Full Press Release Details
Evolent Health Announces Second Quarter 2018 Results
WASHINGTON, D.C., August 7, 2018 - 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 ended June 30, 2018.
Highlights from the second quarter of 2018 announcement include (all comparisons are to the quarter ended June 30, 2017):
Frank Williams, Chief Executive Officer of Evolent Health, Inc., commented, "We are quite pleased with our second quarter results as we achieved our key strategic, operational and financial objectives. We continue to see considerable interest from provider organizations looking to move substantially into value-based care as well as existing risk-bearing organizations focused on improving performance."
Mr. Williams commented, "We also continue to see considerable wins and momentum in the Medicaid market. Establishing a major presence in key markets such as Miami-Dade, Palm Beach, Fort Myers, Pensacola and Tallahassee creates a strong, long-term growth opportunity for Evolent in Florida and beyond."
Mr. Williams added, "We are excited to announce our partnership with Torrance Health IPA and Torrance Memorial Integrated Physicians in California. Torrance has a strong reputation and highly engaged physicians across its network, and we look forward to elevating the performance of its Medicare risk business."
Mr. Williams concluded, "Lastly, we are pleased to report that our 2018 Next Generation ACO cohort is operational and continues to perform well from both a cost and clinical quality standpoint. Our continued ability to identify and codify best practices across the network is driving meaningful improvements in health outcomes for patients across multiple regions and serves as a model for our Medicare Center of Excellence."
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. We are not providing forward looking guidance for GAAP reported financial measures in the "Business Outlook" section below. A reconciliation of forward looking non-GAAP financial measures to the most comparable GAAP financial measure is provided in the "Guidance Reconciliation" table below. 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 United States of America generally accepted accounting principles ("GAAP") results:
Total cash and cash equivalents as of June 30, 2018, were $198.0 million.
For the full year 2018, Adjusted Revenue is expected to be in the range of approximately $570.0 million to $585.0 million. We are making two small adjustments to full year guidance: reducing the high end of the range in the Services business by $5.0 million and adjusting the intersegment eliminations to $15.0 million from $20.0 million. The components of Adjusted Revenue include Adjusted Services Revenue, which is forecasted to be approximately $495.0 million to $505.0 million, and True Health premiums revenue, which is forecasted to be approximately $90.0 million to $95.0 million; intersegment eliminations are forecasted to be approximately $(15.0) million for the full year. Adjusted EBITDA is expected to be in the range of approximately $18.0 million to $23.0 million.
For the three months ended June 30, 2018, Adjusted Revenue is expected to be in the range of approximately $140.0 million to $144.0 million. The components of Adjusted Revenue include Adjusted Services Revenue, which is forecasted to be approximately $122.0 million to $124.0 million, and True Health premiums revenue, which is forecasted to be approximately $22.0 million to $24.0 million; intersegment eliminations are forecasted to be approximately $(4.0) million for the quarter. Adjusted EBITDA is expected to be in the range of approximately $3.0 million to $5.0 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 second quarter performance this evening, August 7, 2018, 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, Inc.
Evolent Health, Inc.'s Services segment focuses on partnering with leading provider organizations to achieve superior clinical and financial results in value-based care. With a provider heritage and over 20 years of health plan administration experience, Evolent operates in more than 30 U.S. health care markets, actively managing care across Medicare, Medicaid, commercial and self-funded adult and pediatric populations. With the experience to drive change, Evolent confidently stands by a commitment to achieve results. Our True Health segment consists of a commercial health plan we operate in New Mexico that focuses on small and large businesses. For more information, visit 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. The financial results of Evolent Health LLC are consolidated in the financial statements of Evolent Health, Inc.
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 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.
