Full Press Release Details
Evolent Health Announces Fourth Quarter and Full Year 2016 Results
WASHINGTON, D.C., Feb. 28, 2017 - Evolent Health, Inc. (NYSE: EVH), a company providing an integrated value-based care platform to the nation's leading health systems and physician organizations, today announced financial results for the quarter and full year ended December 31, 2016.
Highlights from the fourth quarter and full year 2016 announcement include (all comparisons are to the quarter and full year ended December 31, 2015):
Quarter ended December 31, 2016:
Full year ended December 31, 2016:
Additional announcements:
Frank Williams, chief executive officer of Evolent Health, Inc., commented, "We are pleased with our results for the quarter and calendar year, having achieved our strategic, operational and financial objectives, as well as advancing our position as the preferred provider partner for the movement to value-based care."
Evolent ended the year at the high end of its anticipated range for new partnerships and entered new markets in Arizona, California, Idaho, Illinois and Texas for the first time. The company also experienced continued growth from existing partners in the form of new lives added and the adoption of new service offerings. In the aggregate, the company added approximately 1.3 million lives to its platform, bringing the total life count to approximately 2.0 million lives as of December 31, 2016. This represented a growth of
approximately 181.5% over the prior year. A further 600,000 lives were added to the platform on January 1, 2017.
Mr. Williams continued, "With strong momentum continuing through the end of the year and into 2017, we are excited to welcome two operating partners to our national network: Carilion Clinic and Orlando Health."
Carilion Clinic is a $1.5 billion health system comprised of seven hospitals serving more than one million people in western Virginia. Evolent is initially supporting Carilion in developing an integrated care model for Medicare beneficiaries that includes advanced analytics and stratification, care management programs, and quality and network improvement programs.
Orlando Health is a $2.6 billion health system serving central Florida through a network of more than 2,500 physicians. Over the past four years, Orlando Health has become a nationally-ranked leader in quality and cost performance with government and commercial payers. Evolent will support Orlando health in managing its commercial and Medicare risk business.
Mr. Williams added, "In terms of our Medicare offering in the market, we are also thrilled to support six of our partners in their participation in the Center for Medicare and Medicaid Services' (CMS) Next Generation Accountable Care Organization (ACO) program, including Hill Physicians Medical Group, St. Luke's Health Partners, Deaconess Health System, Indiana University Health, Premier Health ACO of Ohio and Carilion Clinic. The commitment to this model by CMS and its participating providers demonstrates that the trend toward public-private health care transformation remains strong as providers take steps toward more aggressive risk arrangements. We are pleased that the investments we've made in our technology platform, clinical knowledge base and risk management infrastructure are enabling us to deliver the expertise and experience that providers are seeking to drive results."
Next Generation ACO is a premier program for incenting the transition to value-based care for providers, with features that closely mirror the financial dynamics of Medicare Advantage. It is an Advanced Alternative Payment Model (APM) for the 2017 calendar year under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) in which clinicians may qualify for exemption from payment adjustments under the Merit-based Incentive Payment System (MIPS). The Next Generation ACO Model aligns with CMS' broader strategy to move away from fee-for-service reimbursement and toward value-based payment mechanisms that reward quality of health outcomes.
Financial Results of Evolent Health, Inc.
Evolent Health, Inc. completed a reorganization of its corporate structure on June 4, 2015 (the "Reorganization"), in connection with the initial public offering of its Class A common stock ("IPO"). Prior to the Reorganization, Evolent Health, Inc. had no operations. As a result, the financial statements of Evolent Health, Inc. for the year ended December 31, 2015, do not reflect a complete view of the operational results for that period. In order to provide consistent and comparable metrics for the periods before and after June 4, 2015, the adjusted results of Evolent Health, Inc. for the year ended December 31, 2015, presented and discussed in this release reflect the Reorganization as if it had occurred on January 1, 2015, and therefore include the results of Evolent Health LLC for the entire twelve month period ended December 31, 2015.
The adjusted results also include certain other adjustments. See "Financial Statement Presentation" and "Non-GAAP Financial Measures" for more information.
Evolent Health, Inc. reported the following United States of America generally accepted accounting principles ("GAAP") results:
Total cash, cash equivalents and investments as of December 31, 2016, were $178.9 million.
