WASHINGTON, Aug. 2, 2023
/PRNewswire/ -- Evolent Health, Inc. (NYSE: EVH), a company that
specializes in better health outcomes for people with complex
conditions through proven solutions that make health care simpler
and more affordable, today announced financial results for the
quarter ended June 30, 2023.
Highlights from the second quarter 2023 announcement
include:
- Revenue of $469.1 million, an
increase of $149.2 million, or 46.6%,
from the three months ended June 30,
2022.
- Net loss attributable to common shareholders of Evolent
Health, Inc. of $41.4 million
resulting in a net loss margin of (8.8)%.
- Adjusted EBITDA of $47.4 million
resulting in an Adjusted EBITDA margin of 10.1%.
- Total Lives on Platform of 78.6 million, up from 19.4 million
for the three months ended June 30,
2022.
-
- Composed of 3.8 million lives in our Performance Suite with an
average PMPM of $24.20,
73.0 million in our Specialty Technology and Services Suite
with an average PMPM of $0.35 and
1.8 million on our Administrative Services platform with an
average PMPM of $14.22.
- Average unique members of 41.8 million, up from 16.3 million
from the three months ended June 30,
2022.
- Total cases managed during the quarter for case-based products
totaled 15.0 thousand, yielding an average per case revenue of
$2,505.
Evolent highlighted the following commercial arrangements to add
to the 2023-year sales cycle, taking the total year-to-date count
of new operating partnerships to six versus its annual target of
six to eight:
- Evolent signed a new operating partnership with Molina in the
state of Florida, bringing
Performance Suite for both cardiology and oncology specialties for
Molina's Medicaid and health care exchange members across the
state; and
- Evolent also announced a new corporate agreement with a
regional, non-profit health plan with over a million members. As
part of the agreement Evolent will be replacing several legacy
specialty vendors with its Technology and Services solution,
helping create a more integrated environment for the health
plan.
- In addition to these, Evolent also announced it signed two
Technology and Services client expansions with existing operating
partners. Evolent noted that early evidence of marketplace
receptivity to the Company's integrated approach to specialty care
was encouraging given the number of cross sales and strength of the
sales pipeline looking forward.
Seth Blackley, Chief Executive
Officer, and Co-Founder of Evolent stated, "We are pleased to
report another quarter of strong results. We also had an
outstanding quarter of new business momentum, adding two new
operating partners plus two expansions and our specialty growth in
the quarter, before the impact of acquisitions, was 32%. We are
raising our Adjusted EBITDA range for 2023 and have confidence in
our medium-term target of $300
million in Adjusted EBITDA run-rate exiting 2024. I want to
thank all of Evolent's 5,000 employees for their dedication to
improving care for our patients living with complex health
conditions".
Financial Results of Evolent Health, Inc.
In our earnings releases, prepared remarks, conference calls,
slide presentations and webcasts, we may use or discuss non-GAAP
financial measures. Definitions of the non-GAAP financial measures,
as well as reconciliations of non-GAAP financial measures to the
most directly comparable GAAP financial measures are included in
this earnings release. See Financial Statement Presentation and
Non-GAAP Financial Measures for more information.
Reported Results
Evolent Health, Inc. reported the following results in
accordance with U.S. generally accepted accounting principles
("GAAP"):
- Revenue of $469.1 million and
$319.9 million for the three months
ended June 30, 2023 and 2022,
respectively.
- Cost of revenue of $351.9 million
and $249.7 million for the three
months ended June 30, 2023 and 2022,
respectively.
- Selling, general and administrative expenses of $90.4 million and $59.0
million for the three months ended June 30, 2023 and 2022, respectively.
- Net loss attributable to common shareholders of Evolent
Health, Inc. of $(41.4) million and
$(4.6) million for the three months
ended June 30, 2023 and 2022, respectively.
-
- Net loss margin of (8.8)% and (1.4)% for the three months ended
June 30, 2023 and 2022,
respectively.
- Loss attributable to common shareholders of Evolent
Health, Inc., per basic and diluted share, of $(0.37) and $(0.05)
for the three months ended June 30, 2023 and 2022,
respectively.
Total cash and cash equivalents was $142.5 million as of June
30, 2023.
Adjusted Results
- Adjusted cost of revenue of $351.9
million and $248.5 million for
the three months ended June 30, 2023
and 2022, respectively.
- Adjusted selling, general and administrative expenses of
$69.6 million and $49.7 million for the three months ended
June 30, 2023 and 2022,
respectively.
- Adjusted EBITDA of $47.4 million
and $21.7 million for the three
months ended June 30, 2023 and 2022,
respectively.
-
- Adjusted EBITDA margin of 10.1% and 6.8% for the three months
ended June 30, 2023 and 2022,
respectively.