Adjusted Transformation Services Revenue and Adjusted Platform and Operations Services Revenue are defined as transformation services revenue and platform and operations services revenue, respectively, before the effect of intersegment eliminations and adjusted to exclude the impact of purchase accounting adjustments. In addition, the company's Adjusted Transformation Services Revenue and Adjusted Platform and Operations Services Revenue for the six months ended June 30, 2018, include a $4.5 million adjustment related to revenue that was contracted for prior to 2018 and that was properly excluded from revenue in our 2017 results under the revenue recognition rules then in effect under Accounting Standards Codification ("ASC") 605. On January 1, 2018, we adopted the new revenue recognition rules under ASC 606 using the modified retrospective method, which required us to include this $4.5 million as part of the cumulative transition adjustment to beginning retained earnings as of January 1, 2018. Under ASC 605, and based on proportionate performance revenue recognition, we would have recognized an additional $4.5 million in revenue during 2018, primarily within our Adjusted Transformation Services Revenue. The company has therefore included this revenue, and related profit, in its adjusted results for the six months ended June 30, 2018, as they had not been previously reported prior to 2018 and the contracts are expected to be completed within 2018. This is a one-time adjustment and it will not reoccur in future periods.
Adjusted Services Revenue is defined as the sum of Adjusted Transformation Revenue and Adjusted Platform and Operations 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, transaction 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 one-time (e.g. transaction 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.
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 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 adjusted to exclude the impact of one-time adjustments, such as goodwill 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 the sum of Services Adjusted EBITDA and True Health Adjusted EBITDA and is defined as EBITDA (net income (loss) attributable to Evolent Health, Inc. before interest income, interest expense, (provision) benefit for income taxes, depreciation and amortization expenses), adjusted to exclude, changes in fair value of contingent consideration and indemnification assets, income (loss) from equity affiliates, other income (expense), net, 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, transaction costs related to acquisitions and business combinations and other one-time adjustments (which for the six months ended June 30, 2018, includes the ASC 606 transition adjustment described above). Management uses Adjusted EBITDA as a supplemental performance measure because the removal of transaction 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 Class A and Class B Shareholders is defined as earnings (loss) available to common shareholders adjusted to exclude, income (loss) from equity affiliates, (provision) benefit for income taxes, 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, transaction costs related to acquisitions and business combinations and other one-time adjustments (which for the six months ended June 30, 2018, includes the ASC transition adjustment described above).
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 and Comprehensive Income (Loss)
| (in thousands, except per share data) | For the Three | For the Six | |||||||||||||
| Months Ended | Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Revenue | |||||||||||||||
| Transformation services | $ | 8,215 | $ | 5,361 | $ | 14,720 | $ | 15,596 | |||||||
| Platform and operations services | 113,346 | 101,710 | 223,164 | 197,714 | |||||||||||
| Premiums | 22,737 | - | 46,128 | - | |||||||||||
| Total revenue | 144,298 | 107,071 | 284,012 | 213,310 | |||||||||||