In addition to closing the previously announced acquisition of Valence Health, Inc., excluding its contracts serving certain state insurance cooperatives ("Valence Health") on October 3, 2016, the Company completed the acquisition of Aldera Holdings, Inc. ("Aldera") on November 1, 2016. Aldera is
the primary software provider for the Valence Health third party administration platform. The results of Valence Health and Aldera are included in the consolidated results of Evolent Health, Inc. from October 3, 2016, and November 1, 2016, respectively.
For the full year 2017, Adjusted Revenue is expected to be in the range of $415.0 million to $425.0 million. Adjusted EBITDA is expected to be in the range of $(8.0) million to $0.0 million. For the three months ended March 31, 2017, Adjusted Revenue is expected to be in the range of $103.0 million to $106.0 million and Adjusted EBITDA is expected to be in the range of $(6.0) million to $(4.0) 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 in "Forward Looking Statements - Cautionary Language" and Evolent Health, Inc.'s filings with the Securities and Exchange Commission ("SEC").
Web and Conference Call Information
As previously announced, Evolent Health, Inc. will hold a conference call to discuss its fourth quarter and full year performance this evening, February 28, 2017, at 4:30 p.m., Eastern Time. The conference call will be available via live webcast on the Company's Investor Relations website at http://ir.evolenthealth.com. To participate by telephone, dial 855.940.9467 or 412.317.6034 for international callers, and ask to join to the "Evolent Health call." Participants are advised to dial in at least 15 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.
About Evolent Health
Evolent Health partners with leading health systems to drive value-based care transformation. By providing clinical, analytical and financial capabilities, Evolent Health helps physicians and health systems achieve superior quality and cost results. Evolent Health's approach breaks down barriers, aligns incentives and powers a new model of care delivery resulting in meaningful alignment between providers, payers, physicians and patients. Learn more at: www.evolenthealth.com.
| Bob East | Robin Glass |
| 443.213.0500 | 571.389.6005 |
| Investor Relations | Media Relations |
| InvestorRelations@evolenthealth.com | RGlass@evolenthealth.com |
Financial Statement Presentation
Evolent Health, Inc. is a holding company and its principal asset is all of the Class A common units in its operating subsidiary, Evolent Health LLC, which has owned all of our operating assets and substantially all of our business since inception. Prior to the Reorganization on June 4, 2015, the predecessor of Evolent Health, Inc. accounted for Evolent Health LLC as an equity method investment. The financial results of Evolent Health LLC have been consolidated in the financial statements of Evolent Health, Inc. following the Reorganization. As a result, the financial statements of Evolent Health, Inc. for the year ended December 31, 2015, do not reflect a complete view of the operational results for that period. In order to provide a consistent presentation for the periods before and after June 4, 2015, and effectively provide
comparative results, the adjusted results of Evolent Health, Inc. presented and discussed in this release reflect the Reorganization as if it had occurred on January 1, 2015, and therefore include the operations of Evolent Health LLC for the period from January 1, 2015, through June 3, 2015, as well as for the period from June 4, 2015, through December 31, 2015, when the results were consolidated. Including Evolent Health LLC's results for this period is not consistent with GAAP and should not be considered as an alternative to comparable GAAP measures. Certain tables below relating to the twelve month periods ended December 31, 2016 and 2015, reflect certain income statement line items as adjusted to reflect results from operations for the twelve month period ended December 31, 2015, as if the Reorganization had occurred on January 1, 2015, and also reflect other adjustments described in "Non-GAAP Financial Measures."
Non-GAAP Financial Measures
In addition to disclosing financial results that are determined in accordance with GAAP, we present and discuss Adjusted Revenue, Adjusted Transformation Revenue, Adjusted Platform and Operations Revenue, Adjusted Cost of Revenue, Adjusted Selling, General and Administrative Expenses, Adjusted Depreciation and Amortization Expenses, Adjusted Operating Income (Loss), Adjusted EBITDA, Adjusted Earnings (Loss) Available to Class A and Class B Shareholders, Adjusted Earnings (Loss) per Share Available to Class A and Class B Shareholders and Adjusted Weighted-Average Class A and Class B Shares, which are all non-GAAP financial measures, as supplemental measures to help investors evaluate our fundamental operational performance.