- Adjusted income attributable to common shareholders of
$15.8 million and $9.3 million for the three months ended
June 30, 2023 and 2022,
respectively.
-
- Adjusted income per share attributable to common shareholders
of $0.14 and $0.10 for the three months ended June 30, 2023 and 2022, respectively.
Business
Outlook
We do not believe we can meaningfully reconcile guidance for
non-GAAP Adjusted EBITDA to net income (loss) attributable to
common shareholders of Evolent Health, Inc. because the company
cannot provide guidance for the more significant reconciling items
between net income (loss) attributable to common shareholders of
Evolent Health, Inc. and Adjusted EBITDA without unreasonable
effort. This is due to the fact that future period non-GAAP
guidance includes adjustments for items not indicative of our core
operations, and as a result from changes to our business due to
acquisitions and other events. Such items may, from time to time,
include gain on transfer of membership; loss on
repayment/extinguishment of debt; gain from equity method
investees, change in fair value of contingent consideration, change
in tax receivable agreement liability, other income (expense),
right-of-use asset impairments, repositioning costs, stock-based
compensation expense, severance costs, amortization of contract
cost assets, strategy and shareholder advisory expenses,
acquisition-related costs, loss from discontinued operations,
dividends and accretion on Series A Preferred Stock and certain
other items the company believes to be non-indicative of its
ongoing operations. Such adjustments may be affected by changes in
ongoing assumptions, judgements, as well as nonrecurring, unusual
or unanticipated charges, expenses or gains (losses) or other items
that may not directly correlate to the underlying performance of
our business operations. The exact amount of these adjustments are
not currently determinable but may be significant.
Third Quarter 2023 Guidance
For the three months ending September 30,
2023, revenue is expected to be in the range of
approximately $500 million to
$520 million. Adjusted EBITDA is
expected to be in the range of approximately $42 million to $47
million.
Full Year 2023 Guidance
The Company is reiterating its previously-stated guidance for
revenue and raising its Adjusted EBITDA guidance for the year
ending December 31, 2023, with
revenue expected to be in the range of approximately $1.935 billion to $1.965
billion and Adjusted EBITDA expected to be in the range of
approximately $185 million to
$200 million.
This "Business Outlook" section contains forward-looking
statements, and actual results may differ materially. Factors that
may cause actual results to differ materially from our current
expectations are set forth below in "Forward Looking Statements -
Cautionary Language" and Evolent Health, Inc.'s filings with the
Securities and Exchange Commission ("SEC").
Additional Outlook Information
Cash deployed for software development is expected to be in the
range of $35 million - $40 million for the year ended December 31, 2023.
Web and Conference Call Information
Evolent Health, Inc. will hold a conference call to discuss its
second quarter performance this evening, August 2, 2023, at
5:00 p.m., Eastern Time. To listen to
a live broadcast via the internet and view the accompanying
materials, please visit the Company's Investor Relations website at
http://ir.evolenthealth.com. PLEASE NOTE: Use the following updated
numbers to participate by telephone, dial 855.940.9467 or
412.317.6034 for international callers, and reference the
"Evolent call". Participants are advised to dial in at least
fifteen minutes prior to the call to register. The call will be
archived on the company's website for one week and will be
available beginning later this evening. Evolent invites all
interested parties to attend the conference call.
About Evolent
Evolent (NYSE: EVH) specializes in better health outcomes for
people with complex conditions through proven solutions that make
health care simpler and more affordable. Evolent serves a national
base of leading payers and providers and is consistently recognized
as a top place to work in health care nationally. Learn more about
how Evolent is changing the way health care is delivered by
visiting evolenthealth.com.
Contacts:
Seth Frank
Investor Relations
sfrank@evolenthealth.com
Non-GAAP Financial Measures
The Company views the following activities as integral to
understanding its non-GAAP financial measures:
- Repositioning costs include severance, termination benefits and
related payroll taxes of $4.7
million, dedicated employee costs of $1.7 million and third-party professional
services of $4.8 million.
Repositioning costs are not part of Evolent's normal course of
business and are incurred when there is a business reason to enact
a repositioning plan. Adjusting for these costs gives a better view
of the Evolent's normal operating costs. We only adjust costs that
(i) are included within selling, general and administrative
expenses on the consolidated statement of operations, (ii) meet the
criteria outlined within the respective repositioning plan and
(iii) does not relate to normal business operations or ongoing
activities.
-
- Dedicated employee costs primarily include project management
and technology staff costs needed to migrate acquired businesses
to Evolent's integrated technology platform and costs related
to the consolidation of internal operations, strategies, processes
and platforms. Dedicated employee costs are limited to employees
that will have no role in ongoing operations and have no planned
role at Evolent once the repositioning activities are
completed.
