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Evolent Health Announces Second Quarter 2017 Results

12:03 EDT 7 Aug 2017 | PR Newswire

WASHINGTON, Aug. 7, 2017 /PRNewswire/ --Evolent Health, Inc. (NYSE: EVH), a company providing an integrated value-based care platform to the nation's leading health systems and physician organizations, today announced financial results for the quarter ended June 30, 2017.

Highlights from the second quarter of 2017 announcement include (all comparisons are to the quarter ended June 30, 2016):

  • GAAP revenue of $107.1 million, an increase of 89.4%; Adjusted Revenue of $107.3 million, an increase of 89.9%
  • Net income (loss) attributable to Evolent Health, Inc. of $(16.9) million, Adjusted EBITDA of $(3.6) million
  • Lives on platform of approximately 2.8 million, an increase of 98.2%
  • New partnership agreement with Crystal Run Healthcare in New York, providing third-party administration services and population health management

Chief Executive Officer of Evolent Health, Inc. Frank Williams commented, "We are pleased with our second quarter results and our continued strong performance in the market as we build upon our solid reputation for adding value to patients and providers. Entering our sixth year of operations, we continue to see results that prove providers can deliver high-value care when they have built-for-purpose technology and predictive analytics, engaged physicians, and measurable and effective clinical programs."

Mr. Williams continued, "We are excited to announce our partnership with Crystal Run Healthcare in New York, a multi-specialty group medical practice with nearly 50 medical specialties represented across 20 practice locations. Evolent will provide third party administration services and population health management for Crystal Run's Medicaid and commercial lines of business, including a plan for lower-income residents who do not qualify for Medicaid but need the same essential benefits as other health plans at a lower cost. This focus on providing access, high quality care and coverage for the underserved aligns directly with our mission and our investment in establishing a national Medicaid Center of Excellence."

Mr. Williams concluded, "For the remainder of this year, we are focused on delivering value for our partners, continuing to expand the Evolent network and continuing to innovate our platform and approach to maintain our leadership position in a large and growing market."

Financial Results of Evolent Health, Inc.

In our earnings releases, prepared remarks, conference calls, slide presentations and webcasts, we may use or discuss non-GAAP financial measures. Definitions of the non-GAAP financial measures, as well as reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in this earnings release. See "Financial Statement Presentation" and "Non-GAAP Financial Measures" for more information.

Reported Results

Evolent Health, Inc. reported the following United States of America generally accepted accounting principles ("GAAP") results:

  • Revenue of $107.1 million and $56.5 million for the three months ended June 30, 2017 and 2016, respectively, an increase of 89.4%;
  • Cost of revenue of $68.0 million and $32.8 million for the three months ended June 30, 2017 and 2016, respectively, an increase of 107.4%;
  • Net income (loss) attributable to Evolent Health, Inc. of $(16.9) million and $(8.4) million for the three months ended June 30, 2017 and 2016, respectively;
  • Earnings (loss) available to common shareholders, basic and diluted, of $(16.9) million and $(8.4) million for the three months ended June 30, 2017 and 2016, respectively; and
  • Earnings (loss) available to common shareholders, per basic and diluted share, of $(0.28) and $(0.20) for the three months ended June 30, 2017 and 2016, respectively.

Total cash, cash equivalents and investments as of June 30, 2017, were $124.0 million.

Adjusted Results

  • Adjusted Revenue of $107.3 million and $56.5 million for the three months ended June 30, 2017 and 2016, respectively, an increase of 89.9%;
  • Adjusted Cost of Revenue of $66.2 million and $32.1 million for the three months ended June 30, 2017 and 2016, respectively, an increase of 105.8%;
  • Adjusted EBITDA of $(3.6) million and $(3.9) million for the three months ended June 30, 2017 and 2016, respectively;
  • Adjusted Earnings (Loss) Available for Class A and Class B Shareholders of $(8.8) million and $(7.2) million for the three months ended June 30, 2017 and 2016, respectively; and
  • Adjusted Earnings (Loss) per Share Available for Class A and Class B Shareholders of $(0.13) and $(0.12) for the three months ended June 30, 2017 and 2016, respectively.

