Alignment Healthcare, Inc. (NASDAQ: ALHC), a tech-enabled Medicare Advantage company, today reported financial results for its fourth quarter and full year ending Dec. 31, 2022.

“Alignment Healthcare’s relentless focus on quality allowed us to deliver strong financial results in 2022, having exceeded or met our guidance across all four of our key performance indicators for the eighth consecutive quarter,” said John Kao, founder and CEO. “As we approach the company’s 10-year anniversary, we’re confident that strategic investments in our people and technology will continue to drive meaningful improvements in the health and quality of life of all those we serve.”

Fourth Quarter 2022 Financial HighlightsAll comparisons, unless otherwise noted, are to the three months ended Dec. 31, 2021.

  • Health plan membership at the end of the quarter was approximately 98,400, up 14.3% year over year
  • Total revenue was $361.8 million, up 21.3% year over year
  • Health plan premium revenue of $344.9 million represented 21.5% growth year over year
  • Adjusted gross profit was $38.3 million and loss from operations was ($52.1) million
    • Adjusted gross profit excludes depreciation and amortization of $4.8 million and selling, general, and administrative expenses of $83.2 million (which includes $20.5 million of equity-based compensation). Adjusted gross profit also excludes an additional $2.4 million of equity-based compensation recorded within medical expenses
    • Medical benefits ratio based on adjusted gross profit was 89.4%
  • Adjusted EBITDA was ($23.7) million and net loss was ($57.0) million

Full Year 2022 Financial HighlightsAll comparisons, unless otherwise noted, are to the twelve months ended Dec. 31, 2021.

  • Total revenue was $1,434.2 million, up 22.8% year over year
  • Health plan premium revenue of $1,372.3 million represented 22.4% growth year over year
  • Adjusted gross profit was $193.6 million and loss from operations was ($128.6) million
    • Adjusted gross profit excludes depreciation and amortization of $17.5 million and selling, general, and administrative expenses of $295.6 million (which includes $72.6 million of equity-based compensation). Adjusted gross profit also excludes an additional $9.1 million of equity-based compensation recorded within medical expenses
    • Medical benefits ratio based on adjusted gross profit was 86.5%
  • Adjusted EBITDA was ($26.7) million and net loss was ($149.6) million
  • As of Dec. 31, 2022, total cash was $409.5 million, and debt was $165.0 million (excluding unamortized debt issuance costs)

Adjusted Gross Profit is reconciled as follows:

  Three Months EndedDecember 31,   Year EndedDecember 31,
    2022       2021       2022       2021  
(dollars in thousands)              
Loss from operations $ (52,106 )   $ (43,466 )   $ (128,639 )   $ (178,072 )
Add back:              
Equity-based compensation (medical expenses)   2,377       3,960       9,128       15,418  
Depreciation (medical expenses)   64       61       213       220  
Depreciation and amortization   4,687       4,088       17,273       15,813  
Selling, general, and administrative expenses   83,228       78,081       295,646       290,991  
Total add back   90,356       86,190       322,260       322,442  
Adjusted gross profit $ 38,250     $ 42,724     $ 193,621     $ 144,370  
Adjusted gross profit %   10.6 %     14.3 %     13.5 %     12.4 %
Medical benefit ratio   89.4 %     85.7 %     86.5 %     87.6 %
               

Adjusted EBITDA is reconciled as follows:

  Three Months EndedDecember 31,   Year EndedDecember 31,
    2022       2021       2022       2021  
(dollars in thousands)              
Net loss $ (56,995 )   $ (47,834 )   $ (149,639 )   $ (195,286 )
Less: Net loss attributable to noncontrolling interest   92             92        
Add back:              
Interest expense   4,793       4,452       18,289       17,443  
Depreciation and amortization   4,751       4,149       17,486       16,033  
Income taxes   172             339        
EBITDA   (47,187 )     (39,233 )     (113,433 )     (161,810 )
Equity-based compensation(1)   22,885       28,814       81,718       121,999  
Reorganization and transaction-related expenses(2)         527       579       4,585  
Acquisition expenses(3)   548       1,020       1,614       2,110  
Loss on sublease and disposal of assets(4)   102             611        
Loss on extinguishment of debt               2,196        
Adjusted EBITDA $ (23,652 )   $ (8,872 )   $ (26,715 )   $ (33,116 )
               

(1)  2022 represents equity-based compensation related to grants made in the current year, as well as equity-based compensation related to the timing of the IPO, which includes previously issued stock appreciation rights ("SARs") liability awards, modifications related to transaction vesting units, and grants made in conjunction with the IPO. 2021 represents equity-based compensation related to the timing of the IPO as previously discussed. Equity-based compensation expense for the year ended December 31, 2021 includes $11.4 million related to the cash settlement of SARs.

