Shares of Evolent Health (EVH) have gained 9.4% over the past four weeks to close the last trading session at $33.75, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $45.38 indicates a potential upside of 34.5%.The mean estimate comprises 13 short-term price targets with a standard deviation of $7.37. While the lowest estimate of $34 indicates a 0.7% increase from the current pr ...

Shares of Evolent Health (EVH) have gained 10% over the past four weeks to close the last trading session at $33.53, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $45.50 indicates a potential upside of 35.7%.The mean estimate comprises 12 short-term price targets with a standard deviation of $7.80. While the lowest estimate of $34 indicates a 1.4% increase from the current pri ...

Financial Data and Key Metrics Changes - Fourth quarter revenue totaled $556.1 million, representing a year-over-year growth of 45.4%, at the top end of the guidance range [25] - Adjusted EBITDA for the fourth quarter was $48.1 million, reflecting a growth of 48.9% [25] - For the full year 2023, revenue reached $1.96 billion, also a 45% year-over-year growth, with adjusted EBITDA totaling $194.7 million [52] Business Line Data and Key Metrics Changes - Evolent's core specialty care offerings accounted for 88% of total revenue in the fourth quarter, with specialty care revenue growing approximately 74% year-over-year [25] - The NIA acquisition contributed approximately 19% to reported growth, while 55% of the growth came from organic sources [25] Market Data and Key Metrics Changes - The company experienced a gross Medicaid membership decline of 8.5% on a same-store basis, with expectations of a total decline in the mid-teens by mid-2024 [91] - In Medicare Advantage, which represents about 42% of revenue, there has been elevated utilization, particularly for inpatient and supplemental benefit cost drivers [68] Company Strategy and Development Direction - The company is focused on strong organic growth, profitability, and disciplined capital allocation as guiding principles [27] - Evolent is expanding its Performance Suite into advanced imaging and has signed new revenue agreements to enhance its service offerings [55][56] - The company aims to achieve a $300 million adjusted EBITDA run rate exit target for 2024, with a strong pipeline of new revenue agreements [24][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the $300 million adjusted EBITDA target, citing consistent performance across several years [7] - The company noted that headwinds from Medicaid redeterminations are mostly behind them, with expectations for continued organic growth [71] - Management highlighted the importance of engaging partners to manage specialty care costs effectively, which is increasingly sought after by health plans [57] Other Important Information - The company ended 2023 with a cash balance of $193 million, exceeding its goal of increasing cash by more than $120 million [41] - Evolent's average product members grew to almost 80 million for the quarter, despite challenges in the Medicaid segment [26] Q&A Session Summary Question: How does the new Performance Suite offering impact market sizing? - Management indicated that the new offering does increase the total addressable market, although it remains a small portion of the overall market [123] Question: What is the expected impact of the Medicaid redeterminations? - Management confirmed that the impact aligns with expectations, with a projected decline in membership and a modest increase in utilization metrics [91] Question: What are the paths to achieve the $4 million EBITDA target? - Management noted multiple paths to achieve the target, primarily through Technology and Services, and emphasized a strong pipeline of opportunities [76] Question: How does the company view the expansion of Performance Suite outside of Florida and Arizona? - Management stated that expansion opportunities exist but emphasized the importance of delivering outstanding performance first [115][132]