Business Outlook

For the three months ended September 30, 2017, Adjusted Revenue is expected to be in the range of $103.0 million to $105.0 million and Adjusted EBITDA is expected to be approximately breakeven. For the full year 2017, we expect Adjusted Revenue to be in the range of $424.0 million to $428.0 million and Adjusted EBITDA to be in the range of $(8.0) million to $(4.0) million.

This "Business Outlook" section contains forward-looking statements, and actual results may differ materially. Factors that may cause actual results to differ materially from our current expectations are set forth in "Forward Looking Statements - Cautionary Language" and Evolent Health, Inc.'s filings with the Securities and Exchange Commission ("SEC").

Web and Conference Call Information

As previously announced, Evolent Health, Inc. will hold a conference call to discuss its second quarter performance this evening, August 7, 2017, at 5:00 p.m., Eastern Time. The conference call will be available via live webcast on the Company's Investor Relations website at http://ir.evolenthealth.com. To participate by telephone, dial 855.940.9467 or 412.317.6034 for international callers, and ask to join to the Evolent Health call. Participants are advised to dial in at least fifteen minutes prior to the call to register. The call will be archived on the company's website for one week and will be available beginning later this evening. Evolent Health invites all interested parties to attend the conference call.

About Evolent Health

Evolent Health partners with leading health systems to drive value-based care transformation. By providing clinical, analytical and financial capabilities, Evolent Health helps physicians and health systems achieve superior quality and cost results. Evolent Health's approach breaks down barriers, aligns incentives and powers a new model of care delivery resulting in meaningful alignment between providers, payers, physicians and patients. Learn more at: www.evolenthealth.com.

Financial Statement Presentation

Evolent Health, Inc. is a holding company and its principal asset is all of the Class A common units in its operating subsidiary, Evolent Health LLC, which has owned all of our operating assets and substantially all of our business since inception. The financial results of Evolent Health LLC are consolidated in the financial statements of Evolent Health, Inc.

Non-GAAP Financial Measures

In addition to disclosing financial results that are determined in accordance with GAAP, we present and discuss Adjusted Revenue, Adjusted Transformation Revenue, Adjusted Platform and Operations Revenue, Adjusted Cost of Revenue, Adjusted Selling, General and Administrative Expenses, Adjusted Depreciation and Amortization Expenses, Adjusted Operating Income (Loss), Adjusted Gross Margin, Adjusted EBITDA, Adjusted Earnings (Loss) Available to Class A and Class B Shareholders, Adjusted Earnings (Loss) per Share Available to Class A and Class B Shareholders and Adjusted Weighted-Average Class A and Class B Shares, which are all non-GAAP financial measures, as supplemental measures to help investors evaluate our fundamental operational performance.

The adjusted results also include certain other adjustments.

Adjusted Revenue, Adjusted Transformation Revenue and Adjusted Platform and Operations Revenue are defined as revenue, transformation revenue, and platform and operations revenue, respectively, adjusted to exclude the impact of purchase accounting adjustments. Management uses Adjusted Revenue, Adjusted Transformation Revenue and Adjusted Platform and Operations Revenue as supplemental performance measures because they reflect a complete view of the operational results. The measures are also useful to investors because they reflect the full view of our operational performance in line with how we generate our long term forecasts.

Adjusted Cost of Revenue and Adjusted Selling, General and Administrative Expenses are defined as cost of revenue and selling, general and administrative expenses, respectively, adjusted to exclude the impact of stock-based compensation expenses and transaction costs related to acquisitions and business combinations, securities offerings, as well as one-time adjustments. Management uses Adjusted Cost of Revenue and Adjusted Selling, General and Administrative Expenses as supplemental performance measures which are also useful to investors because they facilitate an understanding of our long term operational costs while removing the effect of transaction costs that are one time and costs that are non-cash (stock-based compensation expenses) in nature. Additionally, these supplemental performance measures facilitate understanding a breakdown of our Adjusted Total Operating Expenses.

Adjusted Depreciation and Amortization Expenses is defined as depreciation and amortization expenses adjusted to exclude the impact of amortization expenses related to intangible assets acquired through acquisitions and business combinations. Management uses Adjusted Depreciation and Amortization Expenses as a supplemental performance measure because it reflects a complete view of the operational results. The measure is also useful to investors because it facilitates understanding a breakdown of our Adjusted Total Operating Expenses.

