Full Press Release Details
Evolent Health Announces Third Quarter 2022 Results
WASHINGTON (November 2, 2022) - 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, 2022.
Highlights from the third quarter of 2022 announcement include
Quarter ended September 30, 2022
Revenue of $352.6 million, an increase of $130.1 million, or 58.5%, from the three months ended September 30, 2021.
Net income attributable to common shareholders of Evolent Health, Inc. of $2.1 million resulting in a net income margin of 0.6%.
Achieved Adjusted EBITDA of $28.1 million resulting in an Adjusted EBITDA margin of 8.0%.
Total Lives on Platform of 19.5 million as of September 30, 2022, composed of 2.1 million Evolent Health Services Lives on Platform and 17.4 million Clinical Solutions Lives on Platform.
Total cases managed during the quarter within surgical management and advanced care planning totaled 12.8 thousand, yielding an average per case revenue of $2.2 thousand.
Also today, Evolent announced the following 3 new operating partnerships
New Century Health expands Performance Suite into two new states with Molina Healthcare, anticipated to go live in the first half of 2023. Evolent will provide solutions for both oncology and cardiology in one state and cardiology in the other.
Evolent Care Partners added a large, multi-specialty group practice in Washington state to its ACO network for the 2023 Medicare Shared Savings Program performance year.
Additional third quarter business development updates
The Company announced the addition of Vital Decisions services to an existing New Century Health Technology and Services customer.
The Company closed the acquisition of IPG and achieved substantial progress integrating the Company into New Century Health during the quarter.
Seth Blackley, Chief Executive Officer, and Co-Founder of Evolent Health stated, "Our third quarter results were strong across organic growth, margin expansion and product innovation. We also achieved another successful quarter of sales momentum, signing three new operating partnerships, bringing our total new partnership announcements to 13 for the year versus our target of 6-8.
Mr. Blackley continued, In addition, we are seeing sales acceleration of our integrated, value-based specialty proposition with many large health plans around the country. Finally, I'm excited to have promoted Dan McCarthy to President of Evolent, overseeing our specialty business, and I am happy to welcome Kali Beyah as our new Chief People and Brand Officer."
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 $352.6 million and $222.5 million for the three months ended September 30, 2022 and 2021, respectively.
Cost of revenue of $266.6 million and $163.1 million for the three months ended September 30, 2022 and 2021, respectively.
Selling, general and administrative expenses of $68.5 million and $51.3 million for the three months ended September 30, 2022 and 2021, respectively.
Net income (loss) attributable to common shareholders of Evolent Health, Inc. of $2.1 million and $(13.0) million for the three months ended September 30, 2022 and 2021, respectively.
Net income (loss) margin of 0.6% and (5.9)% for the three months ended September 30, 2022 and 2021, respectively.
Income (loss) attributable to common shareholders of Evolent Health, Inc., per basic and diluted share, of $0.02 and $(0.15) for the three months ended September 30, 2022 and 2021, respectively.
Segment Highlights Clinical Solutions
Revenue of $245.3 million, up 53.7%, from $159.6 million from the three months ended September 30, 2021.
Adjusted EBITDA of $16.3 million and $23.9 million for the three months ended September 30, 2022 and 2021, respectively.
Adjusted EBITDA margin of 6.6% and 15.0% for the three months ended September 30, 2022 and 2021, respectively.
Clinical Solutions Lives on Platform in our Performance suite was 2.5 million with a quarterly Clinical Solutions Performance suite Average PMPM of $27.02 and in our New Century Health Technology and Services suite Lives on Platform was 14.9 million with a quarterly New Century Health Technology and Services suite Average PMPM of $0.29 as of September 30, 2022. Clinical Solutions Cases was 12.8 thousand with a quarterly Revenue per Case of $2.2 thousand.
Segment Highlights Evolent Health Services
Revenue of $107.3 million, up 70.7%, from $62.9 million from the three months ended September 30, 2021.
