PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) Presents Evolent Health's unaudited interim consolidated financial statements, covering balance sheets, operations, equity, cash flows, and detailed notes [Consolidated Balance Sheets](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Summarizes the company's financial position, detailing assets, liabilities, and equity as of September 30, 2023, and December 31, 2022 Consolidated Balance Sheets (in thousands) | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | **ASSETS** | | | | | | Total current assets | $638,798 | $478,054 | $160,744 | 33.6% | | Intangible assets, net | $777,668 | $442,784 | $334,884 | 75.6% | | Goodwill | $1,117,543 | $722,774 | $394,769 | 54.6% | | Total assets | $2,669,615 | $1,817,293 | $852,322 | 46.9% | | **LIABILITIES & EQUITY** | | | | | | Total current liabilities | $615,294 | $433,442 | $181,852 | 41.9% | | Long-term debt, net | $599,947 | $412,986 | $186,961 | 45.3% | | Tax receivables agreement liability | $112,134 | $45,950 | $66,184 | 144.0% | | Total liabilities | $1,397,916 | $957,876 | $440,040 | 45.9% | | Mezzanine Equity (Preferred Stock) | $175,606 | $0 | $175,606 | - | | Total shareholders' equity | $1,096,093 | $859,417 | $236,676 | 27.5% | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20(LOSS)) Details the company's revenues, expenses, and net income or loss for the three and nine months ended September 30, 2023 and 2022 Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Revenue | $511,015 | $352,585 | $158,430 | 44.9% | | Total operating expenses | $528,953 | $339,634 | $189,319 | 55.7% | | Operating income (loss) | $(17,938) | $12,951 | $(30,889) | (238.5)% | | Net income (loss) attributable to common shareholders | $(33,196) | $2,123 | $(35,319) | (1663.6)% | | Basic income (loss) per share | $(0.30) | $0.02 | $(0.32) | (1600.0)% | | Diluted income (loss) per share | $(0.30) | $0.02 | $(0.32) | (1600.0)% | | Metric | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | :------- | | Revenue | $1,407,841 | $969,581 | $438,260 | 45.2% | | Total operating expenses | $1,457,702 | $964,061 | $493,641 | 51.2% | | Operating income (loss) | $(49,861) | $5,520 | $(55,381) | (1003.3)% | | Net income (loss) attributable to common shareholders | $(100,865) | $(7,815) | $(93,050) | (1190.7)% | | Basic income (loss) per share | $(0.91) | $(0.09) | $(0.82) | (911.1)% | | Diluted income (loss) per share | $(0.91) | $(0.09) | $(0.82) | (911.1)% | [Consolidated Statements of Changes in Mezzanine Equity and Shareholders' Equity](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20MEZZANINE%20EQUITY%20AND%20SHAREHOLDERS'%20EQUITY) Outlines the changes in mezzanine equity and total shareholders' equity for the nine months ended September 30, 2023 and 2022 - Total shareholders' equity increased from **$859.4 million** as of December 31, 2022, to **$1,096.1 million** as of September 30, 2023, driven by Series A Preferred Stock issuance, shares for acquisition, and stock-based compensation, partially offset by net loss and preferred stock dividends[29](index=29&type=chunk)[27](index=27&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Presents the cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2023 and 2022 Cash Flow Activities (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Net cash and restricted cash provided by (used in) operating activities | $53,201 | $(47,248) | $100,449 | | Net cash and restricted cash used in investing activities | $(409,492) | $(254,659) | $(154,833) | | Net cash and restricted cash provided by financing activities | $365,692 | $142,395 | $223,297 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $9,340 | $(160,124) | $169,464 | - Operating cash flows significantly improved, moving from a net outflow of **$(47.2) million** in 2022 to a net inflow of **$53.2 million** in 2023, primarily due to non-cash adjustments despite a higher net loss[299](index=299&type=chunk)[301](index=301&type=chunk) - Investing activities saw a substantial increase in cash used, from **$(254.7) million** in 2022 to **$(409.5) million** in 2023, mainly driven by the NIA acquisition and continued investments in internal-use software and property and equipment[302](index=302&type=chunk)[303](index=303&type=chunk) - Financing activities provided **$365.7 million** in 2023, a significant increase from **$142.4 million** in 2022, primarily due to proceeds from the Credit Agreement and issuance of preferred equity to fund acquisitions[304](index=304&type=chunk)[305](index=305&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Provides detailed explanations and disclosures supporting the interim consolidated financial statements [Note 1. Organization](index=13&type=section&id=Note%201.%20Organization) Describes the company's structure, operational focus, and liquidity position - Evolent Health, Inc. operates as a holding company through its subsidiary, Evolent Health LLC, focusing on improving healthcare quality and affordability for complex conditions[36](index=36&type=chunk)[40](index=40&type=chunk) - The Company re-evaluated its reportable segments, consolidating previous Evolent Health Services and Clinical Solutions into one segment, effective March 31, 2023[37](index=37&type=chunk) - As of September 30, 2023, the Company had **$184.5 million** in unrestricted cash and cash equivalents, believing it has sufficient liquidity for at least the next twelve months[38](index=38&type=chunk) [Note 2. Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles](index=13&type=section&id=Note%202.%20Basis%20of%20Presentation,%20Summary%20of%20Significant%20Accounting%20Policies%20and%20Change%20in%20Accounting%20Principles) Outlines the basis for preparing interim financial statements, key accounting estimates, and changes in accounting principles - The interim consolidated financial statements are unaudited and include all necessary recurring adjustments, with certain GAAP footnote disclosures omitted as per SEC instructions

| --- | --- | |-----------------------------|-------| | | | | | | | | | | | | | | | | Evolent | | | Second Quarter 2023 Results | | | | | | August 2, 2023 | | | CONTACT: | | | Seth R. Frank | | | Evolent Investor Relations | | | sfrank@evolent.com | | These statements are only predictions based on our current expectations and projections about future events. Forward-looking statements involve risks and uncertainties that may cause actual results, level of activity, performance or achievements to differ mate ...

