PART I [Item 1. Business](index=11&type=section&id=Item%201.%20Business) Evolent Health leads in value-based care, offering integrated solutions across Clinical Solutions and Evolent Health Services, leveraging acquisitions and proprietary technology for growth - Evolent Health is a market leader in value-based care, driven by price pressure in traditional FFS, market incentives for value-based models, growth in consumer-focused insurance, and data innovation [24](index=24&type=chunk)[25](index=25&type=chunk)[320](index=320&type=chunk) - The company operates in two segments: Clinical Solutions (specialty care management) and Evolent Health Services (administrative simplification), with Clinical Solutions accounting for approximately **70% of corporate revenue in 2022** [30](index=30&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk) - Recent acquisitions, including Vital Decisions, IPG, and NIA, are central to expanding Evolent's specialty care management offerings [12](index=12&type=chunk)[29](index=29&type=chunk)[34](index=34&type=chunk) - Key competitive strengths include early innovation in value-based care, comprehensive solutions, deep market experience, proprietary technology (Identifi® and CarePro™), a provider-heritage brand, and a partnership-driven model [61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) - Growth opportunities include expanding existing partnerships, capitalizing on the rapidly growing value-based care market, capturing additional value through clinical results, and pursuing strategic acquisitions [72](index=72&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from acquisition integration, revenue concentration, evolving healthcare regulations, data security, and substantial debt obligations - Key risks include difficulties in efficiently integrating NIA into operations, the unreliability of NIA's historical financial information, and pro forma financial information not being indicative of future financial condition [131](index=131&type=chunk)[132](index=132&type=chunk)[134](index=134&type=chunk) Revenue Concentration by Largest Partners (2022) | Partner | % of Revenue (2022) | | :-------------------------------- | :------------------ | | Cook County Health and Hospitals System | 22.4% | | Florida Blue Medicare, Inc. | 11.5% | - The company is exposed to significant risks from the rapidly evolving value-based healthcare market, including uncertainty in demand for products and services, and potential negative impacts from changes in managed care industry practices [142](index=142&type=chunk) - The healthcare regulatory and political framework is uncertain and evolving, with potential policy changes that could significantly impact business methods, costs, and revenues [143](index=143&type=chunk)[145](index=145&type=chunk)[149](index=149&type=chunk) - Failure to accurately underwrite performance-based contracts, especially in specialty care management, could lead to reduced profitability due to unpredictable healthcare costs and pricing pressures [169](index=169&type=chunk) - The company has recorded significant goodwill of **$722.8 million** as of December 31, 2022, and intangible assets, which are subject to impairment tests, with future impairments potentially affecting results of operations [182](index=182&type=chunk)[183](index=183&type=chunk)[569](index=569&type=chunk) - Significant debt following the NIA acquisition (**$421.8 million** principal outstanding as of December 31, 2022, plus an additional **$265.0 million** debt financing for NIA) and Series A Preferred Stock obligations could adversely affect liquidity and limit future growth [280](index=280&type=chunk)[281](index=281&type=chunk)[444](index=444&type=chunk) - The company is subject to privacy and data protection laws and online security risks, with failure to safeguard confidential data potentially leading to significant liabilities and reputational harm [213](index=213&type=chunk)[216](index=216&type=chunk)[222](index=222&type=chunk) [Item 1B. Unresolved Staff Comments](index=83&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments applicable to the company - The discussion of legal proceedings is incorporated by reference from "Part II – Item 8. Financial Statements and Supplementary Data - Note 11 - Commitments and Contingencies - Litigation Matters" [309](index=309&type=chunk) [Item 2. Properties](index=83&type=section&id=Item%202.%20Properties) Evolent Health leases its corporate headquarters in Arlington, Virginia, and other global offices, with total rental expense of **$14.6 million** in 2022 - Evolent Health's corporate headquarters are located in Arlington, Virginia, occupying approximately **34,000 square feet** of office space, with additional leased offices in other U.S. locations, Pune, India, and Manila, Philippines [307](index=307&type=chunk) - The company leases all of its facilities and does not own any real property [307](index=307&type=chunk) Total Rental Expense on Operating Leases (2022) | Metric | Amount (in millions) | | :----- | :------------------- | | Total Rental Expense (net of sublease income) | $14.6 | [Item 3. Legal Proceedings](index=85&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings are incorporated by reference from Note 11 of the financial statements, detailing ongoing and resolved litigation - The discussion of legal proceedings is incorporated by reference from "Part II – Item 8. Financial Statements and Supplementary Data - Note 11 - Commitments and Contingencies - Litigation Matters" [309](index=309&type=chunk) [Item 4. Mine Safety Disclosures](index=85&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to Evolent Health, Inc [310](index=310&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=86&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Evolent Health's Class A common stock trades on NYSE under "EVH," with **93** record holders, and no cash dividends are anticipated as earnings are retained for growth - Evolent Health's Class A common stock is traded on the New York Stock Exchange (NYSE) under the symbol "EVH" [313](index=313&type=chunk) Class A Common Stock Holders (as of Feb 16, 2023) | Metric | Value | | :----- | :---- | | Holders of Record | 93 | - The company has not declared or paid any cash dividends on its common stock and does not anticipate paying any in the foreseeable future, intending to retain future earnings for business development and growth [305](index=305&type=chunk)[314](index=314&type=chunk) [Item 6. Reserved](index=87&type=section&id=Item%206.