Adjusted EBITDA of $18.5 million and $(3.4) million for the three months ended September 30, 2022 and 2021, respectively.
Adjusted EBITDA margin of 17.3% and (5.3)% for the three months ended September 30, 2022 and 2021, respectively.
Evolent Health Services Lives on Platform was 2.1 million with a quarterly Evolent Health Services Average PMPM of $16.41 as of September 30, 2022.
Total cash and cash equivalents was $156.8 million as of September 30, 2022.
Adjusted cost of revenue of $265.5 million and $162.9 million for the three months ended September 30, 2022 and 2021, respectively.
Adjusted selling, general and administrative expenses of $59.0 million and $45.8 million for the three months ended September 30, 2022 and 2021, respectively.
Adjusted EBITDA of $28.1 million and $13.8 million for the three months ended September 30, 2022 and 2021, respectively.
Adjusted EBITDA margin of 8.0% and 6.2% for the three months ended September 30, 2022 and 2021, respectively.
Adjusted income (loss) attributable to common shareholders of $58.9 million and $(2.4) million for the three months ended September 30, 2022 and 2021, respectively.
Adjusted income (loss) per share attributable to common shareholders of $0.62 and $(0.03) for the three months ended September 30, 2022 and 2021, respectively.
Fourth Quarter 2022 Guidance
For the three months ending December 31, 2022, revenue is expected to be in the range of approximately $361.0 million to $381.0 million. Adjusted EBITDA is expected to be in the range of approximately $24.0 million to $29.0 million.
Full Year 2022 Guidance
Revenue for the year ending December 31, 2022 is expected to be in the range of approximately $1.33 billion to $1.35 billion. Adjusted EBITDA is expected to be in the range of approximately $98.0 million to $103.0 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 ).
Additional Outlook Information
Cash deployed for software development is expected to be in the range of $30 million - $35 million for the year ended December 31, 2022.
Web and Conference Call Information
As previously announced, Evolent Health, Inc. will hold a conference call to discuss its third quarter performance this evening, November 2, 2022, at 5 00 p.m., Eastern Time. To listen to a live broadcast via the internet and view the accompanying materials, please visit the Company's Investor Relations website at http ir.evolenthealth.com. 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.
sfrank evolenthealth.com
Non-GAAP Financial Measures
In addition to disclosing financial results that are determined in accordance with GAAP, we present and discuss 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, Adjusted Earnings (Loss) Available to Common Shareholders and Adjusted Earnings (Loss) per Share Available to Common Shareholders, which are all non-GAAP financial measures, as supplemental measures to help investors evaluate our fundamental operational performance.
Adjusted Cost of Revenue and Adjusted Selling, General and Administrative Expenses are defined as cost of revenue and selling, general and administrative expenses, respectively, adjusted to exclude the impact of stock-based compensation expenses, severance costs, amortization of contract cost assets recorded as a result of a one-time ASC 606 transition adjustment, acquisition-related costs related to acquisitions and business combinations, securities offerings, discontinued operations, strategy and shareholder advisory services and certain 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 (gain) loss on disposal of assets and items arising from acquisitions and business combinations, such as changes in fair value of contingent consideration.
Adjusted Operating Income (Loss) is defined as Adjusted Revenue less Adjusted Total Operating Expenses, and reflects the adjustments made in those non-GAAP measures. Management uses Adjusted Total Operating Expenses and Adjusted Operating Income (Loss) because the removal of acquisition costs, non-recurring or non-cash items (e.g. depreciation, amortization and stock-based compensation expenses) allows us to focus on operational performance, and believes these measures are useful to investors because they give investors insight into our core operating performance.
Adjusted EBITDA is defined as net income (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 gain on transfer of membership, loss on extinguishment repayment of debt, net, gain from equity method investees, changes in fair value of contingent consideration, change in the tax receivable agreement liability, other income (expense), net, repositioning costs, stock-based compensation expense, severance costs, amortization of contract cost assets, strategy and shareholder advisory services, acquisition-related costs and gain (loss) from discontinued operations.