(2)  Represents legal, professional, accounting and other advisory fees related to our pre-IPO corporate reorganization and the IPO that are considered non-recurring and non-capitalizable.

(3)  Represents acquisition-related fees, such as legal and advisory fees, that are non-capitalizable.

(4)  Represents loss related to right of use (“ROU”) assets that were subleased in the second quarter of 2022 and loss related to disposal of assets.

Outlook for First Quarter and Fiscal Year 2023

  Three Months Ending March 31, 2023 Twelve Months Ending|March 31, 2023
$ Millions Low   High   Low   High
Health Plan Membership   109,300       109,500       113,000       115,000  
Revenue   $429       $434       $1,705       $1,730  
Adjusted Gross Profit1   $38       $41       $205       $217  
Adjusted EBITDA2   ($17)       ($14)       ($34)       ($20)  

_______________________

  1. Adjusted gross profit is a non-GAAP financial measure that is presented as supplemental disclosure, that we define as loss from operations before depreciation and amortization, clinical equity-based compensation expense, and selling, general, and administrative expenses. We cannot reconcile our estimated ranges for adjusted gross profit to loss from operations, the most directly comparable GAAP measure, and cannot provide estimated ranges for loss from operations, without unreasonable efforts because of the uncertainty around certain items that may impact loss from operations, including equity-based compensation expense and depreciation and amortization, that are not within our control or cannot be reasonably predicted.
  2. Adjusted EBITDA is a non-GAAP financial measure that is presented as supplemental disclosure, that we define as net loss before interest expense, income taxes, depreciation and amortization expense, reorganization and transaction-related expenses, equity-based compensation expense, loss on sublease and loss on extinguishment of debt. We cannot reconcile our estimated ranges for Adjusted EBITDA to net loss, the most directly comparable GAAP measure, and cannot provide estimated ranges for net loss, without unreasonable efforts because of the uncertainty around certain items that may impact net loss, including equity-based compensation expense and depreciation and amortization, that are not within our control or cannot be reasonably predicted.

Conference Call DetailsThe company will host a conference call at 5 p.m. EST today to discuss these results and management’s outlook for future financial and operational performance. A live audio webcast will be available online at https://ir.alignmenthealthcare.com/. At the start of the conference call, participants may access the webcast at the following link: https://edge.media-server.com/mmc/p/83hqdb3q. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web links, and will remain available for approximately 12 months.

About Alignment HealthAlignment Health is championing a new path in senior care that empowers members to age well and live their most vibrant lives. A consumer brand name of Alignment Healthcare (NASDAQ: ALHC), Alignment Health is a tech-enabled Medicare Advantage company that offers more than 40 benefits-rich, value-driven plans that serve 52 counties across six states. The company partners with nationally recognized and trusted local providers to deliver coordinated care, powered by its customized care model, 24/7 concierge care team and purpose-built technology, AVAⓇ. Based in California, the company’s mission-focused team makes high-quality, low-cost care a reality for members every day. As it expands its offerings and grows its national footprint, Alignment upholds its core values of leading with a serving heart and putting the senior first. For more information, visit www.alignmenthealth.com.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include statements regarding our future growth and our financial outlook for the first quarter ending March 31, 2023, and year ending December 31, 2023. Forward-looking statements are subject to risks and uncertainties and are based on assumptions that may prove to be inaccurate, which could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. Important risks and uncertainties that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: our ability to attract new members and enter new markets, including the need for certain governmental approvals; our ability to maintain a high rating for our plans on the Five Star Quality Rating System; risks associated with being a government contractor; changes in laws and regulations applicable to our business model; risks related to our indebtedness, including the potential for rising interest rates; changes in market or industry conditions and receptivity to our technology and services; results of litigation or a security incident; the impact of shortages of qualified personnel and related increases in our labor costs; and the impact of COVID-19 on our business and results of operation. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2022, and the other periodic reports we file with the SEC. All information provided in this release and in the attachments is as of the date hereof, and we undertake no duty to update or revise this information unless required by law.