- Professional services costs primarily relate to services
provided by a third-party vendor to review our operating model and
organizational design in order to improve our profitability, create
value through our solutions and invest in strategic opportunities
in future periods.
- Acquisition-related costs include but are not limited to
integration consultants, investor outreach services, external
valuation and accounting advisory services, legal fees and
transaction bonuses paid to certain employees.
- Purchase accounting adjustments include amortization expense on
intangible assets such as corporate trade names, customer,
relationships, provider network contracts and existing technology
related to acquisitions and business combinations. We believe it is
important for the reader to understand that revenue generated from
acquisitions is included within revenue in calculating adjusted
income to common shareholders however amortization expense from
acquired intangible assets is excluded in determining adjusted
income to common shareholders because it does not directly relate
to the services performed for the Company's customers.
In addition to disclosing financial results that are determined
in accordance with GAAP, we present Adjusted Cost of Revenue,
Adjusted Selling, General and Administrative Expenses, Adjusted
Income Attributable to Common Shareholders, Adjusted Income per
Common Share Attributable to Common Shareholders, Adjusted EBITDA
and Adjusted EBITDA Margin, which are all non-GAAP financial
measures, as supplemental measures to help investors evaluate our
fundamental operational performance.
Adjusted Cost of Revenue and Adjusted Selling, General and
Administrative Expenses are defined as cost of revenue and selling,
general and administrative expenses, respectively, adjusted to
exclude the impact of stock-based compensation expenses,
acquisition-related costs and repositioning costs. Management
believes Adjusted Cost of Revenue and Adjusted Selling, General and
Administrative Expenses are useful to investors, because they
facilitate an understanding of our long-term operational costs
while removing the effect of costs that are not a representative
component of the day-to-day operating performance of our business,
and are useful to management as supplemental performance
measures.
Adjusted EBITDA is defined as net loss attributable to common
shareholders of Evolent Health, Inc. before interest income,
interest expense, benefit from (provision for) income taxes,
depreciation and amortization expenses, adjusted to exclude change
in the tax receivable agreement liability, gain from equity method
investees, changes in fair value of contingent consideration, other
income (expense), net, right-of-use asset impairments,
repositioning costs, stock-based compensation expense, severance
costs, amortization of contract cost assets, dividends and
accretion on Series A Preferred Stock, acquisition-related costs
and loss from discontinued operations.
Management believes that Adjusted EBITDA is useful to investors
because it allows further insight into the period over period
operational performance. Management also uses Adjusted EBITDA as a
supplemental performance measure because the removal of
repositioning costs, acquisition-related costs, severance or
non-cash items (e.g. depreciation, amortization, right-of-use asset
impairment and stock-based compensation expense) allows us to focus
on operational performance.
Adjusted EBITDA Margin is as defined Adjusted EBITDA divided by
Revenue. Management believes that this measure is useful to
investors because it allows further insight into the period over
period operational performance. Management also uses Adjusted
EBITDA Margin as a supplemental performance measure because it
allows the investor to understand operational performance compared
to revenues over time.
Adjusted Income Attributable to Common Shareholders is defined
as net loss attributable to common shareholders of Evolent Health,
Inc. adjusted to exclude gain from equity method investees, other
income (expense), net, changes in fair value of contingent
consideration, provision (benefit) for income taxes, change in tax
receivable agreement liability, purchase accounting adjustments,
right-of-use asset impairment, repositioning costs, stock-based
compensation expenses, severance costs, amortization of contract
cost assets recorded as a result of a one-time ASC 606 transition
adjustment, dividends and accretion on Series A Preferred Stock and
acquisition-related costs.
Adjusted Income per Share Attributable to Common Shareholders is
defined as Adjusted Income Attributable to Common Shareholders
divided by Weighted-Average Common Shares, and reflects the
adjustments made in those non-GAAP measures.
Management believes that Adjusted Income Attributable to Common
Shareholders and Adjusted Income per Share Attributable to Common
Shareholders are useful to investors because excluding non-cash
items (e.g. depreciation, amortization and stock-based compensation
expenses) allows investors to focus on operational performance.
These measures are also useful to management for the same
reason.
These adjusted measures do not represent and should not be
considered as alternatives to GAAP measurements, and our
calculations thereof may not be comparable to similarly entitled
measures reported by other companies. A reconciliation of these
adjusted measures to their most comparable GAAP financial measures
is presented in the tables below. We believe these measures are
useful across time in evaluating our fundamental core operating
performance.