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 EBITDA Margin is as defined Adjusted EBITDA divided by Revenue. Management uses Adjusted EBITDA margin as a supplemental performance measure because it allows the investor to understand operational performance compared to revenues over time. We believe that this measure is also useful to investors because it allows further insight into the period over period operational performance in a manner that is comparable to other organizations in our industry and in the market in general.
Adjusted Earnings (Loss) Available to Common Shareholders is defined as net income (loss) attributable to common shareholders of Evolent Health, Inc. adjusted to exclude gain from equity method investees, other income (expense), net, gain on transfer of membership, loss on extinguishment of debt, net, loss on repayment of debt, changes in fair value of contingent consideration, change in tax receivable agreement liability, purchase accounting adjustments, repositioning costs, stock-based compensation expenses, severance costs, amortization of contract cost assets recorded as a result of a one-time ASC 606 transition adjustment, gain (loss) from discontinued operations, strategy and shareholder advisory services and acquisition-related costs.
Adjusted Earnings (Loss) per Share Available to Common Shareholders is defined as Adjusted Earnings (Loss) Available to Common Shareholders divided by Weighted-Average Common Shares, and reflects the adjustments made in those non-GAAP measures.
Management uses Adjusted Earnings (Loss) Available to Common Shareholders and Adjusted Earnings (Loss) per Share Available to Common Shareholders because excluding non-cash items (e.g. depreciation, amortization and stock-based
compensation expenses) allows us to focus on operational performance. We believe that these measures are also useful to investors for the same reason.
These adjusted measures do not represent and should not be considered as alternatives to GAAP measurements, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies. A reconciliation of these adjusted measures to their most comparable GAAP financial measures is presented in the tables below. We believe these measures are useful across time in evaluating our fundamental core operating performance.
Lives on Platform and Per Member Per Month ("PMPM") Fee
Total Lives on Platform are calculated by summing our Evolent Health Services Lives on Platform and our Clinical Solutions Lives on Platform. Evolent Health Services Lives on Platform are calculated by summing members on our value-based care and comprehensive health plan administrative platform. Clinical Solutions Lives on Platform are calculated by summing the Clinical Solutions Lives on Platform in our Performance suite and New Century Health Technology and Services suite Lives on Platform. Clinical Solutions Lives on Platform in our Performance suite are calculated by summing members covered for oncology specialty care services and members covered for cardiology specialty care services for contracts not under ASO arrangements. New Century Health Technology and Services suite Lives on Platform are calculated by summing members covered for oncology specialty care services, members covered for cardiology specialty care services and members covered for advance care planning services for contracts under ASO arrangements. Members covered for more than one category are counted in each category. Clinical Solutions Cases are calculated by summing the number of individuals receiving services through our IPG and Vital Decisions programs in a given period.
Evolent Health Services average per member per month ("PMPM") fee is defined as platform and operations revenue pertaining to the Evolent Health Services segment during the period reported divided by the average of the beginning and ending Evolent Health Services segment membership during the period reported divided by the number of months in the period. Clinical Solutions Performance suite Average PMPM fee is defined as platform and operations services revenue pertaining to our Clinical Solutions Performance suite during the period reported divided by the average of the beginning and ending Clinical Solutions Performance suite membership during the period reported divided by the number of months in the period. New Century Health Technology and Services suite Average PMPM fee is defined as platform and operations revenue pertaining to the New Century Health Technology and Services suite during the period reported divided by the average of the beginning and ending New Century Health Technology and Services suite membership during the period reported divided by the number of months in the period. Clinical Solutions Revenue per Case is calculated by the revenue pertaining to IPG and Vital Decisions divided by the number of cases for a given period.
