Full Press Release Details
Evolent Health Announces Fourth Quarter and Full Year 2020 Results
Washington, D.C., (February 25, 2021) - 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 and full year ended December 31, 2020.
Highlights from the fourth quarter and full year 2020 announcement include (all comparisons are to the quarter and full year ended December 31, 2019)
Quarter ended December 31, 2020
GAAP revenue of $271.9 million, an increase of 15.0% year-over-year.
Net loss attributable to common shareholders of Evolent Health, Inc. of $(14.6) million.
Achieved Adjusted EBITDA of $16.1 million.
Lives on Full Platform of approximately 3.6 million and New Century Health Technology Services Suite of 6.2 million
Full year ended December 31, 2020
GAAP revenue of $1.02 billion, an increase of 20.8% year-over-year.
Net loss attributable to common shareholders of Evolent Health, Inc. of $(334.2) million.
Achieved Adjusted EBITDA of $41.4 million.
Additional announcements
Evolent adds two new regional physician group partners, in addition to expanding partnership with Blue Cross Blue Shield of Texas for total cost of care.
Evolent expands its New Century Health partnership with Centene.
Seth Blackley, Chief Executive Officer and Co-Founder of Evolent Health commented, "Overall, we are very pleased with our results for the quarter and the year, having exceeded the high-end of ranges for both our top and bottom line targets. We also continue to make strong progress on executing our strategic priorities strong organic growth, expanding margins and optimal capital allocation."
Mr. Blackley commented, "Our differentiated products and strong market momentum led to the addition of eight new payer and provider partners and strong same-store sales growth in 2020. This was at the top end of our new partner target, which demonstrates the diversity of our partner base and depth across the business. Today, we are excited to announce Evolent Care Partners, our total cost of care solution, has entered into partnerships with two new regional physician groups. In addition, we are expanding current partnerships with Blue Cross Blue Shield of Texas and Centene. Our pipeline remains strong and we are seeing robust demand for our solutions due to macro trends, including increasing pressure on Medicare and Medicaid budgets and the acceleration of cost reducing measures."
Mr. Blackley continued, "In 2020, we achieved positive cash flow ahead of schedule. Our cost reduction effort continues to be in line with our expectations and we are on track with margin expansion. Furthermore, across 2020, we delivered on our commitment to further focus on our core and exit the health plan business as we have now monetized, or entered into agreements to monetize, all health plan assets. The monetization of our plans and our disciplined focus on our cost structure have allowed us to de-lever, and as of today, we have a strong cash position and no senior debt."
Mr. Blackley concluded, "Looking ahead, we enter 2021 with strong momentum and high visibility. Our decade of experience leading the market in population health is a key differentiator in creating value for our partners. We remain committed to our strategic priorities and are well set up, operationally and strategically, heading into 2021."
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.
Evolent Health, Inc. reported the following results in accordance with U.S. generally accepted accounting principles ("GAAP")
Revenue of $271.9 million and $236.5 million for the three months ended December 31, 2020 and 2019, respectively, an increase of 15.0%. Revenue of $1.02 billion and $846.4 million for the years ended December 31, 2020 and 2019, respectively, an increase of 20.8%.
Services revenue of $246.5 million and $204.0 million for the three months ended December 31, 2020 and 2019, respectively, before intersegment eliminations of $(4.9) million and $(3.1) million, respectively. Services revenue of $925.0 million and $687.1 million for the years ended December 31, 2020 and 2019, respectively, before intersegment eliminations of $(19.9) million and $(12.5) million, respectively and
True Health premiums revenue of $30.2 million and $35.8 million for the three months ended December 31, 2020 and 2019, respectively, before intersegment eliminations of $77 thousand and $(0.2) million, respectively. True Health premiums revenue of $117.6 million and $172.7 million for the years ended December 31, 2020 and 2019, respectively, before intersegment eliminations of $(0.2) million and $(1.0) million, respectively.
Cost of revenue of $176.7 million and $155.5 million for the three months ended December 31, 2020 and 2019, respectively, an increase of 13.7%. Cost of revenue of $701.4 million and $513.1 million for the years ended December 31, 2020 and 2019, respectively, an increase of 36.7%.
