Alignment Healthcare(US:ALHC)2025-07-30 20:11PART I. Financial Information Item 1. Financial Statements (Unaudited) Unaudited financial statements for Q2 2025 show significant revenue growth, a shift from net loss to net income, and improved cash flow from operations Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $1.0 billion, driven by higher cash and accounts receivable, while liabilities grew due to increased medical expenses payable Condensed Consolidated Balance Sheet Highlights | Account | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $470,266 | $432,859 | | Accounts receivable, net | $282,931 | $153,904 | | Total current assets | $880,122 | $661,638 | | Total assets | $1,000,150 | $782,063 | | Liabilities & Equity | | | | Medical expenses payable | $455,154 | $289,788 | | Total current liabilities | $529,527 | $351,845 | | Long-term debt, net | $322,295 | $321,428 | | Total liabilities | $859,183 | $681,108 | | Total stockholders' equity | $140,967 | $100,955 | Condensed Consolidated Statements of Operations Q2 2025 total revenues increased 49.0% to $1.02 billion, leading to a significant turnaround from an operating loss to a net income of $15.7 million Q2 and Six-Month Performance Summary | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | % Change | Six Months 2025 (in thousands) | Six Months 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,015,288 | $681,286 | 49.0% | $1,942,220 | $1,309,887 | 48.3% | | Medical expenses | $881,740 | $605,312 | 45.7% | $1,702,640 | $1,178,530 | 44.5% | | Income (loss) from operations | $22,748 | $(18,382) | 223.7% | $17,355 | $(59,488) | 129.2% | | Net income (loss) attributable to Co. | $15,667 | $(24,010) | 165.2% | $6,553 | $(70,531) | 109.3% | | Diluted EPS | $0.07 | $(0.13) | 153.8% | $0.03 | $(0.37) | 108.1% | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $141.0 million by June 30, 2025, driven by net income and equity-based compensation, a significant improvement from the prior year - Total stockholders' equity increased by $40.0 million in the first six months of 2025, from $100.96 million to $140.97 million24 - Key drivers for the equity increase in the first half of 2025 were net income of $6.3 million and equity-based compensation of $32.7 million24 Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $45.7 million for the six months ended June 30, 2025, driven by improved net income, while investing and financing cash flows shifted Six-Month Cash Flow Summary | Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $45,746 | $17,291 | | Net cash (used in) provided by investing activities | $(10,126) | $69,671 | | Net cash provided by financing activities | $1,797 | $49,153 | | Net increase in cash | $37,417 | $136,115 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, revenue composition, a significant increase in medical expenses payable, debt refinancing, and a contingent liability from a new CMS RADV audit - The company operates as a single reportable segment focused on providing healthcare services to seniors, primarily through Medicare Advantage Plans in California, North Carolina, Nevada, Arizona, and Texas2933 - In November 2024, the company issued $330 million of 4.25% Convertible Senior Notes due 2029 and used the proceeds to repay its existing Oxford term loans9598 - Medical expenses payable increased to $455.2 million at June 30, 2025, from $289.8 million at year-end 2024, with favorable prior year development of $12.5 million recognized in the first six months of 20259091 - On June 25, 2025, the company was notified of a Medicare Advantage contract-specific risk adjustment data validation (RADV) audit for payment year 2019, with no reasonable estimate of potential retrospective adjustment currently available130 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong H1 2025 performance to 27.8% membership growth, leading to $1.94 billion in revenue, profitability, improved Adjusted EBITDA, and a stronger Medical Benefits Ratio Overview Alignment Healthcare is a consumer-centric platform improving senior healthcare through Medicare Advantage plans, serving 223,700 members across 45 markets in 5 states as of June 30, 2025 - The company's business model is a "virtuous cycle" that uses savings from managed healthcare expenditures to reinvest in richer benefits, which drives membership growth137 - Health Plan Membership grew to 223,700 as of June 30, 2025, operating in 45 markets across