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]

[FORM 10-Q General Information](index=1&type=section&id=FORM%2010-Q%20General%20Information) This section provides foundational details of the Form 10-Q filing, including registrant identification, compliance status, and cautionary notes on forward-looking statements [Filing Details and Registrant Information](index=1&type=section&id=Filing%20Details%20and%20Registrant%20Information) This section provides the basic filing information for the Quarterly Report on Form 10-Q for Evolent Health, Inc. for the period ended June 30, 2023, including its incorporation state, address, and stock exchange listing - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2023[2](index=2&type=chunk) | Detail | Value | | :--- | :--- | | Registrant Name | Evolent Health, Inc. | | State of Incorporation | Delaware | | Principal Executive Offices | 800 N. Glebe Road, Suite 500, Arlington, Virginia 22203 | | Trading Symbol | EVH | | Exchange | New York Stock Exchange | [Compliance and Filer Status](index=1&type=section&id=Compliance%20and%20Filer%20Status) Evolent Health, Inc. confirms compliance with SEC filing requirements, electronic submission of Interactive Data Files, and is classified as a 'Large accelerated filer' for reporting purposes - The registrant has filed all required reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days[3](index=3&type=chunk) - The registrant has submitted electronically every Interactive Data File required pursuant to Rule 405 of Regulation S-T during the preceding 12 months[3](index=3&type=chunk) | Status | Value | | :--- | :--- | | Filer Classification | Large accelerated filer | | Emerging Growth Company | No | | Shell Company | No | | Class A Common Stock Outstanding (as of July 28, 2023) | 113,244,482 shares | [Explanatory Note and Forward-Looking Statements](index=3&type=section&id=Explanatory%20Note%20and%20Forward-Looking%20Statements) This section clarifies the company's identity and provides cautionary language regarding forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ materially from projections - Evolent Health, Inc. operates as a holding company, with its principal asset being all of the Class A common units of Evolent Health LLC, through which operations are conducted[9](index=9&type=chunk) - Forward-looking statements are subject to risks and uncertainties, including integration challenges from acquisitions (NIA), revenue concentration from large partners, healthcare regulatory changes, and the ability to manage growth and cost structure[12](index=12&type=chunk)[13](index=13&type=chunk) - The company disclaims any obligation to update forward-looking statements to reflect events or circumstances occurring after the report date[16](index=16&type=chunk) [PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents the unaudited consolidated financial statements and management's discussion and analysis of Evolent Health, Inc.'s financial condition and results of operations [Item 1. Financial Statements](index=13&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Evolent Health, Inc. for the periods ended June 30, 2023, and December 31, 2022, including balance sheets, statements of operations, changes in equity, cash flows, and comprehensive notes detailing accounting policies, transactions, and financial performance [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show a significant increase in total assets, primarily driven by acquisitions, and corresponding increases in liabilities and shareholders' equity from December 31, 2022, to June 30, 2023 | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $2,646,831 | $1,817,293 | $829,538 | 45.6% | | Total Liabilities | $1,380,783 | $957,876 | $422,907 | 44.2% | | Total Shareholders' Equity | $1,093,219 | $859,417 | $233,802 | 27.2% | | Cash and Cash Equivalents | $142,530 | $188,200 | $(45,670) | -24.3% | | Intangible Assets, net | $801,923 | $442,784 | $359,139 | 81.1% | | Goodwill | $1,117,556 | $722,774 | $394,782 | 54.6% | | Long-term debt, net | $633,013 | $412,986 | $220,027 | 53.3% | | Tax receivable agreement liability | $112,134 | $45,950 | $66,184 | 144.0% | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=8&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) The company experienced significant revenue growth for both the three and six months ended June 30, 2023, compared to the prior year, but also reported increased operating losses and net losses attributable to common shareholders, largely due to higher expenses including depreciation, amortization, and a right-of-use asset impairment | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change (3M) | % Change (3M) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $469,136 | $319,939 | $149,197 | 46.6% | | Total operating expenses | $490,704 | $324,572 | $166,132 | 51.2% | | Operating loss | $(21,568) | $(4,633) | $(16,935) | -365.5% | | Net loss attributable to common shareholders | $(41,411) | $(4,588) | $(36,823) | -802.6% | | Basic and diluted loss per common share | $(0.37) | $(0.05) | $(0.32) | -640.0% | | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change (6M) | % Change (6M) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $896,826 | $616,996 | $279,830 | 45.4% | | Total operating expenses | $928,749 | $624,427 | $304,322 | 48.7% | | Operating loss | $(31,923) | $(7,431) | $(24,492) | -329.6% | | Net loss attributable to common shareholders | $(67,669) | $(9,938) | $(57,731) | -580.9% | | Basic and diluted loss per common share | $(0.62) | $(0.11) | $(0.51) | -463.6% | - A right-of-use assets impairment charge of **$24.1 million** was recognized for the three and six months ended June 30, 2023[24](index=24&type=chunk) - Interest expense significantly increased to **$14.5 million** (3 months) and **$27.4 million** (6 months) in 2023, up from $2.1 million and $4.4 million in 2022, respectively[24](index=24&type=chunk) [Consolidated Statements of Changes in Mezzanine Equity and Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Mezzanine%20Equity%20and%20Shareholders'%20Equity) Shareholders' equity increased significantly from December 31, 2022, to June 30, 2023, primarily due to the issuance of Series A Preferred Stock and Class A common stock for acquisitions, despite a net loss attributable to common shareholders | Metric (in thousands) | Balance as of Dec 31, 2022 | Balance as of June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Total Shareholders' Equity | $859,417 | $1,093,219 | $233,802 | | Series A Preferred Stock (Amount) | — | $172,829 | $172,829 | | Class A Common Stock (Shares) | 101,501 | 113,083 | 11,582 | | Additional Paid-In Capital | $1,486,857 | $1,774,784 | $287,927 | | Retained Earnings (Accumulated Deficit) | $(606,154) | $(660,459) | $(54,305) | - Issuance of Series A Preferred Stock, net of issuance costs, contributed **$168.0 million** to mezzanine equity in the six months ended June 30, 2023[31](index=31&type=chunk) - Shares issued for acquisition (NIA) totaled **8,475 thousand shares**, valued at **$261.2 million**, significantly increasing Class A common stock and additional paid-in capital[31](index=31&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2023, the