WASHINGTON, May 3, 2023
/PRNewswire/ -- Evolent Health, Inc. (NYSE: EVH), a health care
company that delivers proven clinical and administrative solutions
to payers and providers, today announced financial results for the
quarter ended March 31, 2023.
Highlights from the first quarter 2023 announcement include:
- Revenue of $427.7 million, an
increase of $130.6 million, or 44.0%,
from the three months ended March 31,
2022.
- Net loss attributable to common shareholders of Evolent Health,
Inc. of $26.3 million resulting in a
net loss margin of (6.1)%.
- Adjusted EBITDA of $50.5 million
resulting in an Adjusted EBITDA margin of 11.8%.
- Total Lives on Platform of 65.6 million, up from 17.9 million
for the three months ended March 31,
2022
-
- Composed of 3.2 million lives in our Performance Suite with an
average PMPM of $24.66,
60.5 million in our Specialty Technology and Services Suite
with an average PMPM of $0.36 and
1.9 million on our Administrative Services platform with an
average PMPM of $14.91.
- Average unique members of 41.3 million, up from 15.1 million
from the three months ended March 31,
2022.
- Total cases managed during the quarter for case-based products
totaled 15.4 thousand, yielding an average per case revenue of
$2,555.
Evolent highlighted the following two commercial arrangements to
add to the 2023-year sales cycle, taking the total year-to-date
count of new partnerships and significant expansions to four versus
its target of six to eight:
- As announced in late March, the Company signed a significant
specialty technology and services expansion with Centene whereby
they will expand their use of Evolent Health's oncology solution
across Centene and WellCare Medicare Advantage ("MA") members
nationally during 2023; and
- The Company announced today that a long standing national payer
customer has entered into an agreement with AMSURG, a leading
Ambulatory Surgery Care ("ASC") chain, to utilize the Company's
surgical management solution as the preferred implant provider
nationally.
Seth Blackley, Chief Executive
Officer, and Co-Founder of Evolent Health stated, "We achieved
strong first quarter results and a positive start to 2023. Our
revenue growth and Adjusted EBITDA margins give us confidence in
our financial outlook for 2023 and year-end 2024 Adjusted EBITDA
run-rate target. We welcomed NIA into the Evolent family in January
and integration is proceeding as anticipated. Through the
discipline of our three core operating priorities, Evolent seeks to
continue to strengthen our position in specialty value-based care
for years to come."
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 $427.7 million and
$297.1 million for the three months
ended March 31, 2023 and 2022,
respectively.
- Cost of revenue of $310.5 million
and $219.7 million for the three
months ended March 31, 2023 and 2022,
respectively.
- Selling, general and administrative expenses of $89.7 million and $58.9
million for the three months ended March 31, 2023 and 2022, respectively.
- Net loss attributable to common shareholders of Evolent Health,
Inc. of $(26.3) million and
$(5.4) million for the three months
ended March 31, 2023 and 2022,
respectively.
-
- Net loss margin of (6.1)% and (1.8)% for the three months ended
March 31, 2023 and 2022,
respectively.
- Loss attributable to common shareholders of Evolent Health,
Inc., per basic and diluted share, of $(0.24) and $(0.06)
for the three months ended March 31,
2023 and 2022, respectively.
Total cash and cash equivalents was $157.5 million as of March 31, 2023.
Adjusted Results
- Adjusted cost of revenue of $308.2
million and $218.5 million for
the three months ended March 31, 2023
and 2022, respectively.
- Adjusted selling, general and administrative expenses of
$68.9 million and $54.3 million for the three months ended
March 31, 2023 and 2022,
respectively.
- Adjusted EBITDA of $50.5 million
and $24.3 million for the three
months ended March 31, 2023 and 2022,
respectively.
-
- Adjusted EBITDA margin of 11.8% and 8.2% for the three months
ended March 31, 2023 and 2022,
respectively.
- Adjusted income attributable to common shareholders of
$22.1 million and $10.4 million for the three months ended
March 31, 2023 and 2022,
respectively.
-
- Adjusted income per share attributable to common shareholders
of $0.20 and $0.12 for the three months ended March 31, 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),
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.
Second Quarter 2023 Guidance
For the three months ending June 30,
2023, revenue is expected to be in the range of
approximately $455 million to
$470 million. Adjusted EBITDA is
expected to be in the range of approximately $45 million to $49
million.
