( |
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( |
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Loss on extinguishment of debt |
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Total other expenses |
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Loss before income taxes |
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( |
) |
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( |
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( |
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( |
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Provision for income taxes |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Less: Net loss attributable to noncontrolling interest |
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Net loss attributable to Alignment Healthcare, Inc. |
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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 loss per share - basic and diluted |
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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 June 30, 2023 |
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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 |
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— |
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( |
) |
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( |
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( |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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— |
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Forfeitures |
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( |
) |
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Equity-based compensation |
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— |
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Balance at September 30, 2023 |
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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 June 30, 2022 |
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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 |
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— |
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( |
) |
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( |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Forfeitures |
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( |
) |
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Equity-based compensation |
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— |
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Balance at September 30, 2022 |
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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, 2022 |
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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 |
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— |
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( |
) |
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( |
) |
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( |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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Forfeitures |
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( |
) |
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Equity-based compensation |
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— |
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Repurchase of noncontrolling interest attributable to subsidiary |
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— |
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Balance at September 30, 2023 |
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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, 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 |
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— |
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( |
) |
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( |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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— |
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— |
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Forfeitures |
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( |
) |
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Equity-based compensation |
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— |
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Repurchase of noncontrolling interest attributable to subsidiary |
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— |
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( |
) |
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( |
) |
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( |
) |
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Balance at September 30, 2022 |
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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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Nine Months Ended September 30, |
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2023 |
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2022 |
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Operating Activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Provision for credit loss |
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(Gain) loss on sublease |
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( |
) |
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Depreciation and amortization |
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Amortization-investment discount |
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( |
) |
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( |
) |
Amortization-debt issuance costs |
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Amortization of payment-in-kind interest |
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Equity-based compensation |
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Non-cash lease expense |
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Loss on extinguishment of debt |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
) |
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( |
) |
Prepaid expenses and other current assets |
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( |
) |
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( |
) |
Other assets |
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( |
) |
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( |
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Medical expenses payable |
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Accounts payable and accrued expenses |
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( |
) |
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Deferred premium revenue |
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Accrued compensation |
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Lease liabilities |
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( |
) |
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( |
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Payment-in-kind interest |
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( |
) |
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Net cash provided by operating activities |
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Investing Activities: |
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Purchase of business, 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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Maturities of investments |
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Acquisition of property and equipment |
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( |
) |
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( |
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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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Repurchase of noncontrolling interest |
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( |
) |
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Issuance of long-term debt |
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Debt issuance costs |
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( |
) |
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Repayment of long-term debt |
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( |
) |
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Contributions from noncontrolling interest holders |
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Net cash provided by financing activities |
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Net decrease in cash |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents 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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Purchase of business in accounts payable |
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$ |
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$ |
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8
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total above:
|
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September 30, 2023 |
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September 30, 2022 |
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||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash in other assets |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
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”), 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 Medicare Advantage Plans in the states of California, North Carolina, Nevada, Arizona, Florida and Texas.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying 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”). 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; 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”) who regularly reviews financial operating results on a consolidated basis for purposes of allocating resources and evaluating financial performance. 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, cash equivalents, restricted cash and U.S. Treasury bills was determined based on Level 1 inputs. The fair value of certificate of deposits, which are recorded in other assets in the condensed consolidated balance sheets, was determined based on
10
Level 2 inputs. There were
Revenue and Accounts Receivable
Earned premium revenue consisted of premium revenue and capitation revenue for the three and nine months ended September 30, 2023 and 2022 were as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Premium |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Capitation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Premium revenue is derived monthly from the federal government based on our contracts with the Centers for Medicare and Medicaid Services (“CMS”). In accordance with these arrangements, 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 per month (“PMPM”), which is adjusted based on certain risk factors derived from medical diagnoses and conditions of 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 third-party payors and from CMS related to our participation in the CMS "ACO Realizing Equity, Access, and Community Health Model” or “ACO REACH” model, as discussed below.
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 the 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 began participating 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. CMS replaced the Direct Contracting Entity ("DCE") program with the ACO REACH model, effective January 1, 2023. The ACO REACH entity ("ACO") is responsible for the cost of health care services related to the patient population attributed to the ACO 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 ACO acts as a principal in arranging for and controlling services provided directly by their contracts with primary care physicians, as well as services provided by preferred institutional care providers and specialists. Capitation payments for the ACO program are determined from an annual benchmark established by CMS. These payments, which are adjusted for variable considerations, represent revenue for providing health care services, including primary care as well as institutional and specialist care. The ACO recognizes 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 ACO for the three and nine months ended September 30, 2023 was $
Interest income earned on our cash deposits and short-term investments is included within other revenue on the condensed consolidated statements of operations. Interest income for the three and nine months ended September 30, 2023 was $
Revenue Adjustments
11
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.
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, Nevada, Arizona, Texas and Florida 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 premium 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 ACO 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.
We typically receive our monthly premium payments from CMS on the first day of the month. However, as the first day of October did not occur on a business day, we received the October premium payment on the last day of September. Accordingly, at September 30, 2023, we recorded deferred premium revenue of $
Property and Equipment—Net
Depreciation expense is computed using the straight-line method generally based on the following estimated useful lives:
Description |
|
Estimated Service Lives (years) |
Computer and equipment |
|
|
Office equipment and furniture |
|
|
Software |
|
|
Leasehold improvements |
|
Medical Expenses
12
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 ACO 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.
In August 2022, the Inflation Reduction Act ("IRA") was signed into law. The law intends to increase tax revenue and reduce Medicare costs through lower prescription drug prices, inflation rebates, and capping annual Medicare Part D out of pocket expenses. The provisions of the law are set to take effect over the next seven years. We are in the process of evaluating the impact the IRA will have on our business.
