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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________________________________
FORM 10-Q
_______________________________________
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2025
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-40295
_______________________________________
ALIGNMENT HEALTHCARE, INC.
(Exact Name of Registrant as Specified in its Charter)
_______________________________________
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| Delaware |
46-5596242 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1100 W. Town and Country Road, Suite 1600
Orange, California
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92868 |
| (Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (844) 310-2247
_______________________________________
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class |
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Trading
Symbol(s)
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Name of each exchange on which registered |
| Common Stock, par value $0.001 per share |
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ALHC |
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The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
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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| Large accelerated Filer |
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x |
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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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of April 28, 2025, the registrant had 197,843,352 shares of common stock, $0.001 par value per share, outstanding.
Table of Contents
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Condensed Consolidated Statements of Stockholders' Equity |
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FORWARD-LOOKING STATEMENTS
Throughout this quarterly report on Form 10-Q (this “Quarterly Report”), we make “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements. Forward-looking statements give our current expectations relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning. The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. These statements are based upon management’s current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:
•our history of net losses, and our ability to achieve or maintain profitability in an environment of increasing expenses;
•the effect of our relatively limited operating history on investors’ ability to evaluate our current business and future prospects;
•the viability of our growth strategy and our ability to realize expected results;
•our ability to attract new members and to successfully enter into new markets;
•the quality and pricing of our products and services;
•our ability to maintain a high rating for our health plans on the Five Star Quality Rating System;
•our ability to develop and maintain satisfactory relationships with care providers who service our members;
•our ability to manage our growth effectively, execute our business plan, maintain high levels of service and member satisfaction or adequately address competitive challenges;
•our ability to compete in the healthcare industry;
•the impact on our business of security breaches, loss of data or other disruptions causing the compromise of sensitive information or preventing us from accessing critical information;
•the impact on our business of disruptions in our disaster recovery systems or management continuity planning;
•the cost of legal proceedings and litigation, including intellectual property and privacy disputes;
•our dependence on reimbursements by the Centers for Medicare and Medicaid Services ("CMS") and premium payments by individuals;
•other risks associated with being a government contractor;
•the impact on our business of the healthcare services industry becoming more cyclical;
•our ability to manage acquisitions, divestitures and other significant transactions successfully;
•our ability to maintain, enhance and protect our reputation and brand recognition;
•our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;
•our ability to obtain, maintain, protect and enforce intellectual property protection for our technology;
•the potential adverse impact of claims by third parties that we are infringing on, misappropriating or otherwise violating their intellectual property rights;
•the impact of any restrictions on our use of or ability to license data or our failure to license data and integrate third-party technologies;
•our dependence on our senior management team and other key employees;
•the concentration of our health plans in a limited number of U.S. states;
•our management team’s limited experience managing a public company;
•our ability to generate sufficient cash flow to service all of our indebtedness;
•the impact of shortages of qualified personnel and related increases in our labor costs;
•the risk that our records may contain inaccurate or unsupportable information regarding risk adjustment scores of members;
•our ability to accurately estimate incurred but not reported medical expenses;
•the impact of negative publicity regarding the managed healthcare industry;
•the impact of weather and other factors beyond our control on our clinics, the centers out of which our external providers operate, and the facilities that host our AVA platform (as defined below);
•the impact on our business of renegotiation, non-renewal or termination of risk agreements with hospitals, physicians, nurses, pharmacists and medical support staff;
•risks associated with estimating the amount of liabilities that we recognize under our risk agreements with providers;
•our ability to respond to general economic conditions, including but not limited to, increased inflation and higher interest rates;
•risks associated with an economic downturn, including pressure on governmental budgets and reduced spending for health and human service programs;
•our ability to develop and maintain proper and effective internal control over financial reporting;
•the impact of state and federal efforts to reduce Medicare spending;
•our ability to comply with applicable federal, state and local rules and regulations, including those relating to data privacy and security; and
•other factors disclosed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report.
We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report.
All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications.
You should evaluate all forward-looking statements made in this Quarterly Report in the context of these risks and uncertainties.
We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Alignment Healthcare, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands, except par value and share amounts)
(Unaudited)
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March 31, 2025 |
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December 31, 2024 |
| Assets |
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| Current Assets: |
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| Cash and cash equivalents |
$ |
446,184 |
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$ |
432,859 |
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Accounts receivable (less allowance for credit losses of $0 at March 31, 2025 and $0 at December 31, 2024) |
214,059 |
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153,904 |
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| Investments - current |
33,360 |
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37,791 |
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| Prepaid expenses and other current assets |
80,883 |
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37,084 |
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| Total current assets |
774,486 |
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661,638 |
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| Property and equipment, net |
68,504 |
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67,139 |
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| Right of use asset, net |
7,750 |
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7,818 |
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| Goodwill |
34,192 |
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34,826 |
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| Intangible Assets, net |
4,550 |
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4,550 |
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| Other assets |
6,135 |
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6,092 |
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| Total assets |
$ |
895,617 |
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$ |
782,063 |
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| Liabilities and Stockholders' Equity |
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| Current Liabilities: |
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| Medical expenses payable |
$ |
396,734 |
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$ |
289,788 |
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| Accounts payable and accrued expenses |
28,032 |
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22,126 |
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| Accrued compensation |
32,353 |
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39,931 |
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| Total current liabilities |
457,119 |
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351,845 |
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| Long-term debt, net of debt issuance costs |
321,855 |
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321,428 |
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| Long-term portion of lease liabilities |
7,648 |
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7,835 |
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| Total liabilities |
786,622 |
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681,108 |
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| Commitments and Contingencies (Note 12) |
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| Stockholders' Equity: |
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Preferred stock, $.001 par value; 100,000,000 shares authorized as of March 31, 2025 and December 31, 2024, respectively; no shares issued and outstanding as of March 31, 2025 and December 31, 2024 |
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Common stock, $.001 par value; 1,000,000,000 shares authorized as of March 31, 2025 and December 31, 2024; 197,667,653 and 191,778,639 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively |
198 |
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192 |
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| Additional paid-in capital |
1,125,340 |
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1,107,952 |
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| Accumulated deficit |
(1,017,407) |
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(1,008,293) |
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| Total Alignment Healthcare, Inc. stockholders' equity |
108,131 |
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99,851 |
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| Noncontrolling interest |
864 |
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1,104 |
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| Total stockholders' equity |
108,995 |
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100,955 |
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| Total liabilities and stockholders' equity |
$ |
895,617 |
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$ |
782,063 |
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See accompanying notes to unaudited condensed consolidated financial statements.
Alignment Healthcare, Inc.
Condensed Consolidated Statements of Operations
(amounts in thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended March 31, |
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2025 |
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2024 |
| Revenues: |
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| Earned premiums |
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$ |
918,043 |
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$ |
621,556 |
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| Other |
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8,889 |
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7,045 |
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| Total revenues |
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926,932 |
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628,601 |
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| Expenses: |
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| Medical expenses |
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820,900 |
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573,218 |
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| Selling, general, and administrative expenses |
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103,831 |
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90,512 |
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| Depreciation and amortization |
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7,594 |
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5,977 |
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| Total expenses |
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932,325 |
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669,707 |
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| Loss from operations |
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(5,393) |
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(41,106) |
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| Other expenses: |
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| Interest expense |
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3,950 |
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5,427 |
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| Other (income) expenses, net |
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(10) |
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42 |
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| Total other expenses |
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3,940 |
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5,469 |
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| Loss before income taxes |
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(9,333) |
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(46,575) |
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| Provision for income taxes |
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21 |
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— |
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| Net loss |
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$ |
(9,354) |
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$ |
(46,575) |
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| Less: Net loss attributable to noncontrolling interest |
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240 |
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54 |
|
| Net loss attributable to Alignment Healthcare, Inc. |
|
|
|
|
$ |
(9,114) |
|
|
$ |
(46,521) |
|
| Total weighted-average common shares outstanding - basic and diluted |
|
|
|
|
193,606,438 |
|
|
189,005,394 |
| Net loss per share - basic and diluted |
|
|
|
|
$ |
(0.05) |
|
|
$ |
(0.25) |
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
Alignment Healthcare, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(amounts in thousands, except par value and share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Additional Paid-In Capital |
|
Accumulated Deficit |
|
Noncontrolling Interest |
|
Total |
| Balance at December 31, 2024 |
191,778,639 |
|
$ |
192 |
|
|
$ |
1,107,952 |
|
|
$ |
(1,008,293) |
|
|
$ |
1,104 |
|
|
$ |
100,955 |
|
| Net loss |
— |
|
— |
|
|
— |
|
|
(9,114) |
|
|
(240) |
|
|
(9,354) |
|
| Issuance of common stock upon vesting of restricted stock units |
5,864,819 |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Forfeitures |
(277) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Equity-based compensation |
— |
|
6 |
|
|
17,181 |
|
|
— |
|
|
— |
|
|
17,187 |
|
| Stock options exercised |
24,472 |
|
— |
|
|
207 |
|
|
— |
|
|
— |
|
|
207 |
|
| Balance at March 31, 2025 |
197,667,653 |
|
$ |
198 |
|
|
$ |
1,125,340 |
|
|
$ |
(1,017,407) |
|
|
$ |
864 |
|
|
$ |
108,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Additional Paid-In Capital |
|
Accumulated Deficit |
|
Noncontrolling interest |
|
Total |
| Balance at December 31, 2023 |
188,951,643 |
|
$ |
189 |
|
|
$ |
1,037,015 |
|
|
$ |
(880,258) |
|
|
$ |
1,125 |
|
|
$ |
158,071 |
|
| Net loss |
— |
|
— |
|
|
— |
|
|
(46,521) |
|
|
(54) |
|
|
(46,575) |
|
| Issuance of common stock upon vesting of restricted stock units |
2,277,545 |
|
2 |
|
|
— |
|
|
— |
|
|
— |
|
|
2 |
|
| Forfeitures |
(2,799) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Shares withheld related to net restricted stock settlement |
(69,820) |
|
— |
|
|
(350) |
|
|
— |
|
|
— |
|
|
(350) |
|
| Equity-based compensation |
— |
|
— |
|
|
20,854 |
|
|
— |
|
|
— |
|
|
20,854 |
|
| Noncontrolling interest attributable to subsidiary |
— |
|
— |
|
|
— |
|
|
— |
|
|
15 |
|
|
15 |
|
| Balance at March 31, 2024 |
191,156,569 |
|
$ |
191 |
|
|
$ |
1,057,519 |
|
|
$ |
(926,779) |
|
|
$ |
1,086 |
|
|
$ |
132,017 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
Alignment Healthcare, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2025 |
|
2024 |
| Operating Activities: |
|
|
|
| Net loss |
$ |
(9,354) |
|
|
$ |
(46,575) |
|
| Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
| Loss on right of use assets |
— |
|
|
143 |
|
| Depreciation and amortization |
7,627 |
|
|
6,029 |
|
| Amortization-investment discount |
(370) |
|
|
(1,153) |
|
| Amortization-debt issuance costs |
440 |
|
|
520 |
|
| Equity-based compensation |
17,187 |
|
|
20,854 |
|
| Non-cash lease expense |
395 |
|
|
472 |
|
| Changes in operating assets and liabilities: |
|
|
|
| Accounts receivable |
(60,155) |
|
|
(45,322) |
|
| Prepaid expenses and other current assets |
(43,800) |
|
|
(8,886) |
|
| Other assets |
(23) |
|
|
(114) |
|
| Medical expenses payable |
106,946 |
|
|
71,065 |
|
| Accounts payable and accrued expenses |
5,208 |
|
|
48 |
|
| Deferred premium revenue |
157 |
|
|
(59) |
|
| Accrued compensation |
(7,577) |
|
|
(2,505) |
|
| Lease liabilities |
(65) |
|
|
(755) |
|
| Net cash provided by (used in) operating activities |
16,616 |
|
|
(6,238) |
|
| Investing Activities: |
|
|
|
| Purchase of investments |
(17,905) |
|
|
(21,564) |
|
| Maturities of investments |
22,695 |
|
|
75,390 |
|
| Acquisition of property and equipment |
(8,252) |
|
|
(11,121) |
|
| Net cash (used in) provided by investing activities |
(3,462) |
|
|
42,705 |
|
| Financing Activities: |
|
|
|
| Payment of employment taxes related to release of restricted stock |
— |
|
|
(350) |
|
| Debt issuance costs |
(26) |
|
|
— |
|
| Proceeds from stock option exercises |
207 |
|
|
— |
|
| Contributions from noncontrolling interest holders |
— |
|
|
15 |
|
| Net cash provided by (used in) financing activities |
181 |
|
|
(335) |
|
| Net increase in cash |
13,335 |
|
|
36,132 |
|
| Cash, cash equivalents and restricted cash at beginning of period |
434,942 |
|
|
204,954 |
|
| Cash, cash equivalents and restricted cash at end of period |
$ |
448,277 |
|
|
$ |
241,086 |
|
| Supplemental disclosure of cash flow information: |
|
|
|
| Cash paid for interest |
$ |
— |
|
|
$ |
5,175 |
|
| Supplemental non-cash investing and financing activities: |
|
|
|
| Acquisition of property in accounts payable |
$ |
85 |
|
|
$ |
156 |
|
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total above:
|
|
|
|
|
|
|
|
|
|
|
|
| |
March 31, 2025 |
|
March 31, 2024 |
| Cash and cash equivalents |
$ |
446,184 |
|
|
$ |
238,903 |
|
| Restricted cash in other assets |
2,093 |
|
|
2,183 |
|
| Total |
$ |
448,277 |
|
|
$ |
241,086 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
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 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 (“GAAP”). The balance sheet as of December 31, 2024, included herein, was derived from audited financial statements, but does not include all disclosures required by GAAP. In accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), the Company has omitted certain footnote disclosures that would substantially duplicate the disclosures contained in its annual audited consolidated financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year-ended December 31, 2024 as filed with the SEC. Furthermore, the condensed consolidated financial statements include the accounts of the Company, our subsidiaries, and three immaterial variable interest entities in which we are the primary beneficiary. All intercompany transactions have been eliminated in consolidation. Noncontrolling interest is presented within the equity section of the condensed consolidated balance sheets.
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 one reportable segment and one operating segment, which is to provide healthcare services to our seniors. Factors used in determining the reportable segment include the nature of operating activities, our organizational and reporting structure, and the type of information reviewed by the CODM to allocate resources and evaluate financial performance. All of our assets are located in the United States.
The CODM assesses the Company's performance by using consolidated net loss which is reported on the condensed consolidated statements of operations as net loss. This measure is used predominantly by the CODM in the annual budget and forecasting process. The CODM considers budget-to-actual variances on a quarterly basis when making decisions about the allocation of operating and capital resources for the Company.
In addition to net loss, the CODM is also provided information on certain significant segment expenses which are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2025 |
|
2024 |
| Revenues: |
$ |
926,932 |
|
|
$ |
628,601 |
|
| Expenses: |
|
|
|
| Medical expenses (less depreciation and equity-based compensation) |
819,715 |
|
|
572,033 |
|
| Selling, general, and administrative expenses (less equity-based compensation) |
87,796 |
|
|
70,791 |
|
Other segment expenses (1) |
24,825 |
|
|
26,925 |
|
| Interest expense |
3,950 |
|
|
5,427 |
|
| Net loss |
$ |
(9,354) |
|
|
$ |
(46,575) |
|
(1) Other segment items included in segment net income includes equity-based compensation, depreciation and amortization, other expenses (income), and provision for income taxes.
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, and long-term debt was determined based on Level 2 inputs. There were no assets or liabilities measured at fair value using Level 3 inputs as of March 31, 2025 and December 31, 2024.
Revenue and Accounts Receivable
Earned premium revenue consisted of premium revenue and capitation revenue for the three months ended March 31, 2025 and 2024 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
2025 |
|
2024 |
| Premium |
|
|
|
|
$ |
916,622 |
|
|
$ |
619,722 |
|
| Capitation |
|
|
|
|
1,421 |
|
|
1,834 |
|
| Total |
|
|
|
|
$ |
918,043 |
|
|
$ |
621,556 |
|
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.
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.
We also participate in the CMS “ACO Realizing Equity, Access, and Community Health Model” or “ACO REACH” model, formerly the Direct Contracting Model ("DCE"). CMS serves as the claim adjudicator for institutional and specialists care, and directly pays for such fee for service claims. 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. In 2024, we entered into a management services and risk management agreement with a third-party healthcare company. The third-party is responsible for arranging and controlling the health care services provided to the ACO members, and for providing certain management and support services with respect to ACO operations. The third-party also assumes specified upside and downside financial risks relative to the ACO’s performance. As a result of this arrangement, revenue is recorded on a net basis within other revenue on the condensed consolidated statement of operations. Revenue recognized by the ACO for the three months ended March 31, 2025 and 2024 was $442 and $985, respectively.
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 months ended March 31, 2025 and 2024 was $6,499 and $5,443, respectively.
Revenue Adjustments
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 and Texas are each subject to a minimum annual medical loss ratio (“MLR”) of 85%. The MLR represents medical costs as a percentage of premium revenue. The Code of Federal Regulations defines what constitutes medical costs and premium revenue, including certain additional expenses related to improving the quality of care provided, and the exclusion of certain taxes and fees, in each case as permitted or required by CMS and applicable regulatory requirements. If the minimum MLR is not met, we are required to remit a portion of the premiums back to the federal government. The amount remitted, if any, is recognized as an adjustment to premium revenues in the condensed consolidated statements of operations. The amounts payable under this provision were immaterial at March 31, 2025 and December 31, 2024.