Consolidated Balance Sheets(in thousands, except par value and share amounts)

  December 31,2022   December 31,2021
Assets      
Current Assets:      
Cash $ 409,549     $ 466,600  
Accounts receivable (less allowance for credit losses of $0 at December 31, 2022 and $111 at December 31, 2021, respectively)   92,890       58,512  
Prepaid expenses and other current assets   42,107       27,747  
Total current assets   544,546       552,859  
Property and equipment, net   37,169       30,358  
Right of use asset, net   5,825       7,853  
Goodwill and intangible assets, net   40,288       35,116  
Other assets   6,035       4,709  
Total assets $ 633,863     $ 630,895  
Liabilities and Stockholders' Equity      
Current Liabilities:      
Medical expenses payable $ 170,135     $ 125,886  
Accounts payable and accrued expenses   32,288       17,431  
Accrued compensation   27,538       23,928  
Total current liabilities   229,961       167,245  
Long-term debt, net of debt issuance costs   160,902       150,620  
Long-term portion of lease liabilities   3,698       6,975  
Total liabilities   394,561       324,840  
Stockholders' Equity:      
Preferred stock, $.001 par value; 100,000,000 and 100,000,000 shares authorized as of December 31, 2022 and December 31, 2021, respectively; no shares issued and outstanding as of December 31, 2022 and December 31, 2021          
Common stock, $.001 par value; 1,000,000,000 shares authorized as of December 31, 2022 and December 31, 2021; 187,280,015 and 187,193,613 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively   187       187  
Additional paid-in capital   970,180       888,547  
Accumulated deficit   (732,241 )     (582,694 )
Total Alignment Healthcare, Inc. stockholders' equity   238,126       306,040  
Noncontrolling interest   1,176       15  
Total stockholders' equity   239,302       306,055  
Total liabilities and stockholders' equity $ 633,863     $ 630,895  
       

Consolidated Statements of Operations(in thousands, except per share amounts)(Quarterly data unaudited)

  Three Months EndedDecember 31,   Year EndedDecember 31,
    2022       2021       2022       2021  
Revenues:              
Earned premiums $ 360,100     $ 298,071     $ 1,431,550     $ 1,167,085  
Other   1,711       203       2,609       688  
Total revenues   361,811       298,274       1,434,159       1,167,773  
Expenses:              
Medical expenses   326,002       259,571       1,249,879       1,039,041  
Selling, general, and administrative expenses   83,228       78,081       295,646       290,991  
Depreciation and amortization   4,687       4,088       17,273       15,813  
Total expenses   413,917       341,740       1,562,798       1,345,845  
Loss from operations   (52,106 )     (43,466 )     (128,639 )     (178,072 )
Other expenses:              
Interest expense   4,793       4,452       18,289       17,443  
Other expenses (income)   (76 )     (84 )     176       (229 )
Loss on extinguishment of debt               2,196        
Total other expenses   4,717       4,368       20,661       17,214  
Loss before income taxes   (56,823 )     (47,834 )     (149,300 )     (195,286 )
Provision for income taxes   172             339        
Net loss $ (56,995 )   $ (47,834 )   $ (149,639 )   $ (195,286 )
Less: Net loss attributable to noncontrolling interest   92             92        
Net loss attributable to Alignment Healthcare, Inc. $ (56,903 )   $ (47,834 )   $ (149,547 )   $ (195,286 )
Total weighted-average common shares outstanding - basic and diluted   182,540,539       178,396,999       181,212,757       171,956,849  
Net loss per share attributable to Alignment Healthcare, Inc. - basic and diluted $ (0.31 )   $ (0.27 )   $ (0.83 )   $ (1.14 )
               

Consolidated Statements of Cash Flows (in thousands)