| Expenses | |||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization | |||||||||||||||
| expenses presented separately below) | 69,003 | 67,994 | 140,978 | 135,523 | |||||||||||
| Claims expenses | 18,428 | - | 35,177 | - | |||||||||||
| Selling, general and administrative expenses | 57,403 | 51,090 | 112,929 | 104,641 | |||||||||||
| Depreciation and amortization expenses | 10,034 | 6,904 | 19,530 | 13,519 | |||||||||||
| Change in fair value of contingent consideration and indemnification asset | (1,604 | ) | 200 | (1,504 | ) | 200 | |||||||||
| Total operating expenses | 153,264 | 126,188 | 307,110 | 253,883 | |||||||||||
| Operating income (loss) | (8,966 | ) | (19,117 | ) | (23,098 | ) | (40,573 | ) | |||||||
| Interest income | 878 | 218 | 1,950 | 403 | |||||||||||
| Interest expense | (855 | ) | (947 | ) | (1,708 | ) | (1,901 | ) | |||||||
| Income (loss) from equity affiliates | (1,275 | ) | (555 | ) | (1,406 | ) | (1,077 | ) | |||||||
| Other Income (expense), net | 78 | 3 | 60 | 5 | |||||||||||
| Income (loss) before income taxes and | |||||||||||||||
| non-controlling interests | (10,140 | ) | (20,398 | ) | (24,202 | ) | (43,143 | ) | |||||||
| Provision (benefit) for income taxes | (109 | ) | (700 | ) | (106 | ) | (295 | ) | |||||||
| Net income (loss) | (10,031 | ) | (19,698 | ) | (24,096 | ) | (42,848 | ) | |||||||
| Net income (loss) attributable to non-controlling interests | (115 | ) | (2,793 | ) | (554 | ) | (7,930 | ) | |||||||
| Net income (loss) attributable to Evolent Health, Inc. | $ | (9,916 | ) | $ | (16,905 | ) | $ | (23,542 | ) | $ | (34,918 | ) | |||
| Earnings (Loss) Available to Common Shareholders | |||||||||||||||
| Basic | $ | (9,916 | ) | $ | (16,905 | ) | $ | (23,542 | ) | $ | (34,918 | ) | |||
| Diluted | (9,916 | ) | (16,905 | ) | (23,542 | ) | (34,918 | ) | |||||||
| Earnings (Loss) per Common Share | |||||||||||||||
| Basic | $ | (0.13 | ) | $ | (0.28 | ) | $ | (0.31 | ) | $ | (0.62 | ) | |||
| Diluted | (0.13 | ) | (0.28 | ) | (0.31 | ) | (0.62 | ) | |||||||
| Weighted-Average Common Shares Outstanding | |||||||||||||||
| Basic | 77,209 | 59,478 | 76,297 | 56,057 | |||||||||||
| Diluted | 77,209 | 59,478 | 76,297 | 56,057 | |||||||||||
| Comprehensive income (loss) | |||||||||||||||
| Net income (loss) | $ | (10,031 | ) | $ | (19,698 | ) | $ | (24,096 | ) | $ | (42,848 | ) | |||
| Other comprehensive income (loss), net of taxes, related to: | |||||||||||||||
| Foreign currency translation adjustment | (148 | ) | - | (148 | ) | - | |||||||||
| Total comprehensive income (loss) | (10,179 | ) | (19,698 | ) | (24,244 | ) | (42,848 | ) | |||||||
| Total comprehensive income (loss) attributable to | |||||||||||||||
| non-controlling interests | (115 | ) | (2,793 | ) | (554 | ) | (7,930 | ) | |||||||
| Total comprehensive income (loss) attributable to | |||||||||||||||
| Evolent Health, Inc. | $ | (10,064 | ) | $ | (16,905 | ) | $ | (23,690 | ) | $ | (34,918 | ) |
Evolent Health, Inc.
Condensed Consolidated Balance Sheets
| (in thousands) | As of | As of | ||||||||
| June 30, | December 31, | |||||||||
| 2018 | 2017 | |||||||||
| Cash and cash equivalents | $ | 197,983 | $ | 238,433 | ||||||
| Restricted cash | 56,342 | 56,930 | ||||||||
| Restricted investments | 712 | 8,755 | ||||||||
| Note receivable | 12,000 | 20,000 | ||||||||
| Total current assets | 353,254 | 378,182 | ||||||||
| Intangible assets, net | 236,819 | 241,261 | ||||||||
| Goodwill | 635,282 | 628,186 | ||||||||
| Total assets | 1,321,620 | 1,312,697 | ||||||||
| Long-term debt, net of discount | 121,853 | 121,394 | ||||||||
| Total liabilities | 270,239 | 266,391 | ||||||||
| Total shareholders' equity (deficit) attributable to | ||||||||||
| Evolent Health, Inc. | 1,041,233 | 1,010,879 | ||||||||
| Non-controlling interests | 10,148 | 35,427 | ||||||||
| Total liabilities and shareholders' equity (deficit) | 1,321,620 | 1,312,697 |
Evolent Health, Inc.