Management uses lives on platform, PMPM fees, cases and revenue per case because we believe that they provide insight into the unit economics of our services. We believe that these measures are also useful to investors because they allow further insight into the period over period operational performance. We believe that these measures are also useful to investors because they allow further insight into the period over period operational performance.
Evolent Health, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(unaudited, in thousands, except per share data)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Revenue | $ | 352,585 | $ | 222,471 | $ | 969,581 | $ | 659,599 | |||||||
| Expenses | |||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) | 266,617 | 163,126 | 736,061 | 493,071 | |||||||||||
| Selling, general and administrative expenses | 68,521 | 51,292 | 186,408 | 152,582 | |||||||||||
| Depreciation and amortization expenses | 17,196 | 14,859 | 47,414 | 44,962 | |||||||||||
| Change in fair value of contingent consideration | (12,700) | (225) | (5,822) | (819) | |||||||||||
| Total operating expenses | 339,634 | 229,052 | 964,061 | 689,796 | |||||||||||
| Operating income (loss) | 12,951 | (6,581) | 5,520 | (30,197) | |||||||||||
| Interest income | 425 | 120 | 765 | 311 | |||||||||||
| Interest expense | (4,754) | (6,367) | (9,143) | (18,978) | |||||||||||
| Gain from equity method investees | 1,392 | 63 | 3,940 | 12,725 | |||||||||||
| Gain on transfer of membership | - | - | - | 22,969 | |||||||||||
| Loss on extinguishment repayment of debt, net | (10,192) | - | (10,192) | (19,158) | |||||||||||
| Change in tax receivable agreement liability | (42,870) | - | (42,870) | - | |||||||||||
| Other income (expense), net | (345) | (41) | 130 | (73) | |||||||||||
| Loss from continuing operations before income taxes | (43,393) | (12,806) | (51,850) | (32,401) | |||||||||||
| Provision for (benefit from) income taxes | (45,516) | 234 | (44,498) | 936 | |||||||||||
| Income (loss) from continuing operations | 2,123 | (13,040) | (7,352) | (33,337) | |||||||||||
| Income (loss) from discontinued operations, net of tax (1) | - | - | (463) | 1,383 | |||||||||||
| Net income (loss) attributable to common shareholders of Evolent Health, Inc. | $ | 2,123 | $ | (13,040) | $ | (7,815) | $ | (31,954) | |||||||
| Income (loss) per common share | |||||||||||||||
| Basic | |||||||||||||||
| Continuing operations | $ | 0.02 | $ | (0.15) | $ | (0.08) | $ | (0.39) | |||||||
| Discontinued operations | - | - | (0.01) | 0.02 | |||||||||||
| Basic income (loss) per share attributable to common shareholders of Evolent Health, Inc. | $ | 0.02 | $ | (0.15) | $ | (0.09) | $ | (0.37) | |||||||
| Diluted | |||||||||||||||
| Continuing operations | $ | 0.02 | $ | (0.15) | $ | (0.08) | $ | (0.39) | |||||||
| Discontinued operations | - | - | (0.01) | 0.02 | |||||||||||
| Diluted income (loss) per share attributable to common shareholders of Evolent Health, Inc. | $ | 0.02 | $ | (0.15) | $ | (0.09) | $ | (0.37) | |||||||
| Weighted-average common shares outstanding | |||||||||||||||
| Basic | 95,286 | 85,800 | 91,643 | 85,306 | |||||||||||
| Diluted | 99,308 | 85,800 | 91,643 | 85,306 | |||||||||||
| Comprehensive income (loss) | |||||||||||||||
| Net income (loss) | $ | 2,123 | $ | (13,040) | $ | (7,815) | $ | (31,954) | |||||||
| Other comprehensive income (loss), net of taxes, related to | |||||||||||||||
| Foreign currency translation adjustment | (262) | 4 | (682) | (85) | |||||||||||
| Total comprehensive income (loss) attributable to common shareholders of Evolent Health, Inc. | $ | 1,861 | $ | (13,036) | $ | (8,497) | $ | (32,039) |
(1)Includes $(0.5) million loss on disposal for the nine months ended September 30, 2022 and $1.9 million gain on disposal of discontinued operations for the nine months ended September 30, 2021, respectively.