Adjusted Total Operating Expenses is defined as the sum of Adjusted Cost of Revenue, Adjusted Selling, General and Administrative Expenses and Adjusted Depreciation and Amortization Expenses, and reflects the adjustments made in those non-GAAP measures.  Adjusted Total Operating Expenses is adjusted to exclude the impact of one-time adjustments, such as goodwill impairment, and items arising from acquisitions and business combinations, such as (gain) loss on change in fair value of contingent consideration.

Adjusted Operating Income (Loss) is defined as Adjusted Revenue less Adjusted Total Operating Expenses, and reflects the adjustments made in those non-GAAP measures.

Adjusted Gross Margin is defined as Adjusted Revenue less Adjusted Cost of Revenue, and reflects the adjustments made in those non-GAAP measures.

Adjusted EBITDA is defined as EBITDA (net income (loss) attributable to Evolent Health, Inc. before interest income, interest expense, (provision) benefit for income taxes, depreciation and amortization expenses), adjusted to exclude goodwill impairment, (gain) loss on change in fair value of contingent consideration, income (loss) from affiliates, other income (expense), net, net (income) loss attributable to non-controlling interests, purchase accounting adjustments, stock-based compensation expenses, transaction costs related to acquisitions and business combinations, such as (gain) loss on change in fair value of contingent consideration and securities offerings, as well as one-time adjustments. Management uses Adjusted EBITDA as a supplemental performance measure because the removal of transaction costs, one-time or non-cash items (depreciation, amortization and stock-based compensation expenses) allows us to focus on operational performance. We believe that this measure is also useful to investors because it allows further insight into the period over period operational performance in a manner that is comparable to other organizations in our industry and in the market in general.

Adjusted Earnings (Loss) Available to Class A and Class B Shareholders is defined as earnings (loss) available to common shareholders adjusted to exclude goodwill impairment, income (loss) from affiliates, (provision) benefit for income taxes, (gain) loss on change in fair value of contingent consideration, purchase accounting adjustments, stock-based compensation expenses and transaction costs related to acquisitions and business combinations, such as (gain) loss on change in fair value of contingent consideration, securities offerings, as well as one-time adjustments.

Adjusted Weighted-Average Class A and Class B Shares is defined as weighted average common shares (diluted) adjusted to include, in periods of net loss, the dilutive or potentially dilutive effect of the assumed conversion of Class B common shares to Class A common shares.

Adjusted Earnings (Loss) per Share Available for Class A and Class B Shareholders is defined as Adjusted Earnings (Loss) Available for Class A and Class B Shareholders divided by Adjusted Weighted-Average Class A and Class B Shares, and reflects the adjustments made in those non-GAAP measures.

Management uses Adjusted Earnings (Loss) Available to Class A and Class B Shareholders, Adjusted Weighted-Average Class A and Class B Shares and Adjusted Earnings (Loss) per Share Available to Class A and Class B Shareholders because these performance measures represent our core operating performance distributed amongst all of our investors which is not represented by the GAAP results across time due to our complex equity structure.  We believe that these measures are also useful to investors for the same reason.

These adjusted measures do not represent and should not be considered as alternatives to GAAP measurements, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies. A reconciliation of these adjusted measures to their most comparable GAAP financial measures is presented in the tables below. We believe these measures are useful across time in evaluating our fundamental core operating performance.

Evolent Health, Inc.

Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

For the Three

For the Six

Months Ended

Months Ended

June 30,

June 30,

2017

2016

2017

2016

Revenue

Transformation

$

5,361

$

10,388

$

15,596

$

18,502

Platform and operations

101,710

46,130

197,714

87,465

Total revenue

107,071

56,518

213,310

105,967

Expenses

Cost of revenue (exclusive of

depreciation and amortization expenses

presented separately below)

67,994

32,779

135,523

61,390

Selling, general and administrative expenses

51,090

32,756

104,641

64,702

Depreciation and amortization expenses

6,904

3,612

13,519

6,983

Goodwill impairment

160,600

Loss on change in fair value

of contingent consideration

200

200

Total operating expenses

126,188

69,147

253,883

293,675

Operating income (loss)

(19,117)