Condensed Consolidated Statements of Cash Flows
| (in thousands) | For the Six | ||||||
| Months Ended | |||||||
| June 30, | |||||||
| 2018 | 2017 | ||||||
| Net cash and restricted cash provided by (used in) operating activities | $ | (18,004 | ) | $ | (37,812 | ) | |
| Net cash and restricted cash provided by (used in) investing activities | (19,376 | ) | 1,339 | ||||
| Net cash and restricted cash provided by (used in) financing activities | (3,665 | ) | (19,612 | ) | |||
| Effect of exchange rate on cash and cash equivalents and restricted cash | 7 | - | |||||
| Net increase (decrease) in cash and cash equivalents and restricted cash | (41,038 | ) | (56,085 | ) | |||
| Cash and cash equivalents and restricted cash as of beginning-of-period | 295,363 | 170,029 | |||||
| Cash and cash equivalents and restricted cash as of end-of-period | $ | 254,325 | $ | 113,944 |
Evolent Health, Inc.
Adjusted Results of Operations
| (in thousands) | For the Three Months Ended June 30, 2018 | For the Three Months Ended June 30, 2017 | ||||||||||||||||||||||||||||||||||||
| 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 services (1) | $ | 8,215 | $ | - | $ | 8,215 | $ | 5,361 | $ | - | $ | 5,361 | $ | 2,854 | 53.2 | % | $ | 2,854 | 53.2 | % | ||||||||||||||||||
| Platform and operations services (1) | 113,346 | 216 | 113,562 | 101,710 | 244 | 101,954 | 11,636 | 11.4 | % | 11,608 | 11.4 | % | ||||||||||||||||||||||||||
| Premiums | 22,737 | - | 22,737 | - | - | - | 22,737 | - | % | 22,737 | - | % | ||||||||||||||||||||||||||
| Total revenue | 144,298 | 216 | 144,514 | 107,071 | 244 | 107,315 | 37,227 | 34.8 | % | 37,199 | 34.7 | % | ||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of | ||||||||||||||||||||||||||||||||||||||
| depreciation and amortization | ||||||||||||||||||||||||||||||||||||||
| expenses presented | ||||||||||||||||||||||||||||||||||||||
| separately below) (2) | 69,003 | (815 | ) | 68,188 | 67,994 | (1,837 | ) | 66,157 | 1,009 | 1.5 | % | 2,031 | 3.1 | % | ||||||||||||||||||||||||
| Claims expenses | 18,428 | - | 18,428 | - | - | - | 18,428 | - | % | 18,428 | - | % | ||||||||||||||||||||||||||
| Selling, general and | ||||||||||||||||||||||||||||||||||||||
| administrative expenses (3) | 57,403 | (4,390 | ) | 53,013 | 51,090 | (6,370 | ) | 44,720 | 6,313 | 12.4 | % | 8,293 | 18.5 | % | ||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||
| expenses (4) | 10,034 | (2,769 | ) | 7,265 | 6,904 | (2,383 | ) | 4,521 | 3,130 | 45.3 | % | 2,744 | 60.7 | % | ||||||||||||||||||||||||
| Change in fair value of contingent | ||||||||||||||||||||||||||||||||||||||
| consideration and indemnification asset (5) | (1,604 | ) | 1,604 | - | 200 | (200 | ) | - | (1,804 | ) | (902.0 | )% | - | - | % | |||||||||||||||||||||||
| Total operating expenses | 153,264 | (6,370 | ) | 146,894 | 126,188 | (10,790 | ) | 115,398 | 27,076 | 21.5 | % | 31,496 | 27.3 | % | ||||||||||||||||||||||||
| Operating income (loss) | $ | (8,966 | ) | $ | 6,586 | $ | (2,380 | ) | $ | (19,117 | ) | $ | 11,034 | $ | (8,083 | ) | $ | 10,151 | 53.1 | % | $ | 5,703 | 70.6 | % | ||||||||||||||
| Total operating expenses as a | ||||||||||||||||||||||||||||||||||||||
| percentage of total revenue | 106.2 | % | 101.6 | % | 117.9 | % | 107.5 | % |
Evolent Health, Inc.