Lives on Platform and Per Member Per Month ("PMPM")
Fee
Performance Suite Lives on Platform are calculated by summing
monthly members covered for specialty care services for contracts
not under ASO arrangements, plus members managed by Evolent Care
Partners in risk arrangements and divided by the number of months
in the period. Specialty Technology and Services Suite Lives on
Platform are calculated by summing monthly members covered for
oncology, cardiology, musculoskeletal, advanced imaging and other
diagnostics specialty care services for contracts under ASO
arrangements divided by the number of months in the period.
Administrative Services Lives on Platform are calculated by summing
monthly members covered for administrative services implementation
and core performance services divided by the number of months in
the period. Cases are calculated by summing the number of
individuals receiving services through our surgery management and
advanced care planning programs in a given period. Members covered
for more than one category are counted in each category.
Performance Suite Average PMPM fee is defined as revenue
pertaining to our Performance Suite during the period reported
divided by Performance Suite Lives on Platform for the period
divided by the number of months in the period. Specialty Technology
and Services Suite Average PMPM fee is defined as revenue
pertaining to the Specialty Technology and Services Suite during
the period reported divided by Specialty Technology and Services
Suite Lives on Platform for the period divided by the number of
months in the period. Administrative Services Average PMPM fee is
defined as revenue pertaining to the Administrative Services during
the period reported divided by the Administrative Services Lives on
Platform for the period divided by the number of months in the
period. Revenue per Case is calculated by the revenue pertaining to
surgery management and advanced care planning programs divided by
the number of cases for a given period.
Average Unique Members are calculated by summing members covered
by our Performance Suite, Specialty Technology and Services Suite
and Administrative Services. In cases where clients cross between
multiple products, we only capture members from the product with
the maximum number of members.
Management uses Lives on Platform, PMPM fees, Cases, Revenue per
Case and Average Unique Members because we believe that they
provide insight into the unit economics of our services. We believe
that these measures are also useful to investors because they allow
further insight into the period over period operational
performance. We believe that these measures are also useful to
investors because they allow further insight into the period over
period operational performance.
Due to our change in segments during the first quarter of 2023,
the Company changed its presentation of Lives on Platform to
reflect the membership that corresponds to quarterly revenue. The
Company recast periods prior to the first quarter of 2023 to
reflect the current presentation of Lives on Platform, PMPM fees,
Cases and Revenue per Case. The current Performance Suite maps to
the prior disclosure of the Clinical Solutions Performance Suite.
The current Specialty Technology and Services Suite maps to the
prior disclosure of the Clinical Solutions New Century Health
Technology and Services Suite. The current Administrative Services
maps to the prior disclosure of Evolent Health Services segment.
There has been no change in the presentation of Cases from prior
period.
Evolent Health,
Inc.
Consolidated
Statements of Operations and Comprehensive Income
(Loss)
(unaudited, in
thousands, except per share data)
|
|
|
For the Three
Months
Ended June
30,
|
|
For the Six
Months Ended
June
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenue
|
$ 469,136
|
|
$ 319,939
|
|
$ 896,826
|
|
$ 616,996
|
Expenses
|
|
|
|
|
|
|
|
Cost of
revenue
|
351,938
|
|
249,705
|
|
662,413
|
|
469,444
|
Selling, general and
administrative expenses
|
90,389
|
|
58,955
|
|
180,115
|
|
117,887
|
Depreciation and
amortization expenses
|
32,134
|
|
15,112
|
|
61,409
|
|
30,218
|
Right-of-use assets
impairment
|
24,065
|
|
—
|
|
24,065
|
|
—
|
Change in fair value of
contingent consideration
|
(7,822)
|
|
800
|
|
747
|
|
6,878
|
Total operating
expenses
|
490,704
|
|
324,572
|
|
928,749
|
|
624,427
|
Operating
loss
|
(21,568)
|
|
(4,633)
|
|
(31,923)
|
|
(7,431)
|
Interest
income
|
604
|
|
223
|
|
1,664
|
|
340
|
Interest
expense
|
(14,458)
|
|
(2,148)
|
|
(27,353)
|
|
(4,389)
|
Gain from equity
method investees
|
155
|
|
1,952
|
|
578
|
|
2,548
|
Change in tax
receivable agreement liability
|
—
|
|
—
|
|
(66,184)
|
|
—
|
Other income
(expense), net
|
(26)
|
|
297
|
|
(246)
|
|
475
|
Loss before income
taxes
|
(35,293)
|
|
(4,309)
|
|
(123,464)
|
|
(8,457)
|
Provision for (benefit
from) income taxes
|
(970)
|
|
(184)
|
|
(69,159)
|
|
1,018
|
Loss from continuing
operations
|
(34,323)
|
|
(4,125)
|
|
(54,305)
|
|
(9,475)
|
Loss from discontinued
operations, net of tax
|
—
|
|
(463)
|
|
—
|
|
(463)
|
Loss before preferred
dividends and accretion of Series A
Preferred
Stock
|
(34,323)
|
|
(4,588)
|
|
(54,305)
|
|
(9,938)
|
Dividends and
accretion of Series A Preferred Stock
|
(7,088)
|
|
—
|
|
(13,364)
|
|
—
|
Net loss attributable
to common shareholders of Evolent
Health,
Inc.