%20Reserved) This item is reserved and contains no content [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=87&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Total revenue increased **48.9%** to **$1,352.0 million** in 2022, driven by acquisitions and partner expansion, improving operating income to **$3.6 million** with a focus on specialty conditions [INTRODUCTION](index=87&type=section&id=INTRODUCTION) - Evolent Health is a market leader in value-based care, providing integrated solutions to healthcare providers and payers to improve health care quality and outcomes while reducing costs [320](index=320&type=chunk) - The company manages operations across two reportable segments: Evolent Health Services (EHS) for administrative simplification and Clinical Solutions for specialty care management and total cost of care improvement [322](index=322&type=chunk) - The company anticipates its future focus will be primarily on maximizing the market opportunity in the management of complex specialty conditions, which constituted approximately **70% of corporate revenue** for the year ended December 31, 2022, prior to the NIA acquisition [323](index=323&type=chunk) [Recent Events](index=87&type=section&id=Recent%20Events) [Customers](index=89&type=section&id=Customers) [Transactions](index=89&type=section&id=Transactions) [Critical Accounting Policies and Estimates](index=92&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) [Adoption of New Accounting Standards](index=97&type=section&id=Adoption%20of%20New%20Accounting%20Standards) [RESULTS OF OPERATIONS](index=97&type=section&id=RESULTS%20OF%20OPERATIONS) Consolidated Financial Highlights (2022 vs 2021) | Metric | 2022 (in millions) | 2021 (in millions) | Change ($ in millions) | Change (%) | | :----------------------------------- | :------------------ | :------------------ | :--------------------- | :--------- | | Revenue | $1,352.0 | $908.0 | $444.1 | 48.9% | | Cost of revenue | $1,035.4 | $657.6 | $377.9 | 57.5% | | Selling, general and administrative expenses | $269.3 | $219.5 | $49.8 | 22.7% | | Depreciation and amortization expenses | $67.2 | $60.0 | $7.2 | 11.9% | | Change in fair value of contingent consideration | $(23.5) | $13.3 | $(36.8) | (277.1)% | | Total operating expenses | $1,348.4 | $950.4 | $398.0 | 41.9% | | Operating income (loss) | $3.6 | $(42.4) | $46.1 | 108.6% | | Cost of revenue as a % of revenue | 76.6% | 72.4% | | | | Selling, general and administrative expenses as a % of revenue | 19.9% | 24.2% | | | - Total revenue increased by **$444.1 million (48.9%)** in 2022, primarily due to **$79.3 million** from IPG and Vital Decisions acquisitions and **$364.8 million** from new and expanded partner relationships [387](index=387&type=chunk)[388](index=388&type=chunk) - Cost of revenue increased by **$377.9 million (57.5%)** in 2022, mainly due to higher claims costs (**$253.8 million**) from acquisitions and risk-based contracts, increased personnel costs (**$33.6 million**), professional fees (**$22.1 million**), and surgical management costs at IPG (**$40.9 million**) [391](index=391&type=chunk) - Selling, general, and administrative expenses increased by **$49.8 million (22.7%)** in 2022, driven by higher personnel fees (**$33.1 million**), stock compensation (**$15.2 million**), technology services (**$9.1 million**), severance costs (**$1.5 million**), and acquisition costs (**$7.5 million**) [392](index=392&type=chunk)[393](index=393&type=chunk) [Discussion of Non-Operating Results](index=107&type=section&id=Discussion%20of%20Non-Operating%20Results) - The company recorded a partial Tax Receivable Agreement (TRA) liability of **$46.0 million** as of December 31, 2022, due to a reduction in the valuation allowance from deferred tax liabilities established during the IPG acquisition [414](index=414&type=chunk) [REVIEW OF CONSOLIDATED FINANCIAL CONDITION](index=109&type=section&id=REVIEW%20OF%20CONSOLIDATED%20FINANCIAL%20CONDITION) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=115&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk from floating-rate debt and Series A Preferred Stock, with a **1% SOFR increase** adding **$4.9 million** in interest and **$1.8 million** in dividends, plus foreign currency risk Cash and Restricted Cash (as of Dec 31, 2022) | Category | Amount (in millions) | | :------- | :------------------- | | Cash and cash equivalents | $188.2 | | Restricted cash and restricted investments | $27.0 | | **Total** | **$215.2** | Debt and Preferred Stock Exposure (as of Dec 31, 2022, and post-NIA acquisition) | Instrument | Principal Amount (in millions) | Interest Rate Type | | :-------------------------------- | :----------------------------- | :----------------- | | Convertible notes (2024 & 2025) | $196.8 | Fixed | | Secured term loan (2022) | $175.0 | Floating (SOFR) | | Secured revolving credit facility (2022) | $50.0 | Floating (SOFR) | | Additional secured term loan (post-NIA) | $240.0 | Floating (SOFR) | | Additional secured revolving credit facility (post-NIA) | $25.0 | Floating (SOFR) | | Series A Preferred Stock (post-NIA) | $168.0 (gross proceeds) | Floating (SOFR + 6.00%) | - For every **1% increase in SOFR**, the company would incur an additional **$4.9 million** in annual interest expense and **$1.8 million** in preferred dividends [444](index=444&type=chunk) - The company faces foreign currency risks from operating expenses denominated in Indian Rupee and Philippino Peso, recognizing translation losses of **$0.8 million** in 2022, and has not yet used derivatives to hedge this risk [446](index=446&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=116&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements, including balance sheets, statements of operations, cash flows, and comprehensive notes detailing accounting policies, acquisitions, debt, and subsequent events - The financial statements present the financial position, results of operations, and cash flows in conformity with U.S. GAAP, audited by Deloitte & Touche LLP [452](index=452&type=chunk)[455](index=455&type=chunk) Consolidated Balance Sheet Highlights (as of Dec 31, 2022 vs 2021) | Asset/Liability | 2022 (in millions) | 2021 (in millions) | | :-------------------------------- | :------------------ | :------------------ | | **Assets:** | | | | Cash and cash equivalents | $188.2 | $266.3 | | Accounts receivable, net | $254.7 | $130.6 | | Total current assets | $478.1 | $524.0 | | Property and equipment, net | $87.9 | $81.4 | | Intangible assets, net | $442.8 | $279.8 | | Goodwill | $722.8 | $426.3 | | Total assets | $1,817.3 | $1,419.5 | | **Liabilities:** | | | | Total current liabilities | $433.4 | $445.5 | | Long-term debt, net | $413.0 | $215.7 | | Tax receivable agreement liability | $46.0 | $0 | | Total liabilities | $957.9 | $725.8 | | **Shareholders' Equity:** | | | | Total shareholders' equity | $859.4 | $693.6 | Consolidated Statements of Operations Highlights (2022 vs 2021 vs 2020) | Metric | 2022 (in millions) | 2021 (in millions) | 2020 (in millions) | | :----------------------------------- | :------------------ | :------------------ | :------------------ | | Revenue | $1,352.0 | $908.0 | $924.6 | | Cost