Adjusted Results of Operations
| (in thousands) | For the Six Months Ended June 30, 2018 | For the Six Months Ended June 30, 2017 | ||||||||||||||||||||||||||||||||||||
| 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 services (1) | $ | 14,720 | $ | 3,655 | $ | 18,375 | $ | 15,596 | $ | - | $ | 15,596 | $ | (876 | ) | (5.6 | )% | $ | 2,779 | 17.8 | % | |||||||||||||||||
| Platform and operations services (1) | 223,164 | 1,276 | 224,440 | 197,714 | 775 | 198,489 | 25,450 | 12.9 | % | 25,951 | 13.1 | % | ||||||||||||||||||||||||||
| Premiums | 46,128 | - | 46,128 | - | - | - | 46,128 | - | % | 46,128 | - | % | ||||||||||||||||||||||||||
| Total revenue | 284,012 | 4,931 | 288,943 | 213,310 | 775 | 214,085 | 70,702 | 33.1 | % | 74,858 | 35.0 | % | ||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of | ||||||||||||||||||||||||||||||||||||||
| depreciation and amortization | ||||||||||||||||||||||||||||||||||||||
| expenses presented | ||||||||||||||||||||||||||||||||||||||
| separately below) (2) | 140,978 | (2,451 | ) | 138,527 | 135,523 | (2,860 | ) | 132,663 | 5,455 | 4.0 | % | 5,864 | 4.4 | % | ||||||||||||||||||||||||
| Claims expenses | 35,177 | - | 35,177 | - | - | - | 35,177 | - | % | 35,177 | - | % | ||||||||||||||||||||||||||
| Selling, general and | ||||||||||||||||||||||||||||||||||||||
| administrative expenses (3) | 112,929 | (10,488 | ) | 102,441 | 104,641 | (14,882 | ) | 89,759 | 8,288 | 7.9 | % | 12,682 | 14.1 | % | ||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||
| expenses (4) | 19,530 | (5,405 | ) | 14,125 | 13,519 | (4,708 | ) | 8,811 | 6,011 | 44.5 | % | 5,314 | 60.3 | % | ||||||||||||||||||||||||
| Change in fair value of contingent | ||||||||||||||||||||||||||||||||||||||
| consideration and indemnification asset (5) | (1,504 | ) | 1,504 | - | 200 | (200 | ) | - | (1,704 | ) | (852.0 | )% | - | - | % | |||||||||||||||||||||||
| Total operating expenses | 307,110 | (16,840 | ) | 290,270 | 253,883 | (22,650 | ) | 231,233 | 53,227 | 21.0 | % | 59,037 | 25.5 | % | ||||||||||||||||||||||||
| Operating income (loss) | $ | (23,098 | ) | $ | 21,771 | $ | (1,327 | ) | $ | (40,573 | ) | $ | 23,425 | $ | (17,148 | ) | $ | 17,475 | 43.1 | % | $ | 15,821 | 92.3 | % | ||||||||||||||
| Total operating expenses as a | ||||||||||||||||||||||||||||||||||||||
| percentage of total revenue | 108.1 | % | 100.5 | % | 119.0 | % | 108.0 | % |
Evolent Health, Inc.