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”), which includes an estimate for claims incurred but not reported (“IBNR”) and a payable for adjudicated claims. IBNR is estimated using an actuarial process that is consistently applied and centrally controlled. Medical expenses payable also includes an estimate for the costs necessary to process unpaid claims at the end of each period. We estimate the IBNR 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 cost trends and completion factors that are assessed based on historical data for payment patterns, product mix, seasonality, utilization of health care services, and other relevant factors. Each period, we re-examine previously established IBNR estimates based on actual claim submissions and other changes in facts and circumstances. As the IBNR 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 IBNP 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
13
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 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 September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022, there 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, we utilize the simplified method available under U.S. GAAP. As we do not have a substantial trading history, volatility assumptions were developed using a combination of the Company's historical volatility and 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
Equity-based compensation expense for RSU awards with performance-based vesting is recognized over the requisite service period on a graded vesting schedule and is only recognized when the Company concludes that it is probable that the performance condition(s) will be achieved. At each reporting period, the Company reassesses the probability of achieving the performance criteria. Determining whether the performance criteria will be achieved involves judgment, and the estimate of share-based compensation expense may be revised periodically based on changes in the probability of achieving the performance criteria. Revisions are reflected in the period in which the estimate is changed. We account for forfeitures as they occur.
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
14
In April 2021, the Company acquired a noncontrolling interest representing the portion of equity ownership in a subsidiary that is not attributable to Alignment Healthcare, Inc. The noncontrolling interest in a subsidiary was initially recognized at estimated fair value and was presented within total equity in the Company's condensed consolidated balance sheets. There was
In October 2022, the Company acquired a subsidiary and recorded a noncontrolling interest for the portion of equity ownership not attributable to Alignment Healthcare, Inc. The noncontrolling interest in the subsidiary was initially recognized at estimated fair value on October 1, 2022 and is presented within total equity in the Company's condensed consolidated balance sheet. The net loss attributable to this noncontrolling interest was $
Net Loss per Share
Net loss per share is calculated based on net loss attributable to Alignment Healthcare, Inc.'s stockholders.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Less: Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss attributable to Alignment Healthcare, Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total weighted-average common shares outstanding - |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Restricted shares of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total weighted-average common shares outstanding, |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share - basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Basic net 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 loss per share as of September 30, 2023 and 2022:
|
|
September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Stock options |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
Recent Accounting Pronouncements Adopted
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes
15
that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial position or results of operations upon adoption.
3. Fair Value
The following tables present the carrying value and fair value of these financial instruments as of September 30, 2023 and December 31, 2022:
|
|
September 30, 2023 |
|
|||||||||||||
|
|
|
|
|
Fair Value |
|
||||||||||
|
|
Carrying |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
U.S. Treasury bills |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Certificate of deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
December 31, 2022 |
|
|||||||||||||
|
|
|
|
|
Fair Value |
|
||||||||||
|
|
Carrying |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
U.S. Treasury bills |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Certificate of deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
The carrying value of long-term debt represents the outstanding balance, net of unamortized debt issuance costs. As of September 30, 2023 and December 31, 2022, the fair value of our long-term debt approximates the carrying value.
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. There was
U.S. Treasury Securities Investments
As of September 30, 2023, the Company had $
As of September 30, 2023, the Company had $
Restricted Investments
Restricted investments are composed of investments in U.S. Treasury bills and certificates of deposits and are included within other assets in the condensed consolidated balance sheets. As of September 30, 2023 and December 31, 2022, the Company had $
16
4. Accounts Receivable
Accounts receivable consisted of the following as of September 30, 2023 and December 31, 2022:
|
|
September 30, |
|
|
December 31, |
|
||
Government receivables |
|
$ |
|
|
$ |
|
||
Pharmacy rebate receivables |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
|
||
Total accounts receivable |
|
|
|
|
|
|
||
Allowance for credit losses |
|
|
( |
) |
|
|
|
|
Accounts receivable, net |
|
$ |
|
|
$ |
|
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 September 30, 2023 and December 31, 2022:
|
|
September 30, |
|
|
December 31, |
|
||
Computers and equipment |
|
$ |
|
|
$ |
|
||
Office equipment and furniture |
|
|
|
|
|
|
||
Software |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Subtotal |
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment-net |
|
$ |
|
|
$ |
|
Depreciation expense for the three months ended September 30, 2023 and 2022 was $
For the three and nine months ended September 30, 2023, $
17
6. Goodwill and Intangible Assets
Intangible assets consisted of the following as of September 30, 2023 and December 31, 2022:
|
|
September 30, 2023 |
||||||||||||
|
|
Gross Carrying Value |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
|
Weighted Average Life |
|||
Goodwill |
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
License (indefinite lived) |
|
|
|
|
|
|
|
|
|
|
||||
Plan member relationships |
|
|
|
|
|
( |
) |
|
|
|
|
|||
Other |
|
|
|
|
|
( |
) |
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
December 31, 2022 |
||||||||||||
|
|
Gross Carrying Value |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
|
Weighted Average Life |
|||
Goodwill |
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
License (indefinite lived) |
|
|
|
|
|
|
|
|
|
|
||||
Plan member relationships |
|
|
|
|
|
( |
) |
|
|
|
|
|||
Other |
|
|
|
|
|
( |
) |
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
Amortization expense relating to intangible assets for the three months ended September 30, 2023 and 2022, was $
Remainder of 2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
There were
7. Medical Expenses Payable
The following table is a detail of medical expenses payable as of September 30, 2023 and December 31, 2022:
|
|
September 30, |
|
|
December 31, |
|
||
Claims incurred but not paid |
|
$ |
|
|
$ |
|
||
Capitation payable and risk-sharing payable |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Medical expenses payable |
|
$ |
|
|
$ |
|
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
18
The following table presents components of the change in medical expenses payable as of September 30, 2023 and 2022:
|
|
September 30, |
|
|
September 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 |
|
|
|
|
|
|
||
Capitation payable, risk-sharing payable, and other |
|
|
|
|
|
|
||
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. Although the pandemic primarily impacted 2020 and 2021, the Delta and Omicron variants caused a rebound in COVID-related inpatient utilization during the first quarter of 2022. While COVID has had a less significant impact on 2023, we remain cautious of the potential impact of the COVID-19 in the future. 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.