Full Year 2023 Guidance
The Company is raising its guidance for revenue and reiterating
its previously-stated 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 $180 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
first quarter performance this evening, May 3, 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 888.396.8049 or
416.764.8646 for international callers, and use the
conference ID #55348964. 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 Health invites all
interested parties to attend the conference call.
Investor Day
In addition, Chief Executive Officer and Co-Founder Seth Blackley and Evolent's executive team will
host an Investor Day for the financial community via webcast and in
person in Arlington, VA. on
Tuesday, May 23, 2023.
The event will feature presentations from Evolent's executive
leadership team on the company's long-term corporate strategy,
innovative value-based care solutions, and financial outlook.
Management will also host a Q&A session with attendees.
A live audio and visual webcast of this event, along with
supporting materials, will be available the day of the event on
Evolent's investor relations website at ir.evolenthealth.com/. A
replay, presentations and transcript will also be available after
the event. An audio playback of the event will be available on
Evolent's investor relations website, ir.evolenthealth.com, for 90
days after the call.
The event will be held at the Westin in Arlington (801 N Glebe Rd, Arlington, VA 22203) Tuesday, May 23, 2023, at 10 a.m. Eastern Time and is anticipated to end at
approximately 1 p.m. Eastern
Time.
About Evolent Health
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
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
Depreciation and Amortization Expenses, Adjusted Total Operating
Expenses, Adjusted Change in the Fair Value of Contingent
Consideration, Adjusted Operating Income (Loss), Adjusted EBITDA,
Adjusted EBITDA Margin, Adjusted Income Attributable to Common
Shareholders and Adjusted Income per Common Share Attributable to
Common Shareholders, 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, severance
costs, amortization of contract cost assets recorded as a result of
a one-time ASC 606 transition adjustment, acquisition-related costs
related to acquisitions and business combinations. Management uses
Adjusted Cost of Revenue and Adjusted Selling, General and
Administrative Expenses as supplemental performance measures, which
are also useful to investors, because they facilitate an
understanding of our long-term operational costs while removing the
effect of acquisition-related costs, severance and termination
payments and non-cash items such as stock-based compensation
expenses. Additionally, these supplemental performance measures
facilitate understanding a breakdown of our Adjusted Total
Operating Expenses. Adjustments for acquisition-related costs
incurred generally represent professional service fees and direct
expenses related to acquisitions. We do not consider the amount of
acquisition-related costs to be a representative component of the
day-to-day operating performance of our business.
Adjusted Depreciation and Amortization Expenses is defined as
depreciation and amortization expenses adjusted to exclude the
impact of amortization expenses related to intangible assets
acquired through asset acquisitions and business combinations.
Management uses Adjusted Depreciation and Amortization Expenses as
a supplemental performance measure because it reflects a complete
view of the operational results. The measure is also useful to
investors because it facilitates understanding a breakdown of our
Adjusted Total Operating Expenses.
Adjusted Change in the Fair Value of Contingent Consideration is
defined as changes in the fair value of contingent consideration
adjusted to exclude the impact of contingent consideration related
to contingent consideration incurred through asset acquisitions and
business combinations. Management uses Adjusted Change in the Fair
Value of Contingent Consideration as a supplemental performance
measure because it reflects a complete view of the operational
results. The measure is also useful to investors because it
facilitates understanding a breakdown of our Adjusted Total
Operating Expenses.
Adjusted Total Operating Expenses is defined as the sum of
Adjusted Cost of Revenue, Adjusted Selling, General and
Administrative Expenses and Adjusted Depreciation and Amortization
Expenses, and reflects the adjustments made in those non-GAAP
measures. Adjusted Total Operating Expenses is further adjusted to
exclude the impact of (gain) loss on disposal of assets and items
arising from acquisitions and business combinations, such as
changes in fair value of contingent consideration.
Adjusted Operating Income (Loss) is defined as Adjusted Revenue
less Adjusted Total Operating Expenses, and reflects the
adjustments made in those non-GAAP measures. Management uses
Adjusted Total Operating Expenses and Adjusted Operating Income
(Loss) because the removal of acquisition costs, severance or
non-cash items (e.g. depreciation, amortization and stock-based
compensation expenses) allows us to focus on operational
performance, and believes these measures are useful to investors
because they give investors insight into our core operating
performance.