of revenue | $1,035.4 | $657.6 | $696.6 | | Selling, general and administrative expenses | $269.3 | $219.5 | $210.4 | | Operating income (loss) | $3.6 | $(42.4) | $(262.8) | | Net loss attributable to common shareholders | $(19.2) | $(37.6) | $(334.2) | | Basic and diluted loss per share | $(0.20) | $(0.44) | $(3.94) | Consolidated Statements of Cash Flows Highlights (2022 vs 2021 vs 2020) | Activity | 2022 (in millions) | 2021 (in millions) | 2020 (in millions) | | :----------------------------------------- | :------------------ | :------------------ | :------------------ | | Net cash and restricted cash provided by (used in) operating activities | $(11.6) | $38.7 | $(16.2) | | Net cash and restricted cash provided by (used in) investing activities | $(259.1) | $(15.8) | $261.1 | | Net cash and restricted cash provided by (used in) financing activities | $131.5 | $(29.5) | $(11.9) | - The company's goodwill balance increased significantly to **$722.8 million** as of December 31, 2022, primarily due to the IPG acquisition (**$296.6 million**) [573](index=573&type=chunk)[574](index=574&type=chunk)[577](index=577&type=chunk) - Long-term debt, net, increased to **$413.0 million** in 2022 from **$215.7 million** in 2021, reflecting new secured term loans and revolving credit facilities to finance the IPG acquisition [469](index=469&type=chunk)[582](index=582&type=chunk)[717](index=717&type=chunk) - As a subsequent event, the company completed the NIA acquisition on January 20, 2023, for **$400.0 million** in cash, **$265.0 million** in debt financing, and **8.5 million** shares of Class A common stock [58](index=58&type=chunk)[715](index=715&type=chunk)[724](index=724&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=188&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure [737](index=737&type=chunk) [Item 9A. Controls and Procedures](index=188&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022, excluding newly acquired IPG, with no material changes during the year - Management, with the participation of the CEO and CFO, concluded that the disclosure controls and procedures were effective as of December 31, 2022 [738](index=738&type=chunk) - The company's management is responsible for establishing and maintaining adequate internal control over financial reporting, designed to provide reasonable assurance regarding financial reporting reliability [739](index=739&type=chunk) - IPG, acquired in Q3 2022, was excluded from the assessment of internal control over financial reporting as of December 31, 2022, as permitted by SEC guidance for newly acquired entities [740](index=740&type=chunk)[747](index=747&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the year ended December 31, 2022 [742](index=742&type=chunk) [Item 9B. Other Information](index=191&type=section&id=Item%209B.%20Other%20Information) No other information is reported under this item - No other information is reported under this item [754](index=754&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=191&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) No disclosures regarding foreign jurisdictions that prevent inspections are applicable - No disclosures regarding foreign jurisdictions that prevent inspections are applicable [755](index=755&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=192&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement, with a Code of Business Conduct and Ethics available online - Information on Directors is incorporated by reference from the 2023 Proxy Statement for the Annual Meeting of Shareholders [758](index=758&type=chunk) - Information on Executive Officers is presented in "Part I - Item 1. Business - Information about our Executive Officers" of this Annual Report on Form 10-K and the 2023 Proxy Statement [759](index=759&type=chunk) - The company has adopted a Code of Business Conduct and Ethics applicable to all directors, officers, and employees, available on its investor relations website [760](index=760&type=chunk) [Item 11. Executive Compensation](index=192&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the company's 2023 Proxy Statement - Information required by this Item 11 is incorporated by reference to the company's 2023 Proxy Statement [761](index=761&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=192&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and related stockholder matters are incorporated by reference from the company's 2023 Proxy Statement - Information required by this Item 12 is incorporated by reference to the company's 2023 Proxy Statement [761](index=761&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=192&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2023 Proxy Statement - Information required by this Item 13 is incorporated by reference to the company's 2023 Proxy Statement [762](index=762&type=chunk) [Item 14. Principal Accounting Fees and Services](index=192&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the company's 2023 Proxy Statement - Information required by this Item 14 is incorporated by reference to the company's 2023 Proxy Statement [762](index=762&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=193&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements from Item 8 and provides an extensive index of exhibits, including agreements for acquisitions, credit facilities, securities, and corporate governance documents - The financial statements of the registrant and the report of the independent registered public accounting firm are included in Item 8 [765](index=765&type=chunk) - An Exhibit Index lists numerous documents filed with or incorporated by reference, including agreements for acquisitions (Vital Decisions, IPG, NIA), credit facilities (2022 Credit Agreement, Amendment No. 1), securities (Convertible Senior Notes, Series A Preferred Stock), corporate governance documents, and various compensation plans [765](index=765&type=chunk)[767](index=767&type=chunk)[768](index=768&type=chunk)[769](index=769&type=chunk)[770](index=770&type=chunk) [Item 16. Form 10-K Summary](index=197&type=section&id=Item%2016.%20Form%2010-K%20Summary) A Form 10-K Summary is not applicable - Form 10-K Summary is not applicable [771](index=771&type=chunk) [Signatures](index=198&type=section&id=Signatures) This section contains required signatures from the CFO, CEO, CAO, and Board members, certifying the Form 10-K report's submission - The report is signed by the Chief Financial Officer, Chief Executive Officer, Chief Accounting Officer, and members of the Board of Directors, certifying compliance with Section 13 or 15(d) of the Securities Exchange Act of 1934 [773](index=773&type=chunk)[775](index=775&type=chunk)[776](index=776&type=chunk)[777](index=777&type=chunk)