[Part I](index=9&type=section&id=PART%20I) [Business](index=9&type=section&id=Item%201.%20Business) Evolent Health leads in managing complex conditions for health plans, operating as a single segment with revenue from multi-year PMPM contracts, fueled by organic growth and strategic acquisitions - Evolent focuses on connecting care for patients with complex conditions like cancer and cardiovascular disease to improve outcomes and lower costs through evidence-based clinical pathways[23](index=23&type=chunk) - The company has grown through strategic acquisitions including New Century Health (2018), Vital Decisions (2021), IPG (2022), and NIA (2023) to enhance its specialty care offerings[25](index=25&type=chunk) - Effective January 1, 2023, Evolent consolidated its operations into a single reportable segment, combining specialty care management, total cost of care management, and administrative services[26](index=26&type=chunk) [Our Solutions](index=9&type=section&id=Item%201.%20Business%20-%20Our%20Solutions) Evolent offers three primary solutions: Specialty Care Management, Total Cost of Care Management, and Administrative Services, leveraging proprietary technology and value-based models - The company's three main solutions are Specialty Care Management, Total Cost of Care Management, and Administrative Services[27](index=27&type=chunk) - The Specialty Care Management solution focuses on oncology, cardiology, and musculoskeletal markets, utilizing high-performance provider networks, evidence-based clinical pathways, and the proprietary CareProTM technology platform[28](index=28&type=chunk)[29](index=29&type=chunk)[32](index=32&type=chunk) - The Administrative Services solution is centered around the Identifi® platform, offering health plan services, pharmacy benefit management (PBM), risk management, and analytics to help customers manage patient health and costs[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) [Sources of Revenue](index=13&type=section&id=Item%201.%20Business%20-%20Sources%20of%20Revenue) The majority of Evolent's revenue comes from recurring, multi-year contracts with fixed per-member-per-month (PMPM) fees, categorized into Performance, Specialty Technology and Services, and Administrative Suites - Revenue is primarily derived from recurring multi-year contracts with a fixed fee per member per month (PMPM) structure[41](index=41&type=chunk) - Revenue streams are categorized into: Performance Suite (capitated arrangements), Specialty Technology and Services Suite (non-capitation specialty care), and Administrative Services (platform/operations contracts)[41](index=41&type=chunk) [Growth Opportunities and Competition](index=15&type=section&id=Item%201.%20Business%20-%20Growth%20Opportunities%20and%20Competition) Evolent's growth strategy involves expanding services with existing partners, capturing more value through risk-sharing, entering new areas like kidney care, and pursuing strategic acquisitions in a fragmented and competitive market - Growth avenues include increasing lives with existing partners, cross-selling solutions, and capturing more value through risk-sharing arrangements[56](index=56&type=chunk)[57](index=57&type=chunk) - The company plans to expand offerings into new areas such as physician employment, specialty pharmacy, and additional specialty care lines like kidney and fetal-maternal medicine[58](index=58&type=chunk) - The market is highly competitive and fragmented, with competitors ranging from small niche companies to large, well-financed entities, competing on quality, performance, brand, technology integration, and price[66](index=66&type=chunk) [Human Capital Management](index=21&type=section&id=Item%201.%20Business%20-%20Human%20Capital%20Management) As of December 31, 2023, Evolent had approximately 4,700 global employees, with a human capital strategy focused on talent attraction, competitive compensation, employee development, well-being, and Diversity, Equity, and Inclusion (DEI) - As of December 31, 2023, the company had approximately **4,700 global employees**, none of whom are represented by a labor union[85](index=85&type=chunk) Diversity, Equity, and Inclusion (DEI) Demographics (2023) | Category | 2023 | 2022 | |---|---|---| | **Gender (Global)** | | | | Women | 68% | 62% | | Men | 32% | 38% | | **Leadership (MD+ Level)** | | | | Women | 50% | 48% | | Racial & Ethnic Minorities (U.S.) | 30% | 28% | | **Employee Self-ID (U.S.)** | | | | LGBTQ+ | 11.3% | 8.7% | | Disabled Individual | 13.9% | 7.8% | [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from acquisition integration, reliance on key partners, evolving healthcare regulations, potential unprofitability of performance-based contracts, cybersecurity threats, and substantial debt obligations - A significant portion of revenue is derived from the largest partners; for the year ended December 31, 2023, the three largest partners were Cook County Health and Hospitals System (**15.7%**), Molina Healthcare, Inc. (**13.5%**), and Humana Insurance Company (**12.0%**), with loss or renegotiation of these contracts posing a negative impact[112](index=112&type=chunk) - The company faces risks related to integrating the NIA acquisition, including harmonizing business cultures, retaining key employees, and realizing anticipated