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 gain
from equity method investees, changes in fair value of contingent
consideration, change in the tax receivable agreement liability,
other income (expense), net, stock-based compensation expense,
severance costs, amortization of contract cost assets, dividends
and accretion on Series A Preferred Stock and acquisition-related
costs. Acquisition-related costs include but are not limited to
integration consultants, investor outreach services, external
valuation and accounting advisory services, legal fees, dedicated
integration employee salaries, bonuses, expenses and related
payroll taxes, and transaction bonuses paid to certain
employees.
Management uses Adjusted EBITDA as a supplemental performance
measure because the removal of acquisition-related costs, severance
or non-cash items (e.g. depreciation, amortization and stock-based
compensation expenses) allows us to focus on operational
performance. We believe that this measure is also useful to
investors because it allows further insight into the period over
period operational performance in a manner that is comparable to
other organizations in our industry and in the market in
general.
Adjusted EBITDA Margin is as defined Adjusted EBITDA divided by
Revenue. Management uses Adjusted EBITDA Margin as a supplemental
performance measure because it allows the investor to understand
operational performance compared to revenues over time. We believe
that this measure is also useful to investors because it allows
further insight into the period over period operational performance
in a manner that is comparable to other organizations in our
industry and in the market in general.
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,
provision (benefit) for income taxes, other income (expense), net,
changes in fair value of contingent consideration, change in tax
receivable agreement liability, purchase accounting adjustments,
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 uses Adjusted Income Attributable to Common
Shareholders and Adjusted Income per Share Attributable to Common
Shareholders because excluding non-cash items (e.g. depreciation,
amortization and stock-based compensation expenses) allows us to
focus on operational performance. We believe that these measures
are also useful to investors 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 oncology and cardiology 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 EHS 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 IPG and Vital Decisions 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
IPG and Vital Decisions 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.
The Company has changed its calculation of Lives on Platform to
more accurately reflect the monthly membership that corresponds to
quarterly revenue. The Company has recast prior periods 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 March 31,
|
|
2023
|
|
2022
|
Revenue
|
$ 427,690
|
|
$ 297,057
|
Expenses
|
|
|
|
Cost of
revenue
|
310,475
|
|
219,739
|
Selling, general and
administrative expenses
|
89,726
|
|
58,932
|
Depreciation and
amortization expenses
|
29,275
|
|
15,106
|
Change in fair value of
contingent consideration
|
8,569
|
|
6,078
|
Total operating
expenses
|
438,045
|
|
299,855
|
Operating
loss
|
(10,355)
|
|
(2,798)
|
Interest
income
|
1,060
|
|
117
|
Interest
expense
|
(12,895)
|
|
(2,241)
|
Gain from equity
method investees
|
423
|
|
596
|
Change in tax
receivable agreement liability
|
(66,184)
|
|
—
|
Other income
(expense), net
|
(220)
|
|
178
|
Loss before income
taxes
|
(88,171)
|
|
(4,148)
|
Provision for (benefit
from) income taxes
|
(68,189)
|
|
1,202
|
Loss before preferred dividends and accretion
of Series A Preferred Stock
|
(19,982)
|
|
(5,350)
|
Dividends and accretion of Series A Preferred
Stock
|
(6,276)
|
|
—
|
Net loss attributable
to common shareholders of Evolent Health, Inc.
|
$ (26,258)
|
|
$
(5,350)
|
|
|
|
|
Loss per common
share
|
|
|
|
Basic and
diluted:
|
$
(0.24)
|
|
$
(0.06)
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
Basic and
diluted
|
107,783
|
|
89,509
|
|
|
|
|
Comprehensive
loss
|
|
|
|
Net loss
|
$
(26,258)
|
|
$
(5,350)
|
Other comprehensive
loss, net of taxes, related to:
|
|
|
|
Foreign currency
translation adjustment
|
56
|
|
(132)
|
Total comprehensive
loss attributable to common shareholders of Evolent Health,
Inc.
|
$
(26,202)
|
|
$
(5,482)
|
Evolent Health,
Inc.
Condensed
Consolidated Balance Sheets
(in thousands,
unaudited)
|
|
|
March 31,
2023
|
|
December 31,
2022
|
Cash and cash
equivalents
|
$
157,519
|
|
$
188,200
|
Restricted cash and
restricted investments
|
34,451
|
|
26,958
|
Total current
assets
|
475,972
|
|
478,054
|
Intangible assets,
net
|
825,857
|
|
442,784
|
Goodwill
|
1,117,945
|
|
722,774
|
Total assets
|
2,589,459
|
|
1,817,293
|
|
|
|
|
Accounts
payable
|
51,012
|
|
57,174
|
Accrued
liabilities
|
170,236
|
|
111,198
|
Long-term debt, net of
discount
|
632,277
|
|
412,986
|
Total
liabilities
|
1,297,091
|
|
957,876
|
|
|
|
|
Mezzanine
equity
|
170,625
|
.
|
—
|
|
|
|
|
Total shareholders'
equity
|
1,121,743
|
|
859,417
|
Total liabilities,
mezzanine equity and shareholders' equity
|
2,589,459
|
|
1,817,293
|
Evolent Health,
Inc.