|
$ (41,411)
|
|
$
(4,588)
|
|
$ (67,669)
|
|
$
(9,938)
|
|
|
|
|
|
|
|
|
Loss per common
share
|
|
|
|
|
|
|
|
Basic and
diluted:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
(0.37)
|
|
$
(0.05)
|
|
$
(0.62)
|
|
$
(0.11)
|
Discontinued
operations
|
—
|
|
—
|
|
—
|
|
—
|
Basic and
diluted
|
$
(0.37)
|
|
$
(0.05)
|
|
$
(0.62)
|
|
$
(0.11)
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
|
|
Basic and
diluted
|
111,278
|
|
90,071
|
|
109,540
|
|
89,792
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
Net loss attributable
to common shareholders of Evolent Health, Inc.
|
$ (41,411)
|
|
$
(4,588)
|
|
$ (67,669)
|
|
$
(9,938)
|
Other comprehensive
loss, net of taxes, related to:
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
8
|
|
(288)
|
|
64
|
|
(420)
|
Total comprehensive
loss attributable to common shareholders
of Evolent
Health, Inc.
|
$ (41,403)
|
|
$
(4,876)
|
|
$ (67,605)
|
|
$ (10,358)
|
Evolent Health,
Inc.
Condensed
Consolidated Balance Sheets
(in thousands,
unaudited)
|
|
|
June 30,
2023
|
|
December 31,
2022
|
Cash and cash
equivalents
|
$
142,530
|
|
$
188,200
|
Restricted cash and
restricted investments
|
65,069
|
|
26,958
|
Total current
assets
|
576,699
|
|
478,054
|
Intangible assets,
net
|
801,923
|
|
442,784
|
Goodwill
|
1,117,556
|
|
722,774
|
Total assets
|
2,646,831
|
|
1,817,293
|
|
|
|
|
Accounts
payable
|
76,953
|
|
57,174
|
Accrued
liabilities
|
166,676
|
|
111,198
|
Long-term debt, net of
discount
|
633,013
|
|
412,986
|
Total
liabilities
|
1,380,783
|
|
957,876
|
|
|
|
|
Mezzanine
equity
|
172,829
|
|
—
|
|
|
|
|
Total shareholders'
equity
|
1,093,219
|
|
859,417
|
Total liabilities,
mezzanine equity and shareholders' equity
|
2,646,831
|
|
1,817,293
|
Evolent Health,
Inc.
Condensed
Consolidated Statements of Cash Flows
(in thousands,
unaudited)
|
|
|
For the Six
Months
Ended June
30,
|
|
2023
|
|
2022
|
Net cash and
restricted cash used in continuing operations
|
|
|
|
Net cash and restricted
cash used in operating activities
|
$ (7,320)
|
|
$
(43,778)
|
Net cash and restricted
cash provided by (used in) investing activities
|
(403,347)
|
|
330
|
Net cash and restricted
cash provided by (used in) financing activities
|
403,059
|
|
(30,686)
|
Effect of exchange rate
on cash and cash equivalents and restricted cash
|
49
|
|
(375)
|
Net decrease in cash
and cash equivalents and restricted cash
|
(7,559)
|
|
(74,509)
|
Cash and cash
equivalents and restricted cash as of
beginning-of-period
|
215,158
|
|
354,942
|
Cash and cash
equivalents and restricted cash as of end-of-period
|
$
207,599
|
|
$
280,433
|
Evolent Health,
Inc.
Reconciliation of
Adjusted Results of Operations
(in thousands,
unaudited)
|
|
Reconciliation of
Cost of Revenue to
Adjusted Cost of
Revenue
|
|
For the Three
Months
Ended June
30,
|
|
2023
|
|
2022
|
Cost of
revenue
|
$
351,938
|
|
$
249,705
|
Less:
|
|
|
|
Stock-based
compensation
|
42
|
|
1,162
|
Acquisition-related
costs
|
—
|
|
24
|
Adjusted cost of
revenue
|
$
351,896
|
|
$
248,519
|
|
|
|
|
|
|
|
|
Reconciliation of
Selling, General and Administrative Expenses to
Adjusted Selling,
General and Administrative Expenses
|
|
For the Three
Months
Ended June
30,
|
|
2023
|
|
2022
|
Selling, general and
administrative expenses
|
$ 90,389
|
|
$ 58,955
|
Less:
|
|
|
|
Stock-based
compensation
|
8,924
|
|
5,850
|
Acquisition-related
costs
|
528
|
|
3,423
|
Repositioning
costs
|
11,294
|
|
—
|
Adjusted selling,
general and administrative expenses
|
$ 69,643
|
|
$ 49,682
|
Evolent Health,
Inc.