synergies[106](index=106&type=chunk)[107](index=107&type=chunk) - The business is subject to extensive and evolving healthcare regulations, including potential changes to Medicare and Medicaid programs, prior authorization rules (CMS-4201-F, CMS-0057-F), and fraud, waste, and abuse laws, which could adversely affect operations[118](index=118&type=chunk)[121](index=121&type=chunk)[130](index=130&type=chunk) - The company has significant debt, including convertible notes and obligations under a credit agreement, which could affect its ability to meet obligations and fund growth; as of December 31, 2023, total debt was **$612.5 million**[249](index=249&type=chunk) - The company is required to make potentially substantial payments under a Tax Receivables Agreement (TRA) to pre-IPO investors for certain tax benefits; the recorded TRA liability was **$107.9 million** as of December 31, 2023[232](index=232&type=chunk)[235](index=235&type=chunk)[237](index=237&type=chunk) [Cybersecurity](index=56&type=section&id=Item%201C.%20Cybersecurity) Evolent manages cybersecurity risks through an enterprise risk management program overseen by the Board's Compliance and Regulatory Affairs Committee, led by the CISO, and has not experienced any material incidents in the last three fiscal years - The Compliance and Regulatory Affairs Committee of the Board provides oversight of cybersecurity risks, receiving regular updates from the Chief Information Security Officer (CISO)[279](index=279&type=chunk) - The company's CISO has over **25 years of experience** and is responsible for assessing and managing material risks from cybersecurity threats[281](index=281&type=chunk) - In the last three fiscal years, the company has not experienced any material cybersecurity incidents, and associated expenses have been immaterial[278](index=278&type=chunk) [Properties](index=57&type=section&id=Item%202.%20Properties) Evolent's corporate headquarters is in Arlington, Virginia, under a new 7-year lease, and the company leases all its facilities globally, with total rental expense of **$14.0 million** for 2023 - The corporate headquarters is located in Arlington, Virginia, under a new **7-year lease** for **8,500 square feet**, effective January 1, 2024[283](index=283&type=chunk) - Total rental expense on operating leases, net of sublease income, was **$14.0 million** for the year ended December 31, 2023[283](index=283&type=chunk) [Legal Proceedings](index=57&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal disputes, including a shareholder derivative action dismissed in January 2023, and a subsequent shareholder demand letter which the Board refused in February 2024, with no estimable loss currently - A shareholder derivative action filed in June 2021 was dismissed without prejudice in January 2023[570](index=570&type=chunk) - In response to a shareholder demand letter from April 2023, the Board investigated and, in February 2024, refused to take the requested actions, including commencing litigation[570](index=570&type=chunk) [Part II](index=59&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=59&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Evolent's Class A common stock trades on the NYSE under 'EVH', with **84 holders of record** as of February 15, 2024, and no anticipated cash dividends on common stock, though **$18.8 million** in dividends were paid to Series A Preferred stockholders in 2023 - The company's Class A common stock is traded on the New York Stock Exchange (NYSE) under the symbol **\"EVH\"**[288](index=288&type=chunk) - No cash dividends have been declared or paid on Class A common stock, and none are anticipated in the foreseeable future[289](index=289&type=chunk) - For the year ended December 31, 2023, dividends paid to Series A Preferred stockholders amounted to **$18.8 million**[289](index=289&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=60&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal year 2023, Evolent's revenue grew **45.3%** to **$1.96 billion**, driven by acquisitions and growth in Performance and Specialty Technology suites, resulting in an operating loss of **$71.2 million** and a net loss attributable to common shareholders of **$142.3 million** [Results of Operations](index=66&type=section&id=Item%207.