John Kao
About John Kao
Founder of Alignment Healthcare; CEO and director since 2014; age 63; B.S. from Santa Clara University; MBA from UCLA Anderson (Venture Capital Fellow) . Under his leadership, ALHC scaled rapidly in 2024 with total revenue of $2.7036B (+48.3% YoY), 189,100 members (+58.6% YoY), and first full year of positive adjusted EBITDA ($1.3M) as a public company, while maintaining 98% of members in 4+ Star plans . Since IPO (3/26/2021), year-end value of $100 invested in ALHC was $64.99 in 2024, versus $49.74 in 2023 and $67.94 in 2022, reflecting elevated volatility during scale-up and regulatory cycles . In 2025, execution improved: Q2 revenue $1,015.3M (+49% YoY), adj. EBITDA $45.9M, net income $15.7M, and outlook raised, underscoring momentum in profitability and quality metrics .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| CareMore Medical Enterprises | President | 2006–2011 context (acquired by WellPoint Aug-2011) | Helped scale care model; led to strategic sale to WellPoint (now Elevance) . |
| The TriZetto Group | Executive Vice President | — | Enterprise technology/healthcare IT leadership . |
| PacifiCare Health Systems (Ventures) | President & CEO, Ventures Division | — | Drove new business creation; earlier CFO at Secure Horizons USA . |
| Secure Horizons USA (PacifiCare) | Chief Financial Officer | — | Payer finance leadership in Medicare-focused business . |
| FHP International | Mergers & Acquisitions | — | Payer M&A execution experience . |
| BancAmerica Securities | Investment Banking | — | Capital markets and advisory foundation . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| AHIP (America’s Health Insurance Plans) | Board of Directors | Elected Jun-5-2025 | Industry policy influence; recognition of MA leadership . |
Fixed Compensation
- 2024 CEO base salary rate: $850,000; target bonus increased to 120% of base; AIP payout (corporate metrics only for CEO) at 141.7% of target → $1,337,223; discretionary bonus $1,000,000 (paid in immediately vested stock) .
Multi-year summary compensation (reported):
| Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive ($) | All Other ($) | Total ($) |
|---|---|---|---|---|---|---|---|
| 2024 | 817,308 | 1,000,000 | 3,300,000 | — | 1,246,053 | 5,804 | 6,369,165 |
| 2023 | 786,539 | — | 12,497,891 | — | 1,006,837 | 5,209 | 14,296,476 |
| 2022 | 729,827 | — | 30,937,508 | 1,500,002 | 902,835 | 420 | 34,070,592 |
Performance Compensation
Annual Incentive Plan (AIP) design and 2024 outcomes:
| Metric | Weight | 2024 Targets | Actual Result | Payout Funding |
|---|---|---|---|---|
| Health plan membership (as of Jan 1, 2025) | 30% | Threshold 178,250; Target 186,000; Max 201,500 | Achieved 200% of target | 141.7% corporate funding |
| Adjusted Gross Profit | 35% | Target $292.4–$297.4M; Max $312M | Achieved 133% of target | 141.7% corporate funding |
| Adjusted EBITDA | 35% | Target $0–$5M; Max $20M | Achieved 100% of target | 141.7% corporate funding |
| CMS Star Ratings modifier | — | -25% to +35% to 25% holdback | Final adjustment in 4Q25 based on Star rating | Applied to holdback |
Long-term equity (LTI) – 2024 awards and structure:
| Award Type | Grant Date | Target/Granted | Metrics & Weighting | Vesting |
|---|---|---|---|---|
| RSUs | Mar 13, 2024 | 330,000 RSUs ($1.65M) | Time-based | Vests over 4 years |
| PSUs | Mar 13, 2024 | 330,000 target PSUs ($1.65M) | Revenue 50%, Adjusted EBITDA 50% (FY2026) | Earned 0–200% based on FY2026; vests upon certification (expected ~Feb 28, 2027) |
Prior PSU cycle (granted Sep 2023; performance period FY2024):
| PSU Metric | Weight | Earn-out | Vesting detail |
|---|---|---|---|
| Health plan revenue growth | 60% | 116.8% aggregate (all metrics) | 50% vested at certification (Mar 2025), 50% vest Dec 31, 2025 (service-based) |
| At-risk loyal MBR | 20% | ||
| Adjusted EBITDA less capex | 20% | ||
| Shares earned (Kao) | — | 2,543,124 target from Sep-2023 grant shown outstanding at YE; earned 1,271,561 vested + 1,271,563 time-vesting to 12/31/2025 | As above |
