Full Press Release Details
Evolent Health Announces Third Quarter 2020 Results
Washington, D.C., (November 5, 2020) - Evolent Health, Inc. (NYSE EVH), a health care company that delivers proven clinical and administrative solutions to payers and providers, today announced financial results for the quarter ended September 30, 2020.
Highlights from the third quarter of 2020 include
GAAP revenue of $264.6 million, an increase of 20.2% year-over-year.
Net loss attributable to common shareholders of Evolent Health, Inc. of $(37.3) million.
Achieved adjusted EBITDA of $12.7 million.
Lives on platform of approximately 3.5 million.
Announced two new provider customers for total cost of care, in addition to today's announcement of Florida Blue Medicare as a specialty care customer.
Closed the Passport Health Plan asset sale.
Seth Blackley, Chief Executive Officer and Co-Founder of Evolent Health commented, "Overall, I am very pleased with our results for the quarter and the progress we have made executing on our strategic priorities driving strong organic growth in our core three solutions, expanding margins and efficiently allocating capital. During the quarter we signed two new provider partnerships in our total cost of care solution and today we are announcing the addition of Florida Blue Medicare on our specialty care management platform, New Century Health. This takes our total partner additions to 8 for 2020 and, importantly, opens up the Blue Cross Blue Shield segment for New Century Health. In addition, we are growing our relationships with existing partners, including an expansion of our administrative simplification solution with SOMOS. These agreements and our robust pipeline demonstrate the significant value we are adding for customers."
Mr. Blackley continued, "In addition to driving top line growth, we continued expanding our Adjusted EBITDA margins in the quarter through our focus on operating discipline. Looking ahead, our targeted overhead cost initiative is exceeding our expectations as we work to drive margin expansion in 2021 and beyond."
"We remain focused on maximizing long-term shareholder value by driving top- and bottom-line growth in our three core solutions and also by optimizing our financial model through efficient capital allocation. We are continuing to explore strategic options for our health plan assets and have made significant progress, including completing the sale of assets of Passport and agreeing to sell our interests in the Lighthouse Health Plan to Anthem. Looking ahead, we see several macro trends accelerating that will support our business in the years ahead, including an enhanced focus on cost and value from purchasers of health care services, policy-based focus on driving the shift to value, and increased pressure on managed care plans as a result of the continued impact of COVID-19. With these tailwinds at our back, we will continue to execute on our focused strategy and are encouraged by the strong pipeline momentum of our solutions 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"). All comparisons are to the quarter ended September 30, 2019
Revenue of $264.6 million and $220.1 million for the three months ended September 30, 2020 and 2019, respectively, an increase of 20.2%
Services revenue of $239.7 million and $179.9 million for the three months ended September 30, 2020 and 2019, respectively, before intersegment eliminations of $(4.6) million and $(3.3) million, respectively and
True Health premiums revenue of $29.5 million and $43.8 million for the three months ended September 30, 2020 and 2019, respectively, before intersegment eliminations of $0 and $(0.2) million, respectively.
Cost of revenue of $183.2 million and $131.8 million for the three months ended September 30, 2020 and 2019, respectively, an increase of 39.0%.
Claims expenses of $21.3 million and $34.8 million for the three months ended September 30, 2020 and 2019, respectively, a decrease of (38.7)%.
Selling, general and administrative expenses of $55.8 million and $58.8 million for the three months ended September 30, 2020 and 2019, respectively, a decrease of (5.2)%.
Net loss attributable to common shareholders of Evolent Health, Inc. of $(37.3) million and $(25.5) million for the three months ended September 30, 2020 and 2019, respectively.
Loss attributable to common shareholders of Evolent Health, Inc., per basic and diluted share, of $(0.44) and $(0.30) for the three months ended September 30, 2020 and 2019, respectively.
Total cash and cash equivalents and investments as of September 30, 2020, was $387.0 million.
Adjusted Cost of Revenue of $180.2 million and $129.0 million for the three months ended September 30, 2020 and 2019, respectively, an increase of 39.6%.
Claims expenses of $21.3 million and $34.8 million for the three months ended September 30, 2020 and 2019, respectively, a decrease of (38.7)%.