%20MD%26A%20-%20Results%20of%20Operations) For the year ended December 31, 2023, total revenue increased by **45.3%** to **$1.96 billion**, primarily due to acquisitions and partner growth, leading to an operating loss of **$71.2 million** from a prior operating income, largely due to higher operating expenses including a **$24.1 million** right-of-use asset impairment Consolidated Results of Operations (in thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | |---|---|---|---|---| | **Revenue** | **$1,963,896** | **$1,352,013** | **$611,883** | **45.3%** | | Cost of revenue | $1,503,426 | $1,035,429 | $467,997 | 45.2% | | SG&A expenses | $358,110 | $269,269 | $88,841 | 33.0% | | Depreciation & amortization | $123,415 | $67,195 | $56,220 | 83.7% | | Right-of-use assets impairment | $24,065 | $0 | $24,065 | 100.0% | | **Operating income (loss)** | **$(71,211)** | **$3,642** | **$(74,853)** | **(2,055.3)%** | Revenue by End-Market (in thousands) | End-Market | 2023 | 2022 | |---|---|---| | Medicaid | $785,053 | $559,362 | | Medicare | $708,853 | $458,413 | | Commercial and other | $469,990 | $334,238 | | **Total** | **$1,963,896** | **$1,352,013** | Lives on Platform and Average PMPM Fees | Suite | Avg. Lives on Platform 2023 (thousands) | Avg. PMPM Fee 2023 | Avg. PMPM Fee 2022 | |---|---|---|---| | Performance Suite | 4,236 | $23.90 | $38.02 | | Specialty Technology and Services Suite | 69,494 | $0.36 | $0.39 | | Administrative Services | 1,831 | $13.48 | $21.56 | [Liquidity and Capital Resources](index=74&type=section&id=Item%207.%20MD%26A%20-%20Liquidity%20and%20Capital%20Resources) As of December 31, 2023, Evolent had **$192.8 million** in cash, with net cash provided by operating activities at **$142.6 million**, net cash used in investing activities at **$415.5 million** primarily for the NIA acquisition, and net cash provided by financing activities at **$281.3 million**, ensuring sufficient liquidity for the next twelve months Cash and Cash Equivalents | Date | Cash and Cash Equivalents | |---|---| | Dec 31, 2023 | $192.8 million | | Dec 31, 2022 | $188.2 million | Summary of Cash Flows (in thousands) | Activity | 2023 | 2022 | |---|---|---| | Net cash from Operating Activities | $142,582 | $(11,553) | | Net cash used in Investing Activities | $(415,544) | $(259,115) | | Net cash from Financing Activities | $281,340 | $131,541 | - Operating cash flow in 2023 was positively affected by a **$204.3 million** increase in the reserve for claims and performance-based arrangements, but negatively impacted by a **$142.7 million** increase in accounts receivable, primarily from Cook County Health and Hospitals System[381](index=381&type=chunk) [Critical Accounting Policies and Estimates](index=63&type=section&id=Item%207.%20MD%26A%20-%20Critical%20Accounting%20Policies%20and%20Estimates) Evolent's critical accounting policies involve significant management judgment and estimates in areas such as goodwill impairment testing, revenue recognition, income taxes, reserves for claims and performance-based arrangements, and purchase price allocation in business combinations - Goodwill is tested for impairment annually on October 31; for the 2023 test, a qualitative assessment was performed for the single reporting unit, and no indicators of impairment were found[315](index=315&type=chunk)[319](index=319&type=chunk) - Reserves for claims and performance-based arrangements are a critical estimate, using actuarial methods and completion factors to determine the ultimate cost of claims incurred but not reported, involving considerable judgment[327](index=327&type=chunk)[328](index=328&type=chunk) - The company uses significant judgment in determining its provision for income taxes and any valuation allowance against deferred tax assets, considering recent operating results and projections of future taxable income[322](index=322&type=chunk)[323](index=323&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk from its **$37.5 million** secured revolving credit facility and **$175.0 million** Series A Preferred Stock, both tied to SOFR, and minimal foreign currency exchange risk from international operating expenses - The company has **$37.5 million** in a secured revolving credit facility and **$175.0 million** of Series A Preferred Stock with floating interest/dividend rates based on SOFR; for every **1%** increase in SOFR, annual interest expense would increase by **$0.4 million** and preferred dividends by **$1.8 million**[402](index=402&type=chunk) - The **$575.0 million** in outstanding convertible notes are fixed-rate instruments and are not subject to interest rate fluctuation risk[402](index=402&type=chunk) - Foreign currency risk is related to operating expenses in India and the Philippines; the foreign currency translation loss was immaterial at **$0.1 million** for the year ended December 31, 2023[404](index=404&type=chunk) [Financial Statements and Supplementary Data](index=79&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Evolent Health's consolidated financial statements for 2023 received an unqualified opinion from Deloitte & Touche LLP, with the 'Reserve for Claims and Performance-Based Arrangements' identified as a critical audit matter due to significant estimation, showing total assets of **$2.68 billion** and a net loss attributable to common shareholders of **$142.3 million** - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements[410](index=410&type=chunk) - The audit identified the 'Reserve for Claims and Performance-Based Arrangements' as a critical audit matter because its development involves significant management estimation and judgment[415](index=415&type=chunk)[417](index=417&type=chunk) [Consolidated Balance Sheets](index=82&type=section&id=Item%208.