company experienced a net decrease in cash and cash equivalents, with significant cash outflows from investing activities (primarily acquisitions) largely offset by inflows from financing activities (debt and preferred stock issuance) | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash and restricted cash used in operating activities | $(7,320) | $(43,778) | | Net cash and restricted cash provided by (used in) investing activities | $(403,347) | $330 | | Net cash and restricted cash provided by (used in) financing activities | $403,059 | $(30,686) | | Net decrease in cash and cash equivalents and restricted cash | $(7,559) | $(74,509) | | Cash and cash equivalents and restricted cash as of end-of-period | $207,599 | $280,433 | - Cash paid for asset acquisitions and business combinations (primarily NIA) was **$388.2 million** in the first six months of 2023[34](index=34&type=chunk) - Proceeds from issuance of long-term debt (net of offering costs) were **$256.1 million**, and proceeds from issuance of preferred stock (net of offering costs) were **$168.0 million** in the first six months of 2023[34](index=34&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's financial statements, covering organizational changes, significant accounting policies, recent acquisitions (NIA, IPG), revenue recognition, debt, equity, and various commitments and contingencies [Note 1. Organization](index=13&type=section&id=Note%201.%20Organization) Evolent Health, Inc. is a Delaware-incorporated holding company that supports healthcare entities through its subsidiaries, focusing on value-based specialty care. It recently consolidated its reportable segments into one and maintains sufficient liquidity - The Company changed its reportable segments to one unified segment, effective March 31, 2023, to reflect growth in its value-based specialty care business[38](index=38&type=chunk) - As of June 30, 2023, the Company had unrestricted cash and cash equivalents of **$142.5 million** and believes it has sufficient liquidity for at least the next twelve months[39](index=39&type=chunk) [Note 2. Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles](index=13&type=section&id=Note%202.%20Basis%20of%20Presentation,%20Summary%20of%20Significant%20Accounting%20Policies%20and%20Change%20in%20Accounting%20Principles) This note outlines the basis for preparing the unaudited interim financial statements, key accounting policies, and the impact of recent accounting standard changes, particularly regarding convertible instruments and business combinations - The interim consolidated financial statements are unaudited and include all necessary adjustments for fair presentation, with certain GAAP disclosures omitted as permitted by SEC regulations[42](index=42&type=chunk) - Key accounting estimates include valuation of assets (intangibles, goodwill), liabilities, business combinations, revenue recognition (variable consideration), and reserves for claims[44](index=44&type=chunk) | Restricted Cash & Investments (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Collateral for letters of credit for facility leases | $2,132 | $2,269 | | Collateral with financial institutions | $16,038 | $10,912 | | Claims processing services | $46,899 | $13,777 | | **Total Restricted Cash and Restricted Investments** | **$65,069** | **$26,958** | - The company amortizes identified intangible assets over their estimated useful lives, with corporate trade names now accelerated to be fully amortized by December 2024 due to brand unification[55](index=55&type=chunk) [Note 3. Recently Issued Accounting Standards](index=17&type=section&id=Note%203.%20Recently%20Issued%20Accounting%20Standards) The company adopted ASU 2020-06, simplifying accounting for convertible instruments, and ASU 2021-08, clarifying accounting for contract assets/liabilities in business combinations, with the former having a significant impact on equity and debt carrying amounts - Adoption of ASU 2020-06 on January 1, 2022, using a modified retrospective method, increased retained earnings by **$39.8 million**, reduced additional paid-in capital by **$106.2 million**, and increased the net carrying amount of 2024 and 2025 Notes by **$25.1 million** and **$41.3 million**, respectively[71](index=71&type=chunk) - ASU 2021-08, adopted in Q1 2023, clarifies accounting for contract assets and liabilities in business combinations but did not materially impact consolidated financial statements[72](index=72&type=chunk) [Note 4. Transactions](index=17&type=section&id=Note%204.%20Transactions) This note details the acquisitions of National Imaging Associates Inc. (NIA) in January 2023 and Implantable Provider Group (IPG) in August 2022, including their respective acquisition considerations, purchase price allocations, and pro forma financial impacts - The acquisition of NIA on January 20, 2023, for **$715.7 million** (net of cash), included **$387.8 million cash**, **$261.3 million** in Class A common stock, and **$66.6 million** in contingent consideration[74](index=74&type=chunk) | NIA Acquisition (in thousands) | Amount | | :--- | :--- | | Total Consideration | $715,694 | | Identifiable Intangible Assets Acquired | $404,000 | | Goodwill Acquired | $395,164 | | Revenue from NIA (6 months ended June 30, 2023) | $107,400 | | Net Loss Attributable to NIA (6 months ended June 30, 2023) | $(2,800) | - The IPG acquisition on August 1, 2022, for **$461.7 million**, included **$256.5 million cash**, **$130.2 million** in Class A common stock, and **$75.0 million** in contingent consideration[80](index=80&type=chunk) | Pro Forma Financial Information (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | | Pro Forma Revenue (with NIA as of Jan 1, 2022) | $908,251 | $749,135 | | Pro Forma Net Loss (with NIA as of Jan 1, 2022) | $(59,268) | $(27,207) | [Note 5. Revenue Recognition](index=21&type=section&id=Note%205.%20Revenue%20Recognition) The company recognizes revenue from multi-year contracts providing value-based care solutions, primarily using a variable fee structure based on per member per month rates or plan premiums, disaggregated by end-market and product type - Revenue is recognized over time using the time elapsed output method, with variable consideration allocated to the period to which fees relate[88](index=88&type=chunk) | Revenue by End-Market (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Medicaid | $209,318 | $141,502 | $392,352 | $279,303 | | Medicare | $138,700 | $111,392 | $266,369 | $208,492 | | Commercial and other | $121,118 | $67,045 | $238,105 | $129,201 | | **Total Revenue** | **$469,136** | **$319,939** | **$896,826** | **$616,996** | | Revenue by Product Type (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Performance Suite | $276,576 | $208,085 | $516,449 | $379,249 | | Specialty Technology and Services Suite | $77,052 | $12,874 | $142,368 | $26,454 | | Administrative Services | $77,754 | $92,357 | $160,821 | $199,216 | | Cases | $37,754 | $6,623 | $77,188 | $12,077 | | **Total Revenue** | **$469,136** | **$319,939** | **$896,826** | **$616,996** | | Contract Balances (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Short-term receivables | $344,781 | $246,209 | | Short-term deferred revenue | $6,950 | $5,758 | | Long-term deferred revenue | $1,853 | $2,533 | [Note 6. Credit Losses](index=23&type=section&id=Note%206.