(12,629)

(40,573)

(187,708)

Interest income

218

272

403

551

Interest expense

(947)

(1,901)

Income (loss) from affiliates

(555)

(14)

(1,077)

(14)

Other Income (expense), net

3

1

5

2

Income (loss) before income taxes

and non-controlling interests

(20,398)

(12,370)

(43,143)

(187,169)

Provision (benefit) for income taxes

(700)

(371)

(295)

(1,359)

Net income (loss)

(19,698)

(11,999)

(42,848)

(185,810)

Net income (loss) attributable to

non-controlling interests

(2,793)

(3,612)

(7,930)

(54,683)

Net income (loss) attributable to

Evolent Health, Inc.

$

(16,905)

$

(8,387)

$

(34,918)

$

(131,127)

Earnings (Loss) Available to Common Shareholders

Basic

$

(16,905)

$

(8,387)

$

(34,918)

$

(131,127)

Diluted

(16,905)

(8,387)

(34,918)

(131,127)

Earnings (Loss) per Common Share

Basic

$

(0.28)

$

(0.20)

$

(0.62)

$

(3.09)

Diluted

(0.28)

(0.20)

(0.62)

(3.09)

Weighted-Average Common Shares Outstanding

Basic

59,478

42,594

56,057

42,390

Diluted

59,478

42,594

56,057

42,390

Evolent Health, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands)

As of

As of

June 30,

December 31,

2017

2016

Cash and cash equivalents

$

99,975

$

134,563

Investments, at amortized cost

24,027

44,341

Total current assets

192,620

264,966

Intangible assets, net

254,460

258,923

Goodwill

628,653

626,569

Total assets

1,138,352

1,199,839

Long-term debt, net of discount

120,935

120,283

Total liabilities

243,903

287,725

Total shareholders' equity (deficit) attributable to

Evolent Health, Inc.

859,769

702,526

Non-controlling interests

34,680

209,588

Total liabilities and shareholders' equity (deficit)

1,138,352

1,199,839

Evolent Health, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

For the Six

Months Ended

June 30,

2017

2016

Net cash provided by (used in) operating activities

$

(44,712)

$

(21,918)

Net cash provided by (used in) investing activities

7,739

(18,466)

Net cash provided by (used in) financing activities

2,385

(204)

Net increase (decrease) in cash and cash equivalents

(34,588)

(40,588)

Cash and cash equivalents as of beginning-of-period

134,563

145,726

Cash and cash equivalents as of end-of-period

$

99,975

$

105,138

Evolent Health, Inc.

Adjusted Results of Operations

(unaudited)

(in thousands)

For the Three Months Ended June 30, 2017

For the Three Months Ended June 30, 2016

Evolent Health, Inc.

Evolent Health, Inc.

Evolent

Evolent

Evolent

Evolent

as Reported

as Adjusted

Health, Inc.

Health, Inc.

Health, Inc.

Health, Inc.

Change Over Prior Period

Change Over Prior Period

as Reported

Adjustments

as Adjusted

as Reported

Adjustments

as Adjusted

$

%

$

%

Revenue

Transformation

$

5,361

$

$

5,361

$

10,388

$

$

10,388

$

(5,027)

(48.4)

%

$

(5,027)

(48.4)

%

Platform and operations (1)

101,710

244

101,954

46,130

46,130

55,580

120.5

%

55,824

121.0

%

Total revenue

107,071

244

107,315

56,518

56,518

50,553

89.4

%

50,797

89.9

%

Expenses

Cost of revenue (exclusive of

depreciation and amortization

expenses presented

separately below) (2)

67,994

(1,837)

66,157

32,779

(636)

32,143

35,215

107.4

%

34,014

105.8

%

Selling, general and

administrative expenses (3)

51,090

(6,370)

44,720

32,756

(4,475)

28,281

18,334

56.0

%

16,439

58.1

%

Depreciation and amortization

expenses (4)

6,904

(2,383)

4,521

3,612

3,612

3,292

91.1

%

909

25.2

%

Loss on change in fair value

of contingent consideration (5)

200

(200)

200

%

%

Total operating expenses

126,188

(10,790)

115,398

69,147

(5,111)

64,036

57,041

82.5

%

51,362

80.2

%

Operating income (loss)

$

(19,117)

$

11,034

$

(8,083)

$

(12,629)

$

5,111

$

(7,518)

$

(6,488)

(51.4)

%

$

(565)

(7.5)

%

Total operating expenses as a

percentage of total revenue

117.9

%

107.5

%

122.3

%

113.3

%

(1)      

Adjustments to platform and operations revenue include deferred revenue purchase accounting adjustments of approximately $0.2 million for the three months ended June 30, 2017, resulting from our acquisitions and business combinations.

