Item 1. Financial Statements
Item 1. Financial Statements.
Alignment Healthcare, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands, except par value and share amounts)
(Unaudited)
March 31,
2025 December 31,
2024
Assets
Current Assets:
Cash and cash equivalents $ 446,184 $ 432,859
Accounts receivable (less allowance for credit losses of $ 0 at March 31, 2025 and $ 0 at December 31, 2024)
214,059 153,904
Investments - current 33,360 37,791
Prepaid expenses and other current assets 80,883 37,084
Total current assets 774,486 661,638
Property and equipment, net 68,504 67,139
Right of use asset, net 7,750 7,818
Goodwill 34,192 34,826
Intangible Assets, net 4,550 4,550
Other assets 6,135 6,092
Total assets $ 895,617 $ 782,063
Liabilities and Stockholders' Equity
Current Liabilities:
Medical expenses payable $ 396,734 $ 289,788
Accounts payable and accrued expenses 28,032 22,126
Accrued compensation 32,353 39,931
Total current liabilities 457,119 351,845
Long-term debt, net of debt issuance costs 321,855 321,428
Long-term portion of lease liabilities 7,648 7,835
Total liabilities 786,622 681,108
Commitments and Contingencies (Note 12)
Stockholders' Equity:
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
— —
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
198 192
Additional paid-in capital 1,125,340 1,107,952
Accumulated deficit ( 1,017,407 ) ( 1,008,293 )
Total Alignment Healthcare, Inc. stockholders' equity 108,131 99,851
Noncontrolling interest 864 1,104
Total stockholders' equity 108,995 100,955
Total liabilities and stockholders' equity $ 895,617 $ 782,063
See accompanying notes to unaudited condensed consolidated financial statements.
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Alignment Healthcare, Inc.
Condensed Consolidated Statements of Operations
(amounts in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended March 31,
2025 2024
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 )
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.
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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.
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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
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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.
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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:
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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.
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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.
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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.
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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
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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:
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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
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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
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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.
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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.
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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.
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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
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$ 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.
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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 .
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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
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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.
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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.
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