%20Credit%20Losses) The company is exposed to credit losses primarily from accounts receivable, with an allowance for credit losses based on historical delinquency rates and adjusted for current conditions. The allowance increased significantly in the first half of 2023, partly due to the NIA acquisition - As of June 30, 2023, **70%** of trade accounts receivable, non-trade accounts receivable, and contract assets were current, with **20%** past due less than 60 days[106](index=106&type=chunk) | Allowance for Credit Losses (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | | Balance as of beginning of period | $(10,180) | $(3,374) | | NIA acquisition | $(240) | — | | Provision for credit losses | $(4,390) | $322 | | Charge-offs | $1,898 | — | | **Balance as of end of period** | **$(12,912)** | **$(3,052)** | [Note 7. Property and Equipment, Net](index=24&type=section&id=Note%207.%20Property%20and%20Equipment,%20Net) The company's net property and equipment decreased slightly from December 31, 2022, to June 30, 2023, with significant investments in internal-use software development costs and corresponding depreciation expenses | Property and Equipment (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Computer hardware | $31,139 | $30,092 | | Internal-use software development costs | $203,817 | $189,119 | | Total property and equipment, net | $83,524 | $87,874 | - The company capitalized **$13.8 million** in internal-use software development costs for the six months ended June 30, 2023[107](index=107&type=chunk) - Depreciation expense related to property and equipment was **$16.3 million** for the six months ended June 30, 2023, with **$13.5 million** specifically for capitalized internal-use software development costs[108](index=108&type=chunk) [Note 8. Goodwill and Intangible Assets, Net](index=24&type=section&id=Note%208.%20Goodwill%20and%20Intangible%20Assets,%20Net) Goodwill significantly increased due to the NIA acquisition, and intangible assets also grew, with accelerated amortization for corporate trade names as part of a brand unification strategy. No goodwill or intangible asset impairment was identified in the first half of 2023 | Goodwill (in thousands) | Amount | | :--- | :--- | | Balance as of December 31, 2022 | $722,774 | | Goodwill acquired (NIA) | $395,164 | | Balance as of June 30, 2023 | $1,117,556 | | Intangible Assets, Net (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Corporate trade name | $28,300 | $31,874 | | Customer relationships | $694,535 | $372,259 | | Technology | $74,417 | $31,567 | | Provider network contracts | $4,670 | $7,017 | | **Total intangible assets, net** | **$801,922** | **$442,784** | - Amortization expense for intangible assets was **$45.1 million** for the six months ended June 30, 2023, a significant increase from $14.8 million in the prior year[118](index=118&type=chunk) - Corporate trade names will be fully amortized by December 2024 due to accelerated amortization as part of a unified brand strategy[119](index=119&type=chunk) [Note 9. Long-term Debt](index=26&type=section&id=Note%209.%20Long-term%20Debt) The company's long-term debt significantly increased with the Credit Agreement Amendment for the NIA acquisition, including new term loans and revolving commitments. It also details the carrying values and fair values of its 2024 and 2025 Convertible Senior Notes - On January 20, 2023, the Credit Agreement was amended to include an additional **$240.0 million** in term loans and **$25.0 million** in revolving commitments to finance the NIA acquisition[123](index=123&type=chunk) - Interest expense related to the Credit Agreement was **$23.7 million** for the six months ended June 30, 2023[126](index=126&type=chunk) | Convertible Senior Notes (in thousands) | June 30, 2023 Carrying Value | December 31, 2022 Carrying Value | June 30, 2023 Fair Value | December 31, 2022 Fair Value | | :--- | :--- | :--- | :--- | :--- | | 2024 Notes | $24,018 | $23,925 | $38,000 | $38,000 | | 2025 Notes | $169,527 | $168,885 | $192,445 | $185,546 | - The adoption of ASU 2020-06 on January 1, 2022, resulted in the combination of debt and equity components of the 2024 and 2025 Notes into single debt instruments[134](index=134&type=chunk)[144](index=144&type=chunk) [Note 10. Commitments and Contingencies](index=30&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) The company has various commitments, including letters of credit and a Tax Receivables Agreement (TRA) liability that significantly increased due to the NIA acquisition. It also faces litigation and significant credit and revenue concentration risks with a few key partners - The Tax Receivables Agreement (TRA) liability increased by **$66.2 million** for the six months ended June 30, 2023, totaling **$112.1 million**, primarily due to a valuation allowance reduction from NIA acquisition deferred tax liabilities[155](index=155&type=chunk) - The company is subject to significant concentration risk, with Cook County Health and Hospitals System, Molina Healthcare, and Florida Blue Medicare, Inc. representing substantial portions of its revenue and accounts receivable[160](index=160&type=chunk)[162](index=162&type=chunk) | Top Partners' Share of Consolidated Revenue | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2023 | | :--- | :--- | :--- | | Cook County Health and Hospitals Systems | 17.6% | 17.4% | | Centene Corporation | 10.3% | * | | Florida Blue Medicare, Inc. | 11.1% | 11.5% | | Molina Healthcare | 16.4% | 14.9% | * Represents less than 10.0% of the respective balance. [Note 11. Leases](index=33&type=section&id=Note%2011.%20Leases) The company leases office space and equipment under operating lease agreements, with a significant right-of-use asset impairment charge of $24.1 million recognized in Q2 2023 due to decommissioning its Chicago, IL lease - A right-of-use asset impairment charge of **$24.1 million** was recognized for the three months ended June 30, 2023, due to decommissioning the Chicago, IL lease[167](index=167&type=chunk) | Lease Expense (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Operating lease cost | $(1,727) | $2,231 | $213 | $4,505 | | Variable lease cost | $1,565 | $1,171 | $3,121 | $2,497 | | **Total lease cost** | **$(162)** | **$3,402** | **$3,334** | **$7,002** | | Lease Liabilities Maturity (in thousands) | Operating Lease Expense | | :--- | :--- | | 2023 | $4,444 | | 2024 | $11,610 | | 2025 | $11,285 | | 2026 | $10,291 | | 2027 | $10,044 | | Thereafter | $32,161 | | **Total lease payments** | **$79,835** | | Less: Interest | $17,041 | | **Present value of lease liabilities** | **$62,794** | [Note 12. Convertible Preferred Equity](index=34&type=section&id=Note%2012.