Evolent Health Announces Third Quarter 2021 Results

WASHINGTON, Nov. 3, 2021 /PRNewswire/ -- Evolent Health, Inc. (NYSE: EVH), a health care company that delivers proven clinical and administrative solutions to payers and providers, today announced financial results for the quarter ended September 30, 2021.

Highlights from the third quarter of 2021 announcement include:

Quarter ended September 30, 2021:

• GAAP revenue of $222.5 million, a decrease of $17.1 million, or 7.1%, from the three months ended September 30, 2020.
• Revenue excluding revenue from divested assets increased 36.3% from the three months ended September 30, 2020.
• Net loss attributable to common shareholders of Evolent Health, Inc. of $(13.0) million.
• Achieved Adjusted EBITDA of $13.8 million.
• Total Lives Managed of 14.7 million as of September 30, 2021, composed of 1.6 million Evolent Health Services Lives on Platform and 13.1 million Clinical Solutions Lives on Platform.

Additional announcements:

• Evolent enters into two new agreements with Sunflower Medical Group in Kansas and Northern Medical Group in New York, expanding its total cost of care management services through Evolent Care Partners
• Evolent adds new partnership with Health New England to provide comprehensive advance care planning services through New Century Health

Seth Blackley, Chief Executive Officer and Co-Founder of Evolent Health commented, "Overall, we're pleased with our results this quarter and our continued momentum on growth and earnings power. As we head into 2022, we are seeing momentum from our current portfolio as our solutions are delivering differentiated performance for our partners and our pipeline continues to drive strong growth. Today, we are excited to announce Evolent Care Partners has signed two new provider partnerships with Sunflower Medical Group in Kansas and Northern Medical Group in New York. Additionally, we are pleased to announce a new partnership with Health New England, a leading not-for-profit provider-owned health plan in Massachusetts. Health New England will leverage advance care planning services through New Century Health's Vital Decisions platform to help its more than 180,000 members with serious illness plan for future health care decisions. The three new partnerships announced today bring our total partner additions to ten for 2021, exceeding our target of six to eight."

Mr. Blackley added, "We also continue to drive innovation for our partners to make meaningful progress in increasing efficiency, improving clinical outcomes, and reducing the cost of care. For example, in the 2020 Performance Year, Evolent Care Partners drove over $20 million in savings to Medicare across 55,000 lives – putting it in the top 10% of performance of at-scale first year ACOs in the history of the program. With life growth already under contract and expected expansion to savings rates per life, we expect Evolent Care Partners to become an important financial and strategic contributor to Evolent Health."

"We remain committed to the execution of our focused strategy and are encouraged by our strong performance and momentum as we head into 2022."

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.

Segment Highlights: Evolent Health Services

• Revenue of $63.3 million, down 36.8%, from $100.2 million for the three months ended September 30, 2020, respectively.
• Revenue excluding revenue from divested assets increased $4.4 million, or 7.8%, from the three months ended September 30, 2020
• Adjusted EBITDA of $(3.4) million and $24.6 million for the three months ended September 30, 2021 and 2020, respectively.
• Adjusted EBITDA margin of (5.3)% and 24.6% for the three months ended September 30, 2021 and 2020, respectively.
• Evolent Health Services Lives on Platform was 1.6 million lives with a Evolent Health Services Average PMPM of $13.19 as of September 30, 2021.

Segment Highlights: Clinical Solutions

• Revenue of $159.6 million, up 14.0%, from $140.1 million for the three months ended September 30, 2020.
• Revenue excluding revenue from divested assets increased $54.0 million, or 51.3%, from the three months ended September 30, 2020
• Adjusted EBITDA of $23.9 million and $(1.0) million for the three months ended September 30, 2021 and 2020, respectively.
• Adjusted EBITDA margin of 15.0% and (0.7)% for the three months ended September 30, 2021 and 2020, respectively.
• Clinical Solutions Lives on Platform in our Performance Suite was 1.5 million with a Clinical Solutions Performance Suite Average PMPM of $34.16 and in our New Century Technology and Services Suite Lives on Platform was 11.7 million with a New Century Technology and Services Suite Average PMPM of $0.36 as of September 30, 2021.

Reported Results

Evolent Health, Inc. reported the following results in accordance with U.S. generally accepted accounting principles ("GAAP"):

• Revenue of $222.5 million and $239.6 million for the three months ended September 30, 2021 and 2020, respectively.
• Cost of revenue of $163.1 million and $181.8 million for the three months ended September 30, 2021 and 2020, respectively.
• Selling, general and administrative expenses of $51.3 million and $52.4 million for the three months ended September 30, 2021 and 2020, respectively.
• Net loss attributable to common shareholders of Evolent Health, Inc. of $(13.0) million and $(37.3) million for the three months ended September 30, 2021 and 2020, respectively.
• Loss attributable to common shareholders of Evolent Health, Inc., per basic and diluted share, of $(0.15) and $(0.44) for the three months ended September 30, 2021 and 2020, respectively.

Total cash and cash equivalents was $252.5 million as of September 30, 2021.

Adjusted Results

• Adjusted cost of revenue of $162.9 million and $178.7 million for the three months ended September 30, 2021 and 2020, respectively.
• Adjusted selling, general and administrative expenses of $45.8 million and $47.0 million for the three months ended September 30, 2021 and 2020, respectively.
• Adjusted EBITDA of $13.8 million for both the three months ended September 30, 2021 and 2020, respectively.
• Adjusted EBITDA margin of 6.2% and 5.8% for the three months ended September 30, 2021 and 2020, respectively.
• Adjusted Loss Attributable to Common Shareholders of $(2.4) million and $(2.2) million for the three months ended September 30, 2021 and 2020, respectively.
• Adjusted Loss per Share Attributable to Common Shareholders of $(0.03