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 consolidated balance sheets 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.
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 |
5 |
| Office equipment and furniture |
5-7 |
| Software |
3-5 |
| Leasehold improvements |
15 (or lease term, if shorter) |
Depreciation expense related to property and equipment used to service our members or at our clinics are included within medical expenses in the condensed consolidated statements of operations.
Medical Expenses
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.
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 increased financial responsibility for certain drug manufacturers. The provisions of the law are set to take effect over the next seven years. For the three months ended March 31, 2025, we experienced an increase in both premium revenues and medical expenses as a result of the IRA. Our 2025 bid pricing and budget reflect the expected impact the IRA will have on our business for fiscal year 2025.
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 contract and 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 low-income beneficiaries. Additionally, the Health Care Reform Law mandates consumer discounts of 75% on brand-name prescription drugs for Part D plan participants in the coverage gap. The majority of the discounts are funded by the pharmaceutical manufacturers, while we fund a smaller portion and administer the application of the total discount. In 2025, the IRA retires the Coverage Gap Discount Program and introduces the Manufacturer Discount Program. While CMS’s share of the drug cost liability is expected to decline from Catastrophic Reinsurance and Low-Income Member Cost Sharing, prescription drug manufacturers are expected to experience increased liability. These program changes and the corresponding changes in prepayments were embedded in the 2025 bid pricing.
These Subsidies represent cost reimbursements under the Medicare Part D program and are recorded as deposits or payables. 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 sheets. 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 March 31, 2025 and December 31, 2024, we recorded an allowance for credit losses 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 sheets.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash deposits and current 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 March 31, 2025 and December 31, 2024, there was $478,157 and $469,373, respectively, in excess of FDIC-insured limits.
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 on the date of grant.
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 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 three or four years.
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.
Net Loss per Share
Net loss per share is calculated based on net loss attributable to Alignment Healthcare, Inc.'s stockholders. The following table sets forth the computation of basic and diluted net loss per share for the three months ended March 31, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Three Months Ended March 31, |
| |
|
|
|
|
2025 |
|
2024 |
| Numerator: |
|
|
|
|
|
|
|
| Net loss |
|
|
|
|
$ |
(9,354) |
|
|
$ |
(46,575) |
|
| Less: Net loss attributable to noncontrolling interests |
|
|
|
|
240 |
|
|
54 |
|
| Net loss attributable to Alignment Healthcare, Inc. |
|
|
|
|
$ |
(9,114) |
|
|
$ |
(46,521) |
|
| Denominator: |
|
|
|
|
|
|
|
| Total weighted-average common shares outstanding - basic and diluted |
|
|
|
|
193,653,028 |
|
189,597,668 |
| Less: Restricted shares of common stock |
|
|
|
|
(46,590) |
|
(592,274) |
| Total weighted-average common shares outstanding, net of restricted shares of common stock - basic and diluted |
|
|
|
|
193,606,438 |
|
189,005,394 |
| Net loss per share: |
|
|
|
|
|
|
|
| Net loss per share - basic and diluted |
|
|
|
|
$ |
(0.05) |
|
|
$ |
(0.25) |
|
Basic net loss per share is the same as diluted net loss per share for 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 March 31, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
| |
March 31, |
| |
2025 |
|
2024 |
| Stock options |
8,717,493 |
|
9,023,343 |
| Restricted stock units |
17,187,135 |
|
22,767,035 |
| Convertible senior notes |
25,720,959 |
|
— |
|
| Total |
51,625,587 |
|
31,790,378 |
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-07 around segment disclosures. The new standard requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide, in interim periods, all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The guidance was for annual periods beginning with the Company's fiscal year 2024, and in interim periods within the Company's fiscal year 2025. The Company adopted the requirements of this ASU within our segment disclosure in Note 2 Summary of Significant Accounting Policies above. The adoption only impacted our disclosures with no impact to our results of operations, cash flows or financial condition.
Recent Accounting Pronouncements Issued
In November 2024, the FASB issued ASU 2024-04 “Debt with Conversion and Other Options”, which improves and clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for annual periods beginning after December 15, 2025 (and interim reporting periods within those annual reporting periods). The Company is currently evaluating the impact of this ASU on its financial statements.
In November 2024, the FASB issued ASU 2024-03 “Disaggregation of Income Statement Expenses”, which improve income statement presentation and disclosures related to expenses. It requires a public entity to disaggregate key expense categories such as employee compensation, depreciation and intangible asset amortization within its financial statements. ASU 2024-03 is effective for annual periods beginning with the Company's fiscal year 2027, and interim periods within the Company's fiscal year 2028, with early adoption permitted.
The Company is currently evaluating the impact of this ASU on its disclosures of income statement expenses.
In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which requires public entity to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For public entities, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and
continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition.
3. Fair Value
The following tables present the carrying value and fair value of these financial instruments as of March 31, 2025 and December 31, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2025 |
|
|
|
Fair Value |
|
Carrying Value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| U.S. Treasury bills |
$ |
71,875 |
|
|
$ |
71,874 |
|
|
$ |
— |
|
|
$ |
— |
|
| Certificate of deposits |
2,331 |
|
|
— |
|
|
2,331 |
|
|
— |
|
| Total |
$ |
74,206 |
|
|
$ |
71,874 |
|
|
$ |
2,331 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2024 |
|
|
|
Fair Value |
|
Carrying Value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| U.S. Treasury bills |
$ |
71,120 |
|
|
$ |
71,135 |
|
|
$ |
— |
|
|
$ |
— |
|
| Certificate of deposits |
2,321 |
|
|
— |
|
|
2,321 |
|
|
— |
|
| Total |
$ |
73,441 |
|
|
$ |
71,135 |
|
|
$ |
2,321 |
|
|
$ |
— |
|
The Company estimates the fair value of its convertible senior notes based on valuations provided by third-party pricing services. Fair value of the long-term debt as of March 31, 2025 was approximately $467,834. The Company's fair value of long-term debt disclosure is classified within Level 2 of the valuation hierarchy.
The carrying value of long-term debt represents the outstanding balance, net of unamortized debt issuance costs which was $321,855 and $321,428 as of March 31, 2025 and December 31, 2024, respectively. As of December 31, 2024, the fair value of our long-term debt approximated 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. We recorded an impairment charge related to goodwill as of March 31, 2025 and as of December 31, 2024. See Note 6, Goodwill and Intangible Assets.
U.S. Treasury Securities Investments
As of March 31, 2025 and December 31, 2024, the Company had $33,360 and $37,791, respectively, of investments in U.S. Treasury bills, which were classified as held to maturity and carried at amortized cost. These investments are included in short-term investments in the condensed consolidated balance sheets as the original maturities are greater than three months and less than twelve months.
The Company has the intent and ability to hold these securities to maturity and gross unrecognized gains and losses were immaterial.
As of March 31, 2025 and December 31, 2024, the Company had $37,471 and $32,296, respectively, of investments in U.S. Treasury bill money market funds with an original maturity of less than three months. These investments are considered cash equivalents and are included in cash and cash equivalents in the condensed consolidated balances sheets.
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 March 31, 2025 and December 31, 2024, the Company had $1,044 and $1,033 of restricted investments in U.S. Treasury bills and $2,331 and $2,321 of restricted investments in certificates of deposits, respectively. The Company has the intent and ability to hold these investments until maturity; therefore, these investments are stated at amortized cost. Restricted investments are required to be maintained at a financial institution within certain states. As of March 31, 2025 and December 31, 2024, these investments had maturities with less than 12 months. Due to the nature of the state's requirements, these assets are classified as noncurrent assets regardless of the contractual maturity date.
4. Accounts Receivable
Accounts receivable consisted of the following as of March 31, 2025 and December 31, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
| |
March 31, 2025 |
|
December 31, 2024 |
| Government receivables |
$ |
68,467 |
|
|
$ |
26,338 |
|
| Pharmacy rebate receivables |
127,147 |
|
|
111,813 |
|
| Other receivables |
18,445 |
|
|
15,753 |
|
| Total accounts receivable |
214,059 |
|
|
153,904 |
|
| Allowance for credit losses |
— |
|
|
— |
|
| Accounts receivable, net |
$ |
214,059 |
|
|
$ |
153,904 |
|
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 a credit loss related to accounts receivable of $0 and $0 during the three months ended March 31, 2025 and 2024, respectively. Credit losses are recorded in selling general, and administrative expenses in the condensed consolidated statements of operations.
5. Property and Equipment
Property and equipment consisted of the following as of March 31, 2025 and December 31, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2025 |
|
December 31, 2024 |
| Computers and equipment |
$ |
12,723 |
|
|
$ |
12,569 |
|
| Office equipment and furniture |
4,341 |
|
|
4,341 |
|
| Software |
184,548 |
|
|
179,336 |
|
| Leasehold improvements |
6,231 |
|
|
6,231 |
|
| Construction in progress |
17,009 |
|
|
14,049 |
|
| Subtotal |
224,852 |
|
|
216,526 |
|
| Less accumulated depreciation |
(156,348) |
|
|
(149,387) |
|
| Property and equipment-net |
$ |
68,504 |
|
|
$ |
67,139 |
|
Depreciation expense for the three months ended March 31, 2025 and 2024 was $6,993 and $6,001, respectively, of which $33 and $52, respectively, were included in medical expenses.
6. Goodwill and Intangible Assets
Intangible assets consisted of the following as of March 31, 2025 and December 31, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2025 |
|
Gross Carrying Value |
|
Accumulated Amortization |
|
Net Carrying Value |
|
Weighted Average Life |
| Goodwill |
$ |
34,192 |
|
|
$ |
— |
|
|
$ |
34,192 |
|
|
— |
| License (indefinite lived) |
4,550 |
|
|
— |
|
|
4,550 |
|
|
— |
| Plan member relationships |
2,700 |
|
|
(2,700) |
|
|
— |
|
|
9 years |
| Other |
633 |
|
|
(633) |
|
|
— |
|
|
2 - 10 years |
| Total |
$ |
42,075 |
|
|
$ |
(3,333) |
|
|
$ |
38,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2024 |
|
Gross Carrying Value |
|
Accumulated Amortization |
|
Net Carrying Value |
|
Weighted Average Life |
| Goodwill |
$ |
34,826 |
|
|
$ |
— |
|
|
$ |
34,826 |
|
|
— |
| License (indefinite lived) |
4,550 |
|
|
— |
|
|
4,550 |
|
|
— |
| Plan member relationships |
2,700 |
|
|
(2,700) |
|
|
— |
|
|
9 years |
| Other |
633 |
|
|
(633) |
|
|
— |
|
|
2 - 10 years |
| Total |
$ |
42,709 |
|
|
$ |
(3,333) |
|
|
$ |
39,376 |
|
|
|
Amortization expense relating to intangible assets for the three months ended March 31, 2025 and 2024, was $634 and $28, respectively. Included within the amortization balance for the three months ended March 31, 2025 was $634 in impairment charges related to the remeasurement of goodwill associated with one of our subsidiaries.
There were no impairment charges related to goodwill and intangible assets for the three months ended March 31, 2024.
7. Medical Expenses Payable
The following table is a detail of medical expenses payable as of March 31, 2025 and December 31, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
| |
March 31, 2025 |
|
December 31, 2024 |
| Claims incurred but not paid |
$ |
196,936 |
|
|
$ |
168,357 |
|
| Capitation and risk-sharing payable |
83,771 |
|
|
52,016 |
|
| Other |
116,027 |
|
|
69,415 |
|
| Medical expenses payable |
$ |
396,734 |
|
|
$ |
289,788 |
|
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 three-year period.
The following table presents components of the change in medical expenses payable as of March 31, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2025 |
|
March 31, 2024 |
| Claims incurred but not paid - beginning balance |
$ |
168,357 |
|
|
$ |
95,664 |
|
| Incurred related to: |
|
|
|
| Current year |
282,332 |
|
|
198,675 |
|
| Prior years |
(14,596) |
|
|
(4,969) |
|
| Total incurred, net of reinsurance |
267,736 |
|
|
193,706 |
|
| Payments related to: |
|
|
|
| Current year |
123,768 |
|
|
91,486 |
|
| Prior years |
115,389 |
|
|
68,639 |
|
| Total payments, net of reinsurance |
239,157 |
|
|
160,125 |
|
| Claims incurred but not paid - ending balance |
196,936 |
|
|
129,245 |
|
| Capitation payable, risk-sharing payable, and other |
199,798 |
|
|
147,219 |
|
| Total medical expenses payable |
$ |
396,734 |
|
|
$ |
276,464 |
|
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 $5,951 and $871 for the three months ended March 31, 2025 and March 31, 2024, respectively. The favorable prior year development was primarily due to better-than-expected claims recoveries and actual claims expense being less than expected.
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 March 31, 2025 and December 31, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2025 |
|
December 31, 2024 |
| Long-term debt |
$ |
330,000 |
|
|
$ |
330,000 |
|
| Less unamortized debt issuance costs |
(8,145) |
|
|
(8,572) |
|
| Long-term debt-net of amortization |
321,855 |
|
|
321,428 |
|
| Less current maturities of long-term debt |
— |
|
|
— |
|
| Long-term debt - net of current portion |
$ |
321,855 |
|
|
$ |
321,428 |
|
Oxford Term Loan
On September 2, 2022 (the "Effective Date"), Alignment Healthcare USA, LLC, an indirect subsidiary of the Company (the “Borrower”) and certain of our other subsidiaries entered into a term loan agreement (the “Oxford Loan Agreement”) with Oxford Finance LLC, 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 $250,000 in a series of term loans (the “Term Loans”). Pursuant to the Oxford Loan Agreement, we received an initial Term Loan of $165,000 on the Effective Date and had the option to borrow up to an additional $85,000 of Term Loans. On June 14, 2024, we borrowed $50,000 in aggregate principal amount of the Delayed Draw Term Loans prior to the expiration date for such amount of the Delayed Draw Term Loans of June 30, 2024. Interest on the Term Loans was a variable rate equal to (i) the secured overnight financing rate ("SOFR") 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%.
In connection with the issuance of the convertible senior notes, as noted below, we repaid all amounts outstanding under the terms loans with Oxford Finance on November 22, 2024.
Convertible Senior Notes
On November 22, 2024, the Company completed the sale of $330,000 of our 4.25% Convertible Senior Notes (the "Notes"). The Notes were issued pursuant to an indenture (the "Indenture"), dated as of November 22, 2024, between the Company and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"). The Notes are senior, unsecured obligations of the Company, and interest will be payable semi-annually in arrears at a rate of 4.25% per annum beginning on May 15, 2025. The Notes will mature on November 15, 2029, unless earlier repurchased, redeemed or converted in accordance with their terms. The net cash proceeds from the sale of the Notes was approximately $321,100, after subtracting fees, discounts and estimated expenses in connection with the transaction.
Prior to the close of business on the business day immediately preceding August 15, 2029, the Notes will be convertible at the option of holders during certain periods, upon satisfaction of certain conditions. On or after August 15, 2029, the Notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Notes may be settled in shares of Company common stock, cash or a combination of cash and shares of Company common stock, at the Company's election.
The Notes have an initial conversion rate of approximately 62.4 shares of Company common stock per $1 principal amount of the Notes. The conversion rate will be subject to adjustment in certain events, including adjustment in the event of certain significant corporate transactions. This represents an initial conversion price of approximately $16.04 per share. The initial conversion price of the Notes represents a premium of approximately 25% to the closing price of the Company's common stock on November 14, 2024. The Company has used the proceeds from the sale of the Notes to repay in full the $215,000 aggregate principal amount, accrued interest and fees related to the Oxford term loans, as well as certain fees and expenses incurred in connection with the transaction.
The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in principal amount of the outstanding notes may declare 100% of the principal of, and accrued and unpaid special interest, if any, on, all the notes to be due and payable.
The Company has recognized the Notes in their entirety as a liability on the condensed consolidated balance sheet and no portion of the proceeds from the issuance of the convertible debt instrument was accounted for separately as an embedded conversion feature within stockholders’ equity.
Future maturities under the Notes for each of the next five years ending March 31, are as follows:
|
|
|
|
|
|
|
Amount |
| Remainder of 2025 |
$ |
— |
|
| 2026 |
— |
|
| 2027 |
— |
|
| 2028 |
— |
|
| 2029 |
330,000 |
|
|
$ |
330,000 |
|
9. Income Taxes
For the three months ended March 31, 2025 and 2024, we recorded income tax expense of $21 and $0, respectively. The change in tax for the three months ended March 31, 2025 when compared to the three months ended March 31, 2024 is primarily attributable to a change in state taxes. Our future effective tax rate may vary from the statutory tax rate primarily due to changes in our valuation allowance, state taxes, and excess executive compensation.
We have federal and state cumulative net operating losses ("NOLs") as of March 31, 2025 and December 31, 2024. 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 March 31, 2025 and 2024. Under the Tax Cuts and Jobs Act (“TCJA”), federal NOLs generated after 2017 will be carried forward indefinitely but are limited to an 80% deduction of taxable income. NOLs generated prior to 2018 have a 20-year carryforward period and can be used to offset 100% of taxable income. An exception to the TCJA federal NOL rule applies to certain of our subsidiaries and requires all NOLs generated from those entities to have a 20-year carryforward period and offset 100% of taxable income. For the year ended December 31, 2024 federal and state NOL carryforwards were $565,838 and $543,513, respectively. $374,188 of the total federal net operating loss carryforwards have an indefinite life while the remaining federal and state net operating loss carryforwards begin to expire in 2033 if not utilized. On June 27, 2024, California Senate Bill 167 (“SB 167”) was enacted into law, suspending California NOL utilization for taxpayers with more than $1 million of taxable income, effective for tax years 2024, 2025, and 2026. SB 167 includes an extended carryover period for the suspended NOLs with an additional year carryforward for each year of suspension. The Company will continue to monitor this legislation and its impact on our deferred tax assets.