Condensed
Consolidated Statements of Cash Flows
(in thousands,
unaudited)
|
|
|
For the Three
Months
Ended March 31,
|
|
2023
|
|
2022
|
Net cash and
restricted cash used in continuing operations
|
|
|
|
Net cash and restricted
cash used in operating activities
|
$ (7,974)
|
|
$
(57,442)
|
Net cash and restricted
cash provided by (used in) investing activities
|
(394,993)
|
|
16,766
|
Net cash and restricted
cash provided by (used in) financing activities
|
379,729
|
|
(51,376)
|
Effect of exchange rate
on cash and cash equivalents and restricted cash
|
50
|
|
(104)
|
Net decrease in cash
and cash equivalents and restricted cash
|
(23,188)
|
|
(92,156)
|
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
|
$
191,970
|
|
$
262,786
|
Evolent Health,
Inc.
Reconciliation of
Adjusted Results of Operations
(in thousands,
unaudited)
|
|
|
For the Three Months
Ended March 31, 2023
|
|
|
For the Three Months
Ended March 31, 2022
|
|
Evolent Health,
Inc.
as
Reported
|
|
Evolent Health,
Inc.
as
Adjusted
|
|
Evolent
|
|
|
|
Evolent
|
|
|
Evolent
|
|
|
|
Evolent
|
|
|
|
Health,
Inc.
|
|
|
|
Health,
Inc.
|
|
|
Health,
Inc.
|
|
|
|
Health,
Inc.
|
|
Change Over Prior
Period
|
|
Change Over Prior
Period
|
|
as
Reported
|
|
Adjustments
|
|
as
Adjusted
|
|
|
as
Reported
|
|
Adjustments
|
|
as
Adjusted
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenue
|
$
427,690
|
|
$
—
|
|
$ 427,690
|
|
|
$
297,057
|
|
$
—
|
|
$ 297,057
|
|
$ 130,633
|
|
44.0 %
|
|
$ 130,633
|
|
44.0 %
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
(exclusive of depreciation and amortization expenses presented
separately below) (1)
|
310,475
|
|
(2,232)
|
|
308,243
|
|
|
219,739
|
|
(1,195)
|
|
218,544
|
|
90,736
|
|
41.3 %
|
|
89,699
|
|
41.0 %
|
Selling, general and
administrative expenses (2)
|
89,726
|
|
(20,777)
|
|
68,949
|
|
|
58,932
|
|
(4,674)
|
|
54,258
|
|
30,794
|
|
52.3 %
|
|
14,691
|
|
27.1 %
|
Depreciation and
amortization expenses (3)
|
29,275
|
|
(12,751)
|
|
16,524
|
|
|
15,106
|
|
(4,569)
|
|
10,537
|
|
14,169
|
|
93.8 %
|
|
5,987
|
|
56.8 %
|
Change in fair value of
contingent consideration
|
8,569
|
|
(8,569)
|
|
—
|
|
|
6,078
|
|
(6,078)
|
|
—
|
|
2,491
|
|
41.0 %
|
|
—
|
|
— %
|
Total operating
expenses
|
438,045
|
|
(44,329)
|
|
393,716
|
|
|
299,855
|
|
(16,516)
|
|
283,339
|
|
138,190
|
|
46.1 %
|
|
110,377
|
|
39.0 %
|
Operating income
(loss)
|
$
(10,355)
|
|
$
44,329
|
|
$
33,974
|
|
|
$
(2,798)
|
|
$
16,516
|
|
$
13,718
|
|
$
(7,557)
|
|
(270.1) %
|
|
$
20,256
|
|
147.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
expenses as a percentage of total revenue
|
102.4 %
|
|
|
|
92.1 %
|
|
|
100.9 %
|
|
|
|
95.4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Adjustments to cost of
revenue include $1.5 million and $0.8 million in stock-based
compensation expense for the three months ended March 31, 2023 and
2022, respectively, and $0.4 million of related to the amortization
of contract costs assets for the three months ended March 31, 2022.
