Evolent Health(EVH) - 2022 Q1 - Quarterly Report

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