Adjusted selling, general and administrative expenses of $50.4 million and $53.1 million for the three months ended September 30, 2020 and 2019, respectively, a decrease of (5.1)%.
Adjusted EBITDA of $12.7 million and $3.3 million for the three months ended September 30, 2020 and 2019, respectively.
Adjusted Loss Available to Common Shareholders of $(2.7) million and $(7.7) million for the three months ended September 30, 2020 and 2019, respectively.
Adjusted Loss per Share Available to Common Shareholders of $(0.03) and $(0.09) for the three months ended September 30, 2020 and 2019, respectively.
The Company is not providing forward looking guidance for GAAP reported financial measures. A reconciliation of forward looking Adjusted EBITDA financial measures 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.
Evolent reiterated that it expects to be within previously-stated full year 2020 guidance ranges. Adjusted Revenue for the year ending December 31, 2020 is expected to be in the range of approximately $1.000 billion to $1.014 billion. The components of Adjusted Revenue include Adjusted Services
revenue, which is forecasted to be approximately $903.3 million to $913.3 million, and True Health premiums revenue, which is forecasted to be approximately $116.0 million to $120.0 million intersegment eliminations are forecasted to be approximately $(19.3) million for the full year. Adjusted EBITDA is expected to be in the range of approximately $35.0 million to $38.0 million.
For the three months ending December 31, 2020, Adjusted Revenue is expected to be in the range of approximately $249.0 million to $264.0 million. The components of Adjusted Revenue include Adjusted Services revenue, which is forecasted to be approximately $225.0 million to $235.0 million, and True Health premiums revenue, which is forecasted to be approximately $28.5 million to $32.5 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 $10.0 million to $13.0 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 third quarter and full year performance this evening, November 5, 2020, 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.
cgriffin evolenthealth.com
dpaladino evolenthealth.com
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, 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, 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.
Evolent Health, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share data)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Revenue | |||||||||||||||
| Transformation services | $ | 4,807 | $ | 5,184 | $ | 10,800 | $ | 10,481 | |||||||
| Platform and operations services | 230,299 | 171,438 | 652,574 | 463,252 | |||||||||||
| Premiums | 29,487 | 43,521 | 87,136 | 136,125 | |||||||||||
| Total revenue | 264,593 | 220,143 | 750,510 | 609,858 | |||||||||||
| Expenses | |||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) | 183,165 | 131,763 | 524,630 | 357,587 | |||||||||||
| Claims expenses | 21,325 | 34,802 | 63,136 | 108,644 | |||||||||||
| Selling, general and administrative expenses | 55,758 | 58,808 | 160,967 | 200,578 | |||||||||||
| Depreciation and amortization expenses | 14,694 | 15,408 | 46,610 | 44,966 | |||||||||||
| Loss on extinguishment of debt, net | 4,789 | - | 4,789 | - | |||||||||||
| (Gain) loss on disposal of assets | - | - | 6,447 | (9,600) | |||||||||||
| Goodwill impairment | - | - | 215,100 | - | |||||||||||
| Change in fair value of contingent consideration and indemnification asset | 2,570 | (500) | (492) | (300) | |||||||||||
| Total operating expenses | 282,301 | 240,281 | 1,021,187 | 701,875 | |||||||||||
| Operating loss | (17,708) | (20,138) | (270,677) | (92,017) | |||||||||||