%20Convertible%20Preferred%20Equity) In connection with the NIA acquisition, the company issued 175,000 shares of Series A Preferred Stock for $168.0 million, which ranks senior to common stock, pays quarterly cash dividends, and is convertible into Class A Common Stock - On January 20, 2023, **175,000 shares** of Series A Preferred Stock were issued at **$960.00 per share**, generating **$168.0 million** in gross proceeds to finance the NIA acquisition[170](index=170&type=chunk) - Series A Preferred Stock ranks senior in dividend and liquidation rights, has an initial liquidation preference of **$1,000.00 per share**, and pays quarterly cash dividends at Adjusted Term SOFR plus **6.00%**[171](index=171&type=chunk)[172](index=172&type=chunk) - Holders can convert shares into Class A Common Stock at an initial conversion price of **$40.00 per share**. The company may redeem shares on or after January 20, 2025, at **165.00%** of the liquidation preference[173](index=173&type=chunk)[174](index=174&type=chunk) - Dividends paid on Series A Preferred Stock were **$8.5 million** for the six months ended June 30, 2023[180](index=180&type=chunk) [Note 13. Loss Per Common Share](index=36&type=section&id=Note%2013.%20Loss%20Per%20Common%20Share) The company reported basic and diluted net loss per common share of $(0.37) for the three months and $(0.62) for the six months ended June 30, 2023, with a significant number of anti-dilutive shares excluded from the calculation | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss attributable to common shareholders (in thousands) | $(41,411) | $(4,588) | $(67,669) | $(9,938) | | Weighted-average common shares outstanding (in thousands) | 111,278 | 90,071 | 109,540 | 89,792 | | **Loss per common share (Basic and Diluted)** | **$(0.37)** | **$(0.05)** | **$(0.62)** | **$(0.11)** | | Anti-dilutive Shares Excluded (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Restricted stock units, performance-based RSUs, leveraged stock units | 1,073 | 1,642 | 1,505 | 1,817 | | Stock options | 976 | 1,852 | 1,106 | 1,807 | | Series A Preferred Stock | 4,375 | — | 4,375 | — | | Convertible senior notes | 6,188 | 11,582 | 6,188 | 11,582 | | **Total** | **12,612** | **15,076** | **13,174** | **15,206** | [Note 14. Stock-based Compensation](index=36&type=section&id=Note%2014.%20Stock-based%20Compensation) Total stock-based compensation expense increased significantly for both the three and six months ended June 30, 2023, primarily driven by Restricted Stock Units (RSUs) and Performance Stock Units (PSUs), with the majority allocated to selling, general and administrative expenses | Stock-based Compensation Expense (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Stock options | $14 | $91 | $74 | $253 | | RSUs | $6,903 | $4,647 | $14,392 | $7,948 | | LSUs | $77 | $382 | $361 | $1,157 | | PSUs | $1,972 | $1,892 | $4,849 | $3,000 | | **Total compensation expense by award type** | **$8,966** | **$7,012** | **$19,676** | **$12,358** | | Allocation by Line Item (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Cost of revenue | $42 | $1,162 | $1,582 | $1,962 | | Selling, general and administrative expenses | $8,924 | $5,850 | $18,094 | $10,396 | | **Total compensation expense by financial statement line item** | **$8,966** | **$7,012** | **$19,676** | **$12,358** | [Note 15. Income Taxes](index=37&type=section&id=Note%2015.%20Income%20Taxes) The company recognized a significant income tax benefit for the six months ended June 30, 2023, primarily due to a reduction in the valuation allowance resulting from deferred tax liabilities established during the NIA acquisition, leading to a positive effective tax rate | Income Tax (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Provision for (benefit from) income taxes | $(970) | $(184) | $(69,159) | $1,018 | | Effective tax rate | 2.7% | 3.9% | 56.0% | -11.4% | - The income tax benefit for the six months ended June 30, 2023, primarily relates to a **$56.1 million** reduction in the valuation allowance due to deferred tax liabilities from the NIA acquisition[187](index=187&type=chunk) - The company had unrecognized tax benefits of **$1.6 million** as of June 30, 2023[188](index=188&type=chunk) [Note 16. Investments in Equity Method Investees](index=37&type=section&id=Note%2016.%20Investments%20in%20Equity%20Method%20Investees) The company holds non-controlling ownership interests in joint ventures and other entities, accounted for under the equity method, and provides management and support services to these investees, generating revenue - The company's economic interests in equity method investments ranged between **4%** and **38%**, and voting interests between **25%** and **40%**, as of June 30, 2023[191](index=191&type=chunk) | Gain from Equity Method Investees (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Gain | $200 | $2,000 | $600 | $2,500 | | Revenue from Services Agreements (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $4,600 | $3,900 | $9,400 | $7,500 | [Note 17. Fair Value Measurement](index=38&type=section&id=Note%2017.%20Fair%20Value%20Measurement) The company measures contingent consideration liabilities at fair value on a recurring basis, using Level 3 inputs and a real options approach, with the fair value increasing significantly due to additions from the NIA acquisition | Contingent Consideration (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Fair Value | $113,300 | $78,000 | | Valuation Technique | Real options approach | Real options approach | | Significant Unobservable Inputs | Risk-neutral expected earnout consideration, Weighted average discount rate | Risk-neutral expected earnout consideration, Weighted average discount rate | | Input Ranges (Discount Rate) | 8.50% - 13.98% | 9.85% - 10.01% | | Changes in Level 3 Liabilities (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | | Balance as of beginning of period | $78,000 | $28,700 | | Additions | $66,600 | — | | Settlements | $(32,047) | — | | Total (gain) loss, net | $747 | $4,700 | | **Balance as of end of period** | **$113,300** | **$33,400** | [Note 18. Related Parties](index=39&type=section&id=Note%2018.%20Related%20Parties) The company has ongoing financial relationships with related parties, including equity method investees and UPMC, involving both revenue generation from services and cost of revenue for subcontracted tasks | Related Party Balances (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Accounts receivable, net | $7,326 | $8,787 | | Prepaid expenses and other current assets | $43 | — | | Accounts payable | — | $27 | | Accrued liabilities | — | $192 | | Related Party Revenues and Expenses (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $39,486 | $42,810 | $94,207 | $74,874 | | Cost of revenue | $32,076 | $36,684 | $79,582 | $63,145 | | Selling, general and administrative expenses | $997 | $236 | $1,239 | $302 | [Note 19. Repositioning and Other Changes](index=40&type=section&id=Note%2019.%20Repositioning%20and%20Other%20Changes) The company initiated a repositioning plan in Q2 2023 to align assets and talent with value-based specialty care, incurring $11.3 million in charges for severance, dedicated employee costs, and professional services, with total expected charges of $25.3 million - A repositioning plan was implemented in Q2 2023 to streamline operations and focus on value-based specialty care, involving organizational changes and brand consolidation[206](index=206&type=chunk) | Repositioning Plan Costs (in thousands) | Incurred for 3 Months Ended June 30, 2023 | Incurred for 6 Months Ended June 30, 2023 | Total Amount Expected to be Incurred | | :--- | :--- | :--- | :--- | | Severance and termination benefits | $4,737 | $4,737 | $7,300 | | Dedicated employee costs | $1,737 | $1,737 | $7,725 | | Professional services | $4,787 | $4,787 | $10,300 | | **Total** | **$11,261** | **$11,261** | **$25,325** | - The repositioning program is anticipated to be substantially complete by the first half of 2024[207](index=207&type=chunk) [Note 20. Reserve for Claims and Performance-Based Arrangements](index=41&type=section&id=Note%2020.