Financial Performance - Q4 2022 revenue reached $382 million, a 54% year-over-year increase[8] - 2022 annual revenue totaled $1352 million, representing a 489% year-over-year growth[16] - Q4 2022 Adjusted EBITDA was $323 million, a 329% year-over-year increase[34] - 2022 Adjusted EBITDA was $1063 million, with a margin of 79% compared to 73% in 2021[34] Segment Performance - Clinical Solutions revenue for Q4 2022 was $2815 million, a 747% year-over-year increase[18] - Evolent Health Services revenue for Q4 2022 was $101 million, a 158% year-over-year increase[18] - Corporate overhead expenses decreased by 203% to $105 million[18] Debt and Cash Flow - Net debt to LTM Adjusted EBITDA was 25x, including five months of Surgery Management (IPG) Adjusted EBITDA[16, 36] - Available cash increased by $25 million in Q4[16] - Total debt was $4218 million, and net debt was $2703 million[36] Guidance - The company anticipates a 2023 revenue range of $192 billion to $196 billion[16] - The company anticipates a 2023 Adjusted EBITDA range of $180 million to $200 million[35]

Financial Data and Key Metrics Changes - Revenue for Q4 2022 was $382.4 million, a growth of 54% compared to the same period in 2021, with base business growth at 39% after excluding $37 million of acquired revenue [47] - Adjusted EBITDA for Q4 2022 totaled $32.3 million, representing a 33% increase year-over-year [47] - For the full year 2022, total revenue reached $1.352 billion, a growth of 49%, while adjusted EBITDA was $106.3 million, reflecting a 60% annual growth [47] Business Line Data and Key Metrics Changes - Clinical Solutions segment revenue grew 35% to $281.5 million in Q4 2022, with adjusted EBITDA of $26.7 million, a slight decline compared to the previous year [54] - Evolent Health Services revenue increased 16% to $101 million in Q4 2022, with adjusted EBITDA rising to $16.1 million from $7.9 million in the prior year [92] - The Performance suite added over 1.8 million lives during 2022, significantly increasing pricing from an average fee of $0.29 PMPM on technology and services to approximately $26 PMPM on the performance suite [48] Market Data and Key Metrics Changes - The company ended 2022 with 20.6 million lives, an organic growth of approximately 3 million lives from the prior year [60] - The average PMPM fee for the Performance suite was $25.78, down from $32.33 a year ago, attributed to higher growth in Medicaid and commercial lines of business [54] Company Strategy and Development Direction - The company aims to reach a $300 million annual run rate adjusted EBITDA by the end of 2024, focusing on organic growth, expanding margins, and optimal capital allocation [87] - The strategy includes moving from technology and services arrangements into the Performance suite to drive value for patients and health plan partners [8] - The acquisition of NIA is expected to contribute significantly to revenue and adjusted EBITDA, reinforcing the balanced approach between technology services and performance suite business models [50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving financial objectives and highlighted the importance of execution in driving growth [28] - The company anticipates a reduction in Medicaid membership by 8% to 10% by the end of the year, primarily impacting top-line revenue but not significantly affecting the bottom line [5] - Management noted that the integrated platform approach is resonating well with customers, indicating a positive outlook for future partnerships and expansions [10] Other Important Information - The company plans to consolidate operations into a single reportable segment starting Q1 2023, which will affect how adjusted EBITDA is tracked [70] - The employee engagement score was approximately 90% in 2022, indicating a strong cultural health and productivity within the workforce [84] Q&A Session Summary Question: Can you provide details on the new Performance suite agreement within Evolent Care Partners? - The agreement involves a couple of thousand lives and is expected to generate around $15 million annually, with potential to expand to $50 million with other Medicare Advantage partners [98] Question: How do you expect the cadence of synergies from the NIA integration to progress? - The integration is expected to proceed smoothly, with synergies being realized as the year progresses [80] Question: Can you elaborate on the Humana expansion and its potential? - The expansion includes two states, with significant revenue potential exceeding $250 million in 2024, and lays groundwork for further state expansions [83]

Financial Data and Key Metrics Changes - Evolent Health's total revenue for Q3 2022 was $352.6 million, representing a growth of approximately 58.5% year-over-year [8] - Year-over-year organic revenue growth was approximately 49%, excluding the two-month contribution from IPG [8] - Adjusted EBITDA for Q3 totaled $28.1 million, an increase of $14.3 million or over 100% compared to the previous year [8][9] - The company achieved positive net income for the first time, marking an important milestone in its maturation [27] Business Line Data and Key Metrics Changes - Clinical Solutions revenue grew 53.7% to $245.3 million, up from $159.6 million in the same period last year [35] - Evolent Health Services revenue increased 70.8% to $107.3 million, up from $62.9 million in Q3 2021 [38] - Membership in Evolent Health Services for the Performance Suite was 2.1 million, compared to 1.6 million in Q3 2021, with a PMPM fee of $16.41 versus $13.19 [38] Market Data and Key Metrics Changes - The company ended Q3 with 19.5 million lives managed, a growth of 32% from 14.7 million a year ago [10] - The PMPM fee for Clinical Solutions was $27.02, down from $34.16 in the previous year, driven by a mix shift towards Medicaid and commercial members [36] - Lives on the Technology & Services suite increased to 14.9 million from 11.7 million year-over-year, with a PMPM fee of $0.29 versus $0.36 [36] Company Strategy and Development Direction - Evolent's core operating priorities include strong organic growth, expanding margins, and optimal capital allocation [14] - The company is focused on value-based care, which aligns incentives across the healthcare system [12] - Evolent aims to deepen its capabilities in value-based specialty operations and strategy through leadership enhancements [44][45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the underlying value of their model to drive earnings growth despite challenges from the pandemic [30] - The company sees significant opportunities in the value-based care landscape, with less than 7% of primary care revenues linked to value-based arrangements [12][13] - Evolent is well-positioned for future growth, with a diversified pipeline of opportunities across various health plans [49][85] Other Important Information - The acquisition of IPG closed in August, and integration is progressing well, allowing for cross-sells and new logo conversions [24] - The company ended the quarter with $156.8 million in cash, with expectations of being cash flow positive in Q4 [40] - Evolent's capital allocation strategy focuses on investing in innovation, strategic M&A, and maintaining a disciplined balance sheet [20] Q&A Session Summary Question: Expectations for revenue contribution from new partnerships - The expanded Molina partnership is expected to contribute between $35 million and $40 million of run rate revenue, going live in the first half of next year [48] Question: Recent changes for MSSP implications - The new MSSP rule is seen as generally positive, with adjustments expected to improve future shared savings calculations [51] Question: Insights on Molina's partnership and state engagement - When entering a state, not all lives are managed initially, but there are opportunities for future growth [54] Question: Impact of Medicaid mix on PMPM - The decline in PMPM is attributed to a mix shift towards Medicaid, which has a lower prevalence of certain diseases [57] Question: Cost savings from operations in the Philippines - The company views the opportunity to expand operations in the Philippines as meaningful over a multiyear span [60] Question: Outlook for full capitation relationships - There are ongoing conversations regarding full capitation arrangements, particularly in Medicare Advantage plans [62] Question: Bundled approach in go-to-market strategy - Evolent is adopting a more bundled approach to selling multiple offerings as one contract, which aligns with payer preferences [66] Question: EBITDA guidance and growth trajectory - The company reaffirms its mid-teen EBITDA margin target for 2024, with expectations for continued organic revenue growth [81]

PART I - FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The IPG acquisition drove significant increases in assets and liabilities, improving Q3 net income and reducing the nine-month net loss [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $156,756 | $266,280 | | Goodwill | $722,790 | $426,297 | | Intangible assets, net | $451,398 | $279,784 | | **Total assets** | **$1,759,182** | **$1,419,458** | | Long-term debt, net | $412,444 | $215,676 | | Tax receivable agreement liability | $42,870 | $0 | | **Total liabilities** | **$903,044** | **$725,825** | | **Total shareholders' equity** | **$856,138** | **$693,633** | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $352,585 | $222,471 | $969,581 | $659,599 | | Operating income (loss) | $12,951 | $(6,581) | $5,520 | $(30,197) | | Net income (loss) | $2,123 | $(13,040) | $(7,815) | $(31,954) | | Diluted EPS | $0.02 | $(0.15) | $(0.09) | $(0.37) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for the Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(47,248) | $(27,909) | | Net cash (used in) provided by investing activities | $(254,659) | $38,582 | | Net cash provided by (used in) financing activities | $142,395 | $(90,446) | | **Net decrease in cash** | **$(160,124)** | **$(79,826)** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the IPG acquisition's impact on assets and liabilities, new credit agreements, and a potential material goodwill impairment [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights strong Q3 revenue growth from new partners and the IPG acquisition, discusses segment performance, liquidity, and a potential Q4 goodwill impairment [Business Overview and Recent Developments](index=43&type=section&id=Business%20Overview%20and%20Recent%20Developments) - Evolent is a market leader in value-based care, providing integrated solutions to providers and payers through two segments: **Evolent Health Services (EHS)** and **Clinical Solutions**[215](index=215&type=chunk)[217](index=217&type=chunk) - On August 1, 2022, the company acquired Implantable Provider Group (IPG) for total consideration of **$461.7 million**, consisting of cash, stock, and contingent earn-outs. IPG is consolidated into the Clinical Solutions segment[229](index=229&type=chunk)[230](index=230&type=chunk) - To finance the IPG acquisition, the company entered into a new credit agreement on August 1, 2022, for a **$175.0 million term loan** and a **$50.0 million revolving credit facility**[231](index=231&type=chunk) - In August 2022, the company exchanged **$92.8 million of its 2024 Convertible Notes** for **5.4 million shares of Class A common stock**, resulting in a **$10.2 million loss on debt extinguishment**[232](index=232&type=chunk) - Subsequent Event: On October 11, 2022, Bright Health Group notified the company of its intent to exit certain business lines, which may cause a **material goodwill impairment** to the EHS segment (with **$214.2 million of goodwill**) in Q4 2022[233](index=233&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Consolidated Results Summary (in thousands) | Metric | Q3 2022 | Q3 2021 | Change | 9 Months 2022 | 9 Months 2021 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $352,585 | $222,471 | +58.5% | $969,581 | $659,599 | +47.0% | | Cost of Revenue | $266,617 | $163,126 | +63.4% | $736,061 | $493,071 | +49.3% | | SG&A | $68,521 | $51,292 | +33.6% | $186,408 | $152,582 | +22.2% | | Operating Income (Loss) | $12,951 | $(6,581) | +296.8% | $5,520 | $(30,197) | +118.3% | - Q3 2022 revenue growth of **$130.1 million** was driven by new partners and expansion. Evolent Health Services revenue grew by **$44.5 million**, and Clinical Solutions revenue grew by **$85.6 million**[258](index=258&type=chunk)[259](index=259&type=chunk) - Cost of revenue for Q3 2022 increased by **$103.5 million**, primarily due to **$68.6 million in higher claims activity**, **$11.7 million in higher personnel costs**, and **$15.1 million in device costs** from the IPG acquisition[262](index=262&type=chunk) - SG&A expenses for Q3 2022 increased by **$17.2 million**, mainly due to the acquisitions of Vital Decisions and IPG, leading to higher personnel costs (**$8.1 million**) and technology services (**$2.6 million**)[263](index=263&type=chunk) - A non-operating loss on debt extinguishment of **$10.2 million** was recorded in Q3 2022 related to the exchange of 2024 Notes[278](index=278&type=chunk) - A charge of **$42.9 million** was recorded for the Tax Receivable Agreement (TRA) liability, triggered by the reduction in the valuation allowance from deferred tax liabilities created by the IPG acquisition[282](index=282&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2022, the company had **$156.8 million in cash and cash equivalents** and believes this is sufficient to meet working capital and capital expenditure needs for the next twelve months[286](index=286&type=chunk)[287](index=287&type=chunk) Cash Flow Summary for the Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(47,248) | $(27,909) | | Net cash used in/provided by investing activities | $(254,659) | $38,582 | | Net cash provided