| Interest income | 1,288 | 1,124 | 3,049 | 3,026 | |||||||||||
| Interest expense | (7,419) | (3,630) | (19,997) | (10,812) | |||||||||||
| Impairment of equity method investments | - | - | (47,133) | - | |||||||||||
| Gain (loss) from equity method investees | (13,717) | (3,859) | 11,014 | (6,187) | |||||||||||
| Other income (expense), net | (111) | (84) | 170 | (244) | |||||||||||
| Loss before income taxes and non-controlling interests | (37,667) | (26,587) | (323,574) | (106,234) | |||||||||||
| Provision (benefit) for income taxes | 503 | (849) | (3,131) | 53 | |||||||||||
| Net loss | (38,170) | (25,738) | (320,443) | (106,287) | |||||||||||
| Net loss attributable to non-controlling interests | (822) | (217) | (822) | (2,412) | |||||||||||
| Net loss attributable to common shareholders of Evolent Health, Inc. | $ | (37,348) | $ | (25,521) | $ | (319,621) | $ | (103,875) | |||||||
| Loss per common share | |||||||||||||||
| Basic and diluted | $ | (0.44) | $ | (0.30) | $ | (3.87) | $ | (1.27) | |||||||
| Weighted-average common shares outstanding | |||||||||||||||
| Basic and diluted | 85,172 | 83,819 | 82,615 | 81,831 | |||||||||||
| Comprehensive loss | |||||||||||||||
| Net loss | $ | (38,170) | $ | (25,738) | $ | (320,443) | $ | (106,287) | |||||||
| Other comprehensive loss, net of taxes, related to | |||||||||||||||
| Foreign currency translation adjustment | 71 | (68) | (86) | (33) | |||||||||||
| Total comprehensive loss | (38,099) | (25,806) | (320,529) | (106,320) | |||||||||||
| Total comprehensive loss attributable to non-controlling interests | (822) | (217) | (822) | (2,412) | |||||||||||
| Total comprehensive loss attributable to common shareholders of Evolent Health, Inc. | $ | (37,277) | $ | (25,589) | $ | (319,707) | $ | (103,908) |
Evolent Health, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
| September 30, 2020 | December 31, 2019 | ||||||
| Cash and cash equivalents | $ | 370,514 | $ | 101,008 | |||
| Restricted cash | 30,037 | 27,523 | |||||
| Restricted investments | 1,410 | 817 | |||||
| Total current assets | 548,545 | 228,801 | |||||
| Investments, at amortized cost | 16,519 | 18,558 | |||||
| Intangible assets, net | 275,492 | 308,459 | |||||
| Goodwill | 354,722 | 572,064 | |||||
| Total assets | 1,391,789 | 1,498,015 | |||||
| Accounts payable | 32,177 | 37,488 | |||||
| Long-term debt, net of discount | 285,213 | 293,667 | |||||
| Total liabilities | 737,044 | 568,968 | |||||
| Total shareholders' equity attributable to Evolent Health, Inc. | 629,818 | 922,358 | |||||
| Non-controlling interests | 24,927 | 6,689 | |||||
| Total liabilities and shareholders' equity (deficit) | 1,391,789 | 1,498,015 |
Evolent Health, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
| For the Nine Months Ended September 30, | ||||||
| 2020 | 2019 | |||||
| Net cash and restricted cash used in operating activities | $ | (3,374) | (55,832) | |||
| Net cash and restricted cash from (used in) investing activities | 263,297 | (102,460) | ||||
| Net cash and restricted cash from (used in) financing activities | 12,054 | (24,299) | ||||
| Effect of exchange rate on cash and cash equivalents and restricted cash | 43 | 19 | ||||
| Net increase (decrease) in cash and cash equivalents and restricted cash | 272,020 | (182,572) | ||||
| 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 | $ | 400,551 | 205,753 |
Evolent Health, Inc.
Reconciliation of Adjusted Results of Operations
(in thousands, unaudited)
| For the Three Months Ended September 30, 2020 | For the Three Months Ended September 30, 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 | $ | 4,807 | $ | - | $ | 4,807 | $ | 5,184 | $ | - | $ | 5,184 | $ | (377) | (7.3) | % | $ | (377) | (7.3) | % | ||||||||||||||||||