As described above, the financial statements of Evolent Health, Inc. for the year ended December 31, 2015, do not reflect a complete view of the operational results for that period. In order to provide consistent and comparable metrics for the periods before and after June 4, 2015, the adjusted results of Evolent Health, Inc. for the year ended December 31, 2015, presented and discussed in this release reflect the Reorganization as if it had occurred on January 1, 2015, and therefore include the results of Evolent Health LLC for the entire twelve month period ended December 31, 2015. The adjusted results also include certain other adjustments.
Adjusted Revenue, Adjusted Transformation Revenue and Adjusted Platform and Operations Revenue are defined as revenue, transformation revenue, and platform and operations revenue, respectively, adjusted to include revenue, transformation revenue and platform and operations revenue, as applicable, of Evolent Health LLC for periods prior to the Reorganization, and to exclude the impact of purchase accounting adjustments. Management uses Adjusted Revenue, Adjusted Transformation Revenue and Adjusted Platform and Operations Revenue as supplemental performance measures because they reflect a complete view of the operational results. The measures are also useful to investors because they reflect the full view of our operational performance in line with how we generate our long term forecasts.
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 include cost of revenue and selling, general and administrative expenses, as applicable, of Evolent Health LLC for periods prior to the Reorganization, and to exclude the impact of stock-based compensation expenses and transaction costs related to acquisitions and business combinations, the Reorganization, IPO and other securities offerings as well as other one-time adjustments. 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 transaction costs that are one-time and costs that are non-cash (stock-based compensation expenses) in nature. Additionally, these supplemental performance measures facilitate understanding a breakdown of our Adjusted Total Operating Expenses.
Adjusted Depreciation and Amortization Expenses is defined as depreciation and amortization expenses adjusted to include depreciation and amortization expenses of Evolent Health LLC for periods prior to the Reorganization, and to exclude the impact of amortization expenses related to intangible assets acquired
through 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 while removing the impact of purchase accounting adjustments. 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, Adjusted Depreciation and Amortization Expenses, and reflects the adjustments made in those non-GAAP measures. Adjusted Total Operating Expenses is adjusted to exclude the impact of one-time adjustments, such as goodwill impairment, and items arising from acquisitions and business combinations, such as gain on change 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.
Adjusted EBITDA is defined as EBITDA (net income (loss) attributable to Evolent Health, Inc. before interest income (expense), net, (provision) benefit for income taxes, depreciation and amortization expenses), adjusted to include net income (loss) of Evolent Health LLC (less interest income (expense), net, depreciation and amortization expenses and other income (expense), net, of Evolent Health LLC) for the periods prior to the Reorganization, and to exclude goodwill impairment, gain on consolidation, gain on change in fair value of contingent consideration, income (loss) from affiliates, other income (expense), net, net (income) loss attributable to non-controlling interests, purchase accounting adjustments, stock-based compensation expenses and transaction costs related to acquisitions and business combinations, such as gain on change in fair value of contingent consideration, the Reorganization, IPO and related offerings, as well as other one-time adjustments. Management uses Adjusted EBITDA as a supplemental performance measure because the removal of transaction costs, one-time or non-cash items (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 Earnings (Loss) Available to Class A and Class B Shareholders is defined as earnings (loss) available to common shareholders adjusted to exclude the impact of undeclared cumulative preferred dividends for the periods prior to the Reorganization; and to include net income (loss) of Evolent Health LLC for the periods prior to the Reorganization, and to exclude goodwill impairment, gain on consolidation, income (loss) from affiliates, (provision) benefit for income taxes, gain on change in fair value of contingent consideration, purchase accounting adjustments, stock-based compensation expenses and transaction costs related to acquisitions and business combinations, such as gain on change in fair value of contingent consideration, the Reorganization, IPO and related offerings, as well as other one-time adjustments.
Adjusted Weighted-Average Class A and Class B Shares is defined as weighted average common shares (diluted) adjusted to include, in periods of net loss, the dilutive or potentially dilutive effect of the assumed conversion of Class B common shares to Class A common shares.
Adjusted Earnings (Loss) per Share Available to Class A and Class B Shareholders is defined as Adjusted Earnings (Loss) Available to Class A and Class B Shareholders divided by Adjusted Weighted-Average Class A and Class B Shares, and reflects the adjustments made in those non-GAAP measures.