We re-examine previously established outstanding claims reserve estimates based on actual claims submissions and other changes in facts and circumstances. We recognized a favorable prior year development, excluding provision for adverse deviation, of $
8. Long-Term Debt
Long-term debt is recorded at carrying value in the condensed consolidated balance sheets. The carrying value of long-term debt outstanding, net of unamortized debt issuance costs, consisted of the following as of September 30, 2023 and December 31, 2022:
|
|
September 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 |
|
$ |
|
|
$ |
|
Oxford Term Loan
On
The aggregate proceeds of the Delayed Draw Term Loans drawn on or prior to June 30, 2024 may not exceed $
The term loan was subject to a commitment fee of $
19
over the debt term using the straight line method, which is materially consistent with the effective interest method. The debt issuance costs related to the term loan are presented in the condensed consolidated balance sheet as a direct deduction from the carrying value of the term loan. The debt issuance costs related to the delayed draw term loan are presented in the condensed consolidated balance sheet as other assets.
The Term Loans are guaranteed by certain of our wholly owned subsidiaries and collateralized by all unrestricted assets.
For certain prepayments of the Term Loans prior to the second anniversary of the Effective Date, we will be required to pay a prepayment fee ranging from
The Oxford Loan Agreement includes customary events of default, including, among others, payment defaults, breach of representations and warranties, covenant defaults, judgment defaults, insolvency and bankruptcy defaults, and change of control. The occurrence of an event of default could result in the acceleration of the obligations under the Oxford Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations. During the existence of an event of default, the outstanding Term Loans will accrue interest at a rate per annum equal to
The Oxford Loan Agreement includes financial covenants that require the Borrower Parties to (i) maintain minimum liquidity, as defined in the Loan Agreement, of $
Future maturities under the term loan as of September 30, 2023 are as follows:
Period Ending September 30, |
|
Amount |
|
|
|
2023 |
|
$ |
— |
|
|
2024 |
|
|
— |
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
|
|
$ |
|
|
9. Income Taxes
For the three and nine months ended September 30, 2023, we recorded income tax expense of $
We have federal and state cumulative net operating losses ("NOLs") as of September 30, 2023 and December 31, 2022. 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 September 30, 2023 and 2022. Under the Tax Cuts and Jobs Act (“TCJA”), federal NOLs generated after 2017 will be carried forward indefinitely but are limited to an
An “ownership change” as defined under Section 382 of the Internal Revenue Code ("IRC"), 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 a testing period, our ability to utilize our NOL
20
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
Equity Awards
Stock options
Our outstanding stock options generally vest
The following is a summary of the stock option transactions as of and for the three and nine months ended September 30, 2023:
|
|
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, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options forfeited / expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Balances as of March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
|
— |
|
|||
Options granted |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Options exercised |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Options forfeited / expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Balances as of June 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
|
— |
|
|||
Options granted |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Options exercised |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Options forfeited / expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Balances as of September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
|
— |
|
|||
Vested and Exercisable as of September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
|
|
Aggregate intrinsic value represents the difference between the exercise price of the option and the closing price of our common stock. For the three months ended September 30, 2023 and 2022 and nine months ended September 30, 2023 and 2022,
Restricted Stock Awards
Our outstanding RSAs generally vest
The following is a summary of RSA transactions for the three and nine months ended September 30, 2023:
|
|
Restricted Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
||
Unvested and outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Unvested and outstanding as of March 31, 2023 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Unvested and outstanding as of June 30, 2023 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Unvested and outstanding as of September 30, 2023 |
|
|
|
|
$ |
|
21
Restricted Stock Units
Our outstanding RSUs generally vest
The following is a summary of RSU transactions for the three and nine months ended September 30, 2023:
|
|
Restricted Stock Units |
|
|
Weighted-Average Grant Date Fair Value |
|
||
Unvested and outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Cancelled/forfeited |
|
|
( |
) |
|
|
|
|
Unvested and outstanding as of March 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Cancelled/forfeited |
|
|
( |
) |
|
|
|
|
Unvested and outstanding as of June 30, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Cancelled/forfeited |
|
|
( |
) |
|
|
|
|
Unvested and outstanding as of September 30, 2023 |
|
|
|
|
$ |
|
Performance-based Restricted Stock Units ("PSUs")
On September 14, 2023, the Board of Directors of the Company approved the grant of performance-based restricted stock units under the Company's 2021 Equity Incentive Plan to its executive management team and other key employees. Each grantee is eligible to vest in a number of PSUs ranging from
The following is a summary of PSU transactions for the three and nine months ended September 30, 2023:
|
|
Performance-based restricted stock units |
|
|
Weighted-Average Grant Date Fair Value |
|
||
Unvested and outstanding as of June 30, 2023 |
|
|
— |
|
|
$ |
— |
|
Granted |
|
|
|
|
|
|
||
Vested |
|
|
— |
|
|
|
— |
|
Cancelled/forfeited |
|
|
— |
|
|
|
— |
|
Unvested and outstanding as of September 30, 2023 |
|
|
|
|
$ |
|
Equity-Based Compensation Expense
Total equity-based compensation expense was presented on the statement of operations as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(amounts in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Selling, general and administrative expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Medical expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total equity-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
As of September 30, 2023, there was $
22
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, health maintenance organizations ("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 have adopted the RBC rules. Our health plans or risk-bearing entities were in compliance with the minimum capital requirements as of September 30, 2023.