Reconciliation of
Adjusted EBITDA to Net Income (Loss)
Attributable to
Common Shareholders of Evolent Health, Inc.
(in thousands, except
per share data)
(unaudited)
|
|
|
For the Three
Months
Ended June
30,
|
|
For the Six
Months
Ended June
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net loss
attributable to common shareholders of Evolent
Health,
Inc.
|
$
(41,411)
|
|
$
(4,588)
|
|
$(67,669)
|
|
$(9,938)
|
Net loss
margin
|
(8.8) %
|
|
(1.4) %
|
|
(7.5) %
|
|
(1.6) %
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
Interest
income
|
604
|
|
223
|
|
1,664
|
|
340
|
Interest
expense
|
(14,458)
|
|
(2,148)
|
|
(27,353)
|
|
(4,389)
|
Benefit from
(provision for) income taxes
|
970
|
|
184
|
|
69,159
|
|
(1,018)
|
Depreciation and
amortization expenses
|
(32,134)
|
|
(15,112)
|
|
(61,409)
|
|
(30,218)
|
Change in tax
receivable agreement liability
|
—
|
|
—
|
|
(66,184)
|
|
—
|
Gain from equity
method investees
|
155
|
|
1,952
|
|
578
|
|
2,548
|
Change in fair value
of contingent consideration
|
7,822
|
|
(800)
|
|
(747)
|
|
(6,878)
|
Other income
(expense), net
|
(26)
|
|
297
|
|
(246)
|
|
475
|
Right-of-use assets
impairment
|
(24,065)
|
|
—
|
|
(24,065)
|
|
—
|
Repositioning
costs
|
(11,261)
|
|
—
|
|
(11,261)
|
|
—
|
Stock-based
compensation expense
|
(8,966)
|
|
(7,012)
|
|
(19,676)
|
|
(12,358)
|
Severance
costs
|
—
|
|
—
|
|
(954)
|
|
(39)
|
Amortization of
contract cost assets
|
—
|
|
(27)
|
|
—
|
|
(54)
|
Dividends and
accretion of Series A Preferred Stock
|
(7,088)
|
|
—
|
|
(13,364)
|
|
—
|
Acquisition-related
costs
|
(374)
|
|
(3,421)
|
|
(11,720)
|
|
(3,878)
|
Loss from discontinued
operations
|
—
|
|
(463)
|
|
—
|
|
(463)
|
Adjusted
EBITDA
|
$ 47,410
|
|
$ 21,739
|
|
$ 97,909
|
|
$ 45,994
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
10.1 %
|
|
6.8 %
|
|
10.9 %
|
|
7.5 %
|
Evolent Health,
Inc.
Reconciliation of
Net Loss Attributable to Common Shareholders to
Adjusted Income
Attributable to Common Shareholders
(in thousands, except
per share data)
(unaudited)
|
|
|
For the Three
Months
Ended June
30,
|
|
For the Six
Months
Ended June
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net loss
attributable to common shareholders of Evolent
Health,
Inc.