Management uses Adjusted Earnings (Loss) Available to Class A and Class B Shareholders, Adjusted Weighted-Average Class A and Class B Shares and Adjusted Earnings (Loss) per Share Available to Class A and Class B Shareholders because these performance measures represent our core operating performance distributed amongst all of our investors which is not represented by the GAAP results across
time due to our complex equity structure. 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.
Evolent Health, Inc.
Consolidated Statements of Operations
| (in thousands, except per share data) | For the Three | For the Years | |||||||||||||
| Months Ended | Ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Revenue | |||||||||||||||
| Transformation | $ | 12,061 | $ | 10,420 | $ | 38,320 | $ | 19,906 | |||||||
| Platform and operations | 75,950 | 35,638 | 215,868 | 76,972 | |||||||||||
| Total revenue | 88,011 | 46,058 | 254,188 | 96,878 | |||||||||||
| Expenses | |||||||||||||||
| Cost of revenue (exclusive of | |||||||||||||||
| depreciation and amortization | |||||||||||||||
| expenses presented separately below) | 59,883 | 24,749 | 155,177 | 57,398 | |||||||||||
| Selling, general and administrative expenses | 57,592 | 32,371 | 160,692 | 75,286 | |||||||||||
| Depreciation and amortization expenses | 6,495 | 3,126 | 17,224 | 7,166 | |||||||||||
| Goodwill impairment | - | - | 160,600 | - | |||||||||||
| Gain on change in fair value | |||||||||||||||
| of contingent consideration | (2,086 | ) | - | (2,086 | ) | - | |||||||||
| Total operating expenses | 121,884 | 60,246 | 491,607 | 139,850 | |||||||||||
| Operating income (loss) | (33,873 | ) | (14,188 | ) | (237,419 | ) | (42,972 | ) | |||||||
| Interest income (expense), net | (83 | ) | 226 | 723 | 293 | ||||||||||
| Gain on consolidation | - | - | - | 414,133 | |||||||||||
| Income (loss) from affiliates | (379 | ) | - | (841 | ) | (28,165 | ) | ||||||||
| Other Income (expense), net | 2 | - | 4 | - | |||||||||||
| Income (loss) before income taxes | |||||||||||||||
| and non-controlling interests | (34,333 | ) | (13,962 | ) | (237,533 | ) | 343,289 | ||||||||
| Provision (benefit) for income taxes | (9,140 | ) | (5,695 | ) | (10,755 | ) | 23,475 | ||||||||
| Net income (loss) | (25,193 | ) | (8,267 | ) | (226,778 | ) | 319,814 | ||||||||
| Net income (loss) attributable to | |||||||||||||||
| non-controlling interests | (7,786 | ) | (4,148 | ) | (67,036 | ) | (12,680 | ) | |||||||
| Net income (loss) attributable to | |||||||||||||||
| Evolent Health, Inc. | $ | (17,407 | ) | $ | (4,119 | ) | $ | (159,742 | ) | $ | 332,494 | ||||
| Earnings (Loss) Available to Common Shareholders | |||||||||||||||
| Basic | $ | (17,407 | ) | $ | (4,119 | ) | $ | (159,742 | ) | $ | 330,310 | ||||
| Diluted | (17,407 | ) | (4,119 | ) | (159,742 | ) | 319,814 | ||||||||
| Earnings (Loss) per Common Share | |||||||||||||||
| Basic | $ | (0.33 | ) | $ | (0.10 | ) | $ | (3.55 | ) | $ | 13.14 | ||||
| Diluted | (0.33 | ) | (0.10 | ) | (3.55 | ) | 6.93 | ||||||||
| Weighted-Average Common Shares Outstanding | |||||||||||||||
| Basic | 52,177 | 41,482 | 45,031 | 25,129 | |||||||||||
| Diluted | 52,177 | 41,482 | 45,031 | 46,136 |
Evolent Health, Inc.