| Intersegment | ||||||||||||||||||||
| Services | True Health (1) | Eliminations | Consolidated | |||||||||||||||||
| Adjusted Revenue | ||||||||||||||||||||
| Three Months Ended June 30, 2018 | ||||||||||||||||||||
| Services: | ||||||||||||||||||||
| Adjusted Transformation Services | $ | 8,215 | $ | - | $ | - | $ | 8,215 | ||||||||||||
| Adjusted Platform and Operations Services | 117,177 | - | (3,615 | ) | 113,562 | |||||||||||||||
| Adjusted Services Revenue | 125,392 | - | (3,615 | ) | 121,777 | |||||||||||||||
| True Health: | ||||||||||||||||||||
| Premiums | - | 22,939 | (202 | ) | 22,737 | |||||||||||||||
| Adjusted Revenue | 125,392 | 22,939 | (3,817 | ) | 144,514 | |||||||||||||||
| Purchase accounting adjustments (2) | (216 | ) | - | - | (216 | ) | ||||||||||||||
| Total revenue | $ | 125,176 | $ | 22,939 | $ | (3,817 | ) | $ | 144,298 | |||||||||||
| Three Months Ended June 30, 2017 | ||||||||||||||||||||
| Services: | ||||||||||||||||||||
| Adjusted Transformation Services | $ | 5,361 | $ | - | $ | - | $ | 5,361 | ||||||||||||
| Adjusted Platform and Operations Services | 101,954 | - | - | 101,954 | ||||||||||||||||
| Adjusted Services Revenue | 107,315 | - | - | 107,315 | ||||||||||||||||
| Adjusted Revenue | 107,315 | - | - | 107,315 | ||||||||||||||||
| Purchase accounting adjustments (2) | (244 | ) | - | - | (244 | ) | ||||||||||||||
| Total revenue | $ | 107,071 | $ | - | $ | - | $ | 107,071 | ||||||||||||
| Segments | ||||||||||||||||||||
| Services | True Health (1) | Total | ||||||||||||||||||
| Three Months Ended June 30, 2018 | ||||||||||||||||||||
| Adjusted EBITDA | $ | 5,642 | $ | (758 | ) | 4,884 | ||||||||||||||
| Three Months Ended June 30, 2017 | ||||||||||||||||||||
| Adjusted EBITDA | (3,562 | ) | - | (3,562 | ) |
Evolent Health, Inc.
| Intersegment | ||||||||||||||||||||
| Services | True Health (1) | Eliminations | Consolidated | |||||||||||||||||
| Adjusted Revenue | ||||||||||||||||||||
| Six Months Ended June 30, 2018 | ||||||||||||||||||||
| Services: | ||||||||||||||||||||
| Adjusted Transformation Services | $ | 18,375 | $ | - | $ | - | $ | 18,375 | ||||||||||||
| Adjusted Platform and Operations Services | 231,852 | - | (7,412 | ) | 224,440 | |||||||||||||||
| Adjusted Services Revenue | 250,227 | - | (7,412 | ) | 242,815 | |||||||||||||||
| True Health: | ||||||||||||||||||||
| Premiums | - | 46,524 | (396 | ) | 46,128 | |||||||||||||||
| Adjusted Revenue | 250,227 | 46,524 | (7,808 | ) | 288,943 | |||||||||||||||
| ASC 606 transition adjustment (2) | (4,498 | ) | - | - | (4,498 | ) | ||||||||||||||
| Purchase accounting adjustments (3) | (433 | ) | - | - | (433 | ) | ||||||||||||||
| Total revenue | $ | 245,296 | $ | 46,524 | $ | (7,808 | ) | $ | 284,012 | |||||||||||
| Six Months Ended June 30, 2017 | ||||||||||||||||||||
| Services: | ||||||||||||||||||||
| Adjusted Transformation Services | $ | 15,596 | $ | - | $ | - | $ | 15,596 | ||||||||||||
| Adjusted Platform and Operations Services | 198,489 | - | - | 198,489 | ||||||||||||||||
| Adjusted Services Revenue | 214,085 | - | - | 214,085 | ||||||||||||||||
| Adjusted Revenue | 214,085 | - | - | 214,085 | ||||||||||||||||
| Purchase accounting adjustments (3) | (775 | ) | - | - | (775 | ) | ||||||||||||||
| Total revenue | $ | 213,310 | $ | - | $ | - | $ | 213,310 | ||||||||||||
| Segments | ||||||||||||||||||||
| Services | True Health (1) | Total | ||||||||||||||||||
| Six Months Ended June 30, 2018 | ||||||||||||||||||||
| Adjusted EBITDA | $ | 12,608 | $ | 189 | 12,797 | |||||||||||||||
| Six Months Ended June 30, 2017 | ||||||||||||||||||||
| Adjusted EBITDA | (8,337 | ) | - | (8,337 | ) |
Evolent Health, Inc.