(2)      

Adjustments to cost of revenue include $0.4 million and $0.4 million in stock-based compensation expense for the three months ended June 30, 2017 and 2016, respectively.  Stock-based compensation expense includes the value of equity awards granted to employees and non-employee directors of the Company or its consolidated subsidiaries.  Adjustments also include transaction costs of approximately $1.4 million and $0.2 million for the three months ended June 30, 2017 and 2016, respectively, resulting from acquisitions and business combinations.

(3)      

Adjustments to selling, general and administrative expenses include $5.0 million and $4.3 million in stock-based compensation expense for the three months ended June 30, 2017 and 2016, respectively.  Stock-based compensation expense includes the value of equity awards granted to employees and non-employee directors of the Company or its consolidated subsidiaries.  Adjustments also include transaction costs of $1.9 million and $0.2 million for the three months ended June 30, 2017 and 2016, respectively, resulting from acquisitions and business combinations and costs relating to our securities offerings.  These adjustments for the three months ended June 30, 2017, were offset by a one-time benefit of approximately $0.5 million related to a lease termination in conjunction with the Valence Health acquisition.

(4)      

Adjustments to depreciation and amortization expenses of approximately $2.4 million for the three months ended June 30, 2017, relate to amortization of intangible assets acquired via asset acquisition and business combinations.

(5)      

The adjustment represents a loss of $0.2 million for the three months ended June 30, 2017, due to a change in the fair value of contingent consideration related
to our Passport transaction.

Evolent Health, Inc.

Adjusted Results of Operations

(unaudited)

(in thousands)

For the Six Months Ended June 30, 2017

For the Six Months Ended June 30, 2016

Evolent Health, Inc.

Evolent Health, Inc.

Evolent

Evolent

Evolent

Evolent

as Reported

as Adjusted

Health, Inc.

Health, Inc.

Health, Inc.

Health, Inc.

Change Over Prior Period

Change Over Prior Period

as Reported

Adjustments

as Adjusted

as Reported

Adjustments

as Adjusted

$

%

$

%

Revenue

Transformation (1)

$

15,596

$

$

15,596

$

18,502

$

87

$

18,589

$

(2,906)

(15.7)

%

$

(2,993)

(16.1)

%

Platform and operations (1)

197,714

775

198,489

87,465

87,465

110,249

126.0

%

111,024

126.9

%

Total revenue

213,310

775

214,085

105,967

87

106,054

107,343

101.3

%

108,031

101.9

%

Expenses

Cost of revenue (exclusive of

depreciation and amortization

expenses presented

separately below) (2)

135,523

(2,860)

132,663

61,390

(1,090)

60,300

74,133

120.8

%

72,363

120.0

%

Selling, general and

administrative expenses (3)

104,641

(14,882)

89,759

64,702

(8,412)

56,290

39,939

61.7

%

33,469

59.5

%

Depreciation and amortization

expenses (4)

13,519

(4,708)

8,811

6,983

6,983

6,536

93.6

%

1,828

26.2

%

Goodwill impairment (5)

160,600

(160,600)

(160,600)

(100.0)%

%

Loss on change in fair value

of contingent consideration (6)

200

(200)

200

%

%

Total operating expenses

253,883

(22,650)

231,233

293,675

(170,102)

123,573

(39,792)

(13.5)

%

107,660

87.1

%

Operating income (loss)

$

(40,573)

$

23,425

$

(17,148)

$

(187,708)

$

170,189

$

(17,519)

$

147,135

78.4

%

$

371

2.1

%

Total operating expenses as a

percentage of total revenue

119.0

%

108.0

%

277.1

%

116.5

%

(1)       

Adjustments to platform and operations revenue include deferred revenue purchase accounting adjustments of approximately $0.8 million for the six months ended June 30, 2017, resulting from our acquisitions and business combinations.  As part of the Reorganization and as a result of gaining control of Evolent Health LLC, we recorded the fair value of deferred revenue resulting in a $4.9 million reduction to the book value.  This resulted in an adjustment of less than $0.1 million to transformation revenue for the six months ended June 30, 2016.

