Full Press Release Details
Evolent Health Announces First Quarter 2016 Results
Washington, DC, (May 12, 2016) - 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 March 31, 2016.
Highlights from the first quarter of 2016 announcement include (all comparisons are to the quarter ended March 31, 2015):
Frank Williams, Chief Executive Officer of Evolent Health, Inc., commented, "We are quite pleased with our results for the first quarter of 2016, as we delivered strong financial performance and made significant progress operationally and strategically. In the first quarter, we crossed the one million mark in terms of lives on our platform and are excited to see concrete outcomes data that demonstrate the positive impact of our clinical model in delivering higher quality, lower cost care."
"We're also delighted to announce that we have added a new provider system to our customer network: Georgia Physicians for Accountable Care, known as GPAC, with a presence throughout the state of Georgia," Williams added. "Through our partnership, GPAC will be able to leverage our clinical and financial expertise, as well as the IdentifiSM technology platform, to provide the ACO with the tools it needs to effectively manage care across a network of over 630 physicians."
"Our collaboration with GPAC will initially focus on 70,000 patients currently under value-based arrangements, with a significant growth opportunity across the state as additional lives move to risk-based contracts," Williams said. "We are excited about opening up a direct-to-physician channel in markets where large physician groups are pursuing risk-based arrangements and need support in navigating the operational complexity that is critical for financial success."
Financial Results of Evolent Health, Inc.
Evolent Health, Inc. completed a reorganization of its corporate structure on June 4, 2015 (the "Reorganization"), in connection with the initial public offering of its Class A common stock ("IPO"). Prior to the Reorganization, Evolent Health, Inc. had no operations. As a result, the financial statements of Evolent Health, Inc. for the three months ended March 31, 2015, do not reflect a complete view of the operational results for the period. In order to provide consistent and comparable metrics for the periods before and after June 4, 2015, the adjusted results of Evolent Health, Inc. presented and discussed in this release reflect the Reorganization as if it had occurred on January 1, 2015. The adjusted results include the operations of Evolent Health LLC for the period from January 1, 2015, through March 31, 2015, as well as certain other adjustments. See "Financial Statement Presentation" and "Non-GAAP Financial Measures" for more information.
Evolent Health, Inc. reported United States of America generally accepted accounting principles ("GAAP") revenue of $49.4 million for the three months ended March 31, 2016, compared to zero for the same period in 2015, which does not reflect the operating results of Evolent Health LLC as noted above.
Cost of revenue was $28.6 million for the three months ended March 31, 2016, compared to zero for the same period in 2015. Operating income (loss) was $(175.2) million for the three months ended March 31, 2016, compared to zero for the same period in 2015.
Net income (loss) attributable to Evolent Health, Inc. was $(122.8) million for the three months ended March 31, 2016, which included a non-cash impairment charge to goodwill of $160.6. Net income (loss) attributable to Evolent Health, Inc. was $(11.3) million for the three months ended March 31, 2015. Earnings (loss) available for common shareholders was $(122.8) million and $(12.6) million for the three months ended March 31, 2016 and 2015, respectively. Earnings (loss) per share available for common shareholders was $(2.91) and $(4.22) per basic and diluted share for the three months ended March 31, 2016 and 2015, respectively.
Total cash, cash equivalents and investments as of March 31, 2016, were $165.3 million.
For the full year 2016, Adjusted Revenue is expected to be in the range of $212.0 million to $220.0 million and Adjusted EBITDA is expected to be in the range of $(28.0) million to $(24.0) million. For the three months ended June 30, 2016, Adjusted Revenue is expected to be in the range of $51.0 million to $52.0 million and Adjusted EBITDA is expected to be in the range of $(7.0) million to $(6.0) 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 first quarter performance this evening, May 12, 2016, 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 and ask to join to 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 90 days and will be available beginning later this evening. Evolent Health invites all interested parties to attend the conference call.
About Evolent Health
Evolent Health partners with leading health systems to drive value-based care transformation. By providing clinical, analytical and financial capabilities, Evolent Health helps physicians and health systems achieve superior quality and cost results. Evolent Health's approach breaks down barriers, aligns incentives and powers a new model of care delivery resulting in meaningful alignment between providers, payers, physicians and patients. Learn more at: www.evolenthealth.com.