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 September 30, 2023.
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.
We hold these assets until maturity, at which time these assets will renew or are invested in a similar type of investment instrument. Given the regulatory requirements, we expect to hold these investments for long-term. 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.
On April 27, 2022, a former employee of the Company filed a purported class action lawsuit (Dabney v. Alignment Healthcare USA, LLC, Orange County Superior Court) alleging that the Company failed to provide hourly employees with required meal and rest breaks or pay such workers a premium equal to an hour of pay for missed meal or rest breaks. Discovery in the matter commenced on June 8, 2022. On September 2, 2022, the court granted a stay of proceedings and discovery in anticipation of mediation scheduled for August 2023. On
23
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
24
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 Annual Report on Form 10-K for the year ended December 31, 2022 (our "Annual Report"), as well as our unaudited condensed 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 designed to improve 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 health maintenance organization ("HMO") and preferred provider organization ("PPO") contracts, from approximately 13,000 at inception to 115,600 as of September 30, 2023, representing a 28% compound annual growth rate across 52 markets and 6 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.
For the 2023 plan year, Alignment offers plans in 52 markets across California (21 markets), North Carolina (16 markets), Nevada (6 markets), Arizona (3 markets), Texas (2 markets) and Florida (4 markets). There are approximately 8.5 million Medicare-eligible seniors in our current markets.
Factors Affecting Our Performance
Our proprietary technology platform, AVA, is a key element of our business with capabilities that we expect to impact our future performance. AVA enables us to personalize and manage our member relationships, care quality and experience, and to coordinate and manage risk with our provider partners. AVA’s unified platform, analytical tools and data across the healthcare ecosystem enable us to produce consistent outcomes, unit economics and support new member growth. Additionally, our historical financial performance has been, and we expect our financial performance in the future will be, driven by our ability to:
25
26
Executive Summary
The following table presents key financial statistics for the periods indicated:
|
|
Three Months Ended September 30, |
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
|
||||||||||||
(dollars in '000's, except percentages) |
|
2023 |
|
|
2022 |
|
|
% Change |
|
|
2023 |
|
|
2022 |
|
|
% Change |
|
||||||
Health plan membership (at period end) |
|
|
115,600 |
|
|
|
98,000 |
|
|
|
18.0 |
% |
|
|
115,600 |
|
|
|
98,000 |
|
|
|
18.0 |
% |
Medical benefits ratio |
|
|
86.7 |
% |
|
|
86.3 |
% |
|
|
0.4 |
% |
|
|
88.2 |
% |
|
|
85.5 |
% |
|
|
2.7 |
% |
Revenues |
|
$ |
456,709 |
|
|
$ |
360,348 |
|
|
|
26.7 |
% |
|
$ |
1,358,243 |
|
|
$ |
1,072,348 |
|
|
|
26.7 |
% |
Loss from Operations |
|
$ |
(29,756 |
) |
|
$ |
(33,410 |
) |
|
NM(2) |
|
|
$ |
(85,904 |
) |
|
$ |
(76,533 |
) |
|
NM(2) |
|
||
Net loss |
|
$ |
(35,077 |
) |
|
$ |
(40,247 |
) |
|
NM(2) |
|
|
$ |
(100,942 |
) |
|
$ |
(92,644 |
) |
|
NM(2) |
|
||
Adjusted EBITDA(1) |
|
$ |
(8,420 |
) |
|
$ |
(9,493 |
) |
|
NM(2) |
|
|
$ |
(15,647 |
) |
|
$ |
(3,063 |
) |
|
NM(2) |
|
||
Adjusted gross profit (1) |
|
$ |
60,627 |
|
|
$ |
49,467 |
|
|
|
22.6 |
% |
|
$ |
159,623 |
|
|
$ |
155,371 |
|
|
|
2.7 |
% |
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 400 members and 500 members as of September 30, 2023 and 2022, respectively. It also excludes the approximately 7,400 traditional Medicare seniors for which we are at-risk for managing their healthcare expenditures through our ACO REACH contract with CMS.
Adjusted Gross Profit and Medical Benefits Ratio
27
Adjusted gross profit is a non-GAAP financial measure that we define as loss from operations before depreciation and amortization, clinical equity-based compensation expense, and selling, general, and administrative expenses. 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 should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted gross profit in lieu of loss from operations, which is the most directly comparable financial measure calculated in accordance with GAAP.
Our use of the term adjusted gross profit may vary from the use of similar terms by other companies in our industry and accordingly may not be comparable to similarly titled measures used by other companies.
Adjusted gross profit is reconciled as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from operations |
|
$ |
(29,756 |
) |
|
$ |
(33,410 |
) |
|
$ |
(85,904 |
) |
|
$ |
(76,533 |
) |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity-based compensation (medical expenses) |
|
|
1,733 |
|
|
|
1,912 |
|
|
|
6,024 |
|
|
|
6,751 |
|
Depreciation (medical expenses) |
|
|
64 |
|
|
|
57 |
|
|
|
194 |
|
|
|
149 |
|
Depreciation and amortization |
|
|
5,497 |
|
|
|
4,456 |
|
|
|
15,613 |
|
|
|
12,586 |
|
Selling, general, and administrative expenses |
|
|
83,089 |
|
|
|
76,452 |
|
|
|
223,696 |
|
|
|
212,418 |
|
Total add back |
|
|
90,383 |
|
|
|
82,877 |
|
|
|
245,527 |
|
|
|
231,904 |
|
Adjusted gross profit |
|
$ |
60,627 |
|
|
$ |
49,467 |
|
|
$ |
159,623 |
|
|
$ |
155,371 |
|
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 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 loss before interest expense, income taxes, depreciation and amortization expense, reorganization and transaction-related expenses, acquisition expenses, certain litigation costs and settlements, gains or losses on subleases, 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, as we do not consider the excluded items to be part of our ongoing results of operations. 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 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.