(2)       

Adjustments to cost of revenue include $0.7 million and $0.9 million in stock-based compensation expense for the six months ended June 30, 2017 and 2016, respectively.  Stock-based compensation expense includes the value of equity awards granted to employees and non-employee directors of the Company or its consolidated subsidiaries.  Adjustments also include transaction costs of approximately $2.1 million and $0.2 million for the six months ended June 30, 2017 and 2016, respectively, resulting from acquisitions and business combinations.

(3)       

Adjustments to selling, general and administrative expenses include $9.7 million and $8.2 million in stock-based compensation expense for the six months ended June 30, 2017 and 2016, respectively.  Stock-based compensation expense includes the value of equity awards granted to employees and non-employee directors of the Company or its consolidated subsidiaries.  Adjustments also include transaction costs of $5.7 million and $0.2 million for the six months ended June 30, 2017 and 2016, respectively, resulting from acquisitions and business combinations and costs relating to our securities offerings.  These adjustments for the six months ended June 30, 2017, were offset by a one-time benefit of approximately $0.5 million related to a lease termination in conjunction with the Valence Health acquisition.

(4)       

Adjustments to depreciation and amortization expenses of approximately $4.7 million for the six months ended June 30, 2017, relate to amortization of
intangible assets acquired via asset acquisition and business combinations.

(5)       

Represents a write down of goodwill of $160.6 million during the first quarter of 2016.

(6)       

The adjustment represents a loss of $0.2 million for the six months ended June 30, 2017, due to a change in the fair value of contingent consideration related to our Passport transaction.


Evolent Health, Inc.

Reconciliation of Adjusted EBITDA to Net Income (Loss)

Attributable to Evolent Health, Inc.

(unaudited)

(in thousands)

For the Three

For the Six

Months Ended

Months Ended

June 30,

June 30,

2017

2016

2017

2016

Net Income (Loss) Attributable to

Evolent Health, Inc.

$

(16,905)

$

(8,387)

$

(34,918)

$

(131,127)

Less:

Interest income

218

272

403

551

Interest expense

(947)

(1,901)

(Provision) benefit for income taxes

700

371

295

1,359

Depreciation and amortization expenses

(6,904)

(3,612)

(13,519)

(6,983)

EBITDA

(9,972)

(5,418)

(20,196)

(126,054)

Less:

Goodwill impairment

(160,600)

Income (loss) from affiliates

(555)

(14)

(1,077)

(14)

Loss on change in fair value

of contingent consideration

(200)

(200)

Impact of lease termination

496

496

Other income (expense), net

3

1

5

2

Net (income) loss attributable to

non-controlling interests

2,793

3,612

7,930

54,683

Purchase accounting adjustments

(244)

(775)

(87)

Stock-based compensation expense

(5,360)

(4,709)

(10,464)

(9,045)

Transaction costs

(3,343)

(402)

(7,774)

(457)

Adjusted EBITDA

$

(3,562)

$

(3,906)

$

(8,337)

$

(10,536)

Evolent Health, Inc.

Reconciliation of Adjusted Earnings (Loss) Available to Class A and Class B

Shareholders to Earnings (Loss) Available to Common Shareholders

(unaudited)

(in thousands, except per share data)

For the Three

For the Six

Months Ended

Months Ended

June 30,

June 30,

2017

2016

2017

2016

Earnings (Loss) Available to

Common Shareholders - Basic and Diluted (a)

$

(16,905)

$

(8,387)

$

(34,918)

$

(131,127)

Less:

Goodwill impairment

(160,600)

Income (loss) from affiliates

(555)

(14)

(1,077)

(14)

(Provision) benefit for income taxes

700

371

280

1,359

Loss on change in fair value

of contingent consideration

(200)

(200)

Impact of lease termination

496

496

Net (income) loss attributable to

non-controlling interests

2,793

3,612

7,930

54,683

Purchase accounting adjustments

(2,669)