Reconciliation of Adjusted EBITDA to Net Income (Loss)
Attributable to Evolent Health, Inc.
| (in thousands) | For the Three | For the Six | |||||||||||||
| Months Ended | Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net Income (Loss) Attributable to | |||||||||||||||
| Evolent Health, Inc. | $ | (9,916 | ) | $ | (16,905 | ) | $ | (23,542 | ) | $ | (34,918 | ) | |||
| Less: | |||||||||||||||
| Interest income | 878 | 218 | 1,950 | 403 | |||||||||||
| Interest expense | (855 | ) | (947 | ) | (1,708 | ) | (1,901 | ) | |||||||
| (Provision) benefit for income taxes | 109 | 700 | 106 | 295 | |||||||||||
| Depreciation and amortization expenses | (10,034 | ) | (6,904 | ) | (19,530 | ) | (13,519 | ) | |||||||
| EBITDA | (14 | ) | (9,972 | ) | (4,360 | ) | (20,196 | ) | |||||||
| Less: | |||||||||||||||
| Income (loss) from equity affiliates | (1,275 | ) | (555 | ) | (1,406 | ) | (1,077 | ) | |||||||
| Change in fair value of contingent | |||||||||||||||
| consideration and indemnification asset | 1,604 | (200 | ) | 1,504 | (200 | ) | |||||||||
| Other income (expense), net | 78 | 3 | 60 | 5 | |||||||||||
| Net (income) loss attributable to | |||||||||||||||
| non-controlling interests | 115 | 2,793 | 554 | 7,930 | |||||||||||
| ASC 606 transition adjustments | - | - | (4,498 | ) | - | ||||||||||
| Purchase accounting adjustments | (216 | ) | (244 | ) | (433 | ) | (775 | ) | |||||||
| Stock-based compensation expense | (4,718 | ) | (5,360 | ) | (8,513 | ) | (10,464 | ) | |||||||
| Severance costs | 105 | - | (1,489 | ) | - | ||||||||||
| Amortization of contract cost assets | (578 | ) | - | (1,139 | ) | - | |||||||||
| Transaction costs | (14 | ) | (2,847 | ) | (1,798 | ) | (7,278 | ) | |||||||
| Adjusted EBITDA | $ | 4,885 | $ | (3,562 | ) | $ | 12,798 | $ | (8,337 | ) |
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 Six | |||||||||||||
| Months Ended | Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Earnings (Loss) Available to | |||||||||||||||
| Common Shareholders - Basic and Diluted (a) | $ | (9,916 | ) | $ | (16,905 | ) | $ | (23,542 | ) | $ | (34,918 | ) | |||
| Less: | |||||||||||||||
| Income (loss) from equity affiliates | (1,275 | ) | (555 | ) | (1,406 | ) | (1,077 | ) | |||||||
| (Provision) benefit for income taxes | 129 | 700 | 136 | 280 | |||||||||||
| Change in fair value of contingent consideration | |||||||||||||||
| and indemnification asset | 1,604 | (200 | ) | 1,504 | (200 | ) | |||||||||
| Net (income) loss attributable to | |||||||||||||||
| non-controlling interests | 115 | 2,793 | 554 | 7,930 | |||||||||||
| ASC 606 Transition Adjustment | - | - | (4,498 | ) | - | ||||||||||
| Purchase accounting adjustments | (2,985 | ) | (2,669 | ) | (5,838 | ) | (5,569 | ) | |||||||
| Stock-based compensation expense | (4,718 | ) | (5,360 | ) | (8,513 | ) | (10,464 | ) | |||||||
| Severance costs | 105 | - | (1,489 | ) | - | ||||||||||
| Amortization of contract cost assets | (578 | ) | - | (1,139 | ) | - | |||||||||
| Transaction costs | (14 | ) | (2,847 | ) | (1,798 | ) | (7,278 | ) | |||||||
| Adjusted Earnings (Loss) Available | |||||||||||||||