| Platform and operations services (1) | 230,299 | - | 230,299 | 171,438 | 165 | 171,603 | 58,861 | 34.3 | % | 58,696 | 34.2 | % | ||||||||||||||||||||||||||
| Premiums | 29,487 | - | 29,487 | 43,521 | - | 43,521 | (14,034) | (32.2) | % | (14,034) | (32.2) | % | ||||||||||||||||||||||||||
| Total revenue | 264,593 | - | 264,593 | 220,143 | 165 | 220,308 | 44,450 | 20.2 | % | 44,285 | 20.1 | % | ||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (2) | 183,165 | (3,012) | 180,153 | 131,763 | (2,720) | 129,043 | 51,402 | 39.0 | % | 51,110 | 39.6 | % | ||||||||||||||||||||||||||
| Claims expenses | 21,325 | - | 21,325 | 34,802 | - | 34,802 | (13,477) | (38.7) | % | (13,477) | (38.7) | % | ||||||||||||||||||||||||||
| Selling, general and administrative expenses (3) | 55,758 | (5,328) | 50,430 | 58,808 | (5,678) | 53,130 | (3,050) | (5.2) | % | (2,700) | (5.1) | % | ||||||||||||||||||||||||||
| Depreciation and amortization expenses (4) | 14,694 | (5,983) | 8,711 | 15,408 | (6,101) | 9,307 | (714) | (4.6) | % | (596) | (6.4) | % | ||||||||||||||||||||||||||
| Loss on extinguishment of debt | 4,789 | (4,789) | - | - | - | - | 4,789 | 100.0 | % | - | - | % | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration and indemnification asset | 2,570 | (2,570) | - | (500) | 500 | - | 3,070 | (614.0) | % | - | - | % | ||||||||||||||||||||||||||
| Total operating expenses | 282,301 | (21,682) | 260,619 | 240,281 | (13,999) | 226,282 | 42,020 | 17.5 | % | 34,337 | 15.2 | % | ||||||||||||||||||||||||||
| Operating income (loss) | $ | (17,708) | $ | 21,682 | $ | 3,974 | $ | (20,138) | $ | 14,164 | $ | (5,974) | $ | 2,430 | 12.1 | % | $ | 9,948 | 166.5 | % | ||||||||||||||||||
| Total operating expenses as a percentage of total revenue | 106.7 | % | 98.5 | % | 109.1 | % | 102.7 | % |
(1)Adjustments to platform and operations services revenue include deferred revenue purchase accounting adjustments of approximately $0.2 million for the three months ended September 30, 2019, resulting from our acquisitions and business combinations.
(2)Adjustments to cost of revenue include $0.4 million and $1.6 million in stock-based compensation expense for the three months ended September 30, 2020 and 2019, respectively. The adjustments also include approximately $2.6 million and $0.4 million related to the amortization of contract cost assets recorded as a result of the one-time ASC 606 transition adjustment for both the three months ended September 30, 2020 and 2019, respectively. Adjustments also include contract cost assets impairment charge of $0.6 million for the three months ended September 30, 2019. Adjustments also include acquisition-related costs of approximately $0.1 million for the three months ended September 30, 2019 resulting from acquisitions and business combinations.
(3)Adjustments to selling, general and administrative expenses include $2.7 million and $4.2 million in stock-based compensation expense for the three months ended September 30, 2020 and 2019, respectively. Adjustments also include acquisition-related costs of $0.8 million and $1.2 million for the three months ended September 30, 2020 and 2019, respectively, resulting from acquisitions and business combinations. Adjustments for the three months ended September 30, 2020 and 2019 also include $1.8 million and $0.3 million of severance costs, respectively.
(4)Adjustments to depreciation and amortization expenses of approximately $6.0 million and $6.1 million for the three months ended September 30, 2020 and 2019, respectively, relate to amortization of intangible assets acquired via asset acquisitions and business combinations.