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 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 25% annually over four years and generally expire 10 years from the date of the grant. The 2021 Equity Incentive Plan provides that stock option grants will be made with an exercise price at no less than the estimated fair value of common stock at the date of the grant.
The following is a summary of the stock option transactions as of and for the three months ended March 31, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
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, 2024 |
8,762,481 |
|
$ |
16.97 |
|
|
6.29 |
|
$ |
2,250 |
|
| Options granted |
— |
|
— |
|
|
|
|
|
| Options exercised |
(24,472) |
|
8.47 |
|
|
|
|
|
| Options forfeited / expired |
(20,516) |
|
16.06 |
|
|
|
|
|
| Balances as of March 31, 2025 |
8,717,493 |
|
17.00 |
|
|
6.04 |
|
14,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Vested and Exercisable as of March 31, 2025 |
8,238,335 |
|
$ |
17.23 |
|
|
6.01 |
|
$ |
11,551 |
|
Aggregate intrinsic value represents the difference between the exercise price of the option and the closing price of our common stock. The aggregate intrinsic value of options exercised for the three months ended March 31, 2025 was $248. No options were granted during the three months ended March 31, 2025.
Restricted Stock Awards
Our outstanding Restricted Stock Awards ("RSA") generally vest 25% annually over four years. RSAs converted from pre-initial public offering ("IPO") awards generally vest on the later of the fourth anniversary of the original vesting commencement date or 50% annually on the first and second anniversary of the IPO.
The following is a summary of RSA transactions for the three months ended March 31, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
| |
Restricted Shares |
|
Weighted-Average Grant Date Fair Value |
| Unvested and outstanding as of December 31, 2024 |
50,192 |
|
$ |
16.86 |
|
| Vested |
(49,915) |
|
18.00 |
|
| Forfeited |
(277) |
|
18.00 |
|
| Unvested and outstanding as of March 31, 2025 |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units
Our outstanding Restricted Stock Units ("RSU") generally vest 33% annually over three years or 25% annually over four years.
The following is a summary of RSU transactions as of and for the three months ended March 31, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
| |
Restricted Stock Units |
|
Weighted-Average Grant Date Fair Value |
| Unvested and outstanding as of December 31, 2024 |
13,344,685 |
|
$ |
9.05 |
|
| Granted |
2,214,287 |
|
15.48 |
Vested(1) |
(3,004,707) |
|
6.74 |
| Forfeited |
(321,137) |
|
8.71 |
| Unvested and outstanding as of March 31, 2025 |
12,233,128 |
|
$ |
10.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes shares that vested but the issuance and delivery of the shares was deferred.
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 0% to 150% of the target number of PSUs granted, based on the aggregated achievement by the Company of certain performance metrics during the performance period beginning on January 1, 2024 and ending on December 31, 2024. The achievement of PSUs relative to the approved target is based on the following performance metrics and relative weighting: Health Plan Revenue Growth Percentage 60%, At-Risk Returning Member Medical Benefit Ratio 20% and Adjusted EBITDA, less Capital Expenditures 20%.
50% of the total number of earned PSUs vested upon certification of achievement of the performance metrics by the Compensation Committee in March 2025 and the remaining 50% of earned PSUs will be become vested as of December 31, 2025, subject to continued service to the Company through such dates.
On March 13, 2024, the Compensation Committee of the Board of Directors of the Company approved additional grants of PSUs under the Company's 2021 Equity Incentive Plan. Each grantee is eligible to vest in a number of PSUs ranging from 0% to 200% of the target number of PSUs granted, based on the aggregated achievement by the Company of certain performance metrics during the performance period beginning on January 1, 2026 and ending on December 31, 2026. The achievement of PSUs relative to the approved target is based on the following performance metrics and relative weighting: Revenue 50% and Adjusted EBITDA 50%. 100% of the total number of earned PSUs will become vested upon certification of achievement of the performance metrics by the Compensation Committee on or about March 1, 2027 subject to continued service to the Company through such date.
On March 13, 2025, the Compensation Committee of the Board of Directors of the Company approved additional grants of PSUs under the Company's 2021 Equity Incentive Plan. Each grantee is eligible to vest in a number of PSUs ranging from 0% to 200% of the target number of PSUs granted, based on the aggregated achievement by the Company of certain performance metrics during the performance period beginning on January 1, 2027 and ending on December 31, 2027. The achievement of PSUs relative to the approved target is based on the following performance metrics and relative weighting: Revenue 50% and Adjusted EBITDA 50%. 100% of the total number of earned PSUs will become vested upon certification of achievement of the performance metrics by the Compensation Committee on or about March 1, 2028, subject to continued service to the Company through such date.
The following is a summary of PSU transactions for the three months ended March 31, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
| |
Performance-based restricted stock units |
|
Weighted-Average Grant Date Fair Value |
| Unvested and outstanding as of December 31, 2024 |
8,074,871 |
|
$ |
5.64 |
|
| Granted |
714,193 |
|
15.50 |
|
| Vested |
(3,826,723) |
|
5.74 |
|
| Forfeited |
(8,334) |
|
5.74 |
|
| Unvested and outstanding as of March 31, 2025 |
4,954,007 |
|
$ |
6.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-Based Compensation Expense
Total equity-based compensation expense was presented on the statement of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Three Months Ended March 31, |
| (amounts in thousands) |
|
|
|
|
2025 |
|
2024 |
| Selling, general and administrative expenses |
|
|
|
|
$ |
16,035 |
|
|
$ |
19,721 |
|
| Medical expenses |
|
|
|
|
1,152 |
|
|
1,133 |
|
| Total equity-based compensation expense |
|
|
|
|
$ |
17,187 |
|
|
$ |
20,854 |
|
As of March 31, 2025, there was $85,769 in unrecognized compensation expense related to all non-vested awards (Options, RSUs and PSUs) that will be recognized over the weighted-average period of 1.82 years.
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 ("RBC")
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 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 March 31, 2025.
Tangible Net Equity ("TNE")
Our health plans in California are required to comply with the tangible net equity requirements. The required amount is 150% of the larger of: (1) $1,000; (2) the sum of 2% of the first $150,000 of annualized premium revenue and 1% of annualized premium revenue in excess of $150,000; or (3) 8% of the first $150,000 of annualized health care expenditures except those paid on a capitated or managed hospital payment basis, plus 4% of the annualized health care expenditures in excess of $150,000, except those paid on a capitated or managed hospital payment basis, plus 4% of annualized hospital expenditures paid on a managed hospital payment basis. For newer health plans, through the first three years immediately following the health plan’s operational start date, the required amount is 200% of the larger of the TNE calculation described above. We were in compliance with the TNE requirements as of March 31, 2025.
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 March 31, 2025.
Restricted Assets
Pursuant to the regulations governing our subsidiaries, we maintain certain deposits required by the government authorities in the form of cash, certificate of deposit 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. See Note 3, Fair Value, for further discussion.
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 August 15, 2023, the Company entered into a tentative settlement of the action in consideration of an aggregate payment of $913. The settlement of this matter is subject to approval by the court which is expected in the second quarter of 2025. As a result of the tentative settlement, the Company has accrued for a potential liability of $913 as of March 31, 2025 and December 31, 2024 for this matter, which was recorded within accounts payable and accrued expenses on the condensed consolidated balance sheets and selling, general and administrative expenses on the condensed consolidated statements of operations.
On July 7, 2023, a stockholder of Alignment filed a purported class action lawsuit (Maglione v. Alignment Healthcare, Inc., et al, Delaware Chancery Court). The plaintiff alleged that certain provisions of Alignment’s stockholder agreement with General Atlantic (“GA”) and Warburg Pincus violate Delaware law. On April 30, 2024, the Company agreed to amend the stockholder agreement to eliminate the provisions challenged by the Maglione plaintiff. On May 24, 2024, the parties filed a stipulation and proposed order voluntarily dismissing the action as moot, which the court granted. Pursuant to the order, the court retained jurisdiction regarding attorneys’ fees.
The Company entered into discussions with plaintiffs’ counsel to negotiate with respect to attorney’s fees. In March 2025 the parties reached an agreement on settlement fees in the amount of $950. The Company has accrued for the settlement amount as of March 31, 2025, and the settlement was paid in April 2025.
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 not material as of March 31, 2025 and December 31, 2024.
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 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, 2024 (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.
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 consumers.
We have grown Health Plan Membership, which we define as members enrolled in our health maintenance organization ("HMO") and preferred provider organization ("PPO") contracts (the "Alignment Health Plans"), from approximately 13,000 at inception to 217,500 as of March 31, 2025, representing a 29% compound annual growth rate across 45 markets and 5 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 2025 plan year, Alignment offers plans in 45 markets across California (22 markets), North Carolina (16 markets), Nevada (2 markets), Arizona (3 markets) and Texas (2 markets). There are approximately 8.2 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:
•Capitalize on Our Existing Market Growth Opportunity: Our ability to attract and retain members to grow in our existing markets depends on our ability to offer a superior value proposition. We routinely take market share from large established players in highly competitive markets, a key source of our health plan membership growth in excess of the industry average. We believe that there are still significant opportunities for future growth even in our most mature markets where we have approximately 10-30% market share. According to CMS data as of March 31, 2025, our approximately 217,500 Health Plan Members represent only 5% market share of Medicare Advantage enrollees in our markets.
•Drive Growth and Consistent Outcomes Through New Market Expansion: As part of our long-term growth strategy, we may enter new markets with the goal of building brand awareness across our key stakeholders to achieve meaningful market share over time. We intend to focus on markets with significant senior populations where we expect to be able to replicate our model most effectively. Our existing markets also feature a diverse array of membership profiles across ethnicities, income levels and acuity. Since 2020, we have expanded into 29 markets and four states.
•Provide Superior Service, Care and Consumer Satisfaction: We are highly focused on providing superior service and care to our members and on maintaining high levels of consumer satisfaction, which are key to our financial performance and growth. The CMS Five Star Quality Rating System provides economic incentives to Medicare Advantage plans that achieve higher Star ratings by (i) meeting certain care criteria (such as completing particular preventative screening procedures or ensuring proper follow-up care is provided for specific conditions or episodes) and (ii) receiving high member satisfaction ratings. These incentives impact financial performance in the year following the CMS Rating Year (for example, CMS’s announcement of the 2025 Ratings occurred in the second half of 2024 and will impact our financial performance in 2026). In aggregate, more than 95% of our health plan members are enrolled in plans rated 4 stars and above, meaning the vast majority of members consistently receive a high-quality care experience, as defined under CMS star measurement criteria. Additionally, the California HMO plan has achieved a 4 star or greater rating for eight consecutive years.
•Effectively Manage the Quality of Care to Improve Member Outcomes: Our care delivery model is based on a clinical continuum through which we have created a highly personalized experience that is unique to each member depending on their personal health and circumstances. Utilizing data and predictive analytics generated by AVA, our clinical continuum separates seniors into four categories in order to provide optimized care for every stage of a senior’s life: healthy, healthy utilizer, pre-chronic and chronic. We partner with our broader network of community providers to service members in our non-chronic categories, and we have developed a Care Anywhere program implemented by our internal clinical teams to care for our higher risk and/or chronically ill members. By investing in our members’ care proactively, our model has consistently reduced unnecessary and costly care while improving the quality of our members’ lifestyle and healthcare experience. By delivering superior care and preventing avoidable utilization of the healthcare system, we are able to reduce our claims expenditures in some of our largest medical expense categories, which translates to superior medical benefits ratio (“MBR”) financial performance and ultimately the ability to offer richer products in the market.
•Achieve Superior Unit Economics: As our senior population ages, their healthcare needs become more frequent and complex. To combat the healthcare cost increases that typically result, we proactively look to (i) connect with our population early in their enrollment with Alignment to assess their care needs, (ii) develop care plans and engage those members with more chronic, complex health challenges in our clinical model, and (iii) continue to monitor and evaluate our healthier members in a preventative fashion over time. Given the Medicare Advantage payment mechanism and the retention of the vast majority of our members who continue to choose Alignment after their initial selection year, we are able to focus our efforts on driving favorable long-term health outcomes for our entire population. As a result, our clinical model efforts have demonstrated the ability to lower the MBRs of our returning members. We believe this is evidence of our ability to manage the financial risk of our members as they age, and that these favorable underlying unit economic trends translate directly to our ability to continue to deliver a richer product to the marketplace. With this dynamic in mind, our consolidated MBR may be impacted year-to-year based on our pace of new member growth and mix of members by cohort. However, we believe our ability to sustain MBR performance improvement over time positions us well to invest in new member growth to drive long-term financial performance.
•Invest in our Platform and Growth: We plan to continue to invest in our business in order to further develop our AVA platform, pursue new expansion opportunities and create innovative product offerings. In addition, in order to maintain a differentiated value proposition for our members, we continue to invest in innovative product offerings and supplemental benefits to meet the evolving needs of the senior consumer. We anticipate further investments in our business as we expand into new markets and pursue strategic acquisitions, which we expect will primarily be focused on healthcare delivery groups in key geographies, standalone and provider-sponsored Medicare Advantage plans and other complementary risk bearing assets.
•Navigate Seasonality to our Business: Our operational and financial results will experience some variability depending upon the time of year in which they are measured. We experience the largest portion of member growth during the first quarter, when plan enrollment selections made during the annual enrollment period ("AEP") from October 15th through December 7th of the prior year take effect. As a result, we expect to see a significant percentage of our member growth occur on January 1 of a given calendar year. As the year progresses, our per-member revenue often declines as new members join us, typically with less complete or accurate documentation (and therefore lower risk-adjustment scores), and senior mortality disproportionately impacts our higher-acuity (and therefore greater revenue) members. Medical costs will vary seasonally depending on a number of factors, but most significantly the weather. Certain illnesses, such as the influenza virus, are far more prevalent during colder months of the year, which will result in an increase in medical expenses during these time periods. We therefore expect to see higher levels of per-member medical costs in the first and fourth quarters. The design of our prescription drug coverage (Medicare Part D) results in coverage that varies as a member’s cumulative out-of-pocket costs pass through successive stages of a member’s plan period, which begins annually on January 1 for renewals. We anticipate that, starting in 2025, the benefit redesign under the Inflation Reduction Act will result in much more moderate seasonality than we have experienced in past years. Members will still pass through the benefit phases, but our share of the total liability will be more consistent through each phase than it has been in the past. In addition, we expect our corporate, general and administrative expenses to increase in absolute dollars for the foreseeable future to support our growth. Due to the timing of many of these investments, including our primary sales and marketing season, we typically incur a greater level of investment in the second half of the year relative to the first half of the year.
Executive Summary
The following table presents key financial statistics for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Three Months Ended March 31, |
|
|
| (dollars in '000's, except percentages) |
|
|
|
|
|
|
2025 |
|
2024 |
|
% Change |
| Health plan membership (at period end) |
|
|
|
|
|
|
217,500 |
|
165,100 |
|
31.7 |
% |
| Medical benefits ratio |
|
|
|
|
|
|
88.4 |
% |
|
90.9 |
% |
|
(2.5) |
% |
| Revenues |
|
|
|
|
|
|
$ |
926,932 |
|
|
$ |
628,601 |
|
|
47.5 |
% |
| Loss from Operations |
|
|
|
|
|
|
$ |
(5,393) |
|
|
$ |
(41,106) |
|
|
86.9 |
% |
| Net loss |
|
|
|
|
|
|
$ |
(9,354) |
|
|
$ |
(46,575) |
|
|
79.9 |
% |
Adjusted EBITDA(1) |
|
|
|
|
|
|
$ |
20,178 |
|
|
$ |
(11,980) |
|
|
268.4 |
% |
Adjusted gross profit (1) |
|
|
|
|
|
|
$ |
107,217 |
|
|
$ |
57,343 |
|
|
87.0 |
% |
(1)See "Adjusted EBITDA" and "Adjusted Gross Profit" below for a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP and related disclosures.
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 400 members as of March 31, 2025 and 2024. It also excludes the approximately 6,600 and 8,800 ACO REACH members as of March 31, 2025 and 2024, respectively.
Adjusted Gross Profit and Medical Benefits Ratio
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, clinical restructuring costs 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 March 31, |
| |
|
|
|
|
2025 |
|
2024 |
| (dollars in thousands) |
|
|
|
|
|
|
|
| Loss from operations |
|
|
|
|
$ |
(5,393) |
|
|
$ |
(41,106) |
|
| Add back: |
|
|
|
|
|
|
|
| Equity-based compensation (medical expenses) |
|
|
|
|
1,152 |
|
|
1,133 |
|
| Depreciation (medical expenses) |
|
|
|
|
33 |
|
|
52 |
|
Restructuring costs (medical expenses)(1) |
|
|
|
|
— |
|
|
775 |
|
Depreciation and amortization(2) |
|
|
|
|
7,594 |
|
|
5,977 |
|
| Selling, general, and administrative expenses |
|
|
|
|
103,831 |
|
|
90,512 |
|
| Total add back |
|
|
|
|
112,610 |
|
|
98,449 |
|
| Adjusted gross profit |
|
|
|
|
$ |
107,217 |
|
|
$ |
57,343 |
|
(1)Represents severance and related costs incurred as part of a corporate restructuring designed to streamline our organizational structure and drive operational efficiencies.