Claims expenses of $24.8 million and $27.1 million for the three months ended December 31, 2020 and 2019, respectively, a decrease of (8.5)%. Claims expenses of $88.0 million and $135.8 million for the years ended December 31, 2020 and 2019, respectively, a decrease of (35.2)%.
Selling, general and administrative expenses of $61.6 million and $56.5 million for the three months ended December 31, 2020 and 2019, respectively, an increase of 9.1%. Selling, general and administrative expenses of $222.6 million and $257.0 million for the years ended December 31, 2020 and 2019, respectively, a decrease of (13.4)%.
Net loss attributable to common shareholders of Evolent Health, Inc. of $(14.6) million and $(198.1) million for the three months ended December 31, 2020 and 2019, respectively and $(334.2) million and $(302.0) million for the years ended December 31, 2020 and 2019, respectively.
Loss attributable to common shareholders of Evolent Health, Inc., per basic and diluted share, of $(0.17) and $(2.36) for the three months ended December 31, 2020 and 2019, respectively, and $(3.94) and $(3.67) for the years ended December 31, 2020 and 2019, respectively.
Total cash and cash equivalents and investments as of December 31, 2020, was $355.3 million.
Adjusted Cost of Revenue of $176.3 million and $155.8 million for the three months ended December 31, 2020 and 2019, respectively, an increase of 13.2%. Adjusted Cost of Revenue of $693.7 million and $507.3 million for the years ended December 31, 2020 and 2019, respectively, an increase of 36.8%.
Claims expenses of $24.8 million and $27.1 million for the three months ended December 31, 2020 and 2019, respectively, a decrease of (8.5)%. Claims expenses of $88.0 million and $135.8 million for the years ended December 31, 2020 and 2019, respectively, a decrease of (35.2)%.
Adjusted selling, general and administrative expenses of $54.7 million and $46.5 million for the three months ended December 31, 2020 and 2019, respectively, an increase of 17.7%. Adjusted selling,
general and administrative expenses of $199.3 million and $216.2 million for the years ended December 31, 2020 and 2019, respectively, a decrease of (7.8)%.
Adjusted EBITDA of $16.1 million and $8.2 million for the three months ended December 31, 2020 and 2019, respectively. Adjusted EBITDA of $41.4 million and $(11.0) million for the years ended December 31, 2020 and 2019, respectively.
Adjusted Loss Available to Common Shareholders of $(0.6) million and $(5.8) million for the three months ended December 31, 2020 and 2019, respectively. Adjusted Loss Available to Common Shareholders of $(17.7) million and $(60.2) million for the years ended December 31, 2020 and 2019, respectively.
Adjusted Loss per Share Available to Common Shareholders of $(0.01) and $(0.07) for the three months ended December 31, 2020 and 2019, respectively. Adjusted Loss per Share Available to Common Shareholders of $(0.21) and $(0.72) for the years ended December 31, 2020 and 2019, respectively.
The Company is not providing forward looking guidance for GAAP reported financial measures. A reconciliation of forward looking Adjusted EBITDA to net loss attributable to common shareholders of Evolent Health, Inc., the most comparable GAAP financial measure, is provided in the Guidance Reconciliation table below.
With the pending sale of True Health New Mexico, the Company expects to report True Health results as a discontinued operation in 2021, and the Company is providing forward-looking guidance for the Services business only.
Revenue for the year ending December 31, 2021 is expected to be in the range of approximately $830.0 million to $880.0 million. Adjusted EBITDA is expected to be in the range of approximately $40.0 million to $50.0 million.
For the three months ending March 31, 2021, revenue is expected to be in the range of approximately $205.0 million to $215.0 million. Adjusted EBITDA is expected to be in the range of approximately $10.0 million to $14.0 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 below 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 25, 2021, at 5 00 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 the Evolent Health call. Participants are advised to dial in at least fifteen minutes prior to the call to register. The call will be archived on the company's website for one week and will be available beginning later this evening. Evolent Health invites all interested parties to attend the conference 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.
