- Expected to Accelerate Evolent Health's Position as a
Leading Provider of Value-Based Specialty Care Solutions
- Expands Evolent's Value-Based Specialty Care Solutions
Portfolio to Musculoskeletal Conditions
- Expected to be
Immediately Accretive to Adjusted EBITDA Margins and Cash
Flow
- Diversifies Customer Mix and Accelerates Entry
into Commercial Line of Business
WASHINGTON ,
June 29,
2022 /PRNewswire/ -- Evolent Health, Inc.
("Evolent" or "the Company") (NYSE: EVH) today announced that it
has entered into a definitive agreement to acquire IPG, a leading
technology and services company providing surgical management
solutions for musculoskeletal conditions, from TPG Growth, the
middle market and growth equity platform of alternative asset firm
TPG, for $375 million plus additional
contingent consideration of up to $87
million. Upon close the IPG team and platform will be
integrated into New Century Health.
Seth Blackley, Chief Executive
Officer and Co-Founder of Evolent Health stated, "Today's
announcement represents an important step in Evolent's journey to
become a national leader in value-based specialty care solutions.
The acquisition of IPG will expand Evolent's specialty portfolio,
add new customers, and increase our commercial insurance revenue
mix. IPG is a leader in surgical cost management solutions with a
focus on musculoskeletal cost and quality and adds unique clinical
value and an enhanced financial profile to support our mission for
our patients, providers, payers and shareholders."
John Johnson, Chief Financial
Officer of Evolent Health stated, "At closing, the IPG acquisition
is expected to immediately enhance our Adjusted EBITDA margin and
cash flow profile and is consistent with our objective of
efficiently allocating capital to drive long-term value creation.
IPG will add valuable relationships with national and regional
commercial health plans across the country, as well as hundreds of
partnerships with ambulatory surgery centers nationally."
Vince Coppola, Chief Executive
Officer of IPG said, "On behalf of IPG, we are excited to become
part of a leading value-based specialty care solutions company. We
look forward to working closely with the Evolent team to further
accelerate our growth and innovation. This partnership creates
significant opportunities for our business, our clients and our
team."
STRATEGIC RATIONALE
Expanding Specialty Focus:
- Accelerates Evolent's core strategy to be a leading provider of
value-based specialty care solutions.
- Expands Evolent's specialty focus to include surgical cost
management focusing on musculoskeletal conditions, adding to our
specialty portfolio today of oncology, cardiology, and end-of-life
care planning.
- Enables Evolent to more fully meet the value-based specialty
needs of health plan and risk-bearing provider clients through an
integrated and "turnkey" partner service approach
Anticipate an Enhanced Financial Profile for Evolent
Health:
- Expect the transaction to be immediately accretive to Adjusted
EBITDA margins and cash flow.
- Expect meaningful revenue cross-sell synergy opportunity with
health plan and risk-bearing provider customers.
- Improves customer and revenue diversification, adds additional
specialty end-markets and enhanced balance across both the
Company's book of risk and non-risk contracts and health plan
revenue by line of business (i.e., Medicare, Medicaid and
Commercial).
TRANSACTION DETAILS AND
OUTLOOK
Acquisition of IPG
- Evolent will acquire IPG from TPG Growth for $375 million in cash, due at close. In addition,
contingent consideration of up to $87
million may be paid based on future performance milestones
for IPG.
- For Calendar Year 2022, IPG standalone financials are expected
to be:
-
- Revenue of $140 million.
- Adjusted EBITDA of $25 million
(approximately 18% margin).
- Capital expenditures of $2
million.
- Annual sales growth for IPG is expected to be 20%+.
- The upfront valuation multiple for IPG equates to approximately
15-times IPG's expected 2022 Adjusted EBITDA. Full achievement of
the performance milestones would translate to an expected Adjusted
EBITDA multiple of approximately 11-times the incremental
consideration.
- This transaction is expected to close during the third quarter
of 2022 and is subject to customary closing conditions.
- The Company expects to fund $250
million of the purchase price in cash, through a combination
of $25 million cash on hand and
proceeds from a new $225 million Five
Year Senior Credit Facility provided by funds managed by the credit
group of Ares Management.
- The balance of the upfront consideration will be in the form of
newly issued Evolent common shares.
2022 Financial Outlook
- The Company reaffirmed its outlook for the second quarter of
2022 and full year 2022 before the acquisition of IPG, as
originally issued on May 4,
2022.
- At closing, pro forma for the transaction, the Company is
targeting trailing twelve-month net debt (excluding in-the-money
convertible notes) to Adjusted EBITDA ratio of approximately
2.9-times and the Company anticipates targeting net leverage of
under 2.5-times within twelve months following the close of the
transaction.
- The Company expects to provide updated full year guidance
incorporating the acquisition on its second quarter, 2022 earnings
report and conference call in early August, assuming the
acquisition has closed by such time.
Teleconference and
Webcast
Management will host a conference call to discuss the
acquisition on Wednesday, June 29,
2022 at 8:00 am Eastern
Time.