| For the Nine Months Ended September 30, 2020 | For the Nine Months ended September 30, 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 | $ | 10,800 | $ | - | $ | 10,800 | $ | 10,481 | $ | - | $ | 10,481 | $ | 319 | 3.0 | % | $ | 319 | 3.0 | % | ||||||||||||||||||
| Platform and operations services (1) | 652,574 | - | 652,574 | 463,252 | 926 | 464,178 | 189,322 | 40.9 | % | 188,396 | 40.6 | % | ||||||||||||||||||||||||||
| Premiums | 87,136 | - | 87,136 | 136,125 | - | 136,125 | (48,989) | (36.0) | % | (48,989) | (36.0) | % | ||||||||||||||||||||||||||
| Total revenue | 750,510 | - | 750,510 | 609,858 | 926 | 610,784 | 140,652 | 23.1 | % | 139,726 | 22.9 | % | ||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (2) | 524,630 | (7,220) | 517,410 | 357,587 | (6,067) | 351,520 | 167,043 | 46.7 | % | 165,890 | 47.2 | % | ||||||||||||||||||||||||||
| Claims expenses | 63,136 | - | 63,136 | 108,644 | - | 108,644 | (45,508) | (41.9) | % | (45,508) | (41.9) | % | ||||||||||||||||||||||||||
| Selling, general and administrative expenses (3) | 160,967 | (16,354) | 144,613 | 200,578 | (30,839) | 169,739 | (39,611) | (19.7) | % | (25,126) | (14.8) | % | ||||||||||||||||||||||||||
| Goodwill impairment | 215,100 | (215,100) | - | - | - | - | 215,100 | 100.0 | % | - | - | % | ||||||||||||||||||||||||||
| Depreciation and amortization expenses (4) | 46,610 | (17,993) | 28,617 | 44,966 | (18,195) | 26,771 | 1,644 | 3.7 | % | 1,846 | 6.9 | % | ||||||||||||||||||||||||||
| (Gain) loss on disposal of assets | 6,447 | (6,447) | - | (9,600) | 9,600 | - | 16,047 | (167.2) | % | - | - | % | ||||||||||||||||||||||||||
| Loss on extinguishment of debt | 4,789 | (4,789) | - | - | - | - | 4,789 | 100.0 | % | - | - | % | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration and indemnification asset | (492) | 492 | - | (300) | 300 | - | (192) | 64.0 | % | - | - | % | ||||||||||||||||||||||||||
| Total operating expenses | 1,021,187 | (267,411) | 753,776 | 701,875 | (45,201) | 656,674 | 319,312 | 45.5 | % | 97,102 | 14.8 | % | ||||||||||||||||||||||||||
| Operating income (loss) | $ | (270,677) | $ | 267,411 | $ | (3,266) | $ | (92,017) | $ | 46,127 | $ | (45,890) | $ | (178,660) | (194.2) | % | $ | 42,624 | 92.9 | % | ||||||||||||||||||
| Total operating expenses as a percentage of total revenue | 136.1 | % | 100.4 | % | 115.1 | % | 107.5 | % |
(1)Adjustments to platform and operations services revenue include deferred revenue purchase accounting adjustments of approximately $0.9 million for the nine months ended September 30, 2019, resulting from our acquisitions and business combinations.
(2)Adjustments to cost of revenue include $1.4 million and $3.3 million in stock-based compensation expense for the nine months ended September 30, 2020 and 2019, respectively. Adjustments also include acquisition-related costs of approximately $0.3 million for the nine months ended September 30, 2019, resulting from acquisitions and business combinations. The adjustments also include approximately $3.7 million and $1.9 million related to the amortization of contract cost assets recorded as a result of the one-time ASC 606 transition adjustment for the nine months ended September 30, 2020 and 2019, respectively. Adjustments also include contract cost assets impairment charge of $0.6 million for the nine months ended September 30, 2019. Adjustments for the nine months ended September 30, 2020 include $2.2 million of severance costs.
(3)Adjustments to selling, general and administrative expenses include $9.0 million and $11.8 million in stock-based compensation expense for the six months ended September 30, 2020 and 2019, respectively. Adjustments also include acquisition-related costs of $1.6 million and $4.1 million for the nine months ended September 30, 2020 and 2019, respectively, resulting from acquisitions and business combinations. Adjustments for the nine months ended September 30, 2020 and 2019 also include $5.7 million and $14.8 million of severance costs, respectively. The adjustments also include approximately $0.1 million related to the amortization of contract cost assets recorded as a result of the one-time ASC 606 transition adjustment for the nine months ended September 30, 2019.