by (used in) financing activities | $142,395 | $(90,446) | - Cash used in investing activities of **$254.7 million** was primarily for the **$245.0 million acquisition of IPG** and **$27.6 million in capital expenditures**[292](index=292&type=chunk) - Cash provided by financing activities of **$142.4 million** was primarily from **$219.7 million in proceeds** from the new 2022 Credit Agreement, partially offset by claims processing outflows and taxes paid for equity awards[294](index=294&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk from its new floating-rate debt, with a 1% SOFR increase adding $2.3 million in annual interest expense, and minor foreign currency risk - The company has **$225.0 million in floating-rate debt** (**$175.0M term loan**, **$50.0M revolving facility**) based on SOFR. For every **1% increase in SOFR**, annual interest expense would increase by **$2.3 million**[305](index=305&type=chunk) - The company's **$196.8 million in convertible notes** are fixed-rate instruments and not subject to interest rate fluctuations[305](index=305&type=chunk) - The company has foreign currency risk from operating expenses denominated in Indian Rupees, recognizing a translation loss of **$0.7 million** for the nine months ended September 30, 2022[307](index=307&type=chunk) [Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of September 30, 2022, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were **effective** as of September 30, 2022[309](index=309&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[310](index=310&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a settled shareholder class action, expected to be insurance-funded, and an ongoing shareholder derivative action - A shareholder class action lawsuit has been settled for **$23.5 million**, which is expected to be **fully covered by insurance**, resulting in no significant net loss or cash outflow for the company. The settlement is pending final court approval[150](index=150&type=chunk)[315](index=315&type=chunk) - A shareholder derivative action filed in June 2021, related to oversight of the Passport Health Plan, is ongoing. The company has filed a motion to dismiss and believes the case has **little legal or factual merit**[151](index=151&type=chunk)[315](index=315&type=chunk) [Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) Key risks include inflationary pressures, significant interest rate risk from new floating-rate debt, and restrictive covenants limiting operational flexibility - Increasing inflationary pressures on wages and other costs may **negatively impact** the company's margins, profitability, and results of operations[317](index=317&type=chunk)[318](index=318&type=chunk) - The company is exposed to interest rate risk from its new 2022 Credit Agreement, as its floating rate (based on SOFR) could **significantly increase debt service obligations** if rates continue to rise[319](index=319&type=chunk) - The 2022 Credit Agreement imposes **significant operating and financial restrictions**, including limitations on incurring additional debt, making investments, and paying dividends. Failure to comply with these covenants could result in an **event of default**[320](index=320&type=chunk)[323](index=323&type=chunk)

Financial Data and Key Metrics Changes - Evolent Health reported total revenue of $319.9 million for Q2 2022, representing a 44% increase compared to Q2 2021 [10] - Adjusted EBITDA for the quarter was $21.7 million, reflecting a 63% growth and an 800 basis point increase year-over-year [10] - The company ended Q2 with 21.9 million lives managed across all platforms, an 80% increase from 12.2 million a year ago [12] Business Line Data and Key Metrics Changes - Clinical Solutions segment revenue grew 54.6% to $227.6 million, driven by new client growth and same-store sales [40] - Evolent Health Services segment revenue increased 23.3% to $92.3 million, primarily due to the addition of over 300,000 Bright HealthCare lives [44] - Performance suite revenue for Clinical Solutions was $60 million in Q2 2022, contributing to long-term earnings potential [38] Market Data and Key Metrics Changes - The company announced four new operating partnerships in Q2 2022, bringing the year-to-date total to 10, exceeding the full-year target of 6 to 8 [19] - Evolent's partnerships with Molina Healthcare and Blue Cross Blue Shield of North Carolina are expected to significantly expand revenue opportunities [41][23] Company Strategy and Development Direction - Evolent aims to expand its geographic reach and add new specialties to enhance client relationships and revenue potential [22] - The company is focused on integrating the recently acquired IPG to enhance its value-based specialty care offerings [33] - Evolent's strategy emphasizes leadership in value-based specialty care, with a significant opportunity for cross-selling across existing clients [58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting or exceeding financial targets for the remainder of 2022, citing strong performance-based revenue [9] - The company anticipates a neutral to slightly positive impact from proposed changes to the Pathways to Success program, aligning with CMS's goals for value-based reimbursement [29] - Management expects deferred care to normalize in the latter half of 2022, contributing to revenue growth [99] Other Important Information - Evolent closed the IPG acquisition, enhancing its capabilities in specialty care and broadening its healthcare vertical coverage [34] - The company ended Q2 with $193.1 million in cash and cash equivalents, with a pro forma net debt ratio expected to improve to below two times trailing adjusted EBITDA [49] Q&A Session Summary Question: Core sales growth and EBITDA flatness - Management confirmed that the flat EBITDA was due to the timing of performance-based revenue and the maturation curve of the performance suite [55] Question: Feedback on IPG integration - Initial feedback from clients has been positive, indicating significant cross-sell opportunities with the IPG acquisition [56][58] Question: Molina expansion and revenue expectations - The oncology Performance Suite launch is expected to double the revenue from Molina, with significant lives added through new agreements [66][67] Question: Evolent Care Partners growth potential - Evolent Care Partners is seen as a high-growth area, with significant opportunities in ACOs and capitation arrangements [87] Question: Debt management and interest rates - The new senior credit facility has a blended rate of S+500, with plans to pay down debt as cash is generated [80]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________ FORM 10-Q _________________________ (Mark One) S QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-37415 _________________________ | --- | --- | --- | --- | |----------------- ...