28
Adjusted EBITDA is reconciled as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(35,077 |
) |
|
$ |
(40,247 |
) |
|
$ |
(100,942 |
) |
|
$ |
(92,644 |
) |
Less: Net loss attributable to noncontrolling interest |
|
|
30 |
|
|
|
— |
|
|
|
134 |
|
|
|
— |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
5,466 |
|
|
|
4,605 |
|
|
|
15,747 |
|
|
|
13,496 |
|
Depreciation and amortization |
|
|
5,561 |
|
|
|
4,513 |
|
|
|
15,807 |
|
|
|
12,735 |
|
Income taxes |
|
|
- |
|
|
|
167 |
|
|
|
2 |
|
|
|
167 |
|
EBITDA |
|
|
(24,020 |
) |
|
|
(30,962 |
) |
|
|
(69,252 |
) |
|
|
(66,246 |
) |
Equity-based compensation(1) |
|
|
13,569 |
|
|
|
18,687 |
|
|
|
51,183 |
|
|
|
58,833 |
|
Reorganization and transaction-related expenses(2) |
|
|
— |
|
|
|
579 |
|
|
|
— |
|
|
|
579 |
|
Acquisition expenses(3) |
|
|
81 |
|
|
|
7 |
|
|
|
761 |
|
|
|
1,066 |
|
Litigation costs and settlement (4) |
|
|
1,950 |
|
|
|
— |
|
|
|
1,950 |
|
|
|
— |
|
(Gain) loss on sublease(5) |
|
|
— |
|
|
|
— |
|
|
|
(289 |
) |
|
|
509 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
2,196 |
|
|
|
— |
|
|
|
2,196 |
|
Adjusted EBITDA |
|
$ |
(8,420 |
) |
|
$ |
(9,493 |
) |
|
$ |
(15,647 |
) |
|
$ |
(3,063 |
) |
29
Results of Operations
The following table sets forth our consolidated statements of operations data for the periods indicated:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earned premiums |
|
$ |
450,235 |
|
|
$ |
359,978 |
|
|
$ |
1,341,924 |
|
|
$ |
1,071,450 |
|
Other |
|
|
6,474 |
|
|
|
370 |
|
|
|
16,319 |
|
|
|
898 |
|
Total revenues |
|
|
456,709 |
|
|
|
360,348 |
|
|
|
1,358,243 |
|
|
|
1,072,348 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical expenses |
|
|
397,879 |
|
|
|
312,850 |
|
|
|
1,204,838 |
|
|
|
923,877 |
|
Selling, general and administrative expenses |
|
|
83,089 |
|
|
|
76,452 |
|
|
|
223,696 |
|
|
|
212,418 |
|
Depreciation and amortization |
|
|
5,497 |
|
|
|
4,456 |
|
|
|
15,613 |
|
|
|
12,586 |
|
Total expenses |
|
|
486,465 |
|
|
|
393,758 |
|
|
|
1,444,147 |
|
|
|
1,148,881 |
|
Loss from operations |
|
|
(29,756 |
) |
|
|
(33,410 |
) |
|
|
(85,904 |
) |
|
|
(76,533 |
) |
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
5,466 |
|
|
|
4,605 |
|
|
|
15,747 |
|
|
|
13,496 |
|
Other expenses (income) |
|
|
(145 |
) |
|
|
(131 |
) |
|
|
(711 |
) |
|
|
252 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
2,196 |
|
|
|
— |
|
|
|
2,196 |
|
Total other expenses |
|
|
5,321 |
|
|
|
6,670 |
|
|
|
15,036 |
|
|
|
15,944 |
|
Loss before income taxes |
|
|
(35,077 |
) |
|
|
(40,080 |
) |
|
|
(100,940 |
) |
|
|
(92,477 |
) |
Provision for income taxes |
|
|
— |
|
|
|
167 |
|
|
|
2 |
|
|
|
167 |
|
Net loss |
|
$ |
(35,077 |
) |
|
$ |
(40,247 |
) |
|
$ |
(100,942 |
) |
|
$ |
(92,644 |
) |
Less: Net loss attributable to noncontrolling interest |
|
|
30 |
|
|
|
— |
|
|
|
134 |
|
|
|
— |
|
Net loss attributable to Alignment Healthcare, Inc. |
|
$ |
(35,047 |
) |
|
$ |
(40,247 |
) |
|
$ |
(100,808 |
) |
|
$ |
(92,644 |
) |
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 September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
(% of revenue) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earned premiums |
|
|
99 |
% |
|
|
100 |
% |
|
|
99 |
% |
|
|
100 |
% |
Other |
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
Total revenues |
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical expenses |
|
|
87 |
|
|
|
87 |
|
|
|
89 |
|
|
|
86 |
|
Selling, general and administrative expenses |
|
|
18 |
|
|
|
21 |
|
|
|
16 |
|
|
|
20 |
|
Depreciation and amortization |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Total expenses |
|
|
106 |
|
|
|
109 |
|
|
|
106 |
|
|
|
107 |
|
Loss from operations |
|
|
(6 |
) |
|
|
(9 |
) |
|
|
(6 |
) |
|
|
(7 |
) |
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
Other expenses (income) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
Total other expenses |
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
Loss before income taxes |
|
|
(7 |
) |
|
|
(11 |
) |
|
|
(7 |
) |
|
|
(9 |
) |
Provision for income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss |
|
|
(7 |
) |
|
|
(11 |
) |
|
|
(7 |
) |
|
|
(9 |
) |
Less: Net loss attributable to noncontrolling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss attributable to Alignment Healthcare, Inc. |
|
|
(7 |
)% |
|
|
(11 |
)% |
|
|
(7 |
)% |
|
|
(9 |
)% |
30
Revenues
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earned premiums |
|
$ |
450,235 |
|
|
$ |
359,978 |
|
|
$ |
90,257 |
|
|
|
25.1 |
% |
Other |
|
|
6,474 |
|
|
|
370 |
|
|
|
6,104 |
|
|
|
1649.7 |
% |
Total revenues |
|
$ |
456,709 |
|
|
$ |
360,348 |
|
|
$ |
96,361 |
|
|
|
26.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earned premiums |
|
$ |
1,341,924 |
|
|
$ |
1,071,450 |
|
|
$ |
270,474 |
|
|
|
25.2 |
% |
Other |
|
|
16,319 |
|
|
|
898 |
|
|
|
15,421 |
|
|
|
1717.3 |
% |
Total revenues |
|
$ |
1,358,243 |
|
|
$ |
1,072,348 |
|
|
$ |
285,895 |
|
|
|
26.7 |
% |