(4)Adjustments to depreciation and amortization expenses of approximately $18.0 million and $18.2 million for the nine months ended September 30, 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 September 30, 2020 | |||||||||||||||
| Services | |||||||||||||||
| Transformation services | $ | 4,807 | $ | - | $ | - | $ | 4,807 | |||||||
| Platform and operations services | 234,914 | - | (4,615) | 230,299 | |||||||||||
| Services revenue | 239,721 | - | (4,615) | 235,106 | |||||||||||
| True Health | |||||||||||||||
| Premiums | - | 29,487 | - | 29,487 | |||||||||||
| Total revenue | $ | 239,721 | $ | 29,487 | $ | (4,615) | $ | 264,593 | |||||||
| For the Three Months Ended September 30, 2019 | |||||||||||||||
| Services | |||||||||||||||
| Transformation services | $ | 5,184 | $ | - | $ | - | $ | 5,184 | |||||||
| Platform and operations services | 174,688 | - | (3,250) | 171,438 | |||||||||||
| Services revenue | 179,872 | - | (3,250) | 176,622 | |||||||||||
| True Health | |||||||||||||||
| Premiums | - | 43,765 | (244) | 43,521 | |||||||||||
| Total revenue | $ | 179,872 | $ | 43,765 | $ | (3,494) | $ | 220,143 | |||||||
| Services | True Health | Segments Total | |||||||||||||
| For the Three Months Ended September 30, 2020 | |||||||||||||||
| Adjusted EBITDA | $ | 13,783 | $ | (1,100) | $ | 12,683 | |||||||||
| For the Three Months Ended September 30, 2019 | |||||||||||||||
| Adjusted EBITDA | $ | 3,139 | $ | 194 | $ | 3,333 |
| Services | True Health | Intersegment Eliminations | Consolidated | ||||||||||||
| Revenue | |||||||||||||||
| For the Nine Months Ended September 30, 2020 | |||||||||||||||
| Services | |||||||||||||||
| Transformation services | $ | 10,800 | $ | - | $ | - | $ | 10,800 | |||||||
| Platform and operations services | 667,653 | - | (15,079) | 652,574 | |||||||||||
| Services revenue | 678,453 | - | (15,079) | 663,374 | |||||||||||
| True Health | |||||||||||||||
| Premiums | - | 87,415 | (279) | 87,136 | |||||||||||
| Total revenue | $ | 678,453 | $ | 87,415 | $ | (15,358) | $ | 750,510 | |||||||
| For the Nine Months Ended September 30, 2019 | |||||||||||||||
| Services | |||||||||||||||
| Transformation services | $ | 10,481 | $ | - | $ | - | $ | 10,481 | |||||||
| Platform and operations services | 472,638 | - | (9,386) | 463,252 | |||||||||||
| Services revenue | 483,119 | - | (9,386) | 473,733 | |||||||||||
| True Health | |||||||||||||||
| Premiums | - | 136,905 | (780) | 136,125 | |||||||||||
| Total revenue | $ | 483,119 | $ | 136,905 | $ | (10,166) | $ | 609,858 | |||||||
| Services | True Health | Segments Total | |||||||||||||
| For the Nine Months Ended September 30, 2020 | |||||||||||||||
| Adjusted EBITDA | $ | 28,178 | $ | (2,829) | $ | 25,349 | |||||||||
| For the Nine Months Ended September 30, 2019 | |||||||||||||||
| Adjusted EBITDA | $ | (21,157) | $ | 2,038 | $ | (19,119) |
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 September 30, | For the Nine Months Ended September 30, | For the Three Months Ended June 30, 2020 | |||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Net loss attributable to common shareholders of Evolent Health, Inc. | $ | (37,348) | $ | (25,521) | $ | (319,621) | $ | (103,875) | $ | (203,521) | |||||||||
| GAAP margin | (14.1) | % | (11.6) | % | (42.6) | % | (17.0) | % | (85.3) | % | |||||||||
| Less | |||||||||||||||||||
| Interest income | 1,288 | 1,124 | 3,049 | 3,026 | 842 | ||||||||||||||
| Interest expense | (7,419) | (3,630) | (19,997) | (10,812) | (6,293) | ||||||||||||||
| (Provision) benefit for income taxes | (503) | 849 | 3,131 | (53) | 3,904 | ||||||||||||||
| Depreciation and amortization expenses | (14,694) | (15,408) | (46,610) | (44,966) | (15,778) | ||||||||||||||
| EBITDA | (16,020) | (8,456) | (259,194) | (51,070) | (186,196) | ||||||||||||||
| Less | |||||||||||||||||||
| Impairment of equity method investees | - | - | (47,133) | - | - | ||||||||||||||