| Bob East | Robin Glass |
| (443) 213-0500 | (571) 389-6005 |
| Investor Relations | Media Relations |
| InvestorRelations@evolenthealth.com | RGlass@evolenthealth.com |
Financial Statement Presentation
Evolent Health, Inc. is a holding company and its principal asset is all of the Class A common units in its operating subsidiary, Evolent Health LLC, which has owned all of our operating assets and substantially all of our business since inception. Prior to the Reorganization on June 4, 2015, the predecessor of Evolent Health, Inc. accounted for Evolent Health LLC as an equity method investment. The financial results of Evolent Health LLC have been consolidated in the financial statements of Evolent Health, Inc. following the Reorganization. As a result, the financial statements of Evolent Health, Inc. for the three months ended March 31, 2015, do not reflect a complete view of the operational results for the period. In order to provide a consistent presentation for the periods before and after June 4, 2015 and effectively provide comparative results, the adjusted results of Evolent Health, Inc. presented and discussed in this release reflect the Reorganization as if it had occurred on January 1, 2015, and therefore include the operations of Evolent Health LLC for the period from January 1, 2015 through March 31, 2015. Including Evolent Health LLC's results for this period is not consistent with GAAP and should not be considered as an alternative to comparable GAAP measures. The details in the tabular presentation below reflect certain income statement line items as adjusted to reflect results from operations for the three month period as if the Reorganization had occurred on January 1, 2015. The presentation also reflects other adjustments described in "Non-GAAP Financial Measures."
Non-GAAP Financial Measures
In addition to disclosing financial results that are determined in accordance with GAAP, we present and discuss Adjusted Revenue, Adjusted Transformation Revenue, Adjusted Platform and Operations Revenue, Adjusted Cost of Revenue, Adjusted Selling, General and Administrative Expenses, Adjusted Depreciation and Amortization, Adjusted Operating Income (Loss), Adjusted EBITDA, Adjusted Earnings (Loss) Available for Common Shareholders, Adjusted Earnings (Loss) per Share Available for 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. In addition to the adjustments described below, each of the adjusted measures are also adjusted to reflect the Reorganization as if it had occurred on the first day of the relevant period as described in "Financial Statement Presentation" and are adjusted to exclude an impairment to goodwill
we incurred this quarter, the impact of purchase accounting adjustments, stock-based compensation expenses and transaction costs related to the Reorganization, IPO and business combinations.
Adjusted EBITDA is also adjusted to exclude depreciation and amortization expense, other income (expense), interest (income) expense, net income (loss) attributable to non-controlling interests, provision (benefit) for income taxes and income (loss) from affiliate.
Adjusted Earnings (Loss) per Share Available for Common Shareholders is also adjusted to exclude net income (loss) attributable to non-controlling interests, provision (benefit) for income taxes and income (loss) from affiliate.
Adjusted Weighted-Average Common Shares is adjusted to include items that would be considered anti-dilutive under GAAP during periods of loss including the dilutive effects of options and restricted stock and the assumed conversion of preferred or exchangeable securities. For periods of income, Adjusted Weighted-Average Common Shares is equivalent to the GAAP diluted weighted-average common shares including the assumed conversion of preferred or exchangeable securities
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 the comparable GAAP financial measures is presented in the attached tables. We believe these measures are useful across time in evaluating our fundamental core operating performance. Management also uses certain of these measures to manage our business, including in preparing its annual operating budget, financial projections and compensation plans. We believe that certain of these measures are also useful to investors because similar measures are frequently used by securities analysts, investors and other interested parties in their evaluation of companies in similar industries.
Evolent Health, Inc.
For the Three Months Ended March 31, 2016 and 2015
| (in thousands) | For the Three Months Ended March 31, 2016 | For the Three Months Ended March 31, 2015 | ||||||||||||||||||||||||||||||||||||||||
| Add: | ||||||||||||||||||||||||||||||||||||||||||
| Evolent | Evolent | Evolent | Evolent | Evolent | ||||||||||||||||||||||||||||||||||||||
| Health, Inc. | Health, Inc. | Health, Inc. | Health LLC | Health, Inc. | Change Over Prior Period | |||||||||||||||||||||||||||||||||||||
| as Reported | Adjustments (1) | as Adjusted | as Reported | Operations (2) | Adjustments (1) | as Adjusted | $ | % | ||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||
| Transformation | $ | 8,114 | $ | 87 | $ | 8,201 | $ | - | $ | 10,376 | $ | - | $ | 10,376 | $ | (2,175 | ) | (21.0 | )% | |||||||||||||||||||||||
| Platform and operations | 41,335 | - | 41,335 | - | 26,665 | - | 26,665 | 14,670 | 55.0 | % | ||||||||||||||||||||||||||||||||
| Total revenue | 49,449 | 87 | 49,536 | - | 37,041 | - | 37,041 | 12,495 | 33.7 | % | ||||||||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue (exclusive of | ||||||||||||||||||||||||||||||||||||||||||
| depreciation and amortization | ||||||||||||||||||||||||||||||||||||||||||
| presented separately below) | 28,562 | (406 | ) | 28,156 | - | 26,454 | (439 | ) | 26,015 | 2,141 | 8.2 | % | ||||||||||||||||||||||||||||||
| Selling, general and | ||||||||||||||||||||||||||||||||||||||||||
| administrative expenses | 32,095 | (4,086 | ) | 28,009 | - | 28,451 | (8,577 | ) | 19,874 | 8,135 | 40.9 | % | ||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||||||
| expenses | 3,371 | - | 3,371 | - | 1,483 | - | 1,483 | 1,888 | 127.3 | % | ||||||||||||||||||||||||||||||||
| Goodwill impairment | 160,600 | (160,600 | ) | - | - | - | - | - | - | - | % | |||||||||||||||||||||||||||||||
| Total operating expenses | 224,628 | (165,092 | ) | 59,536 | - | 56,388 | (9,016 | ) | 47,372 | 12,164 | 25.7 | % | ||||||||||||||||||||||||||||||
| Operating income (loss) | $ | (175,179 | ) | $ | 165,179 | $ | (10,000 | ) | $ | - | $ | (19,347 | ) | $ | 9,016 | $ | (10,331 | ) | $ | 331 | (3.2 | )% |
(1) Represents adjustments to remove the results of purchase accounting, stock-based compensation, transaction expenses and goodwill impairment
(2) Represents the operational results of Evolent Health LLC for the period from January 1, 2015 through March 31, 2015
Evolent Health, Inc.
