Alignment Healthcare(ALHC) - 2023 Q3 - Quarterly Report

PART I. Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the quarter ended September 30, 2023, showing a 26.7% revenue increase and growth in total assets to $770.8 million, alongside an increased net loss Condensed Consolidated Statements of Operations Highlights | Metric | Three Months Ended Sep 30, 2023 ($) | Three Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2023 ($) | Nine Months Ended Sep 30, 2022 ($) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $456.7M | $360.3M | $1,358.2M | $1,072.3M | | Loss from Operations | $(29.8M) | $(33.4M) | $(85.9M) | $(76.5M) | | Net Loss | $(35.1M) | $(40.2M) | $(100.9M) | $(92.6M) | | Net Loss Per Share | $(0.19) | $(0.22) | $(0.54) | $(0.51) | Condensed Consolidated Balance Sheet Highlights | Metric | September 30, 2023 ($) | December 31, 2022 ($) | | :--- | :--- | :--- | | Total Current Assets | $667.0M | $544.5M | | Total Assets | $770.8M | $633.9M | | Total Current Liabilities | $410.3M | $230.0M | | Total Liabilities | $581.2M | $394.6M | | Total Stockholders' Equity | $189.6M | $239.3M | Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended) | Metric | September 30, 2023 ($) | September 30, 2022 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $128.3M | $103.8M | | Net cash used in investing activities | $(146.2M) | $(20.1M) | | Net cash provided by financing activities | $0.06M | $17.1M | | Net decrease in cash | $(17.9M) | $100.8M | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance, highlighting an 18% membership growth and 26.7% revenue increase for the nine months ended September 30, 2023, alongside an increased Medical Benefits Ratio Overview Alignment Healthcare operates a consumer-centric platform focused on improving healthcare for seniors through Medicare Advantage plans, serving 115,600 members across 52 markets in 6 states - The company's business model is a "virtuous cycle" where managing healthcare expenditures allows reinvestment into richer benefits, which in turn drives membership growth[138] - Health Plan Membership grew to 115,600 as of September 30, 2023, representing a 28% compound annual growth rate since inception[137] - The company operates in 52 markets across California, North Carolina, Nevada, Arizona, Texas, and Florida, with approximately 8.5 million Medicare-eligible seniors in these markets[139] Results of Operations Total revenues increased by 26.7% to $1.36 billion for the nine months ended September 30, 2023, driven by membership growth, while medical expenses rose 30.4% to $1.20 billion Revenue Comparison (Nine Months Ended Sep 30) | Revenue Type | 2023 ($) | 2022 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Earned Premiums | $1,341.9M | $1,071.5M | +$270.4M | +25.2% | | Other | $16.3M | $0.9M | +$15.4M | +1717.3% | | Total Revenues | $1,358.2M | $1,072.3M | +$285.9M | +26.7% | Expense Comparison (Nine Months Ended Sep 30) | Expense Type | 2023 ($) | 2022 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Medical Expenses | $1,204.8M | $923.9M | +$281.0M | +30.4% | | SG&A Expenses | $223.7M | $212.4M | +$11.3M | +5.3% | | Depreciation & Amortization | $15.6M | $12.6M | +$3.0M | +24.1% | - The increase in medical expenses was driven by growth in Health Plan and ACO REACH membership, richer member benefits, and a smaller amount of favorable prior year development[168] Liquidity and Capital Resources As of September 30, 2023, the company held $515.6 million in liquid assets, which management deems sufficient to fund operations for at least the next 12 months, supported by a $250 million term loan agreement - The company held $515.6 million in cash, cash equivalents, and short-term investments as of September 30, 2023[173] - The company has a term loan agreement with Oxford Finance LLC for up to $250 million, with an initial loan of $165 million received in September 2022, bearing a variable interest rate based on SOFR plus a 6.50% margin[178] - Net cash provided by operating activities was $128.3 million for the nine months ended September 30, 2023, an increase from $103.8 million in the prior year period, primarily due to the timing of CMS premium payments[185] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is inflation, which has not materially affected operating results to date, and the company does not hold financial instruments for trading purposes - The main market risk identified is inflation, which has not had a material effect on operating results to date[191][192] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2023[193] - No material changes were identified in the company's internal control over financial reporting during the third quarter of 2023[194] PART II. Other Information Item 1. Legal Proceedings The company discloses a tentative $912,500 settlement in a class action lawsuit regarding employee meal and rest breaks, which has been accrued as a potential liability pending court approval - The company entered into a tentative settlement for $912,500 in the Dabney v. Alignment Healthcare USA, LLC class action lawsuit concerning employee meal and rest breaks[130] - The settlement amount has been accrued as a potential liability as of September 30, 2023, pending court approval expected in Q1 2024[130] Item 1A. Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the Annual Report[196] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities occurred during the period and no material change in the planned use of $361.6 million net proceeds from the March 2021 IPO - The company's IPO in March 2021 generated approximately $361.6 million in net proceeds[196] - There has been no material change in the use of proceeds from the IPO as described in the original prospectus[197] Item 6. Exhibits This section provides a list of all exhibits filed with the Form 10-Q, including corporate governance documents, employment agreements, and Sarbanes-Oxley Act certifications - The report includes exhibits such as the CEO and CFO certifications pursuant to the Sarbanes-Oxley Act, and various employment and separation agreements[199]