Pay-mix: 84% of CEO comp variable in 2024 (excludes one-time discretionary awards) . Compensation “best practices” include clawback policy compliant with SEC/Nasdaq, anti-pledging/hedging policy, no option repricing without shareholder approval, and ownership guidelines .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total beneficial ownership | 7,650,221 shares; 3.8% of outstanding . |
| Ownership breakdown | 1,366,730 shares held directly; 2,093,100 in JEK Trust (John Kao, trustee); 4,190,391 shares underlying currently exercisable options . |
| Options (examples) | 3/25/2021: 2,937,501 exercisable, 979,167 unexercisable, strike $18.00, exp. 3/25/2031 ; 3/8/2022: 182,482 exercisable, 182,482 unexercisable, strike $9.06, exp. 3/8/2032 . |
| Unvested RSUs/PSUs (YE 2024) | RSUs: 330,000 (3/13/2024) + 330,000 (3/13/2024) + 248,344 (3/8/2022) + 77,757 (3/25/2021); PSUs: 2,543,124 (9/14/2023), 1,639,027 (9/12/2022) – see table . |
| Ownership guidelines | CEO 6x base salary; compliance within 5 years; all NEOs and directors in compliance as of 12/31/2024 . |
| Hedging/pledging | Prohibits pledging, short sales, and derivative transactions; limited long-term hedging requires pre-clearance . |
Employment Terms
| Term | CEO (John Kao) | Source |
|---|---|---|
| Agreement/Term | Amended & Restated Employment Agreement effective Mar 26, 2021; auto-renews in 1-year terms unless 90-day notice . | |
| Target/Max Bonus | Initially 100%/200% of base; target increased to 120% in 2024 . | |
| Severance (non-CIC) | 2x (base + target bonus) paid over 24 months; full-year AIP (not prorated) for year of termination; up to 12 months COBRA premium payment/reimbursement . | |
| Severance (CIC + Qualifying Termination) | Same cash/bonus/COBRA as above; equity treatment per 2021 Plan and award agreements (see below) . | |
| Equity acceleration | Options/RSUs: double-trigger acceleration upon termination without cause/for good reason on or after a CIC . PSUs: deemed earned at least at target on CIC based on actual performance (or Board discretion up to max), vest on schedule; double-trigger accelerates unvested earned PSUs if terminated post-CIC . | |
| “Cause” / “Good Reason” | Definitions per agreements; “Good Reason” includes material comp reduction, material breach, and certain relocations (not applicable to CEO for location) with notice/cure provisions . | |
| Restrictive covenants | Non-compete during employment; non-solicit (employees/customers) during employment and 1-year post-termination; perpetual confidentiality and non-disparagement . |
Estimated payments (12/31/2024 assumptions; stock at $11.25):
| Scenario | Cash Severance ($) | Annual Bonus ($) | Stock Award ($) | COBRA ($) | Total ($) |
|---|---|---|---|---|---|
| Termination without Cause / Good Reason / Non-Renewal by Company | 3,740,000 | 1,020,000 | — | 32,128 | 4,792,128 |
| CIC with Qualifying Termination | 3,740,000 | 1,020,000 | 58,142,835 | 32,128 | 62,934,963 |
Board Governance (service history, roles, independence)
- Director since 2014; management director (not independent) .
- Committees: none (independent directors populate Audit, Compensation, and NCGCC) .
- Board leadership: CEO role is separate from Chair; Chair (Joseph Konowiecki) is not independent; Board appointed a Lead Independent Director (Margaret McCarthy) with robust authorities to mitigate independence concerns .
- Board independence: 7 of 9 directors independent; committees fully independent; 2024 aggregate Board/committee attendance ~93% .
Director compensation (context): Non-employee directors receive cash/equity retainers; CEO is an employee director (director fee schedule not applicable) .
Company Performance under Tenure
Financial performance (reported):
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Revenues ($) | 1,431,550,000 | 1,800,933,000 | 2,671,931,000 |
| Net Income ($) | -149,547,000* | -148,017,000* | -128,035,000 |
| EBITDA ($) | -111,153,000* | -106,149,000* | -71,413,000* |
Values marked with * retrieved from S&P Global.
Additional operating highlights:
- 2024: 189,100 members (+58.6% YoY), 98% of members in 4+ Star plans; adjusted EBITDA $1.3M; NPS 61; MBR 88.8% (based on adjusted gross profit) .