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Non-GAAP Financial Measures
In addition to disclosing financial results that are determined in accordance with GAAP, we present and discuss Adjusted Revenue, Adjusted Services Revenue, Adjusted Transformation Services Revenue, Adjusted Platform and Operations Services Revenue, Adjusted Cost of Revenue, Adjusted Selling, General and Administrative Expenses, Adjusted Depreciation and Amortization Expenses, Adjusted Total Operating Expenses, Adjusted Operating Income (Loss), Adjusted EBITDA, Services Adjusted EBITDA, True Health Adjusted EBITDA, Adjusted Earnings (Loss) Available to Common Shareholders, Adjusted Earnings (Loss) per Share Available to Common Shareholders and Adjusted Weighted-Average Common Shares, which are all non-GAAP financial measures, as supplemental measures to help investors evaluate our fundamental operational performance.
Adjusted Services Revenue is defined as the sum of Adjusted Transformation Services Revenue and Adjusted Platform and Operations Services Revenue. Adjusted Revenue is defined as the sum of Adjusted Services Revenue and True Health premiums revenue, less relevant intersegment eliminations. Management uses Adjusted Revenue, Adjusted Services Revenue, Adjusted Transformation Services Revenue and Adjusted Platform and Operations Services 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 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, securities offerings and 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 costs that are not expected to reoccur frequently (e.g. acquisition-related costs) and non-cash (e.g. stock-based compensation expenses) in nature. 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. Because we do not acquire businesses on a predictable cycle, 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 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 adjustments such as goodwill impairment, equity method investment impairment, severance costs, and items arising from acquisitions and business combinations, such as changes in fair value of contingent consideration and indemnification assets.
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 loss attributable to common shareholders of Evolent Health, Inc. before interest income, interest expense, (provision) benefit for income taxes, depreciation and amortization expenses), adjusted to exclude equity method investment impairment, loss on extinguishment of debt, gain (loss) from equity method investees, gain (loss) on disposal of assets and consolidation, goodwill impairment, changes in fair value of contingent consideration and indemnification asset, other income (expense), net, net loss attributable to non-controlling interests, purchase accounting adjustments, repositioning cost, stock-based compensation expense, severance costs, amortization of contract cost assets and acquisition-related costs. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by Adjusted Revenue.
Management uses Adjusted EBITDA as a supplemental performance measure because the removal of acquisition-related costs, one-time 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 Earnings (Loss) Available to Common Shareholders is defined as earnings (loss) attributable to common shareholders adjusted to exclude, income (loss) from equity method investees, other income (expense), net, gain (loss) on disposal of assets, impairment of equity method investees, goodwill impairment, changes in fair value of contingent consideration and indemnification assets, net (income) loss attributable to non-controlling interests, 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, acquisition-related costs and other one-time adjustments.
Adjusted Weighted-Average Common 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 Common Shareholders is defined as Adjusted Earnings (Loss) Available to Common Shareholders divided by Adjusted Weighted-Average Common Shares, and reflects the adjustments made in those non-GAAP measures.
Management uses Adjusted Earnings (Loss) Available to Common Shareholders, Adjusted Weighted-Average Common Shares and Adjusted Earnings (Loss) per Share Available to Common 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.
Lives on platform are calculated by summing members on our value-based care and comprehensive health plan administrative platform, as well as members covered for oncology specialty care services and members covered for cardiology specialty care services. Members covered for more than one category are counted in each category. Management uses lives on platform as a supplemental performance measure because we believe that it provides insight into the unit economics of our services. We believe that this measure is also useful to investors because it allows further insight into the period over period operational performance.