%20Financial%20Statements%20-%20Consolidated%20Balance%20Sheets) As of December 31, 2023, Evolent's total assets increased to **$2.68 billion** from **$1.82 billion** in 2022, primarily due to higher goodwill and intangible assets from the NIA acquisition, while total liabilities rose to **$1.43 billion** and total shareholders' equity grew to **$1.07 billion** Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | |---|---|---| | Cash and cash equivalents | $192,825 | $188,200 | | Goodwill | $1,116,542 | $722,774 | | Intangible assets, net | $752,009 | $442,784 | | **Total Assets** | **$2,680,308** | **$1,817,293** | | Long-term debt, net | $597,049 | $412,986 | | Tax receivables agreement liability | $107,932 | $45,950 | | **Total Liabilities** | **$1,434,180** | **$957,876** | | **Total Shareholders' Equity** | **$1,067,701** | **$859,417** | [Consolidated Statements of Operations](index=83&type=section&id=Item%208.%20Financial%20Statements%20-%20Consolidated%20Statements%20of%20Operations) For the year ended December 31, 2023, Evolent reported **$1.96 billion** in revenue, an operating loss of **$71.2 million**, and a net loss attributable to common shareholders of **$142.3 million**, or **$(1.28)** per share, after accounting for preferred stock dividends and accretion Consolidated Statement of Operations Highlights (in thousands) | Account | 2023 | 2022 | |---|---|---| | Revenue | $1,963,896 | $1,352,013 | | Operating income (loss) | $(71,211) | $3,642 | | Loss from continuing operations | $(113,040) | $(18,701) | | Dividends and accretion of Series A Preferred Stock | $(29,220) | $0 | | **Net loss attributable to common shareholders** | **$(142,260)** | **$(19,164)** | | **Basic and diluted loss per share** | **$(1.28)** | **$(0.20)** | [Notes to Financial Statements](index=88&type=section&id=Item%208.%20Financial%20Statements%20-%20Notes%20to%20Financial%20Statements) The notes provide detailed information on significant accounting policies and transactions, including the NIA and IPG acquisitions, revenue recognition, goodwill and intangible assets, long-term debt, Tax Receivables Agreement, lease obligations, Series A Preferred Stock, stock-based compensation, income taxes, and the reserve for claims - The acquisition of NIA on January 20, 2023, had a total consideration of **$715.7 million**, including **$387.8 million** in cash, **$261.3 million** in stock, and **$66.6 million** in contingent consideration, adding **$404.0 million** in intangible assets and **$395.2 million** in goodwill[490](index=490&type=chunk)[491](index=491&type=chunk)[492](index=492&type=chunk) - As of December 31, 2023, the company had **$575.0 million** in convertible senior notes (**$172.5 million** due 2025, **$402.5 million** due 2029) and **$37.5 million** outstanding under its revolving credit facility[537](index=537&type=chunk)[541](index=541&type=chunk)[559](index=559&type=chunk) - The reserve for claims and performance-based arrangements increased from **$199.7 million** at the beginning of 2023 to **$404.0 million** at year-end, with total claims incurred during the year of **$891.1 million**[660](index=660&type=chunk) [Controls and Procedures](index=135&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, excluding the recently acquired NIA, which represented **31.0%** of total assets and **12.3%** of total revenues for the year - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[665](index=665&type=chunk) - The assessment of internal control over financial reporting excluded the NIA acquisition, completed on January 20, 2023, which constituted **31.0%** of total assets and **12.3%** of revenues for the year[667](index=667&type=chunk)[673](index=673&type=chunk) - Excluding the NIA acquisition, management concluded that the company's internal control over financial reporting was effective as of December 31, 2023[667](index=667&type=chunk) [Part III](index=138&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=138&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and the Code of Business