Alignment Healthcare (ALHC) risk factors, 2025 10-K

Risks Related to Our Business

1. 01We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to achieve or maintain profitability
2. 02We have incurred net losses on an annual basis since our inception, including a net loss of $128.1 million and $148.2 million for the years ended December 31, 2024 and December 31, 2023. As of December 31, 2024, we had an accumulated deficit of $1,008.3 million
3. 03Our relatively limited operating history makes it difficult to evaluate our current business and future prospects and increases the risk of your investment
4. 04Our growth strategy may not prove viable and we may not realize expected results
5. 05If we are unable to attract new members, our revenue growth will be adversely affected
6. 06Our inability to enroll new members and retain existing members would harm our ability to execute our growth strategy and may have a material adverse effect on our business operations and financial position
7. 07We may not be successful in maintaining or improving our Star ratings in future years, which may have a direct and substantial adverse impact on our revenue
8. 08If we fail to develop and maintain satisfactory relationships with care providers to service our members, our business may be adversely affected
9. 09If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and member satisfaction or adequately address competitive challenges
10. 10We have entered into certain key contracts with large independent physician associations, hospitals and other provider networks to serve our membership base. The loss or renegotiation of any of these contracts could negatively impact our results
11. 11Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or our members, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation
12. 12Disruptions in our disaster recovery systems or management continuity planning could limit our ability to operate our business effectively and adequately care for our members
13. 13A significant portion of our revenue relates, directly or indirectly, to the Medicare Advantage program, which accounted for substantially all of our total revenue for the year ended December 31, 2024. Participating in the Medicare Advantage program exposes us to various risks, as described further below
14. 14The Inflation Reduction Act of 2022 contains several provisions that affect the Part D program. These changes may require us to change our prescription drug offerings, reduce our profitability, and otherwise impact our financial performance
15. 15We may be subject to legal proceedings and litigation, including intellectual property and privacy disputes, which are costly and could materially harm our business and results of operations
16. 16Our business may be adversely impacted if the healthcare services industry becomes more cyclical
17. 17Any failure by us to manage acquisitions, joint ventures, divestitures and other significant transactions successfully may have a material adverse effect on our results of operations, financial position, and cash flows
18. 18If we are not able to maintain, enhance and protect our reputation and brand recognition, including through the maintenance and protection of trademarks, our business and results of operations will be harmed
19. 19Our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology platform and other business systems
20. 20by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all
21. 21If we are unable to protect the confidentiality of our trade secrets, know-how and other proprietary and internally developed information, the value of our technology could be adversely affected
22. 22Any restrictions on our use of, or ability to license, data, or our failure to license data and integrate third-party technologies, could have a material adverse effect on our business, financial condition and results of operations
23. 23Our use of “open-source” software could adversely affect our ability to offer our products and services and subject us to possible litigation
24. 24We depend on our senior management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could harm our business
25. 25Our membership is concentrated in a limited number of U.S. states, and so we are subject to risks associated with our geographic concentration, including unanticipated changes in population morbidity, which could significantly increase utilization rates and medical costs
26. 26Our management team has limited experience managing a public company
27. 27Competition for physicians and nurses, shortages of qualified personnel or other factors could increase our labor costs and adversely affect our revenue, profitability and cash flows
28. 28If our records, including those submitted to us by our external providers, contain inaccurate or unsupportable information regarding risk adjustment scores of members, we might overstate or understate our revenue and be subject to various penalties
29. 29A failure to accurately estimate incurred but not reported medical expense could adversely affect our results of operations
30. 30Negative publicity regarding the managed healthcare industry generally could adversely affect our results of operations or business
31. 31Federal reductions in Medicare Advantage funding could adversely affect our financial condition and results of operations
32. 32The centers out of which our external providers operate and the facilities that host our AVA platform may be negatively impacted by weather and other factors beyond our control
33. 33If we are unable to offer new and innovative products and services or our products and services fail to keep pace with advances in industry standards, technology and our members’ needs, our members may terminate or fail to renew their membership with us and our revenue and results of operations may suffer
34. 34We are a holding company with no operations of our own, and we depend on our subsidiaries for cash
35. 35Our ability to obtain funds from certain of our licensed subsidiaries is restricted by state insurance regulations
36. 36If we are required to maintain higher statutory capital levels for our existing operations or if we are subject to additional capital reserve requirements as we pursue new business opportunities, our cash flows and liquidity may be adversely affected
37. 37We have limited experience serving as a participant in the ACO REACH model with CMS and may not be able to realize the expected benefits thereof
38. 38If we are unable to maintain the minimum required number of beneficiaries served by our ACO REACH model, we may become ineligible to participate in the program
39. 39We are subject to risks associated with delegating services and functions to vendors, including supplemental benefit providers and third-party brokers
40. 40Our reliance on third-party vendors may directly and adversely impact our health plan membership. To the extent a vendor’s inadequate performance impacts our members, their satisfaction with our health insurance plans and customer service may be diminished