  Year EndedDecember 31,
    2022       2021  
Operating Activities:      
Net loss $ (149,639 )   $ (195,286 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Provision for credit loss   150       111  
Loss on sublease   510        
Depreciation and amortization   17,486       16,033  
Amortization-debt issuance costs and investment discount   1,850       2,254  
Amortization of payment-in-kind interest   2,943       4,197  
Loss on disposal of property and equipment   101        
Equity-based compensation and common stock payments   81,718       110,600  
Non-cash lease expense   2,811       2,731  
Loss on extinguishment of debt   2,196        
Changes in operating assets and liabilities:      
Accounts receivable   (34,377 )     (17,608 )
Prepaid expenses and other current assets   (14,356 )     (10,340 )
Other assets   (86 )     644  
Medical expenses payable   44,250       12,512  
Accounts payable and accrued expenses   13,743       437  
Accrued compensation   3,609       (1,244 )
Lease liabilities   (4,214 )     (3,817 )
Payment-in-kind interest   (14,122 )      
Noncurrent liabilities          
Net cash (used in) provided by operating activities   (45,427 )     (78,776 )
Investing Activities:      
Purchase of business, net of cash received   (4,043 )      
Asset acquisition, net of cash received         (1,405 )
Purchase of investments   (2,825 )     (2,475 )
Sale of investments   2,425       1,425  
Acquisition of property and equipment   (23,774 )     (18,360 )
Proceeds from the sale of property and equipment          
Net cash used in investing activities   (28,217 )     (20,815 )
Financing Activities:      
Repurchase of noncontrolling interest   (100 )      
Contributions from noncontrolling interest holders   68       15  
Equity repurchase         (1,474 )
Issuance of long-term debt   165,000        
Debt issuance costs   (5,196 )      
Repayment of long-term debt   (143,179 )      
Issuance of common stock         390,600  
Common stock issuance costs         (29,011 )
Net cash provided by financing activities   16,593       360,130  
Net (decrease) increase in cash   (57,051 )     260,539  
Cash and restricted cash at beginning of period   468,350       207,811  
Cash and restricted cash at end of period $ 411,299     $ 468,350  
Supplemental disclosure of cash flow information:      
Cash paid for interest $ 22,447     $ 10,992  
Supplemental non-cash investing and financing activities:      
Acquisition of property in accounts payable $ 47     $ 347  
Purchase of business in accounts payable $ 505     $  

The following table provides a reconciliation of cash and restricted cash reported within the condensed consolidated balance sheets to the total above:

  December 31, 2022   December 31, 2021   December 31, 2020
Cash $ 409,549     $ 466,600     $ 207,311  
Restricted cash in other assets   1,750       1,750       500  
Total $ 411,299     $ 468,350     $ 207,811  

Non-GAAP Financial Measures

Certain of these financial measures are considered “non-GAAP” financial measures within the meaning of Item 10 of Regulation S-K promulgated by the SEC. We believe that non-GAAP financial measures provide an additional way of viewing aspects of our operations that, when viewed with the GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business. These non-GAAP financial measures are also used by our management to evaluate financial results and to plan and forecast future periods. However, non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. Non-GAAP financial measures used by us may differ from the non-GAAP measures used by other companies, including our competitors. To supplement our consolidated financial statements presented on a GAAP basis, we disclose the following non-GAAP measures: Medical Benefits Ratio, Adjusted EBITDA and Adjusted Gross Profit as these are performance measures that our management uses to assess our operating performance. Because these measures facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes and in evaluating acquisition opportunities.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as net loss before interest expense, income taxes, depreciation and amortization expense, reorganization and transaction-related expenses, equity-based compensation expense, loss on sublease and loss on extinguishment of debt.

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.

Medical Benefits Ratio (MBR)

We calculate our MBR by dividing total medical expenses, excluding depreciation and equity-based compensation, by total revenues in a given period.

Adjusted Gross Profit

Adjusted Gross Profit is a non-GAAP financial measure that we define as loss from operations before depreciation and amortization, clinical equity-based compensation expense, and selling, general, and administrative expenses.

Adjusted Gross Profit 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.

Investor Contact Harrison Zhuohzhuo@ahcusa.com

Media Contact Maggie HabibmPR, Inc. for Alignment Healthalignment@mpublicrelations.com

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