Conduct and Ethics is incorporated by reference from the company's 2024 Proxy Statement and available on its investor relations website - Information required by this item is incorporated by reference from the company's definitive proxy statement for the 2024 Annual Meeting of Shareholders[683](index=683&type=chunk) [Executive Compensation](index=138&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the company's 2024 Proxy Statement - Information required by this item is incorporated by reference from the company's 2024 Proxy Statement[686](index=686&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=138&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information concerning security ownership is incorporated by reference from the company's 2024 Proxy Statement - Information required by this item is incorporated by reference from the company's 2024 Proxy Statement[686](index=686&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=138&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information concerning related party transactions and director independence is incorporated by reference from the company's 2024 Proxy Statement - Information required by this item is incorporated by reference from the company's 2024 Proxy Statement[687](index=687&type=chunk) [Principal Accounting Fees and Services](index=138&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information concerning principal accounting fees and services is incorporated by reference from the company's 2024 Proxy Statement - Information required by this item is incorporated by reference from the company's 2024 Proxy Statement[687](index=687&type=chunk) [Part IV](index=139&type=section&id=PART%20IV) [Exhibits, Financial Statement Schedules](index=139&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and various exhibits filed with the Form 10-K, including acquisition agreements, debt instruments, equity plans, and CEO/CFO certifications - This section contains the list of all financial statements, schedules, and exhibits filed with the report[691](index=691&type=chunk) [Form 10-K Summary](index=143&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to this report - Item 16, Form 10-K Summary, is noted as 'Not Applicable'[696](index=696&type=chunk)

WASHINGTON, Feb. 14, 2024 /PRNewswire/ -- Evolent Health, Inc. (NYSE: EVH), a company that specializes in better health outcomes for people with complex conditions through proven solutions that make health care simpler and more affordable, today appointed Russell Glass to its Board of Directors. Glass has almost 25 years of experience as a successful technology and health care executive who currently serves as Chief Executive Officer of Headspace, a pioneering company focused on digitally enabled mental hea ...

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 September 30, 2023 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, Inc. (Exact name of reg ...

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q2 totaled $47.4 million, more than doubling compared to the same period last year, driven by expansion in the base business and acquisitions [3][53] - Revenue for Q2 was $469.1 million, an increase of 46.6% year-over-year, with specialty revenues representing 83% of total revenue [55][49] - Adjusted EBITDA margin improved to 10.1%, reflecting an expansion of about 330 basis points over the same quarter last year [53][67] Business Line Data and Key Metrics Changes - Specialty revenue for the quarter increased approximately 32% year-on-year, excluding acquisitions [46] - Average product membership in the Performance Suite rose to 3.8 million in Q2, compared to 2.1 million in the same period last year [50] - Average PMPM fee for the Performance Suite was $24.20, down from $32.53 a year ago, influenced by a higher growth in Medicaid and commercial lines of business [50][51] Market Data and Key Metrics Changes - The company anticipates a gross decline in Medicaid membership in the mid-teens, translating to about a 6% gross decline in overall revenue due to the Medicaid redetermination process [16][91] - More than 50% of Q2 Medicaid revenue was from states that started the redetermination process in July, indicating a slower impact on revenue [17] Company Strategy and Development Direction - The company is focused on optimal capital allocation, with priorities including investing in business growth, strategic M&A, and maintaining an efficient capital structure [8] - The strategy emphasizes organic growth through integrated value-based specialty management, aiming for $300 million of adjusted EBITDA by the end of 2024 [30][68] - The company is expanding its footprint in Florida with new