(2)Amortization expense for the three months ended March 31, 2025 includes $0.6 million in impairment expense related to the remeasurement of goodwill associated with one of our subsidiaries.
We calculate our MBR by dividing total medical expenses, excluding depreciation, equity-based compensation and clinical restructuring costs, 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, certain litigation costs, gains or losses on right of use ("ROU") assets, gains or losses on sale of property and equipment, restructuring costs 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.
Adjusted EBITDA is reconciled as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Three Months Ended March 31, |
| |
|
|
|
|
2025 |
|
2024 |
| (dollars in thousands) |
|
|
|
|
|
|
|
| Net loss |
|
|
|
|
$ |
(9,354) |
|
|
$ |
(46,575) |
|
| Less: Net loss attributable to noncontrolling interest |
|
|
|
|
240 |
|
|
54 |
|
| Adjustments: |
|
|
|
|
|
|
|
| Interest expense |
|
|
|
|
3,950 |
|
|
5,427 |
|
Depreciation and amortization(1) |
|
|
|
|
7,627 |
|
|
6,029 |
|
| Income taxes |
|
|
|
|
21 |
|
|
— |
|
Equity-based compensation(2) |
|
|
|
|
17,187 |
|
|
20,854 |
|
Litigation costs (3) |
|
|
|
|
507 |
|
|
320 |
|
Loss on ROU assets(4) |
|
|
|
|
— |
|
|
143 |
|
Restructuring costs(5) |
|
|
|
|
— |
|
|
1,768 |
|
| Adjusted EBITDA |
|
|
|
|
$ |
20,178 |
|
|
$ |
(11,980) |
|
(1)Amortization expense for the three months ended March 31, 2025 includes $0.6 million in impairment expense related to the remeasurement of goodwill associated with one of our subsidiaries.
(2)Represents equity-based compensation related to grants made in the applicable year.
(3)Represents litigation costs considered outside of the ordinary course of business based on the following considerations which we assess regularly: (i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) complexity of the case, (iii) nature of the remedies sought, (iv) litigation posture of the Company, (v) counterparty involved, and (vi) the Company's overall litigation strategy.
(4)Represents gains or losses related to ROU assets that were terminated or subleased in the respective period.
(5)Represents severance and related costs incurred as part of a corporate restructuring designed to streamline our organizational structure and drive operational efficiencies.
Results of Operations
The following table sets forth our consolidated statements of operations data for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Three Months Ended March 31, |
| |
|
|
|
|
2025 |
|
2024 |
| (dollars in thousands) |
|
|
|
|
|
|
|
| Revenues: |
|
|
|
|
|
|
|
| Earned premiums |
|
|
|
|
$ |
918,043 |
|
|
$ |
621,556 |
|
| Other |
|
|
|
|
8,889 |
|
|
7,045 |
|
| Total revenues |
|
|
|
|
$ |
926,932 |
|
|
$ |
628,601 |
|
| Expenses: |
|
|
|
|
|
|
|
| Medical expenses |
|
|
|
|
820,900 |
|
|
573,218 |
|
| Selling, general and administrative expenses |
|
|
|
|
103,831 |
|
|
90,512 |
|
| Depreciation and amortization |
|
|
|
|
7,594 |
|
|
5,977 |
|
| Total expenses |
|
|
|
|
932,325 |
|
|
669,707 |
|
| Loss from operations |
|
|
|
|
(5,393) |
|
|
(41,106) |
|
| Other expenses: |
|
|
|
|
|
|
|
| Interest expense |
|
|
|
|
3,950 |
|
|
5,427 |
|
| Other (income) expenses, net |
|
|
|
|
(10) |
|
|
42 |
|
| Total other expenses |
|
|
|
|
3,940 |
|
|
5,469 |
|
| Loss before income taxes |
|
|
|
|
(9,333) |
|
|
(46,575) |
|
| Provision for income taxes |
|
|
|
|
21 |
|
|
— |
|
| Net loss |
|
|
|
|
$ |
(9,354) |
|
|
$ |
(46,575) |
|
| Less: Net loss attributable to noncontrolling interest |
|
|
|
|
240 |
|
|
54 |
|
| Net loss attributable to Alignment Healthcare, Inc. |
|
|
|
|
$ |
(9,114) |
|
|
$ |
(46,521) |
|
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 March 31, |
| |
|
|
|
|
2025 |
|
2024 |
| (% of revenue) |
|
|
|
|
|
|
|
| Revenues: |
|
|
|
|
|
|
|
| Earned premiums |
|
|
|
|
99 |
% |
|
99 |
% |
| Other |
|
|
|
|
1 |
|
|
1 |
|
| Total revenues |
|
|
|
|
100 |
|
|
100 |
|
| Expenses: |
|
|
|
|
|
|
|
| Medical expenses |
|
|
|
|
89 |
|
|
91 |
|
| Selling, general and administrative expenses |
|
|
|
|
11 |
|
|
15 |
|
| Depreciation and amortization |
|
|
|
|
1 |
|
|
1 |
|
| Total expenses |
|
|
|
|
101 |
|
|
107 |
|
| Loss from operations |
|
|
|
|
(1) |
|
|
(7) |
|
| Other expenses: |
|
|
|
|
|
|
|
| Interest expense |
|
|
|
|
— |
|
|
— |
|
| Other (income) expenses, net |
|
|
|
|
— |
|
|
— |
|
| Total other expenses |
|
|
|
|
— |
|
|
— |
|
| Loss before income taxes |
|
|
|
|
(1) |
|
|
(7) |
|
| Provision for income taxes |
|
|
|
|
— |
|
|
— |
|
| Net loss |
|
|
|
|
(1) |
|
|
(7) |
|
| Less: Net loss attributable to noncontrolling interest |
|
|
|
|
— |
|
|
— |
|
| Net loss attributable to Alignment Healthcare, Inc. |
|
|
|
|
(1) |
% |
|
(7) |
% |
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
Change |
|
2025 |
|
2024 |
|
$ |
|
% |
| (dollars in thousands) |
|
|
|
|
|
|
|
| Revenues: |
|
|
|
|
|
|
|
| Earned premiums |
$ |
918,043 |
|
|
$ |
621,556 |
|
|
$ |
296,487 |
|
|
47.7 |
% |
| Other |
8,889 |
|
|
7,045 |
|
|
1,844 |
|
|
26.2 |
% |
| Total revenues |
$ |
926,932 |
|
|
$ |
628,601 |
|
|
$ |
298,331 |
|
|
47.5 |
% |
Earned Premiums. Earned premium revenues were $918.0 million and $621.6 million for the three months ended March 31, 2025 and 2024, respectively, an increase of $296.5 million or 47.7%. The increase was driven by a combination of growth in our Health Plan membership, which increased 31.7% between March 31, 2024 and March 31, 2025, and higher revenue per member per month. The increase in revenue per member per month is primarily attributable to an increase in the CMS benchmark rates and Part D revenue rates resulting from changes arising from the Inflation Reduction Act.
Other Revenue. Other revenue increased $1.8 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, an increase of 26.2%. The increase is mainly attributable to an increase in revenue from services provided to third-party providers and an increase in our average interest earning cash balances during the three months ended March 31, 2025 compared to three months ended March 31, 2024. Cash and cash equivalents were $446.2 million as of March 31, 2025 compared to $238.9 million as of March 31, 2024.
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three Months Ended March 31, |
|
Change |
| |
2025 |
|
2024 |
|
$ |
|
% |
| (dollars in thousands) |
|
|
|
|
|
|
|
| Expenses: |
|
|
|
|
|
|
|
| Medical expenses |
$ |
820,900 |
|
|
$ |
573,218 |
|
|
$ |
247,682 |
|
|
43.2 |
% |
| Selling, general and administrative expenses |
103,831 |
|
|
90,512 |
|
|
13,319 |
|
|
14.7 |
% |
| Depreciation and amortization |
7,594 |
|
|
5,977 |
|
|
1,617 |
|
|
27.1 |
% |
| Total expenses |
$ |
932,325 |
|
|
$ |
669,707 |
|
|
$ |
262,618 |
|
|
39.2 |
% |
Medical Expenses. Medical expenses were $820.9 million and $573.2 million for the three months ended March 31, 2025 and 2024, respectively, an increase of $247.7 million, or 43.2%. The increase was driven primarily by the growth in Alignment’s Health Plan membership, which increased 31.7% between March 31, 2024 and March 31, 2025 and an increase to our Part D cost sharing due to changes arising from the Inflation Reduction Act. Overall, medical expenses for the three months ended March 31, 2025 grew at a lower rate than earned premium revenues compared to the three months ended March 31, 2024, primarily due to a higher percentage of new members relative to returning members in 2024 compared to 2025. The decrease was offset by increases in unit costs.
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $103.8 million and $90.5 million for the three months ended March 31, 2025 and 2024, respectively, an increase of $13.3 million, or 14.7%. The increase 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. Selling, general, and administrative expenses as a percentage of revenue decreased for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 due to economies of scale gained from Alignment's membership growth.
Depreciation and Amortization. Depreciation and amortization expense was $7.6 million and $6.0 million for the three months ended March 31, 2025 and 2024, respectively, an increase of $1.6 million, or 27.1%. The increase was primarily due to the amount and timing of our capital expenditures and the associated depreciation relative to 2024. Additionally, for the three months ended March 31, 2025 we recorded impairment expense of $0.6 million related to the remeasurement of goodwill associated with one of our subsidiaries. The goodwill impairment was recorded to amortization expense.
Other Expenses
Interest expense. Interest expense was $4.0 million and $5.4 million for the three months ended March 31, 2025 and 2024, respectively, a decrease of $1.4 million or 25.9%. The decrease in interest expense was mainly attributable to a decrease in the interest rate on our debt following refinancing in November 2024. The convertible notes have an interest rate of 4.25%, compared to our prior term loans which had an average interest rate of 11.84% for the three months ended March 31, 2024. This decrease in interest rate was offset by an increase in our long-term debt balance which was $330.0 million as of March 31, 2025 compared to $165.0 million as of March 31, 2024.
Other income, net. Other income was $0.0 million for the three months ended March 31, 2025 and 2024.
Liquidity and Capital Resources
General
To date, we have financed our operations principally through our IPO, private placements of our equity securities, revenues, and convertible notes (described below). As of March 31, 2025, we had $479.5 million in cash, cash equivalents and short-term investments.
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 March 31, 2025, our operating parent company (an indirect wholly owned subsidiary of our parent company) had $178.5 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, in further developing our technology 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, increase our sales and marketing activities and develop our technology. Additionally, in the future we may enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights, which may also substantially increase our capital needs.
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 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. As of March 31, 2025, our health plans or risk-bearing entities were in compliance with the minimum capital requirements.
Oxford Term Loan
On September 2, 2022 (the “Effective Date”), 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 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 had the option to borrow up to an additional $85.0 million of Term Loans (such additional Term Loans, the “Delayed Draw Term Loans”). On June 14, 2024, we borrowed $50,000 in aggregate principal amount of the Delayed Draw Term Loans prior to the expiration date for such amount of the Delayed Draw Term Loans of June 30, 2024. Interest on the Term Loans was 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%.
In connection with the issuance of the convertible senior notes, described below, we repaid all amounts outstanding under the term loans with Oxford Finance on November 22, 2024.
Convertible Senior Notes
On November 22, 2024, (the "Effective Date"), the Company completed the sale of $330.0 million of its 4.25% Convertible Senior Notes (the "Notes"). The Notes were issued pursuant to an indenture (the "Indenture"), dated as of November 22, 2024, between the Company and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"). The Notes are senior, unsecured obligations of the Company, and interest will be payable semi-annually in arrears at a rate of 4.25% per annum beginning on May 15, 2025. The Notes will mature on November 15, 2029, unless earlier repurchased, redeemed or converted in accordance with their terms. The net cash proceeds from the sale of the Notes was approximately $321.1 million, after subtracting fees, discounts and estimated expenses in connection with the transaction.
Prior to the close of business on the business day immediately preceding August 15, 2029, the Notes will be convertible at the option of holders during certain periods, upon satisfaction of certain conditions. On or after August 15, 2029, the Notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Notes may be settled in shares of Company common stock, cash or a combination of cash and shares of Company common stock, at the Company's election.
The Notes have an initial conversion rate of approximately 62.4 shares of Company common stock per $1 principal amount of the Notes. The conversion rate will be subject to adjustment in certain events, including adjustment in the event of certain significant corporate transactions. This represents an initial conversion price of approximately $16.04 per share. The initial conversion price of the Notes represents a premium of approximately 25% to the closing price of the Company's common stock on November 14, 2024. The Company has used the proceeds from the sale of the Notes to repay in full the $215.0 million aggregate principal amount, accrued interest and fees related to the Oxford term loans, as well as certain fees and expenses incurred in connection with the transaction.
The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in principal amount of the outstanding notes may declare 100% of the principal of, and accrued and unpaid special interest, if any, on, all the notes to be due and payable.
The Company has recognized the Notes in their entirety as a liability on the condensed consolidated balance sheet and no portion of the proceeds from the issuance of the convertible debt instrument was accounted for separately as an embedded conversion feature within stockholders’ equity.
Cash Flows
The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three Months Ended March 31, |
| (dollars in thousands) |
2025 |
|
2024 |
| Net cash provided by (used in) operating activities |
$ |
16,616 |
|
|
$ |
(6,238) |
|
| Net cash (used in) provided by investing activities |
(3,462) |
|
|
42,705 |
|
| Net cash provided by (used in) financing activities |
181 |
|
|
(335) |
|
| Net change in cash |
13,335 |
|
|
36,132 |
|
| Cash, cash equivalents and restricted cash at beginning of period |
434,942 |
|
|
204,954 |
|
| Cash, cash equivalents and restricted cash at end of period |
$ |
448,277 |
|
|
$ |
241,086 |
|
Operating Activities
For the three months ended March 31, 2025, net cash provided by operating activities was $16.6 million, an increase of $22.9 million compared to net cash used in operating activities of $6.2 million for the three months ended March 31, 2024. The increase is mainly attributable to a decrease in net loss. This decrease was offset by an increase in prepaid expenses and other current assets due to a change in our Part D balances arising from the Inflation Reduction Act.
Investing Activities
For the three months ended March 31, 2025, net cash used in investing activities was $3.5 million, a decrease of $46.2 million compared to net cash provided by investing activities of $42.7 million for the three months ended March 31, 2024. The decrease primarily relates to increased investment maturities during the three months ended March 31, 2024 compared to the three months ended March 31, 2025.
Financing Activities
For the three months ended March 31, 2025, net cash provided by financing activities was $0.2 million, an increase of $0.5 million, compared to net cash used in financing activities of $0.3 million for the three months ended March 31, 2024.
The increase is primarily attributable to cash received in connection with stock option exercises during the three months ended March 31, 2025, which did not occur during the three months ended March 31, 2024.
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 March 31, 2025.
Critical Accounting Estimates
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 Estimates" 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.
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 interest rates and inflation.
Interest Rate Risk
As of March 31, 2025, we had $71.9 million of U.S. Treasury bills which were classified as held to maturity and had maturities less than twelve months. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, we believe that our exposure to interest rate risk on these investments is not significant. We do not enter into investments for trading purposes.
In November 2024, we completed the sale of $330.0 million of 4.25% Convertible Senior Notes. Since the notes have a fixed annual interest rate, we have no financial or economic interest exposure associated with changes in interest rates. However, the fair value of fixed rate debt fluctuates when interest rates change. Additionally, the fair value of the Convertible Senior Notes can be impacted when the market price of our common stock fluctuates.
Inflation Risk
Based on our analysis of the periods presented, although we have experienced modest increases in unit costs and labor expenses, we believe that inflation has not had a material effect on our operating results. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. 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 March 31, 2025.
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 March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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.
Chief Financial Officer Transition
On April 28, 2025, the Company entered into an agreement with James (“Jim”) Head to serve as its new Chief Financial Officer, effective as of May 2, 2025 (the “Effective Date”). Mr. Head will report directly to John Kao, the Company’s Chief Executive Officer. Mr. Head succeeds Thomas Freeman, who notified the Company on April 28, 2025 of his resignation as Chief Financial Officer, effective as of the Effective Date.
Mr. Head, age 59, joins the Company with more than 30 years of experience in strategic finance, healthcare and business development. He was most recently with Claritev Corp. (formerly MultiPlan Corp.), a publicly traded data analytics company for health plans, where he served as Executive Vice President and Chief Financial Officer from November 2021 to August 2024 and as capital structure advisor from September to December 2024. Prior to joining Claritev, he was a partner at BDT & Company, LLC, a merchant bank, from 2016 to 2021. Additionally, he worked in various senior leadership roles for Morgan Stanley over 21 years. Mr. Head holds a master of business administration from the UCLA Anderson School of Management and a bachelor of science degree in finance from Indiana University, Bloomington.