- 2025 Q2: Members 223,700 (+27.8% YoY); revenue $1,015.3M (+49% YoY); adj. EBITDA $45.9M; net income $15.7M .
- 2025 guidance raised (membership, revenue, adjusted gross profit, adjusted EBITDA) in Q1 release .
- Fortune 1000 debut (FY2024 revenue $2.7B); ~217,500 seniors across five states; >98% members in 4+ Star plans for 2025 .
TSR context (since IPO base of $100 on 3/26/2021):
| Year | ALHC year-end value of $100 |
|---|---|
| 2022 | 67.94 |
| 2023 | 49.74 |
| 2024 | 64.99 |
Compensation Structure Analysis
- Increased at-risk pay: CEO variable pay at 84% in 2024; shift to 3-year PSUs measured in FY2026 increases long-term performance linkage .
- AIP quality linkage: 25% holdback adjusted by CMS Star Ratings (-25% to +35%) aligns cash incentives with quality outcomes .
- Equity mix and retention: 50% RSU (4-year vest) + 50% PSU (FY2026 earn, vest 2027) blends retention and performance; no stock options granted in 2024 .
- Discretionary bonuses: 2024 discretionary award of $1,000,000 to CEO (immediately vested stock) rewards above-target growth but reduces formulaic alignment; disclosed transparently .
- Governance safeguards: Clawback policy (SEC/Nasdaq), anti-hedging/pledging, no option repricing; ownership guidelines (CEO 6x salary) with compliance .
Compensation Peer Group (benchmarking)
- 2024 peer group included: Addus HomeCare, agilon health, Amedisys, Evolent Health, LifeStance, Molina, NextGen, Oak Street Health, Omnicell, Oscar, Pediatrix, Privia, RadNet, Veradigm, National HealthCare, Agiliti .
- 2025 peer group revised to: AdaptHealth, agilon health, Astrana, Bausch & Lomb, Clover, DaVita, Ensign, Evolent, Option Care, Oscar, Pediatrix, Privia, Quest Diagnostics, RadNet, Select Medical, Teladoc .
- Positioning generally targeted around median; discretion used for experience/performance/retention .
Say-on-Pay & Shareholder Feedback
- 2024 say-on-pay support: ~86.7% “FOR,” an increase vs 2023; committee continues engagement with investors and uses independent consultant (FW Cook) .
Employment & Contracts (retention economics)
- Severance economics are meaningful (2x cash + full-year AIP + benefits), with substantial equity acceleration in CIC terminations (estimated $62.9M total including $58.1M equity at 12/31/2024 price assumptions), supporting retention but creating significant M&A-related change-in-control value crystallization .
Risk Indicators & Red Flags
- Anti-pledging and hedging prohibitions reduce misalignment risk .
- No option repricing/exchanges without shareholder approval .
- Large potential PSU/RSU vesting events (e.g., 12/31/2025 for remaining Sep-2023 PSUs) could create mechanical supply from tax withholding/sales; vesting schedule disclosed (not a finding of sales activity) .
- Chair not independent; mitigated by separate CEO/Chair roles and empowered Lead Independent Director .
Board Service: Committee Roles and Independence Implications
- John Kao serves as CEO and director; not on board committees (all committees independent) .
- Board leadership structure separates CEO and Chair; Chair is not independent; Lead Independent Director role established with clear authorities to preserve independent oversight (agenda input, executive sessions, CEO evaluation, stockholder consultations) .
Investment Implications
- Alignment: Significant insider ownership (3.8%) and option holdings, strict anti-pledging rules, and CEO 6x salary ownership guideline (in compliance) are positive for alignment; CMS Star Ratings modifier explicitly ties cash bonuses to quality outcomes .
- Retention vs. overhang: Robust severance and CIC acceleration support retention through strategic uncertainty but imply substantial value crystallization in M&A scenarios (estimated $58.1M equity acceleration for CEO), which investors should incorporate into deal modeling and governance assessments .
- Performance linkage: Shift to 3-year PSUs (Revenue/Adj. EBITDA) and 2024 AIP overachievement (141.7% corporate factor) show strong pay-performance alignment during a breakout growth year; discretionary awards in 2024 add some subjectivity but were disclosed transparently .
- Execution momentum: 2025 profitability and raised outlook, combined with high quality (Star Ratings) and scale, improve the probability of PSU payouts and reduce near-term dilution concerns, though vesting events (Dec-2025) may create periodic technical pressure .