Alignment Healthcare(US:ALHC)2023-05-03 16:00PART I. Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2023 Condensed Consolidated Balance Sheets Total assets grew to $761.8 million, driven by current assets, while total liabilities rose to $537.8 million Condensed Consolidated Balance Sheets | Financial Metric | March 31, 2023 ($ in thousands) | December 31, 2022 ($ in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 384,261 | 409,549 | | Short-term investments | 103,483 | — | | Total current assets | 670,914 | 544,546 | | Total assets | 761,751 | 633,863 | | Liabilities & Equity | | | | Medical expenses payable | 185,670 | 170,135 | | Deferred premium revenue | 141,081 | 308 | | Total current liabilities | 374,187 | 229,961 | | Total liabilities | 537,811 | 394,561 | | Total stockholders' equity | 223,940 | 239,302 | Condensed Consolidated Statements of Operations Total revenues increased 27.1% to $439.2 million, while the net loss slightly improved to $37.4 million Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2023 ($ in thousands) | Three Months Ended March 31, 2022 ($ in thousands) | | :--- | :--- | :--- | | Total revenues | 439,155 | 345,526 | | Medical expenses | 396,315 | 303,758 | | Selling, general, and administrative expenses | 70,408 | 74,293 | | Loss from operations | (32,489) | (36,475) | | Net loss | (37,371) | (40,817) | | Net loss per share - basic and diluted | $(0.20) | $(0.23) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased to $223.9 million, primarily due to the quarterly net loss of $37.4 million - The company's total stockholders' equity decreased by $15.4 million during the quarter, from $239.3 million to $223.9 million, mainly due to a net loss of $37.4 million, counteracted by $22.0 million in equity-based compensation21 Condensed Consolidated Statements of Cash Flows Net cash from operations was $85.1 million, while investing activities used $110.4 million, resulting in a net cash decrease Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2023 ($ in thousands) | Three Months Ended March 31, 2022 ($ in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 85,110 | (11,638) | | Net cash used in investing activities | (110,428) | (6,127) | | Net cash provided by financing activities | 30 | — | | Net decrease in cash | (25,288) | (17,765) | Notes to Unaudited Condensed Consolidated Financial Statements Details significant accounting policies, revenue recognition, and disclosures on debt, equity, and legal proceedings - The company's operations primarily consist of Medicare Advantage Plans in California, North Carolina, Nevada, Arizona, Florida, and Texas, operating as a single reportable segment3033 - Premium revenue is derived monthly from CMS and adjusted for member risk factors, supplemented by capitation revenue and participation in the CMS ACO REACH model373840 - Due to the timing of CMS payments, the company recorded $141.1 million in deferred premium revenue at the end of Q1 2023, to be recognized in April 202347 - The company is subject to a class action lawsuit regarding meal and rest breaks, but has not accrued for any potential liability as the loss cannot be reasonably estimated124 Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses Q1 2023 performance, including a 27.1% revenue increase and a higher Medical Benefits Ratio of 89.7% Key Performance Metrics | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Health plan membership | 109,700 | 94,200 | 16.5% | | Revenues ($M) | 439.2 | 345.5 | 27.1% | | Medical benefits ratio | 89.7% | 87.0% | 2.7% | | Net loss ($M) | (37.4) | (40.8) | N/A | | Adjusted EBITDA ($M) | (5.2) | (3.9) | N/A | Results of Operations Revenue grew 27.1% driven by membership, while medical expenses rose 30.4% and SG&A expenses decreased 5.2% - Revenue growth of 27.1% was driven by a 16.2% increase in health plan membership, higher CMS benchmark rates, and an additional $19.8 million from ACO REACH157 - Medical expenses increased 30.4%, outpacing revenue due to richer member benefits, seasonal patterns, and a revenue mix shift towards ACO REACH patients159 - SG&A expenses decreased 5.2% year-over-year, primarily due to a reduction in equity-based compensation; excluding this, SG&A increased 3.2%160 Liquidity and Capital Resources The company holds $487.7 million in liquid assets, sufficient for the next 12 months, and is in compliance with its debt covenants - The company had $487.7 million in cash, cash equivalents, and short-term investments as of March 31, 2023, sufficient to fund operations for at least the next 12 months163165 - The company has an outstanding $165.0 million term loan with a variable interest rate and was in compliance with all financial covenants as of March 31, 2023168171 - Net cash from operating activities was $85.1 million, a significant increase from a use of $11.6 million in Q1 2022, mainly due to the timing of a large deferred premium revenue payment from CMS173 Quantitative and Qualitative Disclosures About Market Risk Identifies inflation as the primary market risk, though it has not had a material effect on recent operating results - The company's primary market risk is exposure to potential changes in inflation, which management believes has not had a material effect on operating results for the periods presented182183 Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2023184 - No material changes to internal control over financial reporting occurred during the three months ended March 31, 2023185 PART II. Other Information Legal Proceedings Discloses a class action lawsuit from a former employee for which no liability has been accrued - The company is defending a class action lawsuit from a former employee regarding alleged meal and rest break violations; no liability has been accrued124187 Risk Factors Reports no material changes to the risk factors previously disclosed in the company's Annual Report - There have been no material changes to the risk factors disclosed in the company's Annual Report187 Unregistered Sales of Equity Securities and Use of Proceeds Confirms no unregistered sales of equity securities and no material change in the use of IPO proceeds - No unregistered sales of equity securities occurred during the three months ended March 31, 2023187 - The company's March 2021 IPO generated approximately $361.6 million in net proceeds, with no material change in the intended use of these funds187188 Exhibits Lists all exhibits filed with the Form 10-Q, including required officer certifications