%20Reserve%20for%20Claims%20and%20Performance-Based%20Arrangements) The company maintains reserves for claims and performance-based arrangements, using actuarial principles and estimates for incurred but not reported claims, with the balance increasing significantly for the six months ended June 30, 2023 - Reserves reflect estimates for payments under performance-based arrangements and the ultimate cost of incurred but not reported claims, including expected development on reported claims[210](index=210&type=chunk) - The estimation process involves considerable judgment and is highly sensitive to changes in key assumptions like completion factors and medical cost trends[215](index=215&type=chunk) | Reserves for Claims and Performance-Based Arrangements (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | | Balance, beginning of period | $199,730 | $171,294 | | Total claims incurred | $358,985 | $269,393 | | Total claims paid | $(312,904) | $(302,653) | | **Balance, end of period** | **$245,811** | **$125,960** | [Note 21. Supplemental Cash Flow Information](index=42&type=section&id=Note%2021.%20Supplemental%20Cash%20Flow%20Information) This note provides supplemental non-cash investing and financing activities, including the impact of business combinations on goodwill and the issuance of Class A common stock for acquisitions, as well as operating cash flows from operating leases | Supplemental Non-cash Activities (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | | Accrued property and equipment purchases | $24 | $1,118 | | Increase/decrease to goodwill from measurement period adjustments/business combinations | $(391) | — | | Class A common stock issued in connection with business combinations | $261,271 | — | | Operating cash flows from operating leases | $6,532 | $7,010 | [Note 22. Subsequent Events](index=42&type=section&id=Note%2022.%20Subsequent%20Events) Subsequent to the reporting period, the company issued a notice of redemption for its outstanding 2024 Notes, planning to redeem them for cash or convert them into Class A Common Stock by October 13, 2023 - On August 2, 2023, the company issued a notice to redeem its outstanding 2024 Notes for cash or conversion into Class A Common Stock by October 13, 2023[218](index=218&type=chunk) - As of August 2, 2023, **$24.3 million** aggregate principal amount of the 2024 Notes was outstanding, with the company intending to fund the redemption using cash on hand[218](index=218&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting business overview, recent events, critical accounting policies, detailed analysis of revenue and expenses, and liquidity, emphasizing growth in value-based care and impacts of acquisitions [Introduction](index=43&type=section&id=Introduction) Evolent Health is a market leader in value-based care, providing integrated solutions to healthcare providers and payers. The company has consolidated its segments into one to reflect growth in its value-based specialty care business and noted no material impact from inflation on Q2 2023 results - Evolent Health provides integrated solutions for value-based care, aiming to improve healthcare quality and outcomes while reducing costs for providers and payers[222](index=222&type=chunk) - The company revised its segment structure to a single segment as of January 1, 2023, due to significant growth in its value-based specialty care business[224](index=224&type=chunk) - Inflationary pressures on operating expenses were not material to revenues or net income for the six months ended June 30, 2023[226](index=226&type=chunk) [Recent Events](index=44&type=section&id=Recent%20Events) Recent events include the acquisition of NIA, which was financed through a credit agreement amendment and the issuance of Series A Preferred Stock, and the implementation of a repositioning plan to streamline operations and focus on value-based specialty care - The acquisition of NIA on January 20, 2023, for **$387.8 million** in cash, **$265.0 million** in debt financing, and **8.5 million shares** of Class A common stock, aims to accelerate the company's value-based specialty care strategy[230](index=230&type=chunk) - A Credit Agreement Amendment on January 20, 2023, provided an additional **$240.0 million** in term loans and **$25.0 million** in revolving commitments to finance the NIA acquisition[231](index=231&type=chunk) - The company issued **175,000 shares** of Series A Preferred Stock for **$168.0 million** to help finance the NIA acquisition[232](index=232&type=chunk) - A repositioning plan initiated in Q2 2023 is expected to incur total charges of approximately **$25.3 million**, recorded in selling, general and administrative expenses, to align assets and talent towards value-based specialty care[235](index=235&type=chunk) [Critical Accounting Policies and Estimates](index=45&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights goodwill as a critical accounting estimate, detailing the annual impairment review process which involves qualitative and quantitative assessments. No goodwill impairment was identified in 2022 or the first half of 2023 - Goodwill is reviewed at least annually for impairment, with tests performed at the reporting unit level, involving qualitative and, if necessary, quantitative assessments[237](index=237&type=chunk)[238](index=238&type=chunk) - The 2022 annual goodwill impairment test for the Evolent Health Services reporting unit, prompted by a partner's exit from a line of business, showed that fair value exceeded carrying value, thus no impairment occurred[240](index=240&type=chunk)[241](index=241&type=chunk) - No qualitative factors triggered a quantitative goodwill impairment test during the six months ended June 30, 2023[242](index=242&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) The company experienced substantial revenue growth for both the three and six months ended June 30, 2023, primarily driven by acquisitions and expansion with partners. However, operating expenses also increased significantly, leading to larger operating losses [Key Components of our Results of Operations](index=46&type=section&id=Key%20Components%20of%20our%20Results%20of%20Operations) This section defines the key components of the company's results of operations, including revenue recognition from value-based care solutions, cost of revenue, selling, general and administrative expenses, depreciation and amortization, and operational metrics like Lives on Platform and PMPM fees - Revenue contracts are typically multi-year arrangements for value-based care solutions, utilizing a variable fee structure based on per member per month rates or plan premiums[248](index=248&type=chunk)[249](index=249&type=chunk) - Cost of revenue includes claims expense, employee-related expenses, TPA support, and in some cases, capitation payments and pharmaceutical treatments[253](index=253&type=chunk) - Key operational metrics include 'Lives on Platform' (members covered for specialty care, risk arrangements, or administrative services), 'PMPM fees' (revenue per member per month), and 'Cases' (individuals in surgery management/advanced care planning)[256](index=256&type=chunk)[257](index=257&type=chunk) [Evolent Health, Inc. Consolidated Results](index=49&type=section&id=Evolent%20Health,%20Inc.