agreements, which is expected to enhance its market presence and operational scale [58][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth from the Humana Performance Suite and other contracts, contributing to high expectations for the remainder of 2023 [2] - The company is monitoring utilization trends closely, noting that its experience may be more favorable than other plans due to robust clinical management [7][39] - Management raised the bottom end of the adjusted EBITDA outlook for the year to between $185 million and $200 million, maintaining revenue guidance of $1.935 billion to $1.965 billion [19] Other Important Information - The company completed an early redemption of its remaining 2024 convertible notes as part of its deleveraging strategy [54] - The integration of new acquisitions is progressing well, with positive feedback from clients regarding the integrated platform [10][9] Q&A Session Summary Question: Can you provide more details on the next steps for the rebranding efforts? - Management highlighted that the focus is on underlying operations and technology integration, with positive client feedback on the vision and platform [22][23] Question: What were the key drivers for the recent regional not-for-profit health plan win? - The decision was influenced by the ability to create a more integrated environment and the credibility of the company in managing specialty care [27][61] Question: How is the company addressing the impact of Medicaid redeterminations? - The company anticipates a gross reduction in Medicaid membership and is closely monitoring trends, with expectations of a mid-teens decline [16][91] Question: What is the outlook for the new business pipeline? - The pipeline is showing positive momentum, with clients accelerating sales processes to manage their MLRs and consolidate vendors [66][89] Question: Can you discuss the competitive landscape for tech-enabled solutions? - The company is focused on execution and innovation, which are seen as key determinants in the competitive landscape [127]

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, 2023 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, Inc. (Exact name of registra ...

Evolent Health, Inc. (NYSE:EVH) Q1 2023 Results Conference Call May 3, 2023 5:00 PM ET Company Participants Seth Frank - VP, IR Seth Blackley - CEO John Johnson - CFO Conference Call Participants Sandy Draper - Guggenheim Partners Anne Samuel - JP Morgan Charles Rhyee - TD Cowen David Larsen - BTIG Jailendra Singh - Truist Jeff Garro - Stephens Jessica Tassan - Piper Sandler Richard Close - Canaccord Genuity Ryan Daniels - William Blair Sean Dodge - RBC Capital Markets Operator Welcome to Evolent Health's E ...

[PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) For Q1 2023, Evolent Health reported **$427.7 million** revenue and a **$26.3 million** net loss, with total assets growing to **$2.6 billion** due to the NIA acquisition Consolidated Balance Sheet Highlights (unaudited) | Account | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $157,519 | $188,200 | | Intangible assets, net | $825,857 | $442,784 | | Goodwill | $1,117,945 | $722,774 | | **Total assets** | **$2,589,459** | **$1,817,293** | | Long-term debt, net | $632,277 | $412,986 | | Tax receivable agreement liability | $112,134 | $45,950 | | **Total liabilities** | **$1,297,091** | **$957,876** | | Total shareholders' equity | $1,121,743 | $859,417 | Consolidated Statement of Operations Highlights (unaudited, except per share data) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Revenue | $427,690 | $297,057 | | Total operating expenses | $438,045 | $299,855 | | Operating loss | $(10,355) | $(2,798) | | Net loss attributable to common shareholders | $(26,258) | $(5,350) | | Loss per common share (Basic and diluted) | $(0.24) | $(0.06) | Consolidated Statement of Cash Flows Highlights (unaudited) | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,974) | $(57,442) | | Net cash (used in) provided by investing activities | $(394,993) | $16,766 | | Net cash provided by (used in) financing activities | $379,729 | $(51,376) | | Net decrease in cash and cash equivalents | $(23,188) | $(92,156) | - Effective Q1 2023, the company changed its reportable segments, collapsing previous Evolent Health Services and Clinical Solutions segments into a single segment to reflect changes in performance evaluation and resource allocation, with historical disclosures recast[34](index=34&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew **44.0%** to **$427.7 million** primarily from acquisitions and new partnerships, while operating loss widened due to increased expenses, prompting a new