Evolent Health, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share data)
| For the Three Months Ended December 31, | For the Year Ended December 31, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Revenue | |||||||||||||||
| Transformation services | $ | 1,190 | $ | 4,722 | $ | 11,990 | $ | 15,203 | |||||||
| Platform and operations services | 240,492 | 196,186 | 893,066 | 659,438 | |||||||||||
| Premiums | 30,241 | 35,617 | 117,377 | 171,742 | |||||||||||
| Total revenue | 271,923 | 236,525 | 1,022,433 | 846,383 | |||||||||||
| Expenses | |||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) | 176,743 | 155,472 | 701,373 | 513,059 | |||||||||||
| Claims expenses | 24,815 | 27,130 | 87,951 | 135,774 | |||||||||||
| Selling, general and administrative expenses | 61,633 | 56,468 | 222,600 | 257,046 | |||||||||||
| Depreciation and amortization expenses | 14,865 | 15,947 | 61,475 | 60,913 | |||||||||||
| (Gain) loss on disposal of assets and consolidation | (5,749) | - | 698 | (9,600) | |||||||||||
| Goodwill impairment | - | 199,800 | 215,100 | 199,800 | |||||||||||
| Change in fair value of contingent consideration and indemnification asset | 4,352 | (3,697) | 3,860 | (3,997) | |||||||||||
| Total operating expenses | 276,659 | 451,120 | 1,293,057 | 1,152,995 | |||||||||||
| Operating loss | (4,736) | (214,595) | (270,624) | (306,612) | |||||||||||
| Interest income | 115 | 961 | 3,164 | 3,987 | |||||||||||
| Interest expense | (8,340) | (3,722) | (28,337) | (14,534) | |||||||||||
| Impairment of equity method investments | - | - | (47,133) | - | |||||||||||
| Gain (loss) from equity method investees | (975) | (3,278) | 10,039 | (9,465) | |||||||||||
| Loss on extinguishment of debt, net | - | - | (4,789) | - | |||||||||||
| Other income (expense), net | (289) | (248) | (119) | (492) | |||||||||||
| Loss before income taxes and non-controlling interests | (14,225) | (220,882) | (337,799) | (327,116) | |||||||||||
| Provision (benefit) for income taxes | (422) | (21,589) | (3,553) | (21,536) | |||||||||||
| Net loss | (13,803) | (199,293) | (334,246) | (305,580) | |||||||||||
| Net gain (loss) attributable to non-controlling interests | 822 | (1,197) | - | (3,609) | |||||||||||
| Net loss attributable to common shareholders of Evolent Health, Inc. | $ | (14,625) | $ | (198,096) | $ | (334,246) | $ | (301,971) | |||||||
| Loss per common share | |||||||||||||||
| Basic and diluted | $ | (0.17) | $ | (2.36) | $ | (3.94) | $ | (3.67) | |||||||
| Weighted-average common shares outstanding | |||||||||||||||
| Basic and diluted | 84,289 | 83,944 | 84,928 | 82,364 | |||||||||||
| Comprehensive loss | |||||||||||||||
| Net loss | $ | (13,803) | $ | (199,293) | $ | (334,246) | $ | (305,580) | |||||||
| Other comprehensive loss, net of taxes, related to | |||||||||||||||
| Foreign currency translation adjustment | 42 | (19) | (44) | (52) | |||||||||||
| Total comprehensive loss | (13,761) | (199,312) | (334,290) | (305,632) | |||||||||||
| Total comprehensive loss attributable to non-controlling interests | 822 | (1,197) | - | (3,609) | |||||||||||
| Total comprehensive loss attributable to common shareholders of Evolent Health, Inc. | $ | (14,583) | $ | (198,115) | $ | (334,290) | $ | (302,023) |
Evolent Health, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
| December 31, | |||||||
| 2020 | 2019 | ||||||
| Cash and cash equivalents | $ | 340,490 | $ | 101,008 | |||
| Restricted cash | 21,091 | 27,523 | |||||
| Restricted investments | 616 | 817 | |||||
| Total current assets | 546,134 | 228,801 | |||||
| Investments, at amortized cost | 14,777 | 18,558 | |||||
| Intangible assets, net | 268,072 | 308,459 | |||||
| Goodwill | 354,734 | 572,064 | |||||
| Total assets | 1,370,185 | 1,498,015 | |||||
| Accounts payable | 32,068 | 37,488 | |||||
| Long-term debt, net of discount | 263,343 | 293,667 | |||||
| Total liabilities | 750,585 | 568,968 | |||||
| Total shareholders' equity attributable to Evolent Health, Inc. | 619,600 | 922,358 | |||||
| Non-controlling interests | - | 6,689 | |||||
| Total liabilities and shareholders' equity (deficit) | 1,370,185 | 1,498,015 |
Evolent Health, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
| For the Year Ended December 31, | ||||||
| 2020 | 2019 | |||||
| Net cash and restricted cash used in operating activities | $ | (16,225) | (42,645) | |||
| Net cash and restricted cash from (used in) investing activities | 261,072 | (181,634) | ||||
| Net cash and restricted cash from (used in) financing activities | (11,862) | (35,545) | ||||
| Effect of exchange rate on cash and cash equivalents and restricted cash | 65 | 30 | ||||
| Net increase (decrease) in cash and cash equivalents and restricted cash | 233,050 | (259,794) | ||||
| Cash and cash equivalents and restricted cash as of beginning-of-period | 128,531 | 388,325 | ||||
| Cash and cash equivalents and restricted cash as of end-of-period | $ | 361,581 | 128,531 |
Evolent Health, Inc.