| to Class A and Class B Shareholders (b) | $ | (2,299 | ) | $ | (8,767 | ) | $ | (1,055 | ) | $ | (18,540 | ) | |||
| Earnings (Loss) per Share Available to | |||||||||||||||
| Common Shareholders - Basic and Diluted (a) (1) | $ | (0.13 | ) | $ | (0.28 | ) | $ | (0.31 | ) | $ | (0.62 | ) | |||
| Adjusted Earnings (Loss) per Share Available | |||||||||||||||
| to Class A and Class B Shareholders (b) (2) | $ | (0.03 | ) | $ | (0.13 | ) | $ | (0.01 | ) | $ | (0.27 | ) | |||
| Weighted-average common shares - basic | 77,209 | 59,478 | 76,297 | 56,057 | |||||||||||
| Weighted-average common shares - diluted | 77,209 | 59,478 | 76,297 | 56,057 | |||||||||||
| Adjusted Weighted-Average Class A | |||||||||||||||
| and Class B Shares (3) | 78,071 | 68,155 | 77,795 | 68,051 |
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 Six | |||||||||
| Months Ended | Months Ended | ||||||||||
| June 30, | June 30, | ||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||
| Weighted-average common shares - diluted | 77,209 | 59,478 | 76,297 | 56,057 | |||||||
| Assumed conversion of Class B common | |||||||||||
| shares to Class A common shares | 862 | 8,677 | 1,498 | 11,994 | |||||||
| Adjusted Weighted-Average Class A and Class B Shares | 78,071 | 68,155 | 77,795 | 68,051 |
Evolent Health, Inc.
Guidance Reconciliation
| (in thousands) | For the Three | For the Twelve | ||||||||
| Months Ended | Months Ended | |||||||||
| September 30, | December 31, | |||||||||
| 2018 | 2018 | |||||||||
| Services revenue | $ | 122,800 | $ | 494,700 | ||||||
| Purchase accounting adjustments | 200 | 800 | ||||||||
| ASC 606 transition adjustments | - | 4,500 | ||||||||
| Adjusted Services Revenue | 123,000 | 500,000 | ||||||||
| True Health premiums revenue | 23,000 | 92,500 | ||||||||
| Intersegment eliminations | (4,000 | ) | (15,000 | ) | ||||||
| Adjusted Revenue | $ | 142,000 | $ | 577,500 | ||||||
| Net Income (Loss) Attributable to | ||||||||||
| Evolent Health, Inc. | $ | (12,800 | ) | $ | (53,000 | ) | ||||
| Less: | ||||||||||
| Interest income | 900 | 3,500 | ||||||||
| Interest expense | (900 | ) | (4,000 | ) | ||||||
| Depreciation and amortization expenses | (10,000 | ) | (40,000 | ) | ||||||
| EBITDA | (2,800 | ) | (12,500 | ) | ||||||
| Less: | ||||||||||
| Income (loss) from equity affiliates | (500 | ) | (2,000 | ) | ||||||
| Net (income) loss attributable to | ||||||||||
| non-controlling interests | (100 | ) | (700 | ) | ||||||
| ASC 606 transition adjustments | - | (4,500 | ) | |||||||
| Purchase accounting adjustments | (200 | ) | (800 | ) | ||||||
| Stock-based compensation expense | (5,000 | ) | (19,000 | ) | ||||||
| Severance costs | - | (1,500 | ) | |||||||
| Amortization of contract cost assets | (500 | ) | (2,000 | ) | ||||||
| Transaction costs | (500 | ) | (2,500 | ) | ||||||
| Adjusted EBITDA | $ | 4,000 | $ | 20,500 |
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 Annual Report on Form 10-K for the year ended December 31, 2017, and other documents filed with the SEC include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.
Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this release.