Reconciliation of Adjusted EBITDA to Net Income (Loss)
| (in thousands) | For the Three | |||||||
| Months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Net Income (Loss) Attributable to | ||||||||
| Evolent Health, Inc. | $ | (122,812 | ) | $ | (11,319 | ) | ||
| Add: | ||||||||
| Net income (loss) of Evolent Health LLC | - | (19,315 | ) | (1) | ||||
| Less: | ||||||||
| Goodwill impairment | (160,600 | ) | - | |||||
| Income (loss) from affiliate | - | (11,319 | ) | |||||
| (Provision) benefit for income taxes | 988 | - | ||||||
| Net (income) loss attributable to | ||||||||
| non-controlling interests | 51,100 | - | ||||||
| Purchase accounting adjustments | (87 | ) | - | |||||
| Stock-based compensation | (4,436 | ) | (8,019 | ) | ||||
| Transaction costs | (56 | ) | (997 | ) | ||||
| Interest income (expense), net | 279 | 32 | ||||||
| Depreciation and amortization expense | (3,371 | ) | (1,483 | ) | ||||
| Adjusted EBITDA | $ | (6,629 | ) | $ | (8,848 | ) |
Evolent Health, Inc.
Reconciliation of Adjusted Earnings (Loss) per Share Available for Common Shareholders to
Earnings (Loss) per Share Available for Common Shareholders
| (in thousands, except per share data) | For the Three | |||||||
| Months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Earnings (Loss) Available for | ||||||||
| Common Shareholders - Basic and Diluted (a) | $ | (122,812 | ) | $ | (12,609 | ) | ||
| Add: | ||||||||
| Net income (loss) of Evolent Health LLC | - | (19,315 | ) | (1) | ||||
| Less: | ||||||||
| Goodwill impairment | (160,600 | ) | - | |||||
| Income (loss) from affiliate | - | (11,319 | ) | |||||
| (Provision) benefit for income taxes | 988 | - | ||||||
| Net (income) loss attributable to | ||||||||
| non-controlling interests | 51,100 | - | ||||||
| Purchase accounting adjustments | (87 | ) | - | |||||
| Stock-based compensation | (4,436 | ) | (8,019 | ) | ||||
| Transaction costs | (56 | ) | (997 | ) | ||||
| Adjusted Earnings (Loss) Available | ||||||||
| for Common Shareholders (b) (2) | $ | (9,721 | ) | $ | (11,589 | ) | ||
| Earnings (Loss) per Share Available | ||||||||
| for Common Shareholders - Basic and Diluted (a) (2) | $ | (2.91 | ) | $ | (4.22 | ) | ||
| Adjusted Earnings (Loss) per Share Available | ||||||||
| for Common Shareholders (b) (3) | $ | (0.16 | ) | $ | (0.43 | ) | ||
| Weighted-average common shares - basic | 42,185 | 2,988 | ||||||
| Weighted-average common shares - diluted | 42,185 | 2,988 | ||||||
| Weighted-average common shares - adjusted (4) | 60,179 | 26,880 |
Evolent Health, Inc.
Reconciliation of Adjusted Weighted-Average Common
Shares to Diluted Weighted-Average Common Shares
| (in thousands) | For the Three | ||||
| Months Ended | |||||
| March 31, | |||||
| 2016 | 2015 | ||||
| Weighted-average common shares - diluted | 42,185 | 2,988 | |||
| Dilutive effect of restricted stock and | |||||
| restricted stock units | 12 | 605 | |||
| Dilutive effect of options | 457 | 1,159 | |||
| Assumed conversion of convertible preferred | |||||
| stock at beginning-of-period | - | 22,128 | |||
| Assumed conversion of Class B common | |||||
| shares to Class A common shares | 17,525 | - | |||
| Weighted-average common shares - adjusted | 60,179 | 26,880 |
Evolent Health, Inc.