repositioning plan Results of Operations Comparison | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change ($ in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $427,690 | $297,057 | $130,633 | 44.0% | | Cost of revenue | $310,475 | $219,739 | $90,736 | 41.3% | | SG&A expenses | $89,726 | $58,932 | $30,794 | 52.3% | | Operating loss | $(10,355) | $(2,798) | $(7,557) | (270.1)% | - The increase in revenue was primarily due to **$82.5 million** from the acquisitions of NIA, IPG, and Vital Decisions, and **$48.1 million** from new and expanded partner relationships[248](index=248&type=chunk) - The company completed its acquisition of National Imaging Associates (NIA) on January 20, 2023, for consideration including **$387.8 million** in cash, debt financing, and **8.5 million** shares of Class A common stock[216](index=216&type=chunk)[217](index=217&type=chunk) - In Q1 2023, the company initiated a "Repositioning Plan" involving organizational changes and cost-reduction initiatives to improve operational efficiency and profitability[220](index=220&type=chunk) Revenue by End-Market | End-Market | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Medicaid | $183,034 | $130,501 | | Medicare | $127,669 | $104,399 | | Commercial and other | $116,987 | $62,157 | | **Total** | **$427,690** | **$297,057** | [Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk from its floating-rate debt and preferred stock, with a **1%** SOFR increase potentially adding **$4.5 million** in annual interest expense and **$1.8 million** in preferred dividends - The company has significant exposure to interest rate fluctuations due to its floating-rate instruments, including a **$415.0 million** term loan, a **$37.5 million** revolving facility, and **$175.0 million** of Series A Preferred Stock[283](index=283&type=chunk) - For every **1%** increase in the SOFR, the company estimates an additional annual interest expense of **$4.5 million** and an additional **$1.8 million** in preferred dividends[283](index=283&type=chunk) - The company has foreign currency risk from operating expenses denominated in Indian Rupee and Philippine Peso, but the impact was not material for the quarter[285](index=285&type=chunk) [Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2023, excluding recent acquisitions from internal control over financial reporting assessment as permitted by SEC guidelines - Management concluded that disclosure controls and procedures were effective as of March 31, 2023[287](index=287&type=chunk) - The company excluded the recent acquisitions of IPG (August 2022) and NIA (January 2023) from its evaluation of internal control over financial reporting, as permitted by the SEC for the first year post-acquisition[288](index=288&type=chunk) [PART II - OTHER INFORMATION](index=55&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) A shareholder derivative action concerning the Passport Health Plan relationship was dismissed by the Delaware Chancery Court on January 5, 2023, resolving the matter - The shareholder derivative action, Lincolnshire Police Pension Fund v. Blackley, et al., was dismissed by the Delaware Chancery Court on January 5, 2023, and the matter is now considered resolved[150](index=150&type=chunk)[292](index=292&type=chunk) [Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) The company supplemented risk factors, emphasizing increased threats from online security risks and potential financial loss due to banking institution failures - The company faces significant online security risks, including cyber-attacks like ransomware and phishing, which could compromise confidential data and harm the business[294](index=294&type=chunk)[295](index=295&type=chunk) - There is a risk of financial loss from bank failures, as the company is likely to hold cash deposits in excess of the **$250,000** FDIC insurance limit[299](index=299&type=chunk) - Evolving data security and privacy laws (e.g., from the FTC and states like California) require ongoing changes to processes, and non-compliance could lead to significant fines and liability[297](index=297&type=chunk)[298](index=298&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported unregistered sales of Class A common stock for the NIA acquisition and an IPG earn-out provision, with **8,474,576** and **849,715** shares issued respectively - On January 20, 2023, the company issued **8,474,576** shares of Class A common stock in connection with the acquisition of NIA[300](index=300&type=chunk) - On February 1, 2023, the company issued **849,715** shares of Class A common stock to settle a contingent consideration earn-out related to the IPG acquisition[301](index=301&type=chunk)