Condensed Consolidated Balance Sheets
| (in thousands) | As of | |||||||
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Cash and cash equivalents | $ | 134,563 | $ | 145,726 | ||||
| Investments, at amortized cost | 44,341 | 9,445 | ||||||
| Total current assets | 264,966 | 184,463 | ||||||
| Investments, at amortized cost | - | 44,618 | ||||||
| Intangible assets, net | 258,923 | 163,152 | ||||||
| Goodwill | 626,569 | 608,903 | ||||||
| Total assets | 1,199,839 | 1,015,514 | ||||||
| Long-term debt, net of discount | 120,283 | - | ||||||
| Total liabilities | 287,725 | 80,935 | ||||||
| Total shareholders' equity (deficit) attributable to | ||||||||
| Evolent Health, Inc. | 702,526 | 649,341 | ||||||
| Non-controlling interests | 209,588 | 285,238 | ||||||
| Total liabilities and shareholders' equity (deficit) | 1,199,839 | 1,015,514 |
Evolent Health, Inc.
Condensed Consolidated Statements of Cash Flows
| (in thousands) | For the Years | |||||||
| Ended | ||||||||
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Net cash provided by (used in) operating activities | $ | (35,510 | ) | $ | (18,468 | ) | ||
| Net cash provided by (used in) investing activities | (97,797 | ) | (43,684 | ) | ||||
| Net cash provided by (used in) financing activities | 122,144 | 207,878 | ||||||
| Net increase (decrease) in cash and cash equivalents | (11,163 | ) | 145,726 | |||||
| Cash and cash equivalents as of beginning-of-year | 145,726 | - | ||||||
| Cash and cash equivalents as of end-of-year | $ | 134,563 | $ | 145,726 |
Evolent Health, Inc.
Adjusted Results of Operations
| (in thousands) | For the Three Months Ended December 31, 2016 | For the Three Months Ended December 31, 2015 | ||||||||||||||||||||||||||||||||||||
| Evolent Health, Inc. | Evolent Health, Inc. | |||||||||||||||||||||||||||||||||||||
| Evolent | Evolent | Evolent | Evolent | as Reported | as Adjusted | |||||||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||||||||||||||
| Transformation (1) | $ | 12,061 | $ | 27 | $ | 12,088 | $ | 10,420 | $ | 377 | $ | 10,797 | $ | 1,641 | 15.7 | % | $ | 1,291 | 12.0 | % | ||||||||||||||||||
| Platform and operations (1) | 75,950 | 1,976 | 77,926 | 35,638 | 306 | 35,944 | 40,312 | 113.1 | % | 41,982 | 116.8 | % | ||||||||||||||||||||||||||
| Total revenue | 88,011 | 2,003 | 90,014 | 46,058 | 683 | 46,741 | 41,953 | 91.1 | % | 43,273 | 92.6 | % | ||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of | ||||||||||||||||||||||||||||||||||||||
| depreciation and amortization | ||||||||||||||||||||||||||||||||||||||
| expenses presented | ||||||||||||||||||||||||||||||||||||||
| separately below) (2) | 59,883 | (4,165 | ) | 55,718 | 24,749 | (351 | ) | 24,398 | 35,134 | 142.0 | % | 31,320 | 128.4 | % | ||||||||||||||||||||||||
| Selling, general and | ||||||||||||||||||||||||||||||||||||||
| administrative expenses (3) | 57,592 | (15,547 | ) | 42,045 | 32,371 | (4,084 | ) | 28,287 | 25,221 | 77.9 | % | 13,758 | 48.6 | % | ||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||
| expenses (4) | 6,495 | (2,257 | ) | 4,238 | 3,126 | - | 3,126 | 3,369 | 107.8 | % | 1,112 | 35.6 | % | |||||||||||||||||||||||||
| Gain on change in fair value | ||||||||||||||||||||||||||||||||||||||
| of contingent consideration (5) | (2,086 | ) | 2,086 | - | - | - | - | (2,086 | ) | - | % | - | - | % | ||||||||||||||||||||||||
| Total operating expenses | 121,884 | (19,883 | ) | 102,001 | 60,246 | (4,435 | ) | 55,811 | 61,638 | 102.3 | % | 46,190 | 82.8 | % | ||||||||||||||||||||||||
| Operating income (loss) | $ | (33,873 | ) | $ | 21,886 | $ | (11,987 | ) | $ | (14,188 | ) | $ | 5,118 | $ | (9,070 | ) | $ | (19,685 | ) | (138.7 | )% | $ | (2,917 | ) | (32.2 | )% |
Evolent Health, Inc.