Risks Related to Regulation

1. 41The Health Care Reform Law and Other Current or Future Legislative, Judicial or Regulatory Changes
2. 42contains exemptions for medical information governed by the California Confidentiality of Medical Information Act, and for PHI collected by a covered entity or business associate governed by the privacy, security, and breach notification rule established pursuant to HIPAA
3. 43Corporate Practice of Medicine and Other Laws
4. 44Anti-Kickback, Physician Self-Referral and Other Fraud and Abuse Laws
5. 45State Regulation of Insurance-Related Products
6. 46If we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting the U.S. healthcare reform, our business may be harmed
7. 47New federal restrictions on plans that CMS believes resemble dual-eligible special needs plans and new state-level restrictions on actual dual-eligible special needs plans may restrict the types and number of plans that we can offer, thus potentially adversely impacting our membership, revenue and/or profitability
8. 48If we lost the services of the licensed physicians who own our associated physician practices for any reason, the contractual arrangements with our associated physician practices could be in jeopardy
9. 49The contractual arrangements we have with our associated physician practices are not as secure as direct ownership of such entities
10. 50Changes in tax laws may adversely affect us, and the Internal Revenue Service or a court may disagree with tax positions taken by us, which may result in adverse effects on our financial condition or the value of our common stock

Risks Related to Our Indebtedness and our Capital Requirements

1. 51Our existing indebtedness could adversely affect our business and growth prospects
2. 52payable semi-annually in arrears at a rate of 4.25% per annum beginning on May 15, 2025. The Convertible Notes will mature on November 15, 2029, unless earlier repurchased, redeemed or converted in accordance with their terms
3. 53We may not be able to generate sufficient cash flow to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under such indebtedness, including refinancing such indebtedness, which may not be successful
4. 54election. If we are unable to settle such obligations in cash, we would be required to settle such obligations by delivering shares of our common stock, which may have a significant dilutive impact on our stockholders
5. 55Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies in the future could reduce our ability to compete successfully and harm our results of operations

Risks Related to Our Common Stock

1. 56Our operating results and stock price may be volatile, including as a result of factors that are beyond our control
2. 57Our actual operating results may not meet or exceed our guidance and investor expectations, which would likely cause our stock price to decline
3. 58An active, liquid trading market for our common stock may not be sustained
4. 59Our Lead Sponsor holds a substantial percentage of our outstanding common stock and has the ability to significantly influence our management, business plans and policies and the election of our directors, and their interests may conflict with ours or the holders of our common stock in the future
5. 60one of the nominees for election to our Board for so long as the Lead Sponsor beneficially owns less than 15% but at least 5% of our common stock then outstanding. The Lead Sponsor may also assign such rights to its affiliates
6. 61Conversion of our convertible notes may dilute the percentage of ownership of our stockholders and could negatively impact the trading prices of our common stock
7. 62Our outstanding convertible notes may impact the trading price of our common stock
8. 63If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our shares or if our results of operations do not meet their expectations, our stock price and trading volume could decline
9. 64We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock
10. 65We have no current plans to pay regular cash dividends on our common stock for the foreseeable future
11. 66Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management, even if beneficial to our shareholders
12. 67The provision of our certificate of incorporation requiring exclusive forum in the Court of Chancery of the State of Delaware or the federal district courts of the United States for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers
13. 68Economic downturn or unstable market and economic conditions, including rising rates of inflation, may have serious adverse consequences on our business, financial condition and share price
14. 69Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture and our business may be harmed
15. 70The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business
16. 71Our business could be negatively impacted by environmental, social and corporate governance matters or our reporting of such matters
17. 72Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on our business, financial condition and results of operations
18. 73companies like ours. We may also face allegations that our employees have misappropriated the trade secrets or other intellectual property or proprietary rights of their former employers or other third parties