Condensed Consolidated Balance Sheets
| (in thousands) | As of | As of | |||||||
| March 31, | December 31, | ||||||||
| 2016 | 2015 | ||||||||
| Cash and cash equivalents | $ | 111,292 | $ | 145,726 | |||||
| Investments, at amortized cost | 20,096 | 9,445 | |||||||
| Total current assets | 167,566 | 184,463 | |||||||
| Investments, at amortized cost | 33,879 | 44,618 | |||||||
| Goodwill | 459,703 | 608,903 | |||||||
| Intangible assets, net | 171,672 | 163,152 | |||||||
| Total assets | 860,063 | 1,015,514 | |||||||
| Total liabilities | 84,401 | 80,935 | |||||||
| Total shareholders' equity (deficit) attributable to Evolent Health, Inc. | 541,524 | 649,341 | |||||||
| Non-controlling interests | 234,138 | 285,238 | |||||||
| Total liabilities and shareholders' equity (deficit) | 860,063 | 1,015,514 |
Evolent Health, Inc.
Consolidated Statements of Operations
| (in thousands) | For the Three | |||||||
| Months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Revenue | ||||||||
| Transformation | $ | 8,114 | $ | - | ||||
| Platform and operations | 41,335 | - | ||||||
| Total revenue | 49,449 | - | ||||||
| Expenses | ||||||||
| Cost of revenue (exclusive of depreciation | ||||||||
| and amortization presented separately below) | 28,562 | - | ||||||
| Selling, general and administrative expenses | 32,095 | - | ||||||
| Depreciation and amortization expenses | 3,371 | - | ||||||
| Goodwill impairment | 160,600 | - | ||||||
| Total operating expenses | 224,628 | - | ||||||
| Operating income (loss) | (175,179 | ) | - | |||||
| Interest income (expense), net | 279 | - | ||||||
| Income (loss) from affiliate | - | (11,319 | ) | |||||
| Income (loss) before income taxes | ||||||||
| and non-controlling interests | (174,900 | ) | (11,319 | ) | ||||
| Provision (benefit) for income taxes | (988 | ) | - | |||||
| Net income (loss) | (173,912 | ) | (11,319 | ) | ||||
| Net income (loss) attributable to | ||||||||
| non-controlling interests | (51,100 | ) | - | |||||
| Net income (loss) attributable to | ||||||||
| Evolent Health, Inc. | $ | (122,812 | ) | $ | (11,319 | ) | ||
| Earnings (Loss) Available to Common Shareholders | ||||||||
| Basic | $ | (122,812 | ) | $ | (12,609 | ) | ||
| Diluted | (122,812 | ) | (12,609 | ) | ||||
| Earnings (Loss) per Common Share | ||||||||
| Basic | $ | (2.91 | ) | $ | (4.22 | ) | ||
| Diluted | (2.91 | ) | (4.22 | ) | ||||
| Weighted-Average Common Shares Outstanding | ||||||||
| Basic | 42,185 | 2,988 | ||||||
| Diluted | 42,185 | 2,988 |
Evolent Health, Inc.
Condensed Consolidated Statements of Cash Flows
| (in thousands) | For the Three | ||||||
| Months Ended | |||||||
| March 31, | |||||||
| 2016 | 2015 | ||||||
| Net cash provided by (used in) operating activities | $ | (18,408 | ) | $ | - | ||
| Net cash provided by (used in) investing activities | (16,051 | ) | - | ||||
| Net cash provided by (used in) financing activities | 25 | - | |||||
| Net increase (decrease) in cash and cash equivalents | (34,434 | ) | - | ||||
| Cash and cash equivalents as of beginning-of-period | 145,726 | - | |||||
| Cash and cash equivalents as of end-of-period | $ | 111,292 | $ | - |
Forward Looking Statements - Cautionary Language
Certain statements made in this release and in other written or oral statements made by us or on our behalf are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: "believe", "anticipate", "expect", "estimate", "aim", "predict", "potential", "continue", "plan", "project", "will", "should", "shall", "may", "might" and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in our businesses, prospective services, future performance or financial results and the outcome of contingencies, such as legal proceedings. We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.
These statements are only predictions based on our current expectations and projections about future events. Forward-looking statements involve risks and uncertainties that may cause actual results, level of activity, performance or achievements to differ materially from the results contained in the forward-looking statements. Risks and uncertainties that may cause actual results to vary materially, some of which are described within the forward-looking statements, include, among others:
The risks included here are not exhaustive. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Our 2015 Form 10-K and other documents filed with the SEC include additional factors that could affect our 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.