Adjusted Results of Operations
| (in thousands) | For the Year Ended December 31, 2016 | For the Year Ended December 31, 2015 | |||||||||||||||||||||||||||||||||||||||
| Add: | Evolent Health, Inc. | Evolent Health, Inc. | |||||||||||||||||||||||||||||||||||||||
| Evolent | Evolent | Evolent | Evolent | Evolent | as Reported | as Adjusted | |||||||||||||||||||||||||||||||||||
| Health, Inc. | Health, Inc. | Health, Inc. | Health LLC | Health, Inc. | Change Over Prior Period* | Change Over Prior Period | |||||||||||||||||||||||||||||||||||
| as Reported | Adjustments | as Adjusted | as Reported | Operations (1) | Adjustments | as Adjusted | $ | % | $ | % | |||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||||||||
| Transformation (2) | $ | 38,320 | $ | 114 | $ | 38,434 | $ | 19,906 | $ | 15,755 | $ | 1,524 | $ | 37,185 | $ | 18,414 | N/A | $ | 1,249 | 3.4 | % | ||||||||||||||||||||
| Platform and operations (2) | 215,868 | 1,976 | 217,844 | 76,972 | 46,059 | 3,304 | 126,335 | 138,896 | N/A | 91,509 | 72.4 | % | |||||||||||||||||||||||||||||
| Total revenue | 254,188 | 2,090 | 256,278 | 96,878 | 61,814 | 4,828 | 163,520 | 157,310 | N/A | 92,758 | 56.7 | % | |||||||||||||||||||||||||||||
| Expenses | |||||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of | |||||||||||||||||||||||||||||||||||||||||
| depreciation and amortization | |||||||||||||||||||||||||||||||||||||||||
| expenses presented | |||||||||||||||||||||||||||||||||||||||||
| separately below) (3) | 155,177 | (5,431 | ) | 149,746 | 57,398 | 44,839 | (2,518 | ) | 99,719 | 97,779 | N/A | 50,027 | 50.2 | % | |||||||||||||||||||||||||||
| Selling, general and | |||||||||||||||||||||||||||||||||||||||||
| administrative expenses (4) | 160,692 | (32,753 | ) | 127,939 | 75,286 | 58,457 | (38,230 | ) | 95,513 | 85,406 | N/A | 32,426 | 33.9 | % | |||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||||||||||||||
| expenses (5) | 17,224 | (2,773 | ) | 14,451 | 7,166 | 2,637 | - | 9,803 | 10,058 | N/A | 4,648 | 47.4 | % | ||||||||||||||||||||||||||||
| Goodwill impairment (6) | 160,600 | (160,600 | ) | - | - | - | - | - | 160,600 | N/A | - | - | % | ||||||||||||||||||||||||||||
| Gain on change in fair value | |||||||||||||||||||||||||||||||||||||||||
| of contingent consideration (7) | (2,086 | ) | 2,086 | - | - | - | - | - | (2,086 | ) | N/A | - | - | % | |||||||||||||||||||||||||||
| Total operating expenses | 491,607 | (199,471 | ) | 292,136 | 139,850 | 105,933 | (40,748 | ) | 205,035 | 351,757 | N/A | 87,101 | 42.5 | % | |||||||||||||||||||||||||||
| Operating income (loss) | $ | (237,419 | ) | $ | 201,561 | $ | (35,858 | ) | $ | (42,972 | ) | $ | (44,119 | ) | $ | 45,576 | $ | (41,515 | ) | $ | (194,447 | ) | N/A | $ | 5,657 | 13.6 | % |
Evolent Health, Inc.