(5,569)

(87)

Stock-based compensation expense

(5,360)

(4,709)

(10,464)

(9,045)

Transaction costs

(3,343)

(402)

(7,774)

(457)

Adjusted Earnings (Loss) Available

to Class A and Class B Shareholders (b)

$

(8,767)

$

(7,245)

$

(18,540)

$

(16,966)

Earnings (Loss) per Share Available to

Common Shareholders - Basic and Diluted (a) (1)

$

(0.28)

$

(0.20)

$

(0.62)

$

(3.09)

Adjusted Earnings (Loss) per Share Available

to Class A and Class B Shareholders (b) (2)

$

(0.13)

$

(0.12)

$

(0.27)

$

(0.28)

Weighted-average common shares - basic

59,478

42,594

56,057

42,390

Weighted-average common shares - diluted

59,478

42,594

56,057

42,390

Adjusted Weighted-Average Class A

and Class B Shares (3)

68,155

60,119

68,051

59,915

(1)         

For periods of net loss, shares used in both the basic and diluted earnings per share calculation represent basic shares as using diluted
shares would be anti-dilutive.

(2)         

Represents Adjusted Earnings (Loss) Available to Class A and Class B Shareholders divided by Adjusted Weighted-Average Class A and Class B Shares as described in footnote 3 below.

(3)         

Represents the weighted-average common shares (diluted) adjusted to include, in periods of net loss, the dilutive or potentially dilutive effect of the assumed conversion of Class B common shares to Class A common shares. See the reconciliation of Adjusted Weighted-Average Class A and Class B Shares to diluted weighted-average common shares on the following page.


Evolent Health, Inc.

Reconciliation of Adjusted Weighted-Average Class A and Class B

 Shares to Diluted Weighted-Average Common Shares

(unaudited)

(in thousands)

For the Three

For the Six

Months Ended

Months Ended

June 30,

June 30,

2017

2016

2017

2016

Weighted-average common shares - diluted

59,478

42,594

56,057

42,390

Assumed conversion of Class B common

shares to Class A common shares

8,677

17,525

11,994

17,525

Adjusted Weighted-Average Class A and Class B Shares

68,155

60,119

68,051

59,915

Evolent Health, Inc.

Guidance Reconciliation

(unaudited)

(in thousands)

For the Three

For the Twelve

Months Ended

Months Ended

September 30,

December 31,

2017

2017

Revenue

$

103,500

$

425,000

Purchase Accounting Adjustments

500

1,000

Adjusted Revenue

$

104,000

$

426,000

Net Income (Loss) Attributable to

Evolent Health, Inc.

$

(15,100)

$

(63,000)

Less:

Interest income

200

800

Interest expense

(1,000)

(4,000)

Depreciation and amortization expenses

(7,000)

(27,500)

EBITDA

(7,300)

(32,300)

Less:

Income (loss) from affiliates

(500)

(2,000)

Net (income) loss attributable to

non-controlling interests

500

6,700

Stock-based compensation

(5,300)

(21,000)

Transaction costs

(2,000)

(10,000)

Adjusted EBITDA

$

$

(6,000)

The guidance reconciliation provided above reconciles the midpoint of the respective guidance ranges to the most comparable GAAP measure.

FORWARD-LOOKING STATEMENTS - CAUTIONARY LANGUAGE

Certain statements made in this release and in other written or oral statements made by us or on our behalf are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like:  "believe," "anticipate," "expect," "estimate," "aim," "predict," "potential," "continue," "plan," "project," "will," "should," "shall," "may," "might" and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in our businesses, prospective services, future performance or financial results and the outcome of contingencies, such as legal proceedings. We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.