Mr. Freeman has served the Company since 2015, acting as its Chief Financial Officer since 2017, and the Company extends its gratitude to Mr. Freeman for his years of service and outstanding contributions to the Company. Mr. Freeman’s decision to resign as Chief Financial Officer was not the result of any disagreement with the Company. From the Effective Date until December 31, 2025 (unless otherwise agreed to by the parties), Mr. Freeman will serve as Strategic Advisor to the CEO and will provide services to facilitate an effective transition of his job responsibilities to Mr. Head. He will also advise on long-term strategy and key partnerships.
Employment Agreement with Mr. Head
On April 28, 2025, the Company entered into an employment agreement with Mr. Head in connection with his appointment as Chief Financial Officer (the “Employment Agreement”). Pursuant to the Employment Agreement, Mr. Head will receive an annual base salary of $600,000. He is eligible to receive a cash bonus under the Company’s annual incentive plan with a target bonus set at 85% of his base salary and an annual equity grant with a target fair value of $2.5 million. In addition, Mr. Head will receive a one-time grant with a grant date fair value of $2.5 million, composed 50% of restricted stock units, which will vest annually over a three-year period, and 50% of performance share units, which will vest, if earned based on the achievement of corporate metrics, following certification of the Company’s financial results for the 2027 fiscal year, subject to Mr. Head’s continued service to the Company on each vesting date.
Upon a termination of Mr. Head’s employment by the Company without “cause,” a resignation by Mr. Head for “good reason” (as such terms are defined in the Employment Agreement), or a termination of employment due to the delivery of a notice of non-renewal by the Company to Mr. Head, subject to the execution and delivery of a release of claims and Mr. Head’s continued compliance with the restrictive covenants set forth in the Employment Agreement, Mr. Head would receive the following severance payments and benefits (in addition to any accrued salary and paid-time-off): (i) a cash payment equal to the sum of his base salary and target annual cash incentive bonus, paid in substantially equal installments over the 12-month period following termination; (ii) a prorated portion of his annual cash incentive bonus for the year of termination; and (iii) payment of COBRA premiums for up to one year following termination.
The foregoing description of the Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Employment Agreement, a copy of which is filed herewith as Exhibit 10.1 and is incorporated by reference herein.
There are no arrangements or understandings between Mr. Head and any other persons pursuant to which he was selected as Chief Financial Officer of the Company. There are no family relationships between Mr. Head and any director or executive officer of the Company, and Mr. Head has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K nor are any such transactions currently proposed.
Amendment to Mr. Freeman’s Employment Agreement
On April 28, 2025, the Company and Mr. Freeman entered into an amendment to his employment agreement (the “Freeman Amendment”) with respect to the above-described transition of his duties. Pursuant to the Freeman Amendment, in consideration for his advisory services, Mr. Freeman will continue to receive his current annual base salary of $580,000 through May 31, 2025, and thereafter he will receive an annual base salary of $290,000. He will also receive (i) the second installment of the annual cash bonus payable under the Company’s annual incentive plan for calendar year 2024 and a pro rata portion, based on service from January 1 to May 31, 2025, of the annual cash bonus payable under the Company’s annual incentive plan for calendar year 2025; (ii) continued and accelerated vesting of certain outstanding equity awards; and (iii) continued eligibility to participate in the Company’s medical, dental and life insurance benefit plans.
The foregoing description of the Freeman Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Freeman Amendment, a copy of which is filed herewith as Exhibit 10.2 and is incorporated by reference herein.
Amendments to Executive Officer Employment Agreements
On April 28, 2025, the Company entered into amendments to the amended and restated employment agreements of Mr. Kao and Dawn Maroney, the Company’s President. The amendment to Mr. Kao’s employment agreement (the “Kao Amendment”) provides for a revised definition of “good reason” for a resignation of his employment. The amendment to Ms. Maroney’s employment agreement (the “Maroney Amendment”) provides for enhanced severance benefits in the event of a change in control of the Company. The foregoing descriptions of the Kao Amendment and Maroney Amendment do not purport to be complete and are qualified in their entirety by reference to the full text of the Kao Amendment and Maroney Amendment, copies of which are filed herewith as Exhibits 10.3 and 10.4, respectively, and are incorporated by reference herein.
Rule 10b5-1 Plans
During the fiscal quarter ended March 31, 2025, our executive officers and directors adopted or terminated, as applicable, the following trading arrangements that are intended to satisfy the affirmative defense of Rule 10b5-1(c):
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| Name & Title |
Date of Adoption |
Date of Termination |
Duration of Trading Arrangement |
Maximum Number of Securities to be Sold(1) |
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John Kao, Chief Executive Officer(2)
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03/12/2025 |
N/A |
6/16/2025 – 3/20/2026 |
1,710,000 |
Thomas Freeman, Chief Financial Officer |
11/25/2024 |
3/14/2025 |
3/4/2025-11/28/2025 |
N/A |
Hyong (Ken) Kim, M.D., Chief Medical Officer |
03/14/2024 |
N/A |
8/11/2025-3/13/2026 |
172,034 |
Robert Scavo, Chief Information Officer |
03/14/2024 |
N/A |
6/10/2025-3/21/2026 |
108,097 |
Andreas Wagner, Chief Human Resources Officer |
03/11/2025 |
N/A |
6/10/2025-2/27/2026 |
39,063 |
(1)Securities reported in this column include securities subject to limit orders and such orders may not fill if limit order conditions are not met. The actual number of shares sold under the plan will depend on the vesting of certain performance-based equity awards and the number of shares withheld or sold satisfy our income tax withholding obligations and may vary from the number provided herein. The number of performance share units included in plans assumes awards are earned at target.
(2)Represents securities held by JEK Trust, dated February 8, 2021, of which Mr. Kao is the trustee.
Item 6. Exhibits.
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Exhibit
Number
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Description |
| 3.1 |
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| 3.2 |
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| 3.3 |
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| 4.1 |
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| 10.1*+ |
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| 10.2*+ |
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| 10.3*+ |
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| 10.4*+ |
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| 31.1* |
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| 31.2* |
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| 32.1** |
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| 32.2** |
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| 101.INS* |
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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* |
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Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL* |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104* |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
_________________________
*Filed herewith.
**Furnished herewith
+Indicates management contract or compensatory plan.
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.
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Alignment Healthcare, Inc. |
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Date: May 1, 2025 |
By: |
/s/ John Kao |
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John Kao |
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Chief Executive Officer |
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Date: May 1, 2025 |
By: |
/s/ Thomas Freeman |
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Thomas Freeman |
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Chief Financial Officer |
EX-10.1
2
exh101employmentagreement-.htm
EX-10.1
Document
EMPLOYMENT AGREEMENT
BETWEEN
ALIGNMENT HEALTHCARE USA, LLC
AND
JAMES HEAD
May 2, 2025
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into effective as of May 2, 2025 (the “Effective Date”), by and between Alignment Healthcare USA, LLC, a California corporation (the “Employer”), and James Head (the “Employee”).
WHEREAS, the Employer desires to employ the Employee, and the Employee desires to accept such employment, on the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
1.Definitions. Generally, defined terms used in this Agreement are defined in the first instance in which they appear herein. In addition, the following terms and phrases have the following meanings:
“Affiliate” means, when used with reference to a specified Person, (a) any Person who directly or indirectly controls, is controlled by or is under common control with the specified Person, (b) any Person who is an officer, director, partner, member, manager or trustee of, or serves in a similar capacity with respect to, the specified Person, or for which the specified Person is an officer, director, partner, member or manager or trustee or serves in a similar capacity, (c) any Person who, directly or indirectly, is the beneficial owner of 10% or more of any class of equity securities of the specified Person, or of which the specified Person, directly or indirectly, is the owner of 10% or more of any class of equity securities and (d) any member of such specified Person’s immediate family.
“Board” means the board of directors of Alignment Healthcare, Inc. or any other Person the Board has appointed or delegated authority.
“Cause” means the Employee’s:
(a)failure to devote substantially all Employee’s working time to the business of the Employer and its Affiliates;
(b)failure to abide by the code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct) of the Employer;
(c)violation or breach of the provisions, representations or covenants of Sections 10, 11, 15 or 16(a);
(d)theft, dishonesty, willful or gross misconduct, breach of fiduciary duty, falsification of any Employer documents or records, or misrepresentation(s) to the Employer;
(e)Employee’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of the Employer or its Affiliates (including, without limitation, Employee’s improper use or disclosure of the Employer’s or any Affiliates’ confidential or proprietary information);
(f)any act by Employee which has a material detrimental effect on the Employer’s reputation or business;
(g)Employee’s failure or inability (other than due to Employee’s Disability) to perform any reasonable and lawful assigned duties consistent with Employee’s position;
(h)material breach by Employee of this Agreement or its exhibits or any other agreement between Employee and the Employer;
(i)commission of any act of fraud, theft or financial dishonesty, or any felony or criminal act involving moral turpitude;
(j)engaging in any discriminatory or sexually harassing behavior; or
(k)unlawful use (including being under the influence) of alcohol or drugs or possession of illegal drugs while on the premises of the Employer or any of its Affiliates or while performing duties and responsibilities to the Employer and its Affiliates.
Solely to the extent that the Board determines in its sole discretion that the Cause conduct is curable, Employee shall have five (5) business days after receipt of notice that the Employer believes it has grounds to terminate Employee’s employment for Cause to entirely cure the Cause conduct under subsections (i) through (viii) above and its consequences to the satisfaction of the Board and thereby avoid termination of Employee’s employment for Cause if so determined by the Board in its sole discretion.
During any time period when the Employer believes that (or is in the process of investigating whether) Employee may have committed an act of Cause (or has committed an act which could result in constituting Cause under any of the above subsections), the Employer may in its discretion place Employee on a leave of absence and/or preclude Employee from utilizing Employer or Affiliate resources or having access to Employer premises. If after Employee’s termination of employment for any reason other than Cause, the Employer discovers that Employee’s employment could have been terminated for Cause, then the Employer may in its discretion recharacterize such termination as a termination for Cause.
“Confidential Information” means all proprietary and other information relating to the business and operations of the Employer and its Affiliates, which has not been specifically designated for release to the public by an authorized representative of the Employer or one of its Affiliates, including, but not limited to the following: (i) information, observations, procedures and data concerning the business or affairs of the Employer or any of its Affiliates; (ii) products or services; (iii) costs and pricing structures; (iv) analyses; (v) drawings, photographs and reports; (vi) computer software, including operating systems, applications and program listings; (vii) flow charts, manuals and documentation; (viii) data bases; (ix) accounting and business methods; (x) inventions, devices, new developments, methods and processes, whether patentable
or unpatentable and whether or not reduced to practice; (xi) customers, vendors, suppliers and customer, vendor and supplier lists; (xii) business goals, plans, techniques and strategies; (xiii) other copyrightable works; (xiv) all production methods, processes, technology and trade secrets; and (xv) all similar and related information in whatever form. Confidential Information also includes any information that the Employer or any of its Affiliates have received, or may receive hereafter, belonging to customers or other third parties with any understanding, express or implied, that the information would not be disclosed. Confidential Information will not include any information that has been published in a form generally available to the public prior to the date the Employee proposes to disclose or use such information (through no wrongful act of the Employee). Confidential Information will not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.
“Disability” means the Employee’s inability, due to physical or mental illness or disability, to perform the essential functions of Employee’s employment with the Employer, even with reasonable accommodation that does not impose an undue hardship on the Employer, for more than 60 consecutive days, or for any 90 days within any one year period, unless a longer period is required by federal or state law, in which case such longer period will be applicable. The Employer reserves the right, in good faith, to make the determination of Disability under this Agreement based on information supplied by the Employee and/or Employee’s medical personnel, as well as information from medical personnel selected by the Employer or its insurers.
“Employer” has the meaning set forth in the preamble; provided that, for purposes of Sections 8 through 15, “Employer” includes Alignment Healthcare, Inc. and all of its Subsidiaries and Affiliates.
“Good Reason” shall exist if, without Employee’s written or oral consent, Employer materially breaches a financial obligation of this Agreement; provided however, that Good Reason shall not exist so long as Employee maintains an equivalent salary or title possessed at Employer or any affiliate immediately before any claim of Good Reason, or a higher salary or title at Employer or any affiliate; and provided further that, Good Reason shall not exist if Cause exists. Employee may terminate employment hereunder for Good Reason within sixty (60) days following the occurrence of any condition constituting Good Reason, provided however that Employee has first provided written notice to Employer specifying in reasonable detail and satisfactory to Employer the condition giving rise to Good Reason, Employee has provided Employer with a period of sixty (60) days to remedy the condition (and the notice so specifies), and Employer has failed to remedy the condition within this sixty (60) day period.
“Person” shall be construed broadly and shall include, without limitation, an individual, a partnership, an investment fund, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
“Subsidiary” or “Subsidiaries” of any Person means any corporation, partnership, joint venture or other legal entity of which such Person (either alone or through or together with any other Person), owns, directly or indirectly, 50% or more of the stock or other equity interests which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.
“Termination Date” means the effective date of the termination of the Employee’s employment hereunder, which (i) in the case of termination due to resignation by the Employee without Good Reason, shall mean the date that is 90 days following the date of the Employee’s written notice to the Employer of Employee’s resignation, or in the case of resignation by the Employee with Good Reason, shall mean the date on which the sixty (60)-day period for Employer to remedy the applicable condition giving rise to Good Reason has lapsed, provided, however, that in each case the Employer may accelerate the Termination Date; (ii) in the case of termination by reason of the Employee’s death, shall mean the date of death; (iii) in the case of termination by reason of Disability, shall mean the date specified in the notice of such termination delivered to the Employee by the Employer; (iv) in the case of a termination by the Employer for Cause or without Cause, shall mean the date specified in the written notice of such termination delivered to the Employee by the Employer; (iv) in the case of termination by mutual agreement, shall mean the date mutually agreed to by the parties hereto, (v) in the case of termination due to either party’s delivery to the other party of a Notice of Nonrenewal pursuant to Section 2, shall mean the next scheduled Renewal Date to which the Notice of Nonrenewal relates.
2.Employment. The Employer shall employ the Employee, and the Employee accepts employment with the Employer, upon the terms and conditions set forth in this Agreement. The initial term of this Agreement (the “Initial Term”) shall commence on the Effective Date and end on the first annual anniversary of the Effective Date; provided, however, that on the first annual anniversary of the Effective Date and each annual anniversary thereafter (each, a “Renewal Date”), the term of this Agreement shall be extended by one additional year (each, an “Extension Term,” and collectively with the Initial Term, the “Employment Period”) unless either party gives written notice to the other within 90 days in advance of the next scheduled Renewal Date that it does not wish to extend the Employment Period (such notice, a “Notice of Nonrenewal”); and provided, further, that the Employment Period may be sooner terminated as provided herein.
3.Position and Duties. During the Employment Period, the Employee shall be employed by Employer on a full-time basis with the title determined exclusively by the Employer, initially as Chief Financial Officer, reporting to the Chief Executive Officer of Employer, or his or her designee as determined in the sole and absolute discretion of the Chief Executive Officer of Employer. Subject to the power and discretion of the Chief Executive Officer of Employer or the Board to modify such duties, position, title, reporting structure, and/or situs of employment, Employee shall have the usual and customary duties, responsibilities, and authority of such position as reasonably may be assigned to Employee by Employer from time to time and perform such other duties and responsibilities on behalf of Employer as reasonably may be directed by the Employer, including, if elected or appointed thereto, serving as an officer and/or member of the board or any Subsidiary or Affiliate of the Employer as reasonably requested by the Employer and its Affiliates, in each case, without additional compensation hereunder. The Employee hereby accepts such employment and positions and agrees to diligently and conscientiously devote Employee’s full and exclusive business time,
attention, and best efforts in discharging and fulfilling Employee’s duties and responsibilities hereunder. The Employee shall comply with the Employer’s policies and procedures and the direction and instruction of the Board and the Employee shall not engage in any business activity which, in the reasonable judgment of the Board, conflicts with the duties of the Employee hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage.
4.Compensation.
(a)Salary. During the Employment Period, the Employer shall pay the Employee base salary at the rate of $600,000 per annum (as may be increased from time to time at the discretion of the Employer, the “Base Salary”), less applicable deductions and withholdings.
(b)Performance Bonus. In addition to the Base Salary, during the Employment Period, the Employee shall be eligible to receive a cash bonus (the “Bonus”) with respect to each calendar year. The amount of the Bonus, if any, payable in respect of any calendar year will be determined based on the achievement of the Employer’s performance metrics, achievement of performance goals established for the Employee, or a combination of the foregoing. The target Bonus amount (the “Target Bonus Percentage”) and the maximum Bonus amount (the “Maximum Bonus Percentage”) in respect of each calendar year will equal 85% and 170%, respectively, of the Base Salary payable to the Employee for such year. The Bonus in respect to any calendar year shall be prorated for partial years. A Bonus will not be paid for the calendar year in which the Employee initiates employment with the Employer if the Employee’s start date occurs on or after October 1. Employee understands that the Bonus is payable under the terms of the Employer’s annual incentive plan, the terms of which are subject to approval annually by the Board. Among other things, the Board may determine that a portion of the Bonus shall be withheld and not paid on the initial Bonus payment date and that all or some portion of such withheld amount shall paid out on a later date, subject to the achievement of certain corporate, departmental or individual performance goals. As a condition to receiving the Bonus, the Employee must be an employee of Employer in good standing as of the applicable Bonus payment date.