Reconciliation of Adjusted Results of Operations
(in thousands, unaudited)
| For the Three Months Ended December 31, 2020 | For the Three Months Ended December 31, 2019 | 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 | ||||||||||||||||||||||||||||||||||||||
| Transformation services | $ | 1,190 | $ | - | $ | 1,190 | $ | 4,722 | $ | - | $ | 4,722 | $ | (3,532) | (74.8) | % | $ | (3,532) | (74.8) | % | ||||||||||||||||||
| Platform and operations services (1) | 240,492 | - | 240,492 | 196,186 | 989 | 197,175 | 44,306 | 22.6 | % | 43,317 | 22.0 | % | ||||||||||||||||||||||||||
| Premiums | 30,241 | - | 30,241 | 35,617 | - | 35,617 | (5,376) | (15.1) | % | (5,376) | (15.1) | % | ||||||||||||||||||||||||||
| Total revenue | 271,923 | - | 271,923 | 236,525 | 989 | 237,514 | 35,398 | 15.0 | % | 34,409 | 14.5 | % | ||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (2) | 176,743 | (409) | 176,334 | 155,472 | 308 | 155,780 | 21,271 | 13.7 | % | 20,554 | 13.2 | % | ||||||||||||||||||||||||||
| Claims expenses | 24,815 | - | 24,815 | 27,130 | - | 27,130 | (2,315) | (8.5) | % | (2,315) | (8.5) | % | ||||||||||||||||||||||||||
| Selling, general and administrative expenses (3) | 61,633 | (6,944) | 54,689 | 56,468 | (10,017) | 46,451 | 5,165 | 9.1 | % | 8,238 | 17.7 | % | ||||||||||||||||||||||||||
| Depreciation and amortization expenses (4) | 14,865 | (5,983) | 8,882 | 15,947 | (6,281) | 9,666 | (1,082) | (6.8) | % | (784) | (8.1) | % | ||||||||||||||||||||||||||
| (Gain) loss on disposal of assets and consolidation | (5,749) | 5,749 | - | - | - | - | (5,749) | (100.0) | % | - | - | % | ||||||||||||||||||||||||||
| Goodwill impairment | - | - | - | 199,800 | (199,800) | - | (199,800) | (100.0) | % | - | - | % | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration and indemnification asset | 4,352 | (4,352) | - | (3,697) | 3,697 | - | 8,049 | (217.7) | % | - | - | % | ||||||||||||||||||||||||||
| Total operating expenses | 276,659 | (11,939) | 264,720 | 451,120 | (212,093) | 239,027 | (174,461) | (38.7) | % | 25,693 | 10.7 | % | ||||||||||||||||||||||||||
| Operating income (loss) | $ | (4,736) | $ | 11,939 | $ | 7,203 | $ | (214,595) | $ | 213,082 | $ | (1,513) | $ | 209,859 | 97.8 | % | $ | 8,716 | 576.1 | % | ||||||||||||||||||
| Total operating expenses as a percentage of total revenue | 101.7 | % | 97.4 | % | 190.7 | % | 100.6 | % |
(1)Adjustments to platform and operations services revenue include deferred revenue purchase accounting adjustments of approximately $1.0 million for the three months ended December 31, 2019, resulting from our acquisitions and business combinations.