Revenues. Earned premium revenues were $450.2 million and $360.0 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $90.2 million or 25.1%. Earned premium revenues were $1,341.9 million and $1,071.4 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $270.5 million or 25.2%. The increase was driven by a combination of growth in our Health Plan membership and higher revenue per member per month in 2023 as compared to 2022. Health plan membership increased 18.0% between September 30, 2022 and September 30, 2023. The increase in revenue per member per month is primarily attributable to an increase in the CMS benchmark rates. Additionally, ACO REACH revenue, also included in earned premiums, increased $18.1 million, or 146.9%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and $55.0 million, or 145.6%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Other revenues increased $6.1 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, an increase of 1,649.7%. Other revenues increased $15.4 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, an increase of 1,717.3%. The increase is mainly attributable to an increase in the interest rate of our interest earning cash balances.
Expenses
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical expenses |
|
$ |
397,879 |
|
|
$ |
312,850 |
|
|
$ |
85,029 |
|
|
|
27.2 |
% |
Selling, general and administrative expenses |
|
|
83,089 |
|
|
|
76,452 |
|
|
|
6,637 |
|
|
|
8.7 |
% |
Depreciation and amortization |
|
|
5,497 |
|
|
|
4,456 |
|
|
|
1,041 |
|
|
|
23.4 |
% |
Total expenses |
|
$ |
486,465 |
|
|
$ |
393,758 |
|
|
$ |
92,707 |
|
|
|
23.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical expenses |
|
$ |
1,204,838 |
|
|
$ |
923,877 |
|
|
$ |
280,961 |
|
|
|
30.4 |
% |
Selling, general and administrative expenses |
|
|
223,696 |
|
|
|
212,418 |
|
|
|
11,278 |
|
|
|
5.3 |
% |
Depreciation and amortization |
|
|
15,613 |
|
|
|
12,586 |
|
|
|
3,027 |
|
|
|
24.1 |
% |
Total expenses |
|
$ |
1,444,147 |
|
|
$ |
1,148,881 |
|
|
$ |
295,266 |
|
|
|
25.7 |
% |
Medical Expenses. Medical expenses were $397.9 million and $312.9 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $85.0 million, or 27.2%. Medical expenses were $1,204.8 million and $923.9 million for the nine
31
months ended September 30, 2023 and 2022, respectively, an increase of $280.9 million, or 30.4%. The increase was driven primarily by the growth in Alignment’s Health Plan membership, as well as growth in ACO REACH membership. Overall, medical expenses for the three and nine months ended September 30, 2023 grew at a higher rate than earned premium revenues compared to the three and nine months ended September 30, 2022, due to a mix shift of revenue growth with ACO REACH patients, richer member benefits, and a smaller amount of favorable prior year development.
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $83.1 million and $76.5 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $6.6 million, or 8.7%. Selling, general and administrative expenses were $223.7 million and $212.4 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $11.3 million, or 5.3%. The increase for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022, respectively, was primarily due to an increase in ongoing investments and expenditures in network development, operations and sales and marketing to drive the growth of Alignment's Health Plan membership, and $0.9 million related to a potential legal settlement, as discussed in Note 12, "Commitments and Contingencies" in our condensed consolidated financial statements.
Depreciation and Amortization. Depreciation and amortization expense was $5.5 million and $4.5 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $1.0 million, or 23.4%. Depreciation and amortization expense was $15.6 million and $12.6 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $3.0 million, or 24.1%. The increase was primarily due to the amount and timing of our capital expenditures and the associated depreciation relative to 2022.
Other Expenses
Interest expense. Interest expense was $5.5 million and $4.6 million for the three months ended September 30, 2023 and 2022, respectively, an increase of $0.9 million or 19.6%. Interest expense was $15.7 million and $13.5 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $2.2 million or 16.3%. The increase in interest expense was primarily due to a higher interest rate on our debt balance during the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022.
Other expenses (income). Other expenses (income) were $(0.1) million and $(0.1) million for the three months ended September 30, 2023 and 2022. Other expenses (income) were $(0.7) million and $0.3 million for the nine months ended September 30, 2023 and 2022, respectively, an increase of $1.0 million or 333%. The increase is primarily attributable to a gain related to ROU assets that were subleased during the three months ended September 30, 2023.
Liquidity and Capital Resources
General
To date, we have financed our operations principally through our proceeds raised through an IPO, private placements of our equity securities, revenues, and certain term loans (described below). As of September 30, 2023, we had $515.6 million in cash, cash equivalents and short-term investments. Deferred premium revenue represented $146.3 million of the cash balance as of September 30, 2023 and is primarily due to the timing of our monthly premium revenue payments from CMS.