Evolent Health, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
| September 30, 2022 | December 31, 2021 | ||||||
| Cash and cash equivalents | $ | 156,756 | $ | 266,280 | |||
| Restricted cash and restricted investments | 38,062 | 88,662 | |||||
| Total current assets | 393,774 | 523,960 | |||||
| Intangible assets, net | 451,398 | 279,784 | |||||
| Goodwill | 722,790 | 426,297 | |||||
| Total assets | 1,759,182 | 1,419,458 | |||||
| Accounts payable | 61,863 | 96,084 | |||||
| Accrued liabilities | 132,238 | 107,241 | |||||
| Long-term debt, net of discount | 412,444 | 215,676 | |||||
| Total liabilities | 903,044 | 725,825 | |||||
| Total shareholders' equity | 856,138 | 693,633 | |||||
| Total liabilities and shareholders' equity | 1,759,182 | 1,419,458 |
Evolent Health, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
| For the Nine Months Ended September 30, | |||||||
| 2022 | 2021 | ||||||
| Net cash and restricted cash used in continuing operations | |||||||
| Net cash and restricted cash used in operating activities | $ | (47,248) | $ | (27,909) | |||
| Net cash and restricted cash provided by (used in) investing activities | (254,659) | 38,582 | |||||
| Net cash and restricted cash provided by (used in) financing activities | 142,395 | (90,446) | |||||
| Effect of exchange rate on cash and cash equivalents and restricted cash | (612) | (53) | |||||
| Net decrease in cash and cash equivalents and restricted cash | (160,124) | (79,826) | |||||
| Cash and cash equivalents and restricted cash as of beginning-of-period (1) | 354,942 | 361,581 | |||||
| Cash and cash equivalents and restricted cash as of end-of-period (1) | $ | 194,818 | $ | 281,755 | |||
| Net cash and restricted cash provided by (used in) discontinued operations | |||||||
| Cash flows provided by operating activities | $ | - | $ | 5,002 | |||
| Cash flows used in investing activities | - | (2,494) |
(1)As a result of the closing of the sale of True Health during the first quarter of 2021, the consolidated statement of operations and related financial information reflect the Company's operations and assets and liabilities of True Health as discontinued operations. Cash flows and comprehensive income have not been adjusted and are included in the consolidated statements of cash flows and consolidated statements of comprehensive income (loss) for the nine months ended September 30, 2021.
Evolent Health, Inc.
Reconciliation of Adjusted Results of Operations
(in thousands, unaudited)
| For the Three Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | 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 | $ | 352,585 | $ | - | $ | 352,585 | $ | 222,471 | $ | - | $ | 222,471 | $ | 130,114 | 58.5 | % | $ | 130,114 | 58.5 | % | ||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (1) | 266,617 | (1,124) | 265,493 | 163,126 | (222) | 162,904 | 103,491 | 63.4 | % | 102,589 | 63.0 | % | ||||||||||||||||||||||||||
| Selling, general and administrative expenses (2) | 68,521 | (9,485) | 59,036 | 51,292 | (5,464) | 45,828 | 17,229 | 33.6 | % | 13,208 | 28.8 | % | ||||||||||||||||||||||||||
| Depreciation and amortization expenses (3) | 17,196 | (6,840) | 10,356 | 14,859 | (5,147) | 9,712 | 2,337 | 15.7 | % | 644 | 6.6 | % | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration | (12,700) | 12,700 | - | (225) | 225 | - | (12,475) | (5,544.4) | % | - | - | % | ||||||||||||||||||||||||||
| Total operating expenses | 339,634 | (4,749) | 334,885 | 229,052 | (10,608) | 218,444 | 110,582 | 48.3 | % | 116,441 | 53.3 | % | ||||||||||||||||||||||||||
| Operating income (loss) | $ | 12,951 | $ | 4,749 | $ | 17,700 | $ | (6,581) | $ | 10,608 | $ | 4,027 | $ | 19,532 | 296.8 | % | $ | 13,673 | 339.5 | % | ||||||||||||||||||
| Total operating expenses as a percentage of total revenue | 96.3 | % | 95.0 | % | 103.0 | % | 98.2 | % |
(1)Adjustments to cost of revenue include $1.0 million and $0.1 million in stock-based compensation expense for the three months ended September 30, 2022 and 2021, respectively, and $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 three months ended September 30, 2021.