| --- | --- | |--------------------------------------------------------|-------| | | | | | | | | | | Evolent Health First Quarter 2022 Results May 4, 2022 | | | | | | 0 | | Safe Harbor Statement Certain statements made in this report 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 limit ...

Financial Data and Key Metrics Changes - Evolent Health reported total revenue of $297.1 million for Q1 2022, representing a 38% increase compared to Q1 2021 [5][19] - Adjusted EBITDA for Q1 2022 was $24.3 million, reflecting a 63% growth year-over-year, with an adjusted EBITDA margin expansion of 130 basis points to 8.2% [5][19] - The company exceeded its revenue outlook range for the quarter, which was $280 to $295 million, and delivered at the high end of its adjusted EBITDA outlook of $20 million to $25 million [5][19] Business Line Data and Key Metrics Changes - Revenue from Clinical Solutions increased by 46.1% to $190.2 million, driven by same-store sales and new client growth [19] - Evolent Health Services revenue grew by 25.9% to $106.9 million, supported by new client go-lives, including the addition of approximately 330,000 Bright HealthCare lives [21] - Membership in the Performance suite for Clinical Solutions was 1.5 million, with a PMPM fee of $38.07, up from $26.32 in the prior year [20] Market Data and Key Metrics Changes - The company ended the quarter covering 20.3 million lives across all platforms, a 74% increase from 11.6 million a year ago [6][18] - The growth was primarily driven by New Century Health and Evolent Care Partners, which together constitute the Clinical Solutions segment [6] - The PMPM fee for the Technology and Services suite decreased slightly to $0.38 from $0.43 in the prior year [21] Company Strategy and Development Direction - Evolent Health focuses on three core operating priorities: strong organic growth, expanding margins, and optimal capital allocation [8][14] - The company aims to drive innovation through internal development, accretive M&A, and strategic partnerships [26][39] - Evolent sees significant opportunities for growth in oncology, cardiology, and musculoskeletal services, responding to customer demand for expanded capabilities [41][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued strong revenue growth and margin expansion, driven by the Clinical Solutions segment [13][19] - The macro environment is viewed as a tailwind for growth, with increased urgency for health plans to drive quality care while lowering costs [12][18] - The company raised its revenue guidance for the year to a range of $1.16 to $1.21 billion and adjusted EBITDA to between $85 and $95 million [23] Other Important Information - Evolent Health's cash position at the end of the quarter was $210.2 million, with $156.3 million available after accounting for cash held in regulated accounts [22] - The company anticipates continued strong performance in the second quarter, with adjusted revenue forecasted at $290 million to $305 million [23] Q&A Session Summary Question: Can you discuss the Oncology Care Partners relationship and its financial relevance for 2022? - Management indicated that the relationship is part of their innovation strategy and is not expected to have a significant short-term financial impact [26][28] Question: What are the growth opportunities with existing clients? - Management highlighted the potential for upselling existing clients to the Performance suite, which could lead to significant revenue increases [33][34] Question: How do you view the impact of potential recession on your pipeline? - Management believes that the core dynamics of managing care will remain stable regardless of economic conditions, although they are monitoring the situation [75][72] Question: What is the expected impact of Medicaid redeterminations? - Management expects a slow ramp in membership rolling off due to redeterminations, with minimal impact on overall guidance [60][61] Question: Can you provide details on the performance fees recognized in the quarter? - Performance fees were recognized based on savings driven relative to benchmarks, contributing to the top-line beat [67][68]

Part I [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements for Q1 2022 and Q1 2021, including balance sheets, income statements, and cash flows Consolidated Balance Sheet Summary (Unaudited) | Balance Sheet Items | March 31, 2022 ($ thousands) | December 31, 2021 ($ thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 210,158 | 266,280 | | Accounts receivable, net | 179,270 | 130,604 | | Total current assets | 463,388 | 523,960 | | Goodwill | 426,274 | 426,297 | | **Total assets** | **1,339,149** | **1,419,458** | | **Liabilities & Equity** | | | | Total current liabilities | 382,465 | 445,493 | | Long-term debt, net | 282,598 | 215,676 | | Total liabilities | 727,940 | 725,825 | | Total shareholders' equity | 611,209 | 693,633 | | **Total liabilities and shareholders' equity** | **1,339,149** | **1,419,458** | Consolidated Statement of Operations Summary (Unaudited) | Income Statement Items | Three Months Ended Mar 31, 2022 ($ thousands) | Three Months Ended Mar 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Revenue | 297,057 | 215,071 | | Total operating expenses | 299,855 | 231,016 | | Operating loss | (2,798) | (15,945) | | Net loss attributable to common shareholders | (5,350) | (9,807) | | Basic and diluted loss per share | (0.06) | (0.12) | Consolidated Statement of Cash Flows Summary (Unaudited) | Cash Flow Items | Three Months Ended Mar 31, 2022 ($ thousands) | Three Months Ended Mar 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (57,442) | (48,163) | | Net cash provided by investing activities | 16,766 | 45,951 | | Net cash used in financing