(c)Annual Equity Grant. On and after January 1, 2026, Employee shall be entitled to receive an annual equity grant (the “Annual Equity Grant”) with an initial target value of Two Million Five Hundred Thousand Dollars ($2,500,000), subject to review and approval by the Board or a committee thereof. The specific form, terms, and conditions of the Annual Equity Grant, including but not limited to the type of equity (e.g., stock options, restricted stock units, performance share units or other equity instruments), the vesting schedule, and any performance criteria, shall be consistent with annual equity grants awarded to other members of senior management and as determined at the sole discretion of the Board and shall be granted in accordance with Parent’s 2021 Equity Incentive Plan (the “Equity Plan”) and any other policies or guidelines established by the Board. The target value of the Annual Equity Grant shall be reviewed annually by the Board and may be adjusted in its discretion based on the Employee’s performance, the Company’s performance, and other factors deemed relevant by the Board. The Employee acknowledges and agrees that the target value of the Annual Equity Grant does not constitute a guarantee of any specific grant amount or value, and that the final determination of the Annual Equity Grant shall be subject to the Board’s approval.
(d)Initial Equity Grant. The Employee will also be eligible to receive on the Grant Date (defined below) (i) a number of restricted stock units of Alignment Healthcare, Inc. (“Parent”) equal to One Million Two Hundred Fifty Thousand Dollars ($1,250,000) divided by the closing per share price of Parent’s common stock on the Nasdaq Stock Market on the Grant Date (the “RSU Grant”) and (ii) a number of performance share units (“PSUs”) of Parent equal to One Million Two Hundred Fifty Thousand Dollars ($1,250,000) divided by the closing per
share price of Parent’s common stock on the Nasdaq Stock Market on the Grant Date (the “PSU Grant”). The “Grant Date” for the foregoing awards will be the first Wednesday of the calendar month following the Employee’s start date (or on the next trading day thereafter if Parent’s stock does not trade on the Nasdaq Stock Market on such date). The RSU Grant will vest in approximately equal installments of thirty-three and one third percent (331/3%) on each of March 13, 2026, 2027 and 2028. The PSU Grant will have the same performance metrics as the performance awards granted to other senior executives in March 2025 (which metrics are summarized on Schedule 1 attached hereto but will be more specifically set out in a form of award agreement to be provided by the Company); provided, however, that notwithstanding the date of certification of achievement of the performance metrics by the Board, the vesting date for the PSU Grant will be March 2028. The foregoing equity awards shall be subject to approval by the Board (or a committee thereof) and shall be further subject to the terms of the Equity Plan and the terms of the applicable award agreement.
(e)Employee Benefits. During the Employment Period, retirement, health and welfare benefits shall be subject to the Employer’s policies and practices and the terms of the applicable benefit plans and arrangements as in effect from time to time. The Employee shall accrue paid time off at the rate of five (5) weeks per twelve (12) months of employment.
(f)Reimbursements. The Employer shall reimburse the Employee for all reasonable and necessary business-related expenses incurred by Employee in the course of performing Employee’s duties under this Agreement which are consistent the Employer’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Employer’s requirements with respect to reporting and documentation of such expenses.
(g)Deductions and Withholding. The Employer shall deduct from any payments to be made by it to or on behalf of the Employee under this Agreement any amounts required to be withheld in respect of any federal, state or local income or other taxes.
(h)Annual Review of Base Salary and Bonus Percentages. The Board (or the Compensation Committee of the Board) shall undertake a review of rate of Base Salary and the Target Bonus Percentage and Maximum Bonus Percentage (the “Bonus Percentages”) not less frequently than annually during the Employment Period and may increase, but not decrease, the rate of Base Salary and the Bonus Percentages from those then in effect.
5.Termination of Employment. The Employee’s employment under this Agreement shall be terminated upon the earliest to occur of the following events:
(a)Termination for Cause. The Employer may in its sole discretion terminate this Agreement and the Employee’s employment hereunder for Cause at any time and with or without advance notice to the Employee.
(b)Termination without Cause. The Employer may terminate this Agreement and the Employee’s employment hereunder without Cause at any time, with or without notice, for any reason or no reason (and no reason need be given).
(c)Mutual Agreement. This Agreement and the Employee’s employment hereunder may be terminated by the mutual written agreement of the Employer and the Employee.
(d)Termination by Death or Disability. This Agreement and the Employee’s employment hereunder shall automatically terminate upon the Employee’s death or Disability.
(e)Resignation. The Employee may terminate this Agreement and Employee’s employment hereunder without Good Reason upon 90 days advance written notice to the Employer. In addition, the Employee may terminate this Agreement and Employee’s employment hereunder with Good Reason as set forth in this Agreement.
(f)Nonrenewal. If either party delivers to the other a Notice of Nonrenewal, this Agreement and the Employee’s employment hereunder shall automatically terminate as of the next scheduled Renewal Date to which the Notice of Nonrenewal relates.
6.Compensation upon Termination.
(a)General. In the event of the Employee’s termination of employment for any reason, the Employee or Employee’s estate or beneficiaries shall have the right to receive the following:
(i)the unpaid portion of the Base Salary and paid time off accrued, but unused, and payable through the Termination Date;
(ii)reimbursement for any expenses for which the Employee shall not have been previously reimbursed, as provided in Section 4(d); and
(iii)continuation of health insurance coverage rights, if any, as required under applicable law.
(b)Termination for Cause; Resignation without Good Reason; Mutual Agreement; Nonrenewal by the Employee; Death or Disability.
(i)In the event of the Employee’s termination of employment by reason of (A) a termination by the Employer for Cause, (B) resignation by the Employee without Good Reason or (C) mutual agreement, the Employer shall have no current or further obligations (including Base Salary) to the Employee under this Agreement other than as set forth in Section 6(a).
(ii)In the event of the Employee’s termination of employment by reason of (A) the Employee’s death, (B) the Employee’s Disability or (C) delivery by the Employee of a Notice of Nonrenewal, the Employer shall have no current or further obligations (including Base Salary) to the Employee under this Agreement other than as set forth in Section 6(a) and payment of any Bonus for any calendar year preceding the calendar year in which termination occurs which has not yet been paid, payable at the time bonuses for such calendar year are otherwise payable to senior executives of the Employer (“Prior Year Bonus”).
(c)Termination without Cause, Resignation with Good Reason or Nonrenewal by the Employer. In the event of the Employee’s termination of employment hereunder at any time on or after the date that is six months after the Effective Date, by reason of (i) a termination by the Employer without Cause, (ii) resignation by the Employee with Good Reason or (iii) delivery by the Employer of a Notice of Nonrenewal, the Employer shall pay or provide to the Employee the payments and benefits set forth in Section 6(a) and payment of any Prior Year Bonus. In addition, in the event of any such termination on or after the date that is six months after the Effective Date, subject to the Employee’s execution and non-revocation of a customary general waiver and release of claims in such form as provided by the Employer (a “Release”) in accordance with Section 6(d) and the Employee’s continued full performance of obligations under Sections 10 and 11, and in lieu of any severance benefits that may be payable to the Employee under a separate severance agreement or an executive severance plan as a result
of such termination, the Employer shall pay or provide to the Employee the following (the “Severance Benefits”):
(i)severance pay in an aggregate amount equal to one (1.0) time the sum of (1) Base Salary, plus (2) the Target Bonus Percentage, paid in substantially equal installments over the 12-month period following the Termination Date in accordance with the Employer’s normal payroll practices;
(ii)a pro rata amount of the Bonus, if any, which would have been payable to the Employee for the calendar year in which the Termination Date occurs, determined after the end of the calendar year in which such Termination Date occurs and equal to the amount which would have been payable to the Employee if Employee’s employment had not been terminated during such calendar year multiplied by the fraction, the numerator of which is the number of whole months the Employee was employed by the Employer during such calendar year and the denominator of which is 12; it being understood that any pro rata bonus payable under this clause (ii) shall be paid in a lump sum at the time bonuses for such calendar year are otherwise payable to senior executives of the Employer; and
(iii)if the Employee elects COBRA benefits, the Employer shall pay or reimburse the Employee’s share of the premium for such COBRA benefits until the earlier of (A) the first annual anniversary of Termination Date; or (B) the date that the Employee is eligible to receive health benefits through new employment; it being understood that (x) the Employee is required to notify the Employer immediately if Employee begins new employment during such period and to repay promptly any excess benefits contributions made by the Employer; and (y) after the Employer’s payment or reimbursement obligation ends, the Employee may continue benefits coverage for the remainder of the COBRA period, if any, by paying the full premium cost of such benefits.
(d)Release Condition. Notwithstanding anything to the contrary in this Agreement, to the extent that any payments due under this Agreement as a result of the termination of the Employee’s employment are subject to the Employee’s execution and delivery of a Release, (i) no such payments shall be made prior to the first normal payroll date of the Employer occurring on or after the Release Effective Date, (ii) the Employer shall deliver the Release to the Employee within ten business days following the Termination Date, (iii) if the Employee fails to execute the Release on or prior to the Release Expiration Date (as defined below) or the Employee timely revokes Employee’s acceptance of the Release within the seven day period following the Release Expiration Date, the Employee shall not be entitled to the Severance Benefits otherwise conditioned on the Release, and (iv) if the Employee executes the Release on or prior to the Release Expiration Date and does not timely revoke Employee’s acceptance of the Release within the seven day period following the Release Expiration Date, any Severance Benefits that would otherwise have been paid to the Employee prior to the first normal payroll date of the Employer occurring on or after the Release Effective Date but for clause (i) above shall be paid on the first normal payroll date of the Employer occurring on or after the Release Effective Date. For purposes of this Section 6(d), “Release Expiration Date” shall mean the date that is 21 days following the date upon which the Employer timely delivers the Release to the Employee, or, in the event that termination of the Employee’s employment is “in connection with an exit incentive or other employment termination program” (as such phrase is defined in the Age Discrimination in Employment Act of 1967), the date that is 45 days following such delivery date, and “Release Effective Date” shall mean the eighth day following the Release Expiration Date, provided that the Employee executes the Release on or prior to the Release Expiration Date and does not timely revoke Employee’s acceptance of the Release within the seven day period following the Release Expiration Date.
(e)Exclusive Remedy. The rights of the Employee set forth in this Section 6 are intended to be the Employee’s exclusive remedy for termination and any severance benefits related thereto and, to the greatest extent permitted by applicable law, the Employee waives all other remedies.
7.Insurance. The Employer or one of its Affiliates may, for its own benefit, maintain “key man” life and disability insurance policies covering the Employee. The Employee will cooperate with the Employer or its Affiliates and provide such information or other assistance as they may reasonably request in connection with obtaining and maintaining such policies.
8.The Employee’s Termination Obligations. The Employee hereby acknowledges and agrees that all personal property and equipment furnished to or prepared by the Employee in the course of or incident to Employee’s employment hereunder belongs to the Employer and shall be promptly returned to the Employer upon termination of the Employee’s employment or, at any event, at the Employer’s request. The term “personal property” includes, without limitation, all office equipment, laptop computers, cell phones, books, manuals, records, reports, notes, contracts, requests for proposals, bids, lists, blueprints, and other documents, or materials, or copies thereof (including computer files), and all other proprietary and non-proprietary information relating to the business of the Employer. Following termination of Employee’s employment hereunder, the Employee will not retain any written or other tangible material containing any proprietary or non-proprietary information of the Employer.
9.Acknowledgment of Protectable Interests. The Employee acknowledges and agrees that Employee’s employment with the Employer involves building and maintaining business relationships and good will on behalf of the Employer with customers, patients, physicians and other professional contractors, employees and staff, and various providers and users of health care services; that Employee is entrusted with proprietary, strategic and other confidential information which is of special value to the Employer; and that the foregoing matters are significant interests that the Employer is entitled to protect.
10.Confidential Information. All Confidential Information that comes or has come into the Employee’s possession by reason of Employee’s employment hereunder is the property of the Employer and shall not be used except in the course of employment by the Employer and for the Employer’s exclusive benefit. Further, the Employee shall not, during Employee’s employment or thereafter, disclose or acknowledge the content of any Confidential Information to any person who is not an employee of the Employer authorized to possess such Confidential Information. Upon termination of employment, the Employee shall deliver to the Employer all documents, writings, electronic storage devices, and other tangible things containing any Confidential Information and the Employee shall not make or retain copies, excerpts, or notes of such information.
11.Restrictive Covenants.
(a)During the Employment Period, except as set forth on Schedule 2 hereto, the Employee shall not, directly or indirectly, without written approval by the Board, accept or perform any work, consulting, or other services for any other business entity or for remuneration of any kind. Without limiting the foregoing, during the Employment Period, the Employee shall not, directly or indirectly, without written approval by the Board, engage in activities or businesses (including, without limitation, owning any interest in, managing, controlling, participating in, consulting with, advising, rendering services for, or in any manner engaging in the business of owning, operating or managing any business) that are principally or primarily involved in holding, managing or acquiring investments in the healthcare industry or other similar business in which the Employer is engaged (or so engage with, for or on behalf of any
customer of the Employer), provided, however, that neither (i) the passive ownership by the Employee of not more than 2.0% of the outstanding equity securities of a publicly traded company nor (ii) the Employee’s ownership of the securities or interests described on Schedule 3 shall constitute a violation of this Section 11(a). If the Employee acquires knowledge of a business venture which may be a business venture or prospective business venture (“Corporate Opportunity”) in which the Employer could have an interest or expectancy, or otherwise is exploiting any Corporate Opportunity, the Employee shall promptly bring such opportunity to the Employer. The Employee shall not have the right to hold any such Corporate Opportunity for Employee’s own account or benefit (or for the account or benefit of Employee’s agents’, partners’ or Affiliates’), or to recommend, assign or otherwise transfer or deal in such Corporate Opportunity with Persons other than the Employer.
(b)During the Employment Period and for a period of one year thereafter, the Employee shall not, directly or indirectly, induce, incite, instigate, aid, or assist any employee of the Employer to terminate Employee’s employment with the Employer.
(c)During the Employment Period and for a period of one year thereafter, the Employee shall not, directly or indirectly, use the Employer’s Confidential Information to induce, attempt to induce or knowingly encourage any Customer (as defined below) of the Employer to divert any business or income from the Employer, or to stop or alter the manner in which it is then doing business with the Employer. The term “Customer” with respect to the Employer shall mean any individual or business firm that is, or within the prior 24 months was, a customer or client of the Employer, or whose business was actively solicited by the Employer at any time, regardless of whether such customer or client was generated, in whole or in part, by the Employee’s efforts.
(d)During the Employment Period and thereafter, the Employee shall not make any defamatory or disparaging statement concerning the Employer or its Affiliates, or their respective predecessors and successors, or any of the current or former directors, employees, officers, managers, shareholders, partners, members, agents or representatives of any of the foregoing (the “Protected Persons”) to the extent such statement could be reasonably likely to damage the reputation and/or financial position of any of the Protected Persons. Notwithstanding the foregoing, nothing herein shall or shall be deemed to prevent or impair the Employee from (i) testifying truthfully in any legal or administrative proceeding if such testimony is compelled or requested, (ii) making competitive-type statements that are normal and customary for the industry in the context of product or service comparisons and the like, (iii) making good faith statements in the good faith performance of the Employee’s duties for the Employer or its Affiliates, or (iv) engaging in protected concerted activity or exercising rights under the National Labor Relations Act.
(e)The Employee acknowledges that the provisions of Sections 10 and 11 are reasonable and necessary to protect the continuing interests of the Employer, and any violation of Sections 10 and 11 will result in irreparable injury to the Employer, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such violation would not reasonably or adequately compensate the Employer for such violation. Accordingly, the Employee agrees that if the Employee violates any of the provision of Sections 10 and 11, in addition to any other remedy that may be available at law or in equity, the Employer shall be entitled to specific performance and injunctive relief, without the necessity of proving actual damages or posting of a bond or other security.
12.Damages For Improper Termination With Cause. If the Employer terminates this Agreement and the Employee’s employment hereunder for Cause, but it subsequently is determined by a court of competent jurisdiction, as the case may be, that the Employer did not have Cause for the termination, then for purposes of this Agreement, the Employer’s decision to
terminate shall be deemed to have been a termination without Cause, and the Employer shall be obligated to pay the Severance Benefits specified under Section 6(c), and, subject to Section 24 hereof, only that amount.
13.Arbitration.
(a)Except as provided in Section 13(b) below and except for any claim or claims that cannot be arbitrated as a matter of law, any controversy or dispute arising out of, based upon, or relating to this Agreement, its enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or arising out of, based upon, or relating in any way to the Employee’s employment or association with the Employer, or termination of the same, including, without limiting the generality of the foregoing, any questions regarding whether a particular dispute is arbitrable, and any alleged violation of statute, common law or public policy, including, but not limited to, any state or federal statutory claims, shall be submitted to final and binding arbitration in Orange County, California, in accordance with the JAMS Employment Arbitration Rules and Procedures, before a single neutral arbitrator selected from the JAMS panel, or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association, in accordance with its National Rules for the Resolution of Employment Disputes (the arbitrator selected hereunder, the “Arbitrator”). Provisional injunctive relief may, but need not, be sought by either party to this Agreement in a court of law while arbitration proceedings are pending, pursuant to California Code of Civil Procedure section 1281.8, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the Arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief which the Arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the Arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the Arbitrator’s award or decision is based. Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction. To the extent permitted by law, the arbitrator’s fees and arbitration expenses and any other costs associated with the arbitration or arbitration hearing that are unique to arbitration will be borne equally by each party. The parties shall each pay their own deposition, witness, expert and attorneys’ fees and other expenses as and to the same extent as if the matter were being heard in court, provided that the arbitrator may in its discretion award costs to the prevailing party if it determines that to be appropriate in accordance with applicable law.