In addition, we operate as a holding company in a highly regulated industry. Alignment Healthcare, Inc., our parent company, is dependent upon dividends and administrative expense reimbursements from our subsidiaries, most of which are subject to regulatory restrictions. We maintain significant levels of aggregate excess statutory capital and surplus in our state-regulated operating subsidiaries. As of September 30, 2023, the parent company had $187.0 million in cash, cash equivalents and short-term investments.
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 the general and administrative costs we expect to incur in connection with continuing to operate 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 will be sufficient to fund our operating and organic 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 additional financing is required from outside sources, we may
32
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.
Oxford Term Loan
On September 2, 2022 (the “Effective Date”), we, Alignment Healthcare USA, LLC, an indirect subsidiary of the Company (the “Borrower”) and certain of our other subsidiaries (together with the Company and the Borrower, the “Borrower Parties”) entered into a term loan agreement (the “Oxford Loan Agreement”) with Oxford Finance LLC (“Oxford”), as administrative agent, collateral agent and a lender, and the other lenders from time to time party thereto (collectively, the “Lenders”), pursuant to which the Lenders have agreed to lend the Borrower an aggregate principal amount of up to $250.0 million in a series of term loans (the “Term Loans”). Pursuant to the Oxford Loan Agreement, the Borrower received an initial Term Loan of $165.0 million on the Effective Date and may borrow up to an additional $85.0 million of Term Loans at its option (such additional Term Loans, the “Delayed Draw Term Loans”). Interest on the Term Loans is a variable rate equal to (i) the secured overnight financing rate administered by the Federal Reserve Bank of New York for a one-month tenor, subject to a floor of 1.00%, plus (ii) an applicable margin of 6.50%. All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on September 1, 2027. The interest rate applied during the quarter ended September 30, 2023 ranged from 11.64% to 11.83%.
The Term Loans are guaranteed by certain of our wholly owned subsidiaries and collateralized by all unrestricted assets.
For certain prepayments of the Term Loans prior to the second anniversary of the Effective Date, we will be required to pay a prepayment fee ranging from 1.00% to 2.00% of the principal amount of the Term Loans being prepaid.
The Oxford Loan Agreement includes customary events of default, including, among others, payment defaults, breach of representations and warranties, covenant defaults, judgment defaults, insolvency and bankruptcy defaults, and change of control. The occurrence of an event of default could result in the acceleration of the obligations under the Oxford Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations. During the existence of an event of default, the outstanding Term Loans will accrue interest at a rate per annum equal to 2.00% plus the otherwise applicable interest rate. Additionally, in the event of any contemplated asset sale or series of asset sales yielding net proceeds in excess of $2,500, except those excluded per the Oxford Loan Agreement, we are required to prepay the aggregate outstanding principal balance of the Term Loans in an amount equal to the entire amount of the asset sale net proceeds, plus any accrued and unpaid interest.
The Oxford Loan Agreement includes financial covenants that require the Borrower Parties to (i) maintain minimum liquidity, as defined in the Loan Agreement, of $23.0 million and (ii) satisfy a maximum permitted ratio of debt to trailing twelve-month revenue, as set forth in the Loan Agreement. As of September 30, 2023, we were in compliance with the financial covenants.
Cash Flows
The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated:
|
|
Nine Months Ended September 30, |
|
|||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
||
Net cash provided by operating activities |
|
$ |
128,279 |
|
|
$ |
103,836 |
|
Net cash used in investing activities |
|
|
(146,245 |
) |
|
|
(20,110 |
) |
Net cash provided by financing activities |
|
|
60 |
|
|
|
17,120 |
|
Net change in cash |
|
|
(17,906 |
) |
|
|
100,846 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
411,299 |
|
|
|
468,350 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
393,393 |
|
|
$ |
569,196 |
|
33
Operating Activities
For the nine months ended September 30, 2023, net cash provided by operating activities was $128.3 million, an increase of $24.5 million compared to net cash provided by operating activities of $103.8 million for the nine months ended September 30, 2022. The net cash provided by operating activities for both periods is mainly attributable to the timing of our monthly premium revenue payments from CMS. We typically receive our monthly premium payments from CMS on the first day of the month. However, as the first day of October 2023 and 2022 did not occur on a business day, we received the October premium payments on the last day of September. At September 30, 2023 and September 30, 2022, we recorded deferred premium revenue of $146.3 million and $116.8 million, respectively. Excluding deferred premium revenue for the nine months ended September 30, 2023 and 2022, we had net cash used in operating activities of $17.8 million and $12.5 million, respectively, an increase of $5.3 million. The increase is mainly attributable to an increase in net loss for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.
Investing Activities
For the nine months ended September 30, 2023, net cash used in investing activities was $146.2 million, an increase of $126.1 million compared to net cash used in investing activities of $20.1 million for the nine months ended September 30, 2022. The increase primarily relates to the purchase of short-term treasury securities during the nine months ended September 30, 2023.
Financing Activities
For the nine months ended September 30, 2023, net cash provided by financing activities was $0.06 million. For the nine months ended September 30, 2022, there was net cash provided by financing activities of $17.1 million. The decrease in net cash provided by financing activities is mainly attributable to cash received in connection with our long-term debt refinancing in Q3 2022 that did not recur in the current quarter.
Material cash requirements from known contractual and other obligations
There have been no material changes to our contractual obligations disclosed in our Annual Report.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2023.
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 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 Annual Report.
Recent Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements, “Summary of Significant Accounting Policies—Recent Accounting Pronouncements Adopted” for more information.
34
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 September 30, 2023.