activities | (51,376) | (55,584) | | Net decrease in cash and restricted cash | (92,156) | (57,795) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q1 2022 financial performance, noting a **38.1% revenue increase** and narrowed operating loss, with sufficient liquidity - The company operates through two reportable segments: Evolent Health Services (EHS), providing administrative and clinical platforms, and Clinical Solutions, focusing on specialty care management and total cost of care improvement[208](index=208&type=chunk) - To date, the COVID-19 pandemic has not materially impacted the company's financial condition or results of operations, and its cash balance of **$210.2 million** as of March 31, 2022, is believed to be sufficient for liquidity needs over the next twelve months[210](index=210&type=chunk) - On October 1, 2021, the company acquired Vital Decisions, a provider of technology-enabled advance care planning services, for **$46.5 million** in cash and **1.8 million** shares of Class A common stock, integrated into the Clinical Solutions segment[219](index=219&type=chunk) - On March 31, 2021, the company completed the sale of its subsidiary True Health New Mexico to Bright HealthCare, with True Health's results now reported as discontinued operations[222](index=222&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) Q1 2022 revenue grew **38.1%** to **$297.1 million**, driven by Clinical Solutions, with operating loss significantly improving Revenue by Segment (in thousands) | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Evolent Health Services | $106,858 | $84,838 | | Clinical Solutions | $190,199 | $130,233 | Lives on Platform (in thousands) and Average PMPM Fees | Metric | As of/For Q1 2022 | As of/For Q1 2021 | | :--- | :--- | :--- | | **Evolent Health Services** | | | | Lives on Platform | 2,079 | 1,982 | | Average PMPM Fee | $19.17 | $14.60 | | **Clinical Solutions** | | | | Performance Suite Lives | 1,495 | 1,405 | | Performance Suite PMPM | $38.07 | $26.32 | | Tech & Services Suite Lives | 16,721 | 8,246 | | Tech & Services Suite PMPM | $0.38 | $0.43 | - Cost of revenue increased by **$61.9 million (39.2%)**, primarily due to **$38.6 million** in higher claims activity in the Clinical Solutions segment, **$8.3 million** in higher personnel costs, and **$9.6 million** from accelerated amortization of contract costs[257](index=257&type=chunk) - Selling, general, and administrative (SG&A) expenses increased by only **$0.3 million (0.6%)**, as higher personnel costs (**$8.3 million**) and stock compensation (**$1.4 million**) were largely offset by lower professional fees (**$7.4 million**) from the Repositioning Plan and shareholder advisory services[258](index=258&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains **$210.2 million** in cash, with management affirming sufficient liquidity for the next twelve months despite Q1 operating cash outflow - The company had **$210.2 million** of cash and cash equivalents as of March 31, 2022[273](index=273&type=chunk) - Net cash used in operating activities was **$57.4 million** for Q1 2022, primarily due to the net loss, timing of customer and vendor payments, and changes in working capital balances[272](index=272&type=chunk)[277](index=277&type=chunk) - Net cash provided by investing activities was **$16.8 million**, mainly from a **$23.0 million** payment related to the transfer of membership (Passport), partially offset by **$8.5 million** in capital expenditures[279](index=279&type=chunk) - Net cash used in financing activities was **$51.4 million**, largely due to a **$34.4 million** decrease in working capital balances for partner claims processing and **$16.2 million** for taxes withheld on vested equity awards[281](index=281&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk is minimal, primarily from fixed-rate convertible notes and immaterial foreign currency exposure to Indian Rupee operating expenses - The company's outstanding convertible notes of **$289.6 million** are fixed-rate instruments, thus not subject to fluctuations in interest rates[293](index=293&type=chunk) - Foreign currency risk is related to operating expenses denominated in Indian Rupee, but the impact is currently minimal, with a recognized loss of **$0.1 million** for the quarter[294](index=294&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed effective disclosure controls and procedures as of March 31, 2022, with no material changes to internal controls during the quarter - Management concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective[296](index=296&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[297](index=297&type=chunk) Part II [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company faces shareholder class action and derivative lawsuits concerning alleged misstatements and board negligence related to Passport Health Plan - A shareholder class action lawsuit filed in August 2019 alleges the company made false or misleading statements regarding its business with Passport, currently in the discovery phase after a partial motion to dismiss ruling[135](index=135&type=chunk) - A shareholder derivative action was filed in June 2021 against board members, alleging negligence in oversight of the company's relationship with Passport Health Plan, with a motion to dismiss currently being briefed[137](index=137&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from those disclosed in the 2021 Annual Report on Form 10-K - No material changes to risk factors were reported for the quarterly period ended March 31, 2022, from those disclosed in the 2021 Form 10-K[302](index=302&type=chunk) [Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including agreements and CEO/CFO certifications