(b)Notwithstanding the foregoing, the Employee agrees that it would be difficult to measure any damages caused to the Employer which might result from any breach by the Employee of the covenants set forth in Sections 10, 11, 14 or 15, and that in any event, money damages would be an inadequate remedy for any such breach. Accordingly, if the Employee has breached, breaches, or proposes to breach Sections 10, 11, 14 or 15, the Employer shall be entitled, in addition to all other remedies such party may have, to a temporary, preliminary or permanent injunction or other appropriate equitable relief to restrain any such breach without showing or proving any actual damage to the non-breaching party from any court having competent jurisdiction over either party.
(c)The Parties expressly agree that each may bring and pursue Claims against the other only in their individual capacities, and not on behalf of, with respect to, joined with, and/or as a part of, any class action, collective action, and/or representative action, except as expressly set forth herein or unless such waiver is not permitted by applicable law. The Parties agree that in the event Employee brings a Claim under the California Private Attorneys General Act of 2004, Employee may pursue Claims and seek remedies as a representative of the California Labor & Workforce Development Agency, but only based on alleged violations of law personally suffered by Employee, and any such individual PAGA Claims must be arbitrated
consistent with this Arbitration provision. If Employee suffered an alleged violation of law, Employee may request that the arbitrator award any remedies available under the law for the violation personally experienced by Employee. However, Employee may not seek to represent other employees, or join the Claims of other employees, or obtain remedies for alleged legal violations suffered by other employees, even if Employee claims to have suffered the same type of alleged legal violations. The Parties further agree that Employee may not participate in, or seek to be covered by or benefit from, a class action, collective action, or representative action asserting Claims covered by this Arbitration provision if filed by another employee. If any Party brings a Claim as a plaintiff, or participates as a member of or person to be covered by a class action, collective action, or representative action, or challenges the enforceability of this provision, the Parties agree that a court, not an arbitrator, shall determine what Claims are subject to the duty to arbitrate and whether any Claims must proceed on a class, collective, joint, and/or representative basis. If the court determines that any Claims must proceed on a class or collective basis, or that any Claims arising from alleged unlawful acts or violations not personally committed against or suffered by Employee have been asserted, then those Claims, if allowed, may only proceed in court, not in arbitration. Such Claims shall be dismissed by the court to the fullest extent allowed by law; if the Claims cannot be dismissed by the court, the Claims will be stayed pending the conclusion of the arbitration between the Parties.
(d)The Parties voluntarily agree that Employer is engaged in transactions involving interstate commerce, and this Arbitration provision shall be subject to the substantive and procedural provisions of the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq.
(e)THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL, INCLUDING ANY RIGHTS TO TRIAL BY JURY, IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER IN CONNECTION WITH ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR THE PROVISION OF SERVICES UNDER THIS AGREEMENT.
(f)
14.Cooperation. Upon the receipt of reasonable notice from the Employer (including from outside counsel to the Employer), the Employee agrees that while employed by the Employer and after the termination of the Employee’s employment for any reason, the Employee will respond and provide information with regard to matters in which the Employee has knowledge as a result of the Employee’s employment with the Employer, and will provide reasonable assistance to the Employer, its Affiliates and their respective representatives in defense of any claims that may be made against the Employer or its Affiliates, and will assist the Employer and its Affiliates in the prosecution of any claims that may be made by the Employer or its Affiliates, to the extent that such claims may relate to the period of the Employee’s employment with the Employer, provided, that with respect to periods after the termination of the Employee’s employment, the Employer shall reimburse the Employee for any reasonable out-of-pocket expenses incurred in providing such assistance and, with respect to any period in which the Employee is required to provide more than ten hours of assistance per week after Employee’s termination of employment but is not receiving severance payments from the Employer or its Affiliates, and is not testifying, the Employer shall pay the Employee a reasonable amount of money for Employee’s services at a reasonable rate agreed to between the Employer and the Employee; and provided further that after the Employee’s termination of employment with the Employer, such assistance shall not unreasonably interfere with the Employee’s business or personal obligations. The Employee agrees to promptly inform the Employer if the Employee becomes aware of any lawsuits involving such claims that may be filed or threatened against the Employer or its Affiliates. The Employee also agrees to promptly inform the Employer (to the extent the Employee is legally permitted to do so) if the Employee is asked to assist in any investigation of the Employer or its Affiliates (or their actions), regardless
of whether a lawsuit or other proceeding has then been filed against the Employer or its Affiliates with respect to such investigation, and shall not do so unless legally required.
15.Disclosure and Assignment of Inventions and Improvements. Without prejudice to any other duties express or implied imposed on the Employee hereunder it shall be part of the Employee’s normal duties at all times to consider in what manner and by what methods or devices the products, services, processes, equipment or systems of the Employer and any customer or vendor of the Employer might be improved and promptly to give to the Chief Executive Officer of the Employer or Employee’s designee full details of any improvement, invention, research, development, discovery, design, code, model, suggestion or innovation (collectively called “Work Product”), which the Employee (alone or with others) may make, discover, create or conceive in the course of the Employee’s employment. The Employee acknowledges that the Work Product is the property of the Employer. To the extent that any of the Work Product is capable of protection by copyright, the Employee acknowledges that it is created within the scope of the Employee’s employment and is a work made for hire. To the extent that any such material may not be a work made for hire, the Employee hereby assigns to the Employer all rights in such material. To the extent that any of the Work Product is an invention, discovery, process or other potentially patentable subject matter (the “Inventions”), the Employee hereby assigns to the Employer all right, title, and interest in and to all Inventions. The Employer acknowledges that the assignment in the preceding sentence does not apply to an Invention that the Employee develops entirely on Employee’s own time without using the Employer’s equipment, supplies, facilities or trade secret information, except for those Inventions that either:
(i) relate at the time of conception or reduction to practice of the Invention to the Employer’s business, or actual or demonstrably anticipated research or development of the Employer, or
(ii) result from any work performed by the Employee for the Employer.
Execution of this Agreement constitutes the Employee’s acknowledgment of receipt of written notification of this Section 15 and of notice of the general exception to assignments of Inventions provided under the Uniform Employee Patents Act, in the form adopted by the state having jurisdiction over this Agreement or provision, or any comparable applicable law.
16.Representations and Warranties; Advice of Counsel.
(a)The Employee represents and warrants that (i) Employee is under no contractual or other obligation that would prevent Employee from accepting the Employer’s offer of employment as set forth herein, (ii) Employee has the full right, authority and capacity to enter into this Agreement and to perform Employee’s obligations hereunder, (iii) the execution of this Agreement and the performance of Employee’s obligations hereunder will not breach or be in conflict with any other agreement to which the Employee is a party or is bound, and (iv) the Employee is not now subject to, and has not previously violated, any covenants against competition, solicitation, hire or similar covenants, any court order or other legal obligation, or other agreement that would affect the performance of Employee’s obligations hereunder or would otherwise conflict with, prevent or restrict the full performance of Employee’s duties and obligations to the Employer or any of its Affiliates before, during or after the Employment Period. The Employee covenants that Employee will not disclose or use on behalf of the
Employer or its Affiliates any proprietary information of a third party without such party’s consent.
(b)Prior to execution of this Agreement, the Employee was advised by the Employer of the Employee’s right to seek independent advice from an attorney of the Employee’s own selection regarding this Agreement. The Employee acknowledges that the Employee has entered into this Agreement knowingly and voluntarily and with full knowledge and understanding of the provisions of this Agreement after being given the opportunity to consult with counsel. The Employee further represents that in entering into this Agreement, the Employee is not relying on any statements or representations made by any of the directors, officers, employees or agents of the Employer or any of its Affiliates which are not expressly set forth herein, and that the Employee is relying only upon the Employee’s own judgment and any advice provided by the Employee’s attorney.
17.Entire Agreement. This Agreement is intended by the parties to be the final expression of their agreement with respect to the employment of the Employee by the Employer and may not be contradicted by evidence of any prior or contemporaneous agreement (including, without limitation any term sheet, offer letter or similar agreement entered into between the Employer or any Affiliate and the Employee). The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.
18.No Other Representations. Except as expressly provided in this Agreement, (i) no person or entity has made or has the authority to make any representations or promises on behalf of any of the parties which are inconsistent with the representations or promises contained in this Agreement, and (ii) this Agreement has not been executed in reliance on any representations or promises not set forth herein. Specifically, no promises, warranties or representations have been made by anyone on any topic or subject matter related to the Employee’s relationship with the Employer or any of its Affiliates or any of their executives or employees, including but not limited to any promises, warranties or representations regarding future employment, compensation, benefits, any entitlement to equity interests in the Employer or any of its Affiliates or regarding the termination of the Employee’s employment. In this regard, the Employee agrees that no promises, warranties or representations shall be deemed to be made in the future unless they are set forth in writing and signed by an authorized representative of the Employer.
19.Amendments. This Agreement may be modified only by agreement of the parties by a written instrument executed by the parties that is designated as an amendment to this Agreement.
20.Severability and Non-Waiver/Survival. Any provision of this Agreement (or portion thereof) which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this Section 20, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions thereof in such jurisdiction or rendering such provision or any other provision of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable. No waiver of any provision or violation of this Agreement by the Employer shall be implied by the Employer’s forbearance or failure to take action. The expiration or termination of the Employment Period and this Agreement shall not impair the rights or obligations of any party hereto which shall have accrued hereunder prior to such expiration or termination.
21.Successor/Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, representatives, executors, administrators, successors, and assigns, provided, however, that the Employee may not assign any or all of Employee’s rights or duties hereunder. The Employee shall be entitled, to the extent permitted under applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit hereunder following the Employee’s death by giving written notice thereof. In the event of the Employee’s death or a judicial determination of Employee’s incompetence, references in this Agreement to the Employee shall be deemed, where appropriate, to refer to Employee’s beneficiary, estate or other legal representative.
22.Voluntary and Knowledgeable Act. The Employee represents and warrants that the Employee has read and understands each and every provision of this Agreement and has freely and voluntarily entered into this Agreement.
23.Choice of Law. This Agreement shall be construed and enforced under and be governed as to its validity and effect by the laws of the State of California without regard to the conflict of laws principles thereof.
24.Attorneys’ Fees. If any dispute between the parties should result in litigation, the prevailing party in such dispute shall be entitled to recover from the other party all reasonable out-of-pocket fees, costs and expenses of enforcing any right of the prevailing party, including without limitation, reasonable attorneys’ fees and expenses, all of which shall be deemed to have accrued upon the commencement of such action and shall be paid whether or not such action is prosecuted to judgment, to the extent permitted by law. Any judgment or order entered in such action shall contain a specific provision providing for the recovery of attorneys’ fees and costs incurred in enforcing such judgment and an award of prejudgment interest from the date of the breach at the maximum rate of interest allowed by law. For the purposes of this Section 24: (a) attorneys’ fees include, without limitation, fees incurred in the following: (i) post-judgment motions; (ii) contempt proceedings; (iii) garnishment, levy, and debtor and third party examinations; (iv) discovery and (v) bankruptcy litigation, and (b) “prevailing party” means the party who is determined in the proceeding to have prevailed or who prevails by dismissal, default or otherwise.
25.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which together shall constitute one and the same instrument.
26.Notices. Except as otherwise provided for herein, all notices and other communications provided for hereunder shall be in writing (including facsimile communication and electronic mail) and mailed (via registered or certified mail), telecopied or delivered to the party for whom it is intended at the address, telecopier number or e-mail address set forth below or, as to each party, at such other address as designated by that party in a written notice to the other parties. All notices and communications shall be deemed to have been validly served, given or delivered (i) if personally delivered, upon receipt or refusal to accept delivery, (ii) if sent via facsimile, upon mechanical confirmation of successful transmission thereof generated by the sending facsimile machine, (iii) if sent by a commercial overnight courier for delivery on the next business day, on the first business day after deposit with such courier service (or the second business day if sent to an address not in the United States), (iv) if sent by registered or certified mail, three days after deposit thereof in the United States mail, or (v) if sent by electronic mail, one business day after transmission when directed to the appropriate e-mail address (provided that the party giving notice must verify the e-mail address of the recipient prior to transmission):
(a)if to the Employee, to Employee at Employee’s most recent address in the Employer’s records,
(b)If to the Employer, to:
Alignment Healthcare USA, LLC
1100 Town & Country Road, Suite 1600
Orange, CA 92868
Facsimile: (844) 320-2247
E-mail: LegalNotices@ahcusa.com
Attention: Legal Department
or to such other address as the recipient party to whom notice is to be given may have furnished to the other party in writing in accordance herewith.
27.Descriptive Headings; Nouns and Pronouns. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa.
28.Non-Qualified Deferred Compensation. To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof. For purposes of Section 409A of the Code, each of the payments that may be made hereunder is designated as a separate payment and, for the avoidance of doubt and without limiting the foregoing, the Employee’s right to receive installment payments pursuant to Section 6(c) shall be treated as a right to receive a series of separate and distinct payments. To the extent that any reimbursement of expenses or in-kind benefits constitutes “deferred compensation” under Section 409A of the Code, such reimbursement or benefit shall be provided no later than December 31 of the year following the year in which the expense was incurred. The reimbursements under this Agreement are not subject to liquidation or exchange for another benefit, and the amount of expenses reimbursed in one taxable year shall not affect the amount eligible for reimbursement in any other taxable year. Notwithstanding any provision of this Agreement to the contrary, in the event that the Employer determines that any amounts payable hereunder will be immediately taxable to the Employee under Section 409A of the Code and related Department of Treasury guidance, the Employer reserves the right (without any obligation to do so or to indemnify the Employee for failure to do so) to (a) adopt such amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Employer determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Employer and/or (b) take such other actions as the Employer determines necessary or appropriate to exempt the amounts payable hereunder from Section 409A of the Code and related Department of Treasury guidance, or to comply with the requirements of Section 409A of the Code and related Department of Treasury guidance, including such Department of Treasury guidance and other interpretive materials as may be issued after the date hereof, and avoid the applicable of penalty taxes thereunder. No provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A of the Code from the Employee or any other individual to the Employer or any of its Affiliates, employees or agents. To the extent any amounts under this Agreement are payable by reference to Employee’s “termination of employment,” such term and similar terms shall be deemed to refer to Employee’s “separation from service,” within the meaning of Section 409A of the Code. Notwithstanding any other provision in this Agreement, to the extent any payments hereunder
constitute nonqualified deferred compensation, within the meaning of Section 409A of the Code, then if the Employee is a specified employee (within the meaning of Section 409A of the Code) as of the date of Employee’s separation from service, each such payment that is payable upon the Employee’s separation from service and would have been paid prior to the six-month anniversary of Employee’s separation from service, shall be delayed until the earlier to occur of (i) the first day of the seventh month following the Employee’s separation from service or (ii) the date of the Employee’s death.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.
ALIGNMENT HEALTHCARE USA, LLC
By: /s/ John Kao
Name: John Kao
Title: Chief Executive Officer
/s/ James Head
James Head, individually
EX-10.2
3
exh102amendmenttoaremploym.htm
EX-10.2
Document
AMENDMENT TO AMENDED & RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDMENT TO AMENDED & RESTATED EMPLOYMENT AGREEMENT (this “Amendment”), effective as of the Effective Date (defined below), by and between Alignment Healthcare USA, LLC, a California corporation (the “Employer”), and Thomas Freeman (the “Employee”).
RECITALS
WHEREAS, Company and Employee are parties to that certain Amended & Restated Employment Agreement, effective March 26, 2021 (the “Agreement”);
WHEREAS, as of the Effective Date, Employee is hereby transitioning from Chief Financial Officer of Employer to a new strategic advisory role; and
WHEREAS, pursuant to and in accordance with Section 19 of the Agreement, Employer and Employee now desire to amend the Agreement in order to effect certain changes to the terms and conditions of Employee’s employment in connection with his new role, as set forth in this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.1Effective Date. This Amendment shall become effective on the later of (i) May 2, 2025 or (ii) the date which is one business day following Parent’s announcement of financial results for the first quarter ended March 31, 2025 (such date, the “Effective Date”). As of the Effective Date, without any further action, Employee will hereby resign his role as Chief Financial Officer. Company hereby waives any notice requirement set forth in the Agreement (including, without limitation, as set forth in Section 5(e)), and accepts Employee’s resignation as of the Effective Date.
1.2Defined Terms; Section References. Any capitalized term used herein but not otherwise defined shall have the meaning ascribed to such term in the Agreement. Unless otherwise stated herein, all section references in this Amendment are to sections of the Agreement, as amended by this Amendment, if applicable.
1.3Amendments to Agreement. As of the Effective Date, the following amendments are hereby made to the Agreement:
(a)The definition of “Cause” is hereby amended and restated in its entirety to read as follows:
“Cause” means the Employee’s:
(i) willful disregard of Employee’s duties, or Employee’s intentional failure to act where the taking of such action would be in the ordinary course of the Employee’s duties hereunder, provided that the Employee is first given 30 days prior written notice of such conduct in order for the Employee to cure such alleged conduct during such period of time;
(ii) violation or breach of the provisions, representations or covenants of Sections 10, 11, 15 or 16(a);
(iii) gross negligence or willful misconduct in the performance of Employee’s duties hereunder;
(iv) commission of any act of fraud, theft or financial dishonesty, or any felony or criminal act involving moral turpitude; or
(v) unlawful use (including being under the influence) of alcohol or drugs or possession of illegal drugs while on the premises of the Employer or any of its Affiliates or while performing duties and responsibilities to the Employer and its Affiliates.