These statements are only predictions based on our current expectations and projections about future events.  Forward-looking statements involve risks and uncertainties that may cause actual results, level of activity, performance or achievements to differ materially from the results contained in the forward-looking statements. Risks and uncertainties that may cause actual results to vary materially, some of which are described within the forward-looking statements, include, among others:

  • the structural change in the market for health care in the United States;
  • uncertainty in the health care regulatory framework;
  • the uncertain impact the results of the 2016 presidential and congressional elections may have on health care laws and regulations;
  • our ability to effectively manage our growth;
  • the significant portion of revenue we derive from our largest partners, and the potential loss, termination or renegotiation of customer contracts;
  • our ability to offer new and innovative products and services;
  • risks related to completed and future acquisitions, investments and alliances, including the acquisitions of Valence Health, Inc., excluding Cicerone Health Solutions, Inc. ("Valence Health") and Aldera Holdings, Inc. ("Aldera"), which may be difficult to integrate, divert management resources, result in unanticipated costs or dilute our stockholders;
  • certain risks and uncertainties associated with the acquisition of Valence Health, including future revenues of Valence Health may be less than expected, the timing and extent of new lives expected to come onto the platform may not occur as expected and the expected results of Evolent may not be impacted as anticipated;
  • the growth and success of our partners, which is difficult to predict and is subject to factors outside of our control, including premium pricing reductions and the ability to control and, if necessary, reduce health care costs;
  • our ability to attract new partners;
  • the increasing number of risk-sharing arrangements we enter into with our partners;
  • our ability to recover the significant upfront costs in our partner relationships;
  • our ability to estimate the size of our target market;
  • our ability to maintain and enhance our reputation and brand recognition;
  • consolidation in the health care industry;
  • competition which could limit our ability to maintain or expand market share within our industry;
  • our ability to partner with providers due to exclusivity provisions in our contracts;
  • restrictions and penalties as a result of privacy and data protection laws;
  • adequate protection of our intellectual property, including trademarks;
  • any alleged infringement, misappropriation or violation of third-party proprietary rights;
  • our use of "open source" software;
  • our ability to protect the confidentiality of our trade secrets, know-how and other proprietary information;
  • our reliance on third parties and licensed technologies;
  • our ability to use, disclose, de-identify or license data and to integrate third-party technologies;
  • data loss or corruption due to failures or errors in our systems and service disruptions at our data centers;
  • online security risks and breaches or failures of our security measures;
  • our reliance on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our users;
  • our reliance on third-party vendors to host and maintain our technology platform;
  • our dependency on our key personnel, and our ability to attract, hire, integrate and retain key personnel;
  • the risk of potential future goodwill impairment on our results of operations;
  • our indebtedness and our ability to obtain additional financing;
  • our ability to achieve profitability in the future;
  • the requirements of being a public company;
  • our adjusted results may not be representative of our future performance;
  • the risk of potential future litigation;
  • our holding company structure and dependence on distributions from Evolent Health LLC;
  • our obligations to make payments to certain of our pre-IPO investors for certain tax benefits we may claim in the future;
  • our ability to utilize benefits under the tax receivables agreement described herein;
  • our ability to realize all or a portion of the tax benefits that we currently expect to result from past and future exchanges of Class B common units of Evolent Health LLC for our Class A common stock, and to utilize certain tax attributes of Evolent Health Holdings and an affiliate of TPG;
  • distributions that Evolent Health LLC will be required to make to us and to the other members of Evolent Health LLC;
  • our obligations to make payments under the tax receivables agreement that may be accelerated or may exceed the tax benefits we realize;
  • different interests among our pre-IPO investors, or between us and our pre-IPO investors;
  • the terms of agreements between us and certain of our pre-IPO investors;
  • the potential volatility of our Class A common stock price;
  • the potential decline of our Class A common stock price if a substantial number of shares become available for sale or if a large number of Class B common units are exchanged for shares of Class A common stock;
  • provisions in our amended and restated certificate of incorporation and amended and restated by-laws and provisions of Delaware law that discourage or prevent strategic transactions, including a takeover of us;
  • the ability of certain of our investors to compete with us without restrictions;
  • provisions in our amended and restated certificate of incorporation which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees;
  • our intention not to pay cash dividends on our Class A common stock;
  • our ability to remediate the material weakness in our internal control over financial reporting;
  • our status as an "emerging growth company"; and
  • our lack of public company operating experience.

The risks included here are not exhaustive. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements.  Our 2016 Form 10-K and other documents filed with the SEC include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.

Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this release.

View original content with multimedia:http://www.prnewswire.com/news-releases/evolent-health-announces-second-quarter-2017-results-300500516.html

SOURCE Evolent Health, Inc.

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