Changes to our Internal Controls over Financial Reporting:
There were no material changes in our internal control over financial reporting during the three months ended September 30, 2023 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 our remote working environment to determine any potential impact on the design and operating effectiveness of our internal controls over financial reporting.
35
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.
There have been no material changes to the risk factors disclosed in the Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Use of Proceeds
On March 25, 2021, the Company’s Registration Statement on Form S-1 (SEC File No. 333-253824) 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 filed with the SEC on March 29, 2021. We may also use a portion of our net proceeds to acquire or invest in complementary businesses, products, services or technologies.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
36
Item 6. Exhibits.
Exhibit Number |
|
Description |
3.1 |
|
|
3.2 |
|
|
4.1 |
|
|
10.1+ |
|
|
10.2+ |
|
|
10.3*+ |
|
|
10.4+ |
|
|
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
37
+ Indicates management contract or compensatory plan.
38
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.
|
|
Alignment Healthcare, Inc. |
|
|
|
|
|
Date: November 2, 2023 |
|
By: |
/s/ John Kao |
|
|
|
John Kao |
|
|
|
President and Chief Executive Officer |
|
|
|
|
Date: November 2, 2023 |
|
By: |
/s/ Thomas Freeman |
|
|
|
Thomas Freeman |
|
|
|
Chief Financial Officer |
39
Exhibit 10.3
CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE
This Confidential Separation Agreement and General Release (“Agreement”), dated July 13, 2023 (the “Execution Date”), is made by and between Richard Cross (“Employee”), on the one hand, and Alignment Healthcare USA, LLC (“Alignment” or the “Company”), on the other hand. The parties to this Agreement may be referred to singularly as a “Party” or collectively as the “Parties.”
RECITALS
NOW, THEREFORE, in consideration of the Recitals above and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
AGREEMENT
-1-
Restricted Shares Vested Unvested Total
Restricted Shares 179,640 0 179,640
RSUs Vested Unvested Total
RSUs granted at IPO 9,750 9,750 19,500
RSUs granted March 2022 12,418 37,251 49,669
RSUs granted Sept. 2022 0 102,759 102,759
Total RSUs 22,168 149,760 171,928
Options Vested Unvested Total
Options granted at IPO @ $18/share 122,778 122,778 245,556
Options granted March 2022 @ $9.06/share 9,124 27,372 36,496
Total Options 131,902 150,150 282,052
Employee acknowledges and agrees that the foregoing Equity Summary includes an accurate and complete listing of all such equity awards, including, without limitation, all restricted shares of common stock of the Parent converted from pre-IPO limited partnership units of Parent’s predecessor (“Restricted Shares”), restricted stock units of
-2-
the Parent (“RSUs”) and options to purchase shares of common stock of the Parent (“Options”), as well as an accurate and complete breakdown of the amount of each type of equity award that has vested and the amount remaining unvested, all as of the Execution Date. For clarity, the Equity Summary does not account for any purchases, sales or other transactions undertaken by Employee in the public market (including, without limitation, any sales made in connection with a vesting event to cover tax withholding obligations), and therefore is not intended to reflect Employee’s total beneficial ownership of shares of Parent common stock or any derivative securities as of any date. The Restricted Shares, RSUs and Options listed under the columns labeled “Vested” in the Equity Summary are referred to herein collectively as the “Vested Securities.”
Subject to receipt of approval of this Agreement by the Compensation Committee of the Board of Directors of Parent, Parent hereby agrees that, as of immediately prior to the effectiveness of Employee’s termination of employment, it shall cause the acceleration of vesting of:
Other than the Vested Securities and the Accelerated RSUs, Employee acknowledges and agrees that (A) all of the remaining Options and RSUs are unvested and shall be cancelled in their entirety as of the Effective Date without payment; (B) any vested Options may be exercised by Employee at any time within a period of ninety (90) days from the Effective Date, after which time such vested Options shall terminate and expire without payment; and (C) he has no rights to any additional or other equity or equity-based compensation (including Restricted Shares, RSUs and Options).
-3-
“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, and that if known by him or her would have materially affected his or her settlement with the debtor or related party.”
This Agreement extends to all claims or causes of action, of every nature and kind whatsoever, known or unknown, enumerated in this Agreement or otherwise. Employee may hereafter discover
-4-
presently unknown facts or claims different from or in addition to those that Employee now knows as to the matters released herein. Nevertheless, it is Employees’ intention, through this Agreement, to fully release all such matters and all claims related thereto, which do now exist, may exist or heretofore have existed.
-5-
-6-
-7-
-8-
[Signature Page Follows]
-9-
Dated: July 13, 2023 /s/ Richard Cross
Richard Cross
ALIGNMENT HEALTHCARE USA, LLC
/s/ John Kao
Dated: July 13, 2023 By: John Kao
Its: Chief Executive Officer
Solely for purposes of Sections 2(a)(i) and 2(b):
ALIGNMENT HEALTHCARE, INC.
/s/ John Kao
Dated: July 13, 2023 By: John Kao
Its: Chief Executive Officer
REAFFIRMATION
I hereby reaffirm this Agreement, including but not limited to the foregoing releases set forth in Sections 3-6 above.
Dated: September 1, 2023 /s/ Richard Cross
Richard Cross
[Signature Page to Separation Agreement]
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: November 2, 2023 |
|
By: |
/s/ John Kao |
|
|
|
John Kao |
|
|
|
President and 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: November 2, 2023 |
|
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 September 30, 2023 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: November 2, 2023 |
|
By: |
/s/ John Kao |
|
|
|
John Kao |
|
|
|
President and 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 September 30, 2023 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: November 2, 2023 |
|
By: |
/s/ Thomas Freeman |
|
|
|
Thomas Freeman |
|
|
|
Chief Financial Officer |