A live link to the webcast of the call as well a presentation to
accompany the call are available at the following location:
http://ir.evolenthealth.com/event-calendar/default.aspx
Shareholders and interested participants may also listen to a
live broadcast of a conference call hosted by management. To
participate, please dial 855-940-9467 or 412-317-6034
for international callers and referencing the "Evolent Health call"
15 minutes prior to the call. An audio playback of the conference
call will be available on Evolent's investor relations website,
ir.evolenthealth.com, for 90 days after the call.
About Evolent Health
Evolent Health (NYSE: EVH) delivers proven clinical and
administrative solutions that improve whole-person health while
making health care simpler and more affordable. Our solutions
encompass total cost of care management, specialty care management,
and administrative simplification. Evolent serves a national base
of leading payers and providers, is the first company to receive
the National Committee for Quality Assurance's Population Health
Program Accreditation 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
About IPG
IPG is a leading provider of surgical cost management solutions,
working with health plans, providers, surgical facilities, device
manufacturers and patients across the country to improve quality
and reduce costs for surgical procedures through optimization of
the most effective site of care and device selection, resulting in
more affordable high-quality care to consumers. For more
information about IPG, call 866.753.0046, or visit www.ipg.com.
About TPG Growth
TPG Growth is the middle market and growth equity investment
platform of TPG, the global alternative asset firm. With
approximately $14.7 billion of assets
under management, TPG Growth targets investments in a broad range
of industries and geographies. TPG Growth has the deep sector
knowledge, operational resources, and global experience to drive
value creation, and help companies reach their full potential. The
platform is backed by the resources of TPG, which has approximately
$120 billion of assets under
management. For more information, please visit www.tpg.com or on
Twitter @TPG.
FORWARD-LOOKING
STATEMENTS
Certain statements made in this press release 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 the closing of the
IPG transaction (including the financing thereof), the ability of
the transaction to accelerate our strategic objectives, expand our
specialty focus and be better positioned to meet client needs, our
expectations that the IPG transaction will be immediately accretive
to Adjusted EBITDA margins and cash flow, provide meaningful
revenue cross-sell synergy opportunity and improve customer and
revenue diversification, our guidance and business outlook and
future performance or financial results, including of IPG. 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 and
uncertainties related to the possibility that the closing of the
IPG transaction may be delayed or may not occur, and the risk that
litigation or other matters could affect the closing, 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; evolution in the market for
value-based care; uncertainty in the health care regulatory
framework, including the potential impact of policy changes; our
ability to offer new and innovative products and services; risks
related to completed and future acquisitions, investments,
alliances and joint ventures, divert management resources, or
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 may not be realized; the growth and
success of our partners, which is difficult to predict and is
subject to factors outside of our control, including governmental
funding reductions and other policy changes, enrollment numbers for
our partners' plans, premium pricing reductions, selection bias in
at-risk membership and the ability to control and, if necessary,
reduce health care costs; 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 inflation and economic and business conditions and the
impact thereof on the economy resulting from the COVID-19 pandemic
and other public health emergencies our ability to recover the
significant upfront costs in our partner relationships; our ability
to attract new partners and successfully capture new growth
opportunities; the increasing number of risk-sharing arrangements
we enter into with our partners; our ability to estimate the size
of our target markets; 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
governmental payer audits and actions, including whistleblower
claims; our ability to partner with providers due to exclusivity
provisions in our contracts; risks related to our offshore
operations; 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; our
ability to achieve profitability in the future; the impact of
litigation, including the ongoing class action lawsuit; 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 and penalties as a result of privacy and
data protection laws; data loss or corruption due to failures or
errors in our systems and service disruptions at our data centers;
restrictions and penalties as a result of privacy and data
protection laws; adequate protection of our intellectual property,
including trademarks; any alleged infringement, misappropriation or
violation of third-party proprietary 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; 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 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; the conditional conversion
features of the 2024 and 2025 convertible notes, which, if
triggered, could require us to settle the 2024 or 2025 convertible
notes in cash; 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;
provisions in our second amended and restated certificate of
incorporation and third amended and restated 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 second amended and restated
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 Annual Report on Form 10-K
for the year ended December 31, 2021
(the "2021 Form 10-K") 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 disclaim any
obligation to update any forward-looking statements to reflect
events or circumstances that occur after the date of this press
release.
This press release is for informational purposes only and does
not constitute an offer to sell or a solicitation of an offer to
purchase any securities of any nature whatsoever, and it may not be
relied upon in connection with the purchase of securities.
The contents of this press release do not constitute legal, tax or
business advice. Anyone reading this press release should seek
advice based on their particular circumstances from independent
legal, tax and business advisors.
Additional Information and Where to Find It:
Financial
Details and Webcast
http://ir.evolenthealth.com/overview/
Information About Evolent Health
https://www.evolenthealth.com/
Contacts:
Evolent Health, Media Contact:
Media Relations
media@evolenthealth.com
Evolent Health, Investor Relations
Contact:
Seth R. Frank
sfrank@evolenthealth.com
571-895-3919
IPG Media Contact:
kperry@ipg.com
404-849-1380
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SOURCE Evolent Health