No Change to LT EPS Potential; Would Be Buyers of Weakness and Reit OW, $30 PT

Research evidence excerpt

No Change to LT EPS Potential; Would Be Buyers of Weakness and Reit OW, $30 PT

C O M PA N Y N O T E

J u l y 1 4 , 2 0 2 6

• Takeaways from 7/8/26 call with ALHC. Continued from Page 1... ALHC says Kardes'

accounting concerns were made known to the company "a whole month after" he resigned,

in May of CY25. At that time, the Board assembled an independent audit committee and

engaged outside legal counsel to conduct a review. As part of this process, the Board

retained another Big Four accounting firm (independent of Deloitte) to investigate the

expense classification. The independent Big Four accounting firm determined that there was

no evidence to support Kardes' claims of expense misclassification and deemed ALHC's

accounting treatment appropriate. The Board's investigation concluded with these findings,

and ALHC understood the issue to be closed approximately 1 year ago. ALHC received clean

audit opinions in CY24 and CY25 from Deloitte.

• Our perspective. We believe ASC 350-40 gives management discretion in determining when

and where the "application development stage" begins and ends for internal use software.

We also believe that ALHC's software strategy may have changed between CY23 and CY24.

The potential to commercialize its software was part of regular analyst/ investor dialogue

prior to CY23. By CY24, we believe this potential had largely been retired from the ALHC

narrative. We believe this may have reflected a strategic shift that could correspond to the

contested accounting classifications. Our analysis of medical claims development in CY25

implies reserving conservatism in CY24. See Exhibits 1 and 2. We note the ($14.6M) of

Incurred Medical Claims Expenses related to prior years in the company's 1Q25 reserve roll