(2)Adjustments to cost of revenue include $0.5 million and $(0.6) million in stock-based compensation expense for the three months ended December 31, 2020 and 2019, respectively. The adjustments also include approximately $48.0 thousand and $0.2 million related to the amortization of contract cost assets recorded as a result of the one-time ASC 606 transition adjustment for the three months ended December 31, 2020 and 2019, respectively. Adjustments also include acquisition-related costs of approximately $0.1 million for the three months ended December 31, 2019 resulting from acquisitions and business combinations.
(3)Adjustments to selling, general and administrative expenses include $3.8 million and $1.2 million in stock-based compensation expense for the three months ended December 31, 2020 and 2019, respectively. Adjustments also include acquisition-related costs of $0.8 million and $6.3 million for the three months ended December 31, 2020 and 2019, respectively, resulting from acquisitions and business combinations. Adjustments for the three months ended December 31, 2020 and 2019 also include $1.0 million and $2.6 million of severance costs, respectively. Adjustments for the three months ended December 31, 2020 include $1.3 million of repositioning costs.
(4)Adjustments to depreciation and amortization expenses of approximately $6.0 million and $6.3 million for the three months ended December 31, 2020 and 2019, respectively, relate to amortization of intangible assets acquired via asset acquisitions and business combinations.
| For the Year Ended December 31, 2020 | For the Year ended December 31, 2019 | 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 | ||||||||||||||||||||||||||||||||||||||
| Transformation services | $ | 11,990 | $ | - | $ | 11,990 | $ | 15,203 | $ | - | $ | 15,203 | $ | (3,213) | (21.1) | % | $ | (3,213) | (21.1) | % | ||||||||||||||||||
| Platform and operations services (1) | 893,066 | - | 893,066 | 659,438 | 1,915 | 661,353 | 233,628 | 35.4 | % | 231,713 | 35.0 | % | ||||||||||||||||||||||||||
| Premiums | 117,377 | - | 117,377 | 171,742 | - | 171,742 | (54,365) | (31.7) | % | (54,365) | (31.7) | % | ||||||||||||||||||||||||||
| Total revenue | 1,022,433 | - | 1,022,433 | 846,383 | 1,915 | 848,298 | 176,050 | 20.8 | % | 174,135 | 20.5 | % | ||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (2) | 701,373 | (7,629) | 693,744 | 513,059 | (5,758) | 507,301 | 188,314 | 36.7 | % | 186,443 | 36.8 | % | ||||||||||||||||||||||||||
| Claims expenses | 87,951 | - | 87,951 | 135,774 | - | 135,774 | (47,823) | (35.2) | % | (47,823) | (35.2) | % | ||||||||||||||||||||||||||
| Selling, general and administrative expenses (3) | 222,600 | (23,298) | 199,302 | 257,046 | (40,857) | 216,189 | (34,446) | (13.4) | % | (16,887) | (7.8) | % | ||||||||||||||||||||||||||
| Depreciation and amortization expenses (4) | 61,475 | (23,976) | 37,499 | 60,913 | (24,476) | 36,437 | 562 | 0.9 | % | 1,062 | 2.9 | % | ||||||||||||||||||||||||||
| (Gain) loss on disposal of assets | 698 | (698) | - | (9,600) | 9,600 | - | 10,298 | 107.3 | % | - | - | % | ||||||||||||||||||||||||||
| Goodwill impairment | 215,100 | (215,100) | - | 199,800 | (199,800) | - | 15,300 | 7.7 | % | - | - | % | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration and indemnification asset | 3,860 | (3,860) | - | (3,997) | 3,997 | - | 7,857 | 196.6 | % | - | - | % | ||||||||||||||||||||||||||
| Total operating expenses | 1,293,057 | (274,561) | 1,018,496 | 1,152,995 | (257,294) | 895,701 | 140,062 | 12.1 | % | 122,795 | 13.7 | % | ||||||||||||||||||||||||||
| Operating income (loss) | $ | (270,624) | $ | 274,561 | $ | 3,937 | $ | (306,612) | $ | 259,209 | $ | (47,403) | $ | 35,988 | 11.7 | % | $ | 51,340 | 108.3 | % | ||||||||||||||||||
| Total operating expenses as a percentage of total revenue | 126.5 | % | 99.6 | % | 136.2 | % | 105.6 | % |
(1)Adjustments to platform and operations services revenue include deferred revenue purchase accounting adjustments of approximately $1.9 million for the year ended December 31, 2019, resulting from our acquisitions and business combinations.