(b)Clause (i) of the definition of “Good Reason” is hereby amended and restated in its entirety to read as follows:
“(i) any material reduction in Employee’s Base Salary (as that term is defined in Section 4(a)) or in the Employee’s annual total cash compensation opportunity (i.e., Base Salary and Target Bonus Percentage (as that term is defined in Section 4(b))), but excluding any reduction applicable to management employees generally;”
(c)The second sentence of Section 2 (Employment) of the Agreement is hereby amended and restated as follows:
“The term of this Agreement shall commence on the Effective Date and shall end on December 31, 2025 (the “Term Expiration Date”), unless otherwise mutually agreed upon by the parties.”
Additionally, all references to “Notice of Nonrenewal” in the Agreement are hereby deleted.
(d)The first two sentences of Section 3 (Position and Duties) of the Agreement are amended and restated in their entirety to read as follows:
“During the term of this Agreement, the Employee shall serve as Strategic Advisor to CEO and shall have the duties set forth in Exhibit A. The Employee hereby accepts such employment and agrees to devote the requisite amount of time and attention and best efforts in discharging and fulfilling his duties and responsibilities hereunder.
The Employee shall comply with the Employer’s policies and procedures and the direction and instruction of the Board. Employee hereby resigns from (i) his position as Chief Financial Officer of Employer, (ii) any other office Employee holds with Employer or any subsidiary or affiliate of Employer, and (iii) any board or committee position Employee holds with Employer or any subsidiary or affiliate of Employer.”
(e)Section 4(a) of the Agreement is hereby amended and restated in its entirety to read as follows:
“(a) Salary. During the term of the Agreement, Employee shall be a salaried, exempt employee, and shall be paid a Base Salary, less applicable deductions and withholdings. “Base Salary” shall mean Employee’s base salary, as may be increased from time to time at the discretion of the Employer. From the Effective Date through May 31, 2025, Employee’s base salary shall equal $580,000 annually. As of June 1, 2025, Employee’s base salary shall equal $290,000 annually.”
Employee agrees that the foregoing reduction in compensation shall not constitute Good Reason under the Agreement.
(f)Section 4(b) of the Agreement is hereby amended and restated in its entirety to read as follows:
“(b) Performance Bonus. Subject to his continued employment as of the applicable payment date (except if payable pursuant to Section 6(c) hereof or if the Employee was employed through the Term Expiration Date but the applicable payment date follows the Term Expiration Date), the Employee shall be eligible to receive the following cash bonuses (“Bonuses”): (i) the second installment of the annual cash bonus payable under Employer’s annual incentive plan for calendar year 2024 (“the “2024 AIP”), payable upon the terms and conditions established under the 2024 AIP as previously approved by the Board; and (ii) a pro rata portion of the annual cash bonus payable under Employer’s annual incentive plan for calendar year 2025 (the “2025 AIP”), payable in two or more installments and upon the other terms and conditions (including corporate and individual performance metrics) established under the 2025 AIP to be approved by the Board. The pro rata portion of the 2025 AIP payable to Employee shall be determined based on the number of calendar days between (and inclusive of) January 1, 2025 and May 31, 2025, divided by three hundred sixty-five (365). Employee’s target bonus and maximum bonus with respect hereto shall be 85% and 170%, respectively (the “Target Bonus Percentage”). Employee agrees that he shall not be entitled to cash bonuses under the Employer’s annual incentive plan or any other cash performance bonus payable with respect to his term of employment after May 31, 2025.”
(g)Section 4(f) (Annual Review of Base Salary and Bonus Percentages) of the Agreement is hereby deleted in its entirety.
(h)Section 5(f) of the Agreement is hereby amended and restated in its entirety to read as follows:
“(f) Term Expiration. Unless sooner terminated, this Agreement and the Employee’s employment hereunder shall automatically terminate as of the Term Expiration Date, unless otherwise mutually agreed upon by the parties.”
(i)Clause (C) of Section 6(b)(ii) of the Agreement is hereby deleted.
(j)Section 6(c) of the Agreement is hereby amended and restated in its entirety to read as follows:
“(c) Termination without Cause or Resignation with Good Reason. In the event of the Employee’s termination of employment hereunder by reason of (i) a termination by the Employer without Cause or (ii) resignation by the Employee with Good Reason, the Employer shall pay or provide to the Employee the payments and benefits set forth in Section 6(a) and, to the extent not already paid, payment of the 2024 AIP Bonus and the 2025 AIP Bonus. In addition, subject to the Employee’s execution and non-revocation of a customary general waiver and release of claims in such form as provided by the Employer (a “Release”) in accordance with Section 6(d) and the Employee’s continued full performance of obligations under Sections 10 and 11, and in lieu of any severance benefits that may be payable to the Employee under a separate severance agreement or an executive severance plan as a result of such termination, the Employer shall pay or provide to the Employee the following (the “Severance Benefits”):
(i) Employer will pay Employee a cash payment in the amount of Base Salary that would have been payable from the Termination Date through the Term Expiration Date, paid in installments over such period in accordance with the Employer’s normal payroll practices;
(ii) As of immediately prior to the Termination Date, Employer will (to the extent not already vested) cause the acceleration of vesting of the shares of Parent common stock under previously issued and then-outstanding equity incentive awards and the options to purchase shares of Parent common stock that, but for the termination of employment, would have vested at any time from the Effective Date through September 30, 2026 (the “Accelerated Awards”); and
(iii) if the Employee elects COBRA benefits, the Employer shall pay or reimburse the Employee’s share of the premium for such COBRA benefits until the earlier of (A) December 31, 2025; or (B) the date that the Employee is eligible to receive health benefits through new employment; it being understood that (x) the Employee is required to notify the Employer immediately if Employee begins new employment during such period and to repay promptly any excess benefits contributions made by the Employer; and (y) after the Employer’s payment or reimbursement obligation ends, the Employee may continue benefits coverage for the remainder of the COBRA period, if any, by paying the full premium cost of such benefits.
(k)The first two sentences of Section 11(a) (Restrictive Covenants) are hereby amended and restated in their entirety to read as follows:
“During the Employment Period, the Employee shall not, directly or indirectly, without written approval by the Board, accept or perform any work, consulting, or other services for any other business entity or for remuneration of any kind; provided, however, that none of the following shall constitute a violation of this Section 11(a): (i) activities that are not directly competitive with the business of the Company, (ii) activities that do not interfere with the performance by Employee of his duties set forth on Exhibit A attached hereto, (iii) the passive ownership by the Employee of not more than 2.0% of the outstanding equity securities of a publicly traded company, or (iv) the Employee’s ownership of the securities or interests described on Schedule 1.”
(l)Section 11(b) (Restrictive Covenants) is hereby amended and restated in its entirety to read as follows:
“(b) During the Employment Period, the Employee shall not, directly or indirectly, solicit, induce or encourage any employee of the Employer to terminate Employee’s employment with the Employer or hire or attempt to hire any employee of the Employer.”
(m)Subject to Employee’s continued employment with Employer under the terms of the Agreement (as hereby amended) as of the Term Expiration Date, as of such date Employer will cause the acceleration of vesting any remaining unvested portion of the Accelerated Awards.
(n)As of the Effective Date, the Employer shall pay the Employee a lump sum amount equal to the value of all accrued but unused paid time-off (“PTO”) earned by the Employee through the Effective Date, in accordance with the Employer’s policies and applicable law. Such payment shall be made within ten (10) business days following the Effective Date and shall be subject to all applicable withholdings and deductions. Employee shall be entitled to one (1) week of PTO during the remaining term of the Agreement. In the event of termination prior to the Term Expiration Date, PTO accrual shall be prorated for the partial year of employment and subject to applicable laws and Employer policy.
1.4Remainder of Agreement Terms. All remaining provisions of the Agreement shall remain unchanged. In the event of any inconsistency or conflict between any term or condition of the Agreement and this Amendment, the terms of this Amendment shall govern and prevail.
1.5Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed to be an original, but both of which together shall constitute one and the same instrument.
1.6Choice of Law. This Amendment shall be construed and enforced under and be governed as to its validity and effect by the laws of the State of California without regard to the conflict of laws principles thereof.
1.7Entire Agreement. This Amendment, together with the Agreement, constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior agreements, representations, and understandings, whether written or oral.
[Signatures on following page]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above.
ALIGNMENT HEALTHCARE USA, LLC
By: /s/ John Kao
Name: John Kao
Title: Chief Executive Officer
By: /s/ Thomas Freeman Name: Thomas Freeman, individually As Strategic Advisor to CEO, as directed by the CEO, Employee shall perform the following duties:
EXHIBIT A
Duties
•Employee shall provide reasonable support and assistance to facilitate the smooth transition of responsibilities to the incoming Chief Financial Officer, including without limitation, participation in knowledge transfer meetings, delivering all necessary documents, records and materials, and responding to reasonable inquiries from the incoming Chief Financial Officer or other relevant parties.
•Employee shall serve in an advisory capacity to the CEO regarding long-term strategy and key partnerships.
EX-10.3
4
exh103amendmenttoaremploym.htm
EX-10.3
Document
AMENDMENT TO AMENDED & RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDMENT TO AMENDED & RESTATED EMPLOYMENT AGREEMENT (this “Amendment”), effective as of April 28, 2025 (the “Effective Date”), by and between Alignment Healthcare USA, LLC, a California corporation (the “Employer”), and John E. Kao (the “Employee”).
RECITALS
WHEREAS, Company and Employee are parties to that certain Amended & Restated Employment Agreement, effective March 26, 2021 (the “Agreement”); and
WHEREAS, pursuant to and in accordance with Section 19 of the Agreement, Employer and Employee now desire to amend the Agreement in order to effect certain changes to the terms and conditions of Employee’s employment in connection with his new role, as set forth in this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.1Defined Terms. Any capitalized term used herein but not otherwise defined shall have the meaning ascribed to such term in the Agreement. All section references in this Amendment are to sections of the Agreement, unless otherwise stated herein.
1.2Amendments to Agreement. As of the Effective Date, Section 1 of the Agreement is hereby amended by amending and restating the definition of “Good Reason” in its entirety as follows:
“‘Good Reason’ shall mean the occurrence of any of the following events without Employee’s express written consent: (i) a reduction in Employee’s annual base salary or annual target bonus opportunity; (ii) a diminution in Employee’s status, authority, title, duties or responsibilities (including a change which results in the Employer no longer being a publicly traded entity or you no longer being the chief executive officer of a publicly traded entity) or (iii) a failure of the Employer’s successor to assume and perform this Agreement as contemplated hereof; provided that any such termination by Employee shall only be deemed for Good Reason pursuant to this definition if: (1) Employee gives Employer written notice within sixty (60) days following Employee’s initial awareness of the occurrence of the condition(s) that Employee believes constitute(s) Good Reason, which notice shall describe such condition(s) and Employee’s intent to terminate for Good Reason; (2) Employer fails to remedy such condition(s) to Employee’s satisfaction within thirty (30) days following receipt of the written notice (such 30 period, as applicable, the “Cure Period”); and (3) Employee voluntarily terminates Employee’s employment within thirty (30) days following the end of the Cure Period. For purposes of the definition of ‘Good Reason,’ Employer includes Alignment Healthcare, Inc. and all of its Subsidiaries and Affiliates.”
1.3Remainder of Agreement Terms. All remaining provisions of the Agreement shall remain unchanged. In the event of any inconsistency or conflict between any term or condition of the Agreement and this Amendment, the terms of this Amendment shall govern and prevail.
1.4Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed to be an original, but both of which together shall constitute one and the same instrument.
1.5Choice of Law. This Amendment shall be construed and enforced under and be governed as to its validity and effect by the laws of the State of California without regard to the conflict of laws principles thereof.
1.6Entire Agreement. This Amendment, together with the Agreement, constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior agreements, representations, and understandings, whether written or oral.
[Signatures on following page]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above.
ALIGNMENT HEALTHCARE USA, LLC
By: /s/ Christopher Joyce
Name: Christopher Joyce
Title: Chief Legal & Administrative Officer
By: /s/ John Kao
Name: John Kao, individually
EX-10.4
5
exh104amendmenttoaremploym.htm
EX-10.4
Document
AMENDMENT TO AMENDED & RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDMENT TO AMENDED & RESTATED EMPLOYMENT AGREEMENT (this “Amendment”), effective as of April 28, 2025 (the “Effective Date”), by and between Alignment Healthcare USA, LLC, a California corporation (the “Employer”), and Dawn Maroney (the “Employee”).
RECITALS
WHEREAS, Company and Employee are parties to that certain Amended & Restated Employment Agreement, effective March 26, 2021 (the “Agreement”); and
WHEREAS, pursuant to and in accordance with Section 19 of the Agreement, Employer and Employee now desire to amend the Agreement in order to effect certain changes to the terms and conditions of Employee’s employment in connection with his new role, as set forth in this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.1Defined Terms. Any capitalized term used herein but not otherwise defined shall have the meaning ascribed to such term in the Agreement. All section references in this Amendment are to sections of the Agreement, unless otherwise stated herein.
1.2Amendments to Agreement. As of the Effective Date, the following amendments are hereby made to the Agreement:
(a)Section 3 of the Agreement is hereby amended and restated in its entirety as follows:
“3. Position and Duties. During the Employment Period, the Employee shall serve as President of Alignment Healthcare, Inc. and CEO of Alignment Health Plan (CA), reporting to the Board and the Chief Executive Officer of Employer, and shall have the usual and customary duties, responsibilities and authority of such position, and, if elected or appointed thereto, shall serve as an officer and/or member of the board or any Subsidiary or Affiliate of the Employer as reasonably requested by the Employer and its Affiliates, in each case, without additional compensation hereunder. The Employee hereby accepts such employment and positions and agrees to diligently and conscientiously devote her full and exclusive business time, attention, and best efforts in discharging and fulfilling her duties and responsibilities hereunder. The Employee shall comply with the Employer’s policies and procedures and the direction and instruction of the Board and the Employee shall not engage in any business activity which, in the reasonable judgment of the Board, conflicts with the duties of the Employee hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage.”
(b)Sections 6(c)(i) and (iii) of the Agreement are hereby amended and restated in their entirety to read as follows:
“(i) severance pay in an aggregate amount equal to one (1.0) times the sum of (1) Base Salary plus (2) the Target Bonus Percentage, paid in substantially equal installments over the 12-month period following the Termination Date in accordance with the Employer’s normal payroll practices; provided, however, that if such termination without Cause or resignation with Good Reason is effective within 12 months of a Change in Control (as defined in Employer’s 2021 Equity Incentive Plan (the “Plan”)), the foregoing payment shall be one and one half (1.5) times the foregoing sum paid in substantially equal installments over the 18-month period following the Termination Date;
…….
(iii) if the Employee elects COBRA benefits, the Employer shall pay or reimburse the Employee’s share of the premium for such COBRA benefits until the earlier of (A) the date that is twelve (12) months after the Termination Date; or (B) the date that the Employee is eligible to receive health benefits through new employment; it being understood that (x) the Employee is required to notify the Employer immediately if she begins new employment during such period and to repay promptly any excess benefits contributions made by the Employer; and (y) after the Employer’s payment or reimbursement obligation ends, the Employee may continue benefits coverage for the remainder of the COBRA period, if any, by paying the full premium cost of such benefits; provided, however, that if such termination without Cause or resignation with Good Reason is effective within 12 months of a Change in Control (as defined in the Plan), then the date set forth in clause (A) above shall be the date that is eighteen (18) months after the Termination Date.”
1.3Remainder of Agreement Terms. All remaining provisions of the Agreement shall remain unchanged. In the event of any inconsistency or conflict between any term or condition of the Agreement and this Amendment, the terms of this Amendment shall govern and prevail.
1.4Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed to be an original, but both of which together shall constitute one and the same instrument.
1.5Choice of Law. This Amendment shall be construed and enforced under and be governed as to its validity and effect by the laws of the State of California without regard to the conflict of laws principles thereof.
1.6Entire Agreement. This Amendment, together with the Agreement, constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior agreements, representations, and understandings, whether written or oral.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above.
ALIGNMENT HEALTHCARE USA, LLC
By: /s/ John Kao
Name: John Kao
Title: Chief Executive Officer
By: /s/ Dawn Maroney
Name: Dawn Maroney, individually
EX-31.1
6
alhc-03312025xex311.htm
EX-31.1
Document
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:
1.I have reviewed this Quarterly Report on Form 10-Q of Alignment Healthcare, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: May 1, 2025 |
By: |
/s/ John Kao |
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John Kao |
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Chief Executive Officer |
EX-31.2
7
alhc-03312025xex312.htm
EX-31.2
Document
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:
1.I have reviewed this Quarterly Report on Form 10-Q of Alignment Healthcare, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: May 1, 2025 |
By: |
/s/ Thomas Freeman |
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Thomas Freeman |
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Chief Financial Officer |
EX-32.1
8
alhc-03312025xex321.htm
EX-32.1
Document
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 March 31, 2025 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:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 1, 2025 |
By: |
/s/ John Kao |
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John Kao |
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Chief Executive Officer |
EX-32.2
9
alhc-03312025xex322.htm
EX-32.2
Document
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 March 31, 2025 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:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 1, 2025 |
By: |
/s/ Thomas Freeman |
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Thomas Freeman |
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Chief Financial Officer |