|
$
(41,411)
|
|
$ (4,588)
|
|
$
(67,669)
|
|
$ (9,938)
|
Less:
|
|
|
|
|
|
|
|
Gain from equity
method investees
|
155
|
|
1,952
|
|
578
|
|
2,548
|
Other income
(expense), net
|
(26)
|
|
297
|
|
(246)
|
|
475
|
Change in fair value
of contingent consideration
|
7,822
|
|
(800)
|
|
(747)
|
|
(6,878)
|
(Provision for)
benefit from income taxes
|
970
|
|
184
|
|
69,159
|
|
(1,018)
|
Change in tax
receivable agreement liability
|
—
|
|
—
|
|
(66,184)
|
|
—
|
Purchase accounting
adjustments
|
(14,359)
|
|
(4,562)
|
|
(27,110)
|
|
(9,131)
|
Right-of-use assets
impairment
|
(24,065)
|
|
—
|
|
(24,065)
|
|
—
|
Repositioning
costs
|
(11,261)
|
|
—
|
|
(11,261)
|
|
—
|
Stock-based
compensation expense
|
(8,966)
|
|
(7,012)
|
|
(19,676)
|
|
(12,358)
|
Severance
costs
|
—
|
|
—
|
|
(954)
|
|
(39)
|
Amortization of
contract cost assets
|
—
|
|
(27)
|
|
—
|
|
(54)
|
Loss from discontinued
operations
|
—
|
|
(463)
|
|
—
|
|
(463)
|
Dividends and
accretion of Series A Preferred Stock
|
(7,088)
|
|
—
|
|
(13,364)
|
|
—
|
Acquisition-related
costs
|
(374)
|
|
(3,421)
|
|
(11,720)
|
|
(3,878)
|
Adjusted income
attributable to common shareholders
|
$
15,781
|
|
$ 9,264
|
|
$
37,921
|
|
$
20,858
|
|
|
|
|
|
|
|
|
Loss per share
attributable to common shareholders
|
|
|
|
|
|
|
|
Basic and
diluted
|
$ (0.37)
|
|
$ (0.05)
|
|
$ (0.62)
|
|
$ (0.11)
|
|
|
|
|
|
|
|
|
Adjusted income per
share attributable to common shareholders
|
|
|
|
|
|
|
|
Basic and
diluted
|
$
0.14
|
|
$
0.10
|
|
$
0.35
|
|
$
0.23
|
|
|
|
|
|
|
|
|
Weighted-average
common shares(1)
|
|
|
|
|
|
|
|
Basic and
diluted
|
111,278
|
|
90,071
|
|
109,540
|
|
89,792
|
_____________________
|
(1)
|
For periods of net
loss, shares used in both the basic and diluted earnings per share
calculation represent basic shares as using diluted
shares would be
anti-dilutive.
|
FORWARD-LOOKING STATEMENTS - CAUTIONARY
LANGUAGE
Certain statements made in this report and in other written or
oral statements made by us or on our behalf are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995 ("PSLRA"). A forward-looking statement is a
statement that is not a historical fact and, without limitation,
includes any statement that may predict, forecast, indicate or
imply future results, performance or achievements, and may contain
words like: "believe," "anticipate," "expect," "estimate," "aim,"
"predict," "potential," "continue," "plan," "project," "will,"
"should," "shall," "may," "might" and other words or phrases with
similar meaning in connection with a discussion of future operating
or financial performance. In particular, these include statements
relating to our ability to grow our impact significantly throughout
this year and beyond, future actions, trends in our businesses,
prospective services, new partner additions/expansions, the
adoption and launch of a unified brand, our guidance and business
outlook and future performance or financial results, and the
closing of pending transactions and the outcome of contingencies,
such as legal proceedings. We claim the protection afforded by the
safe harbor for forward-looking statements provided by the
PSLRA.
These statements are only predictions based on our current
expectations and projections about future events. Forward-looking
statements involve risks and uncertainties that may cause actual
results, level of activity, performance or achievements to differ
materially from the results contained in the forward-looking
statements. Risks and uncertainties that may cause actual results
to vary materially, some of which are described within the
forward-looking statements, include, among others:
- risks relating to our ability to efficiently integrate NIA
into our operations;
- the financial information of NIA and the pro forma
financial information of NIA may not be indicative of future
results or our financial condition;
- the significant portion of revenue we derive from our largest
partners, and the potential loss, non-renewal, termination
or renegotiation of our relationship or contract with any
significant partner, or multiple partners in the aggregate;
- our ability to terminate certain leases and recognize
impairment charges in connection with our repositioning plan;
- evolution of the healthcare regulatory and political
framework;
- uncertainty in the health care regulatory framework, including
the potential impact of policy changes;
- our ability to offer new and innovative products and services
and our ability to keep pace with industry standards, technology
and our partners' needs;
- risks related to completed and future acquisitions,
investments, alliances and joint ventures, including our
acquisitions of IPG and NIA, which could divert management
resources, result in unanticipated costs or dilute our
stockholders;
- the financial benefits we expect to receive as a result of the
sale of certain assets of Passport to Molina Healthcare, Inc.