(2)Adjustments to selling, general and administrative expenses include $6.0 million and $4.3 million in stock-based compensation expense and $2.6 million and $1.2 million of acquisition-related costs resulting from acquisitions and business combinations for the three months ended September 30, 2022 and 2021, respectively. Adjustments for the three months ended September 30, 2022 include $0.9 million of severance costs.
(3)Adjustments to depreciation and amortization expenses of approximately $6.8 million and $5.1 million for the three months ended September 30, 2022 and 2021, respectively, relate to amortization of intangible assets acquired via asset acquisitions and business combinations.
| For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | 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 | $ | 969,581 | $ | - | $ | 969,581 | $ | 659,599 | $ | - | $ | 659,599 | $ | 309,982 | 47.0 | % | $ | 309,982 | 47.0 | % | ||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (1) | 736,061 | (3,503) | 732,558 | 493,071 | (1,884) | 491,187 | 242,990 | 49.3 | % | 241,371 | 49.1 | % | ||||||||||||||||||||||||||
| Selling, general and administrative expenses (2) | 186,408 | (23,433) | 162,975 | 152,582 | (26,160) | 126,422 | 33,826 | 22.2 | % | 36,553 | 28.9 | % | ||||||||||||||||||||||||||
| Depreciation and amortization expenses (3) | 47,414 | (15,971) | 31,443 | 44,962 | (16,990) | 27,972 | 2,452 | 5.5 | % | 3,471 | 12.4 | % | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration | (5,822) | 5,822 | - | (819) | 819 | - | (5,003) | (610.9) | % | - | - | % | ||||||||||||||||||||||||||
| Total operating expenses | 964,061 | (37,085) | 926,976 | 689,796 | (44,215) | 645,581 | 274,265 | 39.8 | % | 281,395 | 43.6 | % | ||||||||||||||||||||||||||
| Operating income (loss) | $ | 5,520 | $ | 37,085 | $ | 42,605 | $ | (30,197) | $ | 44,215 | $ | 14,018 | $ | 35,717 | 118.3 | % | $ | 28,587 | 203.9 | % | ||||||||||||||||||
| Total operating expenses as a percentage of total revenue | 99.4 | % | 95.6 | % | 104.6 | % | 97.9 | % |
(1)Adjustments to cost of revenue include $3.0 million and $1.6 million in stock-based compensation expense, $0.5 million and $0.3 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, 2022 and 2021, respectively.
(2)Adjustments to selling, general and administrative expenses include $16.4 million and $10.1 million in stock-based compensation expense and $7.1 million and $3.3 million of acquisition-related costs resulting from acquisitions and business combinations for the nine months ended September 30, 2022 and 2021, respectively. Adjustments for the nine months ended September 30, 2021 include $6.0 million of repositioning costs and $6.5 million of strategy and shareholder advisory expenses.
(3)Adjustments to depreciation and amortization expenses of approximately $16.0 million and $17.0 million for the nine months ended September 30, 2022 and 2021, respectively, relate to amortization of intangible assets acquired via asset acquisitions and business combinations.
Evolent Health, Inc.