%20Consolidated%20Results) The consolidated results show significant revenue growth for both the three and six months ended June 30, 2023, but also a substantial increase in total operating expenses, leading to a larger operating loss compared to the prior year | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change (3M) | % Change (3M) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $469,136 | $319,939 | $149,197 | 46.6% | | Cost of revenue | $351,938 | $249,705 | $102,233 | 40.9% | | Selling, general and administrative expenses | $90,389 | $58,955 | $31,434 | 53.3% | | Depreciation and amortization expenses | $32,134 | $15,112 | $17,022 | 112.6% | | Right-of-use assets impairment | $24,065 | — | $24,065 | —% | | Operating loss | $(21,568) | $(4,633) | $(16,935) | -365.5% | | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change (6M) | % Change (6M) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $896,826 | $616,996 | $279,830 | 45.4% | | Cost of revenue | $662,413 | $469,444 | $192,969 | 41.1% | | Selling, general and administrative expenses | $180,115 | $117,887 | $62,228 | 52.8% | | Depreciation and amortization expenses | $61,409 | $30,218 | $31,191 | 103.2% | | Right-of-use assets impairment | $24,065 | — | $24,065 | —% | | Operating loss | $(31,923) | $(7,431) | $(24,492) | -329.6% | [Comparison of the Results for Three Months Ended June 30, 2023 to 2022](index=49&type=section&id=Comparison%20of%20the%20Results%20for%20Three%20Months%20Ended%20June%2030,%202023%20to%202022) Revenue increased by 46.6% to $469.1 million, driven by acquisitions and partner expansion. Cost of revenue rose 40.9% due to higher claims and personnel costs. SG&A expenses increased 53.3% due to acquisition-related fees and personnel. Depreciation and amortization more than doubled, and a $24.1 million ROU asset impairment was recognized - Total revenue increased by **$149.2 million (46.6%)** to **$469.1 million**, with **$90.6 million** from NIA and IPG acquisitions and **$58.6 million** from new/expanded partners[263](index=263&type=chunk) - Cost of revenue increased by **$102.2 million (40.9%)** to **$351.9 million**, primarily due to **$52.4 million** in higher claims costs from acquisitions and contract transitions, and **$30.4 million** in higher personnel costs[266](index=266&type=chunk) - Selling, general, and administrative expenses increased by **$31.4 million (53.3%)** to **$90.4 million**, driven by **$22.2 million** in NIA transfer services administration agreement fees and **$8.3 million** in higher personnel costs[268](index=268&type=chunk) - Depreciation and amortization expenses increased by **$17.0 million (112.6%)** to **$32.1 million**, mainly due to **$14.6 million** from acquired intangible assets and **$1.9 million** from accelerated trade name amortization[270](index=270&type=chunk) - A **$24.1 million** impairment charge was recognized for right-of-use assets due to decommissioning the Chicago, IL lease[271](index=271&type=chunk) [Comparison of the Results for Six Months Ended June 30, 2023 to 2022](index=51&type=section&id=Comparison%20of%20the%20Results%20for%20Six%20Months%20Ended%20June%2030,%202023%20to%202022) Revenue grew 45.4% to $896.8 million, largely from acquisitions and partner growth. Cost of revenue increased 41.1% due to higher claims and personnel. SG&A rose 52.8% from acquisition-related fees and headcount. Depreciation and amortization more than doubled, and a $24.1 million ROU asset impairment was recorded - Total revenue increased by **$279.8 million (45.4%)** to **$896.8 million**, with **$172.6 million** from NIA and IPG acquisitions and **$107.2 million** from new/expanded partners[273](index=273&type=chunk) - Cost of revenue increased by **$193.0 million (41.1%)** to **$662.4 million**, driven by **$110.5 million** in higher claims costs and **$56.2 million** in increased personnel costs from acquisitions[275](index=275&type=chunk) - Selling, general, and administrative expenses increased by **$62.2 million (52.8%)** to **$180.1 million**, primarily due to a **$16.1 million** NIA TSA fee, **$10.6 million** in higher personnel fees, and **$11.7 million** in acquisition/severance costs[276](index=276&type=chunk) - Depreciation and amortization expenses increased by **$31.2 million (103.2%)** to **$61.4 million**, mainly from **$27.6 million** in acquired intangible assets and **$2.6 million** in accelerated trade name amortization[278](index=278&type=chunk) - A **$24.1 million** impairment charge was recognized for right-of-use assets due to decommissioning the Chicago, IL lease[279](index=279&type=chunk) [Discussion of Non-Operating Results](index=52&type=section&id=Discussion%20of%20Non-Operating%20Results) Non-operating results were significantly impacted by a substantial increase in interest expense due to new debt for acquisitions, a large change in the Tax Receivable Agreement (TRA) liability, and a corresponding income tax benefit - Interest expense increased significantly to **$27.4 million** for the six months ended June 30, 2023, up from $4.4 million in the prior year, primarily due to new debt from the Credit Agreement[281](index=281&type=chunk) - A **$66.2 million** change in Tax Receivable Agreement (TRA) liability was recorded for the six months ended June 30, 2023, resulting in a total TRA liability of **$112.1 million**[284](index=284&type=chunk) - An income tax benefit of **$(69.2) million** was recognized for the six months ended June 30, 2023, primarily due to the reduction in valuation allowance from deferred tax liabilities related to the NIA acquisition[285](index=285&type=chunk) [Review of Consolidated Financial Condition](index=53&type=section&id=Review%20of%20Consolidated%20Financial%20Condition) The company's liquidity position is deemed sufficient for the next twelve months, despite operating losses. Cash flows were significantly impacted by investing activities (acquisitions) and financing activities (debt and preferred equity issuance). Contractual obligations increased, and goodwill and intangible assets grew substantially due to recent acquisitions - The company believes its current cash and cash equivalents (**$142.5 million** as of June 30, 2023) are sufficient to meet working capital and capital expenditure requirements for at least the next twelve months[287](index=287&type=chunk)[288](index=288&type=chunk) | Cash Flow Summary (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash and restricted cash used in operating activities | $(7,320) | $(43,778) | | Net cash and restricted cash provided by (used in) investing activities | $(403,347) | $330 | | Net cash and restricted cash provided by (used in) financing activities | $403,059 | $(30,686) | - Investing activities used **$403.3 million**, primarily for **$388.2 million** in acquisitions (NIA) and **$15.9 million** in internal-use software/property and equipment[293](index=293&type=chunk) - Financing activities provided **$403.1 million**, mainly from **$256.1 million** in debt proceeds and **$168.0 million** from preferred equity issuance[295](index=295&type=chunk) | Contractual Obligations (in thousands) | 2023 | 2024-2025 | 2026-2027 | 2028+ | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases for facilities | $4,444 | $22,895 | $20,335 | $32,161 | $79,835 | | Purchase obligations related to vendor contracts | $5,342 | $5,700 | $1,466 | — | $12,508 | | Convertible notes interest payments | $1,606 | $5,175 | — | — | $6,781 | | Convertible notes principal repayment | $24,281 | $172,500 | — | — | $196,781 | | Contingent consideration | $43,300 | $70,000 | — | — | $113,300 | | **Total contractual obligations** | **$78,973** | **$276,270** | **$21,801** | **$32,161** | **$409,205** | - Goodwill and intangible assets increased significantly due to the NIA acquisition (**$404.0 million** intangible assets, **$395.2 million** goodwill) and IPG acquisition (**$195.7 million** intangible assets, **$296.6 million** goodwill)[304](index=304&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk on its floating-rate debt and preferred stock, with a 1% increase in SOFR potentially leading to $4.5 million in additional annual interest expense and $1.8 million in preferred dividends. It also faces foreign currency exchange risk but does not currently use derivatives for hedging - As of June 30, 2023, the company had **$415.0 million** in secured term loans, **$37.5 million** in secured revolving credit facilities, and **$175.0 million** in Series A Preferred Stock, all of which are floating-rate instruments based on SOFR[311](index=311&type=chunk) - A **1%** increase in SOFR would result in an additional **$4.5 million** in annual interest expense and **$1.8 million** in annual preferred dividends[311](index=311&type=chunk) - The company is exposed to foreign currency risks, primarily related to operating expenses denominated in Indian Rupee and Philippine Peso, but does not currently use derivative financial instruments to hedge this risk[313](index=313&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2023. The acquisitions of IPG and NIA were excluded from the internal controls over financial reporting assessment for this period due to ongoing integration - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023[315](index=315&type=chunk) - The acquisitions of IPG (August 1, 2022) and NIA (January 20, 2023) were excluded from the assessment of internal controls over financial reporting for the period ended June 30, 2023, due to ongoing integration[317](index=317&type=chunk) - Management acknowledges the inherent limitations of internal controls, which can only provide reasonable assurance against errors and fraud[319](index=319&type=chunk) [PART II](index=59&type=section&id=PART%20II) This part addresses legal proceedings, risk factors, equity security sales, and other required disclosures for the reporting period [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the discussion of legal proceedings from Note 10 of the financial statements, which includes a derivative action filed by a shareholder regarding oversight of Passport Health Plan - The discussion of legal proceedings is incorporated by reference from Note 10, which details a shareholder derivative action concerning the company's relationship with Passport Health Plan[321](index=321&type=chunk) - A shareholder sent a letter to the Board on April 6, 2023, requesting an investigation into alleged wrongdoing and litigation for breach of fiduciary duty against individuals named in the prior Derivative Action[158](index=158&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) This section supplements the significant business risks outlined in the 2022 Form 10-K, specifically highlighting increased exposure to online security risks, the potential failure of banking institutions holding company funds, and the challenge of accurately underwriting performance-based contracts in specialty care management - The company faces significant online security risks due to handling confidential information, with potential liabilities and reputational harm from security breaches, despite implemented measures[323](index=323&type=chunk) - The failure of banking institutions holding company funds, particularly amounts exceeding FDIC insured levels, could reduce available cash and negatively impact company value[328](index=328&type=chunk) - Failure to accurately underwrite performance-based contracts for specialty care management, especially given the unpredictable costs of oncology, cardiology, and other specialties, could reduce profitability[329](index=329&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On May 11, 2023, the company issued 27,522 shares of Class A common stock in connection with a contingent consideration earn-out provision, exempt from registration under Section 4(a)(2) and Rule 506(b) of the Securities Act - On May 11, 2023, **27,522 shares** of Class A common stock were issued for a contingent consideration earn-out provision[330](index=330&type=chunk) - The issuance was exempt from registration under the Securities Act, relying on Section 4(a)(2) and Rule 506(b), as purchasers were accredited investors and no general solicitation occurred[330](index=330&type=chunk) [Item 3. Defaults Upon Senior Securities](index=60&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as 'Not applicable,' indicating no defaults upon senior securities for the reporting period [Item 4. Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as 'Not applicable,' indicating no mine safety disclosures are required for the reporting period [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) This item states 'None,' indicating no other information is required to be disclosed for the reporting period [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including amendments to the Stock and Asset Purchase Agreement, certifications, and XBRL taxonomy documents - Exhibits include Amendment No. 1 and No. 2 to the Stock and Asset Purchase Agreement related to Magellan Health, Inc.[336](index=336&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are included[336](index=336&type=chunk) - XBRL (eXtensible Business Reporting Language) documents are provided for instance, schema, calculation, label, presentation, and definition linkbases[336](index=336&type=chunk) [Signatures](index=62&type=section&id=Signatures) The report is duly signed on behalf of Evolent Health, Inc. by its Chief Financial Officer, John Johnson, and Chief Accounting Officer and Controller, Aammaad Shams, as of August 2, 2023 - The report is signed by John Johnson, Chief Financial Officer, and Aammaad Shams, Chief Accounting Officer and Controller[339](index=339&type=chunk) - The signing date for the report is August 2, 2023[340](index=340&type=chunk)

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)

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]