may not be realized;
- the growth and success of our partners and certain revenues
from our engagements, which are difficult to predict and are
subject to factors outside of our control, including governmental
funding reductions and other policy changes;
- risks relating to our ability to maintain profitability for our
total cost of care and New Century Health's performance-based
contracts and products, including capitation and risk-bearing
contracts;
- our ability to effectively manage our growth and maintain an
efficient cost structure, and to successfully implement cost
cutting measures;
- changes in general economic conditions nationally and
regionally in our markets, including increasing inflationary
pressures and economic and business conditions and the impact
thereof on the economy resulting from public health emergencies,
epidemics, pandemics or contagious diseases such as the COVID-19
pandemic;
- risks related to the failure of any bank in which we deposit
our funds, which could reduce the amount of cash we have available
to meet our cash commitments and make additional investments;
- our ability to recover the significant upfront costs in our
partner relationships and develop our partner relationships over
time;
- our ability to attract new partners and successfully capture
new opportunities;
- the increasing number of risk-sharing arrangements we enter
into with our partners could limit or negatively impact our
profitability;
- our ability to estimate the size of our target markets for our
services;
- our ability to maintain and enhance our reputation and brand
recognition;
- consolidation in the health care industry;
- competition which could limit our ability to maintain or expand
market share within our industry;
- risks related to audits by CMS and other governmental
payers and actions, including whistleblower claims under the False
Claims Act;
- our ability to partner with providers due to exclusivity
provisions in our contracts in some of our partner and founder
contracts;
- risks related to managing our offshore operations and cost
reduction goals;
- our ability to contain health care costs, implement increases
in premium rates on a timely basis, maintain adequate reserves for
policy benefits or maintain cost effective provider
agreements;
- our dependency on our key personnel, and our ability to
attract, hire, integrate and retain key personnel;
- the impact of additional goodwill and intangible asset
impairments on our results of operations;
- our indebtedness, our ability to service our indebtedness, and
our ability to obtain additional financing on favorable terms or at
all;
- our ability to achieve profitability in the future;
- the impact of litigation proceedings, government inquiries,
reviews, audits or investigations;
- material weaknesses in the future may impact our ability to
conclude that our internal control over financial reporting is not
effective and we may be unable to produce timely and accurate
financial statements;
- restrictions on the manner in which we access personal data and
penalties as a result of privacy and data protection laws;
- liabilities and reputational risks related to our ability to
safeguard the security and privacy of confidential data;
- data loss or corruption due to failures or errors in our
systems and service disruptions at our data centers;
- adequate protection of our intellectual property, including
trademarks;
- risks related to legal proceedings related to
any alleged infringement, misappropriation or
violation of third-party intellectual property rights;
- our use of "open source" software;
- our ability to protect the confidentiality of our trade
secrets, know-how and other proprietary information;
- our reliance on third parties and licensed technologies;
- restrictions on our ability to use, disclose, de-identify or
license data and to integrate third-party technologies;
- our reliance on Internet infrastructure, bandwidth providers,
data center providers, other third parties and our own systems for
providing services to our partners;
- our reliance on third-party vendors to host and maintain our
technology platform;
- our obligations to make material payments to certain of
our pre-IPO investors for certain tax benefits we may claim in
the future;
- our ability to utilize benefits under the tax receivables
agreement described herein;
- our obligations to make payments under the tax receivables
agreement that may be accelerated or may exceed the tax benefits we
realize;
- the terms of agreements between us and certain of
our pre-IPO investors may contain different terms than
comparable agreement we may enter into with unaffiliated third
parties;
- the conditional conversion features of the 2025 convertible
notes, which, if triggered, could require us to settle the 2025
convertible notes in cash;
- interest rate risk under the Credit Agreement and the terms of
our Series A Preferred Stock;
- our debt following the NIA acquisition and our ability to
meet our obligations;
- our ability to service our debt and pay dividends on our Series
A Preferred Stock;
- the potential volatility of our Class A common stock
price;
- the potential decline of our Class A common stock price if a
substantial number of shares are sold or become available for sale,
including those issuable upon conversion of our Series A
Preferred Stock;
- our Series A Preferred Stock has rights, preferences and
privileges that are not held by and are preferential to the rights
of holders of our Class A common stock, and could in the future
substantially dilute the ownership interest of holders of our Class
A common stock;
- provisions in our certificate of incorporation and by-laws and
provisions of Delaware law that
discourage or prevent strategic transactions, including a takeover
of us;
- the ability of certain of our investors to compete with us
without restrictions;
- provisions in our certificate of incorporation which could
limit our stockholders' ability to obtain a favorable judicial
forum for disputes with us or our directors, officers or employees;
and
- our intention not to pay cash dividends on our Class A common
stock.
The risks included here are not exhaustive. Although we believe
the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, level of activity,
performance or achievements. Our periodic reports and other
documents filed with the SEC include additional factors that could
affect our businesses and financial performance. Moreover, we
operate in a rapidly changing and competitive environment. New risk
factors emerge from time to time, and it is not possible for
management to predict all such risk factors.
Further, it is not possible to assess the effect of all risk
factors on our businesses or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
Given these risks and uncertainties, investors should not place
undue reliance on forward-looking statements as a prediction of
actual results. In addition, we undertake no obligation to publicly
update any forward-looking statements to reflect events or
circumstances that occur after the date of this release except to
the extent expressly required by law.
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SOURCE Evolent Health