(2)Adjustments to cost of revenue include $1.8 million and $2.7 million in stock-based compensation expense for the years ended December 31, 2020 and 2019, respectively. Adjustments also include acquisition-related costs of approximately $0.4 million for the year ended December 31, 2019, resulting from acquisitions and business combinations. The adjustments also include approximately $3.6 million and $2.7 million related to the amortization of contract cost assets recorded as a result of the one-time ASC 606 transition adjustment for the years ended December 31, 2020 and 2019, respectively. Adjustments for the year ended December 31, 2020 include $2.2 million of severance costs.
(3)Adjustments to selling, general and administrative expenses include $12.8 million and $12.9 million in stock-based compensation expense for the years ended December 31, 2020 and 2019, respectively. Adjustments also include acquisition-related costs of $2.4 million and $10.6 million for the years ended December 31, 2020 and 2019, respectively, resulting from acquisitions and business combinations. Adjustments for the years ended December 31, 2020 and 2019 also include $6.8 million and $17.4 million of severance costs, respectively. Adjustments for the year ended December 31, 2020 include $1.3 million of repositioning costs.
(4)Adjustments to depreciation and amortization expenses of approximately $24.0 million and $24.5 million for the years ended December 31, 2020 and 2019, respectively, relate to amortization of intangible assets acquired via asset acquisitions and business combinations.
Evolent Health, Inc.
(in thousands, unaudited)
| Services | True Health | Intersegment Eliminations | Consolidated | ||||||||||||
| Revenue | |||||||||||||||
| For the Three Months Ended December 31, 2020 | |||||||||||||||
| Services | |||||||||||||||
| Transformation services | $ | 1,190 | $ | - | $ | - | $ | 1,190 | |||||||
| Platform and operations services | 245,352 | - | (4,860) | 240,492 | |||||||||||
| Services revenue | 246,542 | - | (4,860) | 241,682 | |||||||||||
| True Health | |||||||||||||||
| Premiums | - | 30,164 | 77 | 30,241 | |||||||||||
| Total revenue | $ | 246,542 | $ | 30,164 | $ | (4,783) | $ | 271,923 | |||||||
| For the Three Months Ended December 31, 2019 | |||||||||||||||
| Services | |||||||||||||||
| Transformation services | $ | 4,722 | $ | - | $ | - | $ | 4,722 | |||||||
| Platform and operations services | 199,281 | - | (3,095) | 196,186 | |||||||||||
| Services revenue | 204,003 | - | (3,095) | 200,908 | |||||||||||
| True Health | |||||||||||||||
| Premiums | - | 35,817 | (200) | 35,617 | |||||||||||
| Total revenue | $ | 204,003 | $ | 35,817 | $ | (3,295) | $ | 236,525 | |||||||
| Services | True Health | Segments Total | |||||||||||||
| For the Three Months Ended December 31, 2020 | |||||||||||||||
| Adjusted EBITDA | $ | 20,395 | $ | (4,308) | $ | 16,087 | |||||||||
| For the Three Months Ended December 31, 2019 | |||||||||||||||
| Adjusted EBITDA | $ | 6,489 | $ | 1,661 | $ | 8,150 |
| Services | True Health | Intersegment Eliminations | Consolidated | ||||||||||||
| Revenue | |||||||||||||||
| For the Year Ended December 31, 2020 | |||||||||||||||
| Services | |||||||||||||||
| Transformation services | $ | 11,990 | $ | - | $ | - | $ | 11,990 | |||||||
| Platform and operations services | 913,005 | - | (19,939) | 893,066 | |||||||||||