| Loss on extinguishment of debt | (4,789) | - | (4,789) | - | - | ||||||||||||||
| Gain (loss) from equity method investees | (13,717) | (3,859) | 11,014 | (6,187) | 25,143 | ||||||||||||||
| Gain (loss) on disposal of assets | - | - | (6,447) | 9,600 | - | ||||||||||||||
| Goodwill impairment | - | - | (215,100) | - | (215,000) | ||||||||||||||
| Change in fair value of contingent consideration and indemnification asset | (2,570) | 500 | 492 | 300 | (756) | ||||||||||||||
| Other income (expense), net | (111) | (84) | 170 | (244) | 352 | ||||||||||||||
| Net loss attributable to non-controlling interests | 822 | 217 | 822 | 2,412 | - | ||||||||||||||
| Purchase accounting adjustments | - | (165) | - | (926) | - | ||||||||||||||
| Stock-based compensation expense | (3,164) | (5,758) | (10,375) | (15,045) | (3,703) | ||||||||||||||
| Severance costs | (1,757) | (307) | (7,890) | (14,790) | (30) | ||||||||||||||
| Amortization of contract cost assets | (2,610) | (1,061) | (3,817) | (2,613) | (767) | ||||||||||||||
| Acquisition-related costs | (807) | (1,272) | (1,490) | (4,458) | (374) | ||||||||||||||
| Adjusted EBITDA | $ | 12,683 | $ | 3,333 | $ | 25,349 | $ | (19,119) | $ | 9,039 | |||||||||
| Adjusted EBITDA margin | 4.8 | % | 1.5 | % | 3.4 | % | (3.1) | % | 3.8 | % |
Evolent Health, Inc.
Reconciliation of Adjusted Earnings (Loss) Available to Common
Shareholders to Net Loss Attributable to Common Shareholders
(in thousands, except per share data)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Net Loss Attributable to Common Shareholders - Basic and Diluted (a) | $ | (37,348) | $ | (25,521) | $ | (319,621) | $ | (103,875) | |||||||
| Less | |||||||||||||||
| Gain (loss) from equity method investees | (13,717) | (3,859) | 11,014 | (6,187) | |||||||||||
| Other income (expense), net | (111) | - | 170 | 431 | |||||||||||
| Gain (loss) on disposal of assets | - | - | (6,447) | 9,600 | |||||||||||
| Impairment of equity method investees | - | - | (47,133) | - | |||||||||||
| Goodwill impairment | - | - | (215,100) | - | |||||||||||
| Loss on extinguishment of debt | (4,789) | - | (4,789) | - | |||||||||||
| Change in fair value of contingent consideration and indemnification asset | (2,570) | 500 | 492 | 300 | |||||||||||
| Net loss attributable to non-controlling interests | 822 | 217 | 822 | 2,412 | |||||||||||
| Purchase accounting adjustments | (5,983) | (6,266) | (17,993) | (19,121) | |||||||||||
| Stock-based compensation expense | (3,164) | (5,758) | (10,375) | (15,045) | |||||||||||
| Severance costs | (1,757) | (307) | (7,890) | (14,790) | |||||||||||
| Amortization of contract cost assets | (2,610) | (1,061) | (3,817) | (2,613) | |||||||||||
| Acquisition-related costs | (807) | (1,272) | (1,490) | (4,458) | |||||||||||
| Adjusted Loss Attributable to Common Shareholders (b) | $ | (2,662) | $ | (7,715) | $ | (17,085) | $ | (54,404) | |||||||
| Loss per Share Attributable to Common Shareholders - Basic and Diluted (a) (1) | $ | (0.44) | $ | (0.30) | $ | (3.87) | $ | (1.27) | |||||||
| Adjusted Loss per Share Available to Common Shareholders (b) (2) | $ | (0.03) | $ | (0.09) | $ | (0.18) | $ | (0.65) | |||||||
| Weighted-average common shares - basic and diluted (1) | 85,172 | 83,819 | 82,615 | 81,831 | |||||||||||
| Adjusted Weighted-Average Common Shares (3) | 85,172 | 84,525 | 82,615 | 83,481 |
(1)For periods of net loss, shares used in both the basic and diluted earnings per share calculation represent basic shares as using diluted shares would be anti-dilutive.
(2)Represents Adjusted Earnings (Loss) Available to Common Shareholders divided by Adjusted Weighted-Average Common Shares as described in footnote 3 below.
(3)Represents the 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. See the reconciliation of Adjusted Weighted-Average Common to Diluted Weighted-Average Common Shares on the following page.