Reconciliation of Adjusted EBITDA to Net Income (Loss)
Attributable to Evolent Health, Inc.
| (in thousands) | For the Three | For the Years | ||||||||||||||
| Months Ended | Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net Income (Loss) Attributable to | ||||||||||||||||
| Evolent Health, Inc. | $ | (17,407 | ) | $ | (4,119 | ) | $ | (159,742 | ) | $ | 332,494 | |||||
| Less: | ||||||||||||||||
| Interest income (expense), net | (83 | ) | 226 | 723 | 293 | |||||||||||
| (Provision) benefit for income taxes | 9,140 | 5,695 | 10,755 | (23,475 | ) | |||||||||||
| Depreciation and amortization expenses | (6,495 | ) | (3,126 | ) | (17,224 | ) | (7,166 | ) | ||||||||
| EBITDA | (19,969 | ) | (6,914 | ) | (153,996 | ) | 362,842 | |||||||||
| Results of Evolent Health LLC | ||||||||||||||||
| Add: | ||||||||||||||||
| Net income (loss) | - | - | - | (44,079 | ) | (1) | ||||||||||
| Less: | ||||||||||||||||
| Interest income (expense), net | - | - | - | 38 | (1) | |||||||||||
| Depreciation and amortization expenses | - | - | - | (2,637 | ) | (1) | ||||||||||
| Other income (expense), net | - | - | - | 2 | (1) | |||||||||||
| Less: | ||||||||||||||||
| Goodwill impairment | - | - | (160,600 | ) | - | |||||||||||
| Gain on consolidation | - | - | - | 414,133 | ||||||||||||
| Income (loss) from affiliates | (379 | ) | - | (841 | ) | (28,165 | ) | |||||||||
| Gain on change in fair value | ||||||||||||||||
| of contingent consideration | 2,086 | - | 2,086 | - | ||||||||||||
| Loss on lease abandonment | (6,456 | ) | - | (6,456 | ) | - | ||||||||||
| Other income (expense), net | 2 | - | 4 | - | ||||||||||||
| Net (income) loss attributable to | ||||||||||||||||
| non-controlling interests | 7,786 | 4,148 | 67,036 | 12,680 | ||||||||||||
| Purchase accounting adjustments | (2,003 | ) | (683 | ) | (2,090 | ) | (4,828 | ) | ||||||||
| Stock-based compensation expense | (8,657 | ) | (4,194 | ) | (22,501 | ) | (36,468 | ) | ||||||||
| Transaction costs | (4,599 | ) | (241 | ) | (9,227 | ) | (4,280 | ) | ||||||||
| Adjusted EBITDA | $ | (7,749 | ) | $ | (5,944 | ) | $ | (21,407 | ) | $ | (31,712 | ) |
Evolent Health, Inc.
Reconciliation of Adjusted Earnings (Loss) Available to Class A and Class B
Shareholders to Earnings (Loss) Available to Common Shareholders
| (in thousands, except per share data) | For the Three | For the Years | ||||||||||||||
| Months Ended | Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Earnings (Loss) Available to | ||||||||||||||||
| Common Shareholders - Diluted (a) | $ | (17,407 | ) | $ | (4,119 | ) | $ | (159,742 | ) | $ | 319,814 | |||||
| Less: | ||||||||||||||||
| Net income (loss) attributable to | ||||||||||||||||
| non-controlling interests | - | - | - | (12,680 | ) | |||||||||||
| Undeclared cumulative preferred dividends | - | - | - | 2,184 | ||||||||||||
| Earnings (Loss) Available to | ||||||||||||||||
| Common Shareholders - Basic (b) | (17,407 | ) | (4,119 | ) | (159,742 | ) | 330,310 | |||||||||
| Add: | ||||||||||||||||
| Net Income (loss) of Evolent Health LLC | - | - | - | (44,079 | ) | (1) | ||||||||||
| Less: | ||||||||||||||||
| Goodwill impairment | - | - | (160,600 | ) | - | |||||||||||
| Gain on consolidation | - | - | - | 414,133 | ||||||||||||
| Income (loss) from affiliates | (379 | ) | - | (841 | ) | (28,165 | ) | |||||||||
| (Provision) benefit for income taxes | 9,140 | - | 10,755 | (23,475 | ) | |||||||||||
| Gain on change in fair value | ||||||||||||||||
| of contingent consideration | 2,086 | - | 2,086 | - | ||||||||||||
| Loss on lease abandonment | (6,456 | ) | - | (6,456 | ) | - | ||||||||||
| Other income (expense), net | 2 | - | 4 | - | ||||||||||||
| Net (income) loss attributable to | ||||||||||||||||