| Services revenue | 924,995 | - | (19,939) | 905,056 | |||||||||||
| True Health | |||||||||||||||
| Premiums | - | 117,579 | (202) | 117,377 | |||||||||||
| Total revenue | $ | 924,995 | $ | 117,579 | $ | (20,141) | $ | 1,022,433 | |||||||
| For the Year Ended December 31, 2019 | |||||||||||||||
| Services | |||||||||||||||
| Transformation services | $ | 15,203 | $ | - | $ | - | $ | 15,203 | |||||||
| Platform and operations services | 671,919 | - | (12,481) | 659,438 | |||||||||||
| Services revenue | 687,122 | - | (12,481) | 674,641 | |||||||||||
| True Health | |||||||||||||||
| Premiums | - | 172,722 | (980) | 171,742 | |||||||||||
| Total revenue | $ | 687,122 | $ | 172,722 | $ | (13,461) | $ | 846,383 | |||||||
| Services | True Health | Segments Total | |||||||||||||
| For the Year Ended December 31, 2020 | |||||||||||||||
| Adjusted EBITDA | $ | 48,573 | $ | (7,137) | $ | 41,436 | |||||||||
| For the Year Ended December 31, 2019 | |||||||||||||||
| Adjusted EBITDA | $ | (14,667) | $ | 3,699 | $ | (10,968) |
Evolent Health, Inc.
Reconciliation of Adjusted EBITDA to Net Loss
Attributable to Common Shareholders of Evolent Health, Inc.
(in thousands, except per share data)
| For the Three Months Ended December 31, | For the Year Ended December 31, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Net loss attributable to common shareholders of Evolent Health, Inc. | $ | (14,625) | $ | (198,096) | $ | (334,246) | $ | (301,971) | |||||||
| GAAP margin | (5.4) | % | (83.8) | % | (32.7) | % | (35.7) | % | |||||||
| Less | |||||||||||||||
| Interest income | 115 | 961 | 3,164 | 3,987 | |||||||||||
| Interest expense | (8,340) | (3,722) | (28,337) | (14,534) | |||||||||||
| Benefit for income taxes | 422 | 21,589 | 3,553 | 21,536 | |||||||||||
| Depreciation and amortization expenses | (14,865) | (15,947) | (61,475) | (60,913) | |||||||||||
| EBITDA | 8,043 | (200,977) | (251,151) | (252,047) | |||||||||||
| Less | |||||||||||||||
| Impairment of equity method investees | - | - | (47,133) | - | |||||||||||
| Loss on extinguishment of debt | - | - | (4,789) | - | |||||||||||
| Gain (loss) from equity method investees | (975) | (3,278) | 10,039 | (9,465) | |||||||||||
| Gain (loss) on disposal of assets and consolidation | 5,749 | - | (698) | 9,600 | |||||||||||
| Goodwill impairment | - | (199,800) | (215,100) | (199,800) | |||||||||||
| Change in fair value of contingent consideration and indemnification asset | (4,352) | 3,697 | (3,860) | 3,997 | |||||||||||
| Other income (expense), net | (289) | (248) | (119) | (492) | |||||||||||
| Net (gain) loss attributable to non-controlling interests | (822) | 1,197 | - | 3,609 | |||||||||||
| Purchase accounting adjustments | - | (989) | - | (1,915) | |||||||||||
| Repositioning costs | (1,275) | - | (1,275) | - | |||||||||||
| Stock-based compensation expense | (4,231) | (572) | (14,606) | (15,618) | |||||||||||
| Severance costs | (1,096) | (2,560) | (8,986) | (17,350) | |||||||||||
| Amortization of contract cost assets | (127) | (263) | (3,944) | (2,876) | |||||||||||
| Acquisition-related costs | (626) | (6,311) | (2,116) | (10,769) | |||||||||||
| Adjusted EBITDA | $ | 16,087 | $ | 8,150 | $ | 41,436 | $ | (10,968) | |||||||
| Adjusted EBITDA margin | 5.9 | % | 3.4 | % | 4.1 | % | (1.3) | % |
Evolent Health, Inc.
Reconciliation of Adjusted Earnings (Loss) Available to Common