Adjustments for the three months ended March 31, 2023, include $0.7
million of severance costs.
|
(2)
|
Adjustments to selling,
general and administrative expenses include $9.2 million and $4.5
million in stock-based compensation expense and $11.3 million
and $0.5 million of acquisition-related costs resulting from
acquisitions and business combinations for the three months ended
March 31, 2023 and 2022, respectively. Adjustments for the three
months ended March 31, 2023, include $0.3 million of severance
costs.
|
(3)
|
Adjustments to
depreciation and amortization expenses of approximately
$12.8 million and $4.6 million for the three months ended
March 31, 2023 and 2022, respectively, relate to amortization of
intangible assets acquired via asset acquisitions and business
combinations.
|
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 March 31,
|
|
2023
|
|
2022
|
Net loss
attributable to common shareholders of Evolent Health,
Inc.
|
$(26,258)
|
|
$(5,350)
|
Net loss
margin
|
(6.1) %
|
|
(1.8) %
|
|
|
|
|
Less:
|
|
|
|
Interest
income
|
1,060
|
|
117
|
Interest
expense
|
(12,895)
|
|
(2,241)
|
Benefit from
(provision for) income taxes
|
68,189
|
|
(1,202)
|
Depreciation and
amortization expenses
|
(29,275)
|
|
(15,106)
|
Change in tax
receivable agreement liability
|
(66,184)
|
|
—
|
Gain from equity
method investees
|
423
|
|
596
|
Change in fair value
of contingent consideration
|
(8,569)
|
|
(6,078)
|
Other income
(expense), net
|
(220)
|
|
178
|
Stock-based
compensation expense
|
(10,710)
|
|
(5,346)
|
Severance
costs
|
(954)
|
|
(39)
|
Amortization of
contract cost assets
|
—
|
|
(27)
|
Dividends and
accretion of Series A Preferred Stock
|
(6,276)
|
|
—
|
Acquisition costs
(1)
|
(11,346)
|
|
(457)
|
Adjusted
EBITDA
|
$50,499
|
|
$24,255
|
|
|
|
|
Adjusted EBITDA
margin
|
11.8 %
|
|
8.2 %
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Acquisition-related
costs include but are not limited to integration consultants,
investor outreach services, external valuation and accounting
advisory services, legal fees, dedicated integration employee
salaries, bonuses, expenses and related payroll taxes, and
transaction bonuses paid to certain employees.
|
Evolent Health,
Inc.
Reconciliation of
Adjusted Income Attributable to Common
Shareholders to Net
Loss Attributable to Common Shareholders
(in thousands, except
per share data)
(unaudited)
|
|
|
For the Three
Months
Ended March 31,
|
|
2023
|
|
2022
|
Net loss
attributable to common shareholders of Evolent Health,
Inc.
|
$
(26,258)
|
|
$ (5,350)
|
Less:
|
|
|
|
Gain from equity
method investees
|
423
|
|
596
|
Other income
(expense), net
|
(220)
|
|
178
|
Provision for (benefit
from) income taxes
|
68,189
|
|
—
|
Change in fair value
of contingent consideration
|
(8,569)
|
|
(6,078)
|
Change in tax
receivable agreement liability
|
(66,184)
|
|
—
|
Purchase accounting
adjustments
|
(12,751)
|
|
(4,569)
|
Stock-based
compensation expense
|
(10,710)
|
|
(5,346)
|
Severance
costs
|
(954)
|
|
(39)
|
Amortization of
contract cost assets
|
—
|
|
(27)
|
Dividends and
accretion of Series A Preferred Stock
|
(6,276)
|
|
—
|
Acquisition-related
costs
|
(11,346)
|
|
(457)
|
Adjusted income
attributable to common shareholders
|
$
22,140
|
|
$
10,392
|
|
|
|
|
Loss per share
attributable to common shareholders (1)
|
|
|
|
Basic and
diluted
|
$ (0.24)
|
|
$ (0.06)
|
|
|
|
|
Adjusted income per
share attributable to common shareholders
(1)
|
|
|
|
Basic and
diluted
|
$
0.21
|
|
$
0.12
|
|
|
|
|
Weighted-average
common shares(1)
|
|
|
|
Basic and
diluted
|
107,783
|
|
89,509
|
|
|
|
|
|
|
|
|
|
|
(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, 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