| non-controlling interests | 7,786 | 4,148 | 67,036 | 12,680 | ||||||||||||
| Purchase accounting adjustments | (4,329 | ) | (683 | ) | (4,932 | ) | (4,828 | ) | ||||||||
| Stock-based compensation expense | (8,657 | ) | (4,194 | ) | (22,501 | ) | (36,468 | ) | ||||||||
| Transaction costs | (4,599 | ) | (241 | ) | (9,227 | ) | (4,280 | ) | ||||||||
| Adjusted Earnings (Loss) Available | ||||||||||||||||
| to Class A and Class B Shareholders (c) | $ | (12,001 | ) | $ | (3,149 | ) | $ | (35,066 | ) | $ | (43,366 | ) | ||||
| Earnings (Loss) per Share Available | ||||||||||||||||
| to Common Shareholders - Diluted (a) (2) | $ | (0.33 | ) | $ | (0.10 | ) | $ | (3.55 | ) | $ | 6.93 | |||||
| Earnings (Loss) per Share Available | ||||||||||||||||
| for Common Shareholders - Basic (b) (2) | $ | (0.33 | ) | $ | (0.10 | ) | $ | (3.55 | ) | $ | 13.14 | |||||
| Adjusted Earnings (Loss) per Share Available | ||||||||||||||||
| to Class A and Class B Shareholders (c) (3) | $ | (0.18 | ) | $ | (0.05 | ) | $ | (0.57 | ) | $ | (0.94 | ) | ||||
| Weighted-average common shares - basic | 52,177 | 41,482 | 45,031 | 25,129 | ||||||||||||
| Weighted-average common shares - diluted | 52,177 | 41,482 | 45,031 | 46,136 | ||||||||||||
| Adjusted Weighted-Average Class A | ||||||||||||||||
| and Class B Shares (4) | 67,524 | 59,007 | 61,913 | 46,136 |
Evolent Health, Inc.
Reconciliation of Adjusted Weighted-Average Class A and Class B
Shares to Diluted Weighted-Average Common Shares
| (in thousands) | For the Three | For the Years | |||||||||
| Months Ended | Ended | ||||||||||
| December 31, | December 31, | ||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||
| Weighted-average common shares - diluted | 52,177 | 41,482 | 45,031 | 46,136 | |||||||
| Assumed conversion of Class B common | |||||||||||
| shares to Class A common shares | 15,347 | 17,525 | 16,882 | - | |||||||
| Adjusted Weighted-Average Class A and Class B Shares | 67,524 | 59,007 | 61,913 | 46,136 |
Evolent Health, Inc.
Guidance Reconciliation
| (in thousands) | For the Three | For the Twelve | ||||||||
| Months Ended | Months Ended | |||||||||
| March 31, | December 31, | |||||||||
| 2017 | 2017 | |||||||||
| Revenue | $ | 104,200 | $ | 419,000 | ||||||
| Purchase Accounting Adjustments | 300 | 1,000 | ||||||||
| Adjusted Revenue | $ | 104,500 | $ | 420,000 | ||||||
| Net Income (Loss) Attributable to | ||||||||||
| Evolent Health, Inc. | $ | (18,500 | ) | $ | (63,500 | ) | ||||
| Less: | ||||||||||
| Interest income (expense), net | (400 | ) | (1,200 | ) | ||||||
| Depreciation and amortization expenses | (7,600 | ) | (33,000 | ) | ||||||
| EBITDA | (10,500 | ) | (29,300 | ) | ||||||
| Less: | ||||||||||
| Income (loss) from affiliates | (300 | ) | (1,200 | ) | ||||||
| Net (income) loss attributable to | ||||||||||
| non-controlling interests | 4,100 | 14,100 | ||||||||
| Stock-based compensation | (5,000 | ) | (22,000 | ) | ||||||
| Transaction costs | (4,300 | ) | (16,200 | ) | ||||||
| Adjusted EBITDA | $ | (5,000 | ) | $ | (4,000 | ) |
The guidance reconciliation provided above reconciles the midpoint of the respective guidance ranges to the most comparable GAAP measure.
FORWARD-LOOKING STATEMENTS - CAUTIONARY LANGUAGE
Certain statements made in this 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 future actions, trends in our businesses, prospective services, future performance or financial results 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:
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 2015 Form 10-K and other documents filed with the SEC include additional factors that could affect our business 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 report.