California, North Carolina, Nevada, Arizona, and Texas136138 Executive Summary The company's Q2 2025 performance showed substantial year-over-year improvement, with 27.8% membership growth, 49.0% revenue increase, a shift to $15.7 million net income, and a 660.9% surge in Adjusted EBITDA Key Financial and Operational Metrics | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | % Change | Six Months 2025 (in thousands) | Six Months 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Health plan membership | 223,700 | 175,100 | 27.8% | 223,700 | 175,100 | 27.8% | | Medical benefits ratio | 86.7% | 88.7% | (2.0)% | 87.5% | 89.8% | (2.3)% | | Revenues | $1,015,288 | $681,286 | 49.0% | $1,942,220 | $1,309,887 | 48.3% | | Net income (loss) | $15,653 | $(24,003) | 165.2% | $6,299 | $(70,578) | 108.9% | | Adjusted EBITDA | $45,913 | $6,034 | 660.9% | $66,091 | $(5,946) | 1,211.5% | Results of Operations H1 2025 total revenues increased 48.3% to $1.94 billion, driven by membership growth and higher per-member rates, leading to a shift from operating loss to $17.4 million operating income - Earned premium revenues for H1 2025 increased by $628.6 million (48.5%) YoY, driven by a 27.8% increase in membership and higher CMS benchmark and Part D revenue rates165166 - Medical expenses for H1 2025 increased by $524.1 million (44.5%) YoY, a slower pace than revenue growth, attributed to a more favorable mix of returning members and despite unit cost increases168 - SG&A expenses for H1 2025 increased by $29.3 million (16.4%) YoY, but decreased as a percentage of revenue from 14% to 11% due to economies of scale from membership growth169 - Interest expense for H1 2025 decreased by $3.2 million (28.8%) YoY, due to refinancing debt at a lower fixed rate of 4.25% with new convertible notes, despite a higher principal balance172 Liquidity and Capital Resources The company maintains strong liquidity with $503.8 million in cash and investments as of June 30, 2025, having refinanced debt with $330 million in convertible senior notes - As of June 30, 2025, the company had $503.8 million in cash, cash equivalents, and short-term investments175 - In November 2024, the company completed the sale of $330.0 million of its 4.25% Convertible Senior Notes due 2029, using proceeds to repay its $215.0 million Oxford term loan184187 - Net cash from operating activities increased to $45.7 million in H1 2025 from $17.3 million in H1 2024, primarily due to higher net income191 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rates and inflation, with interest rate risk mitigated by fixed-rate debt and short-term investments - The company's $330.0 million in Convertible Senior Notes have a fixed annual interest rate of 4.25%, mitigating exposure to interest rate changes on its debt205 - Management believes inflation has not had a material effect on operating results thus far, though it remains a potential future risk206 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period, June 30, 2025207 - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025208 PART II. Other Information Legal Proceedings The company faces various legal proceedings, including a new CMS RADV audit with an unestimable liability, and tentative settlements for class action and stockholder lawsuits - The company was notified of a Medicare Advantage contract-specific risk adjustment data validation (RADV) audit for payment year 2019, the outcome of which is currently uncertain130 - A tentative settlement of $913 thousand was reached in the Dabney v. Alignment Healthcare USA, LLC class action lawsuit126 Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, were reported - No material changes to risk factors were reported for the quarter211 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the quarter, and there was no material change in the use of $361.6 million net proceeds from the March 2021 IPO - The company generated net proceeds of approximately $361.6 million from its IPO in March 2021213 - There has been no material change in the planned use of IPO proceeds214 Other Information Dawn Maroney, President, adopted a Rule 10b5-1 trading plan on May 22, 2025, for the potential sale of up to 410,000 securities from August 2025 to June 2026 - Dawn Maroney, President, adopted a Rule 10b5-1 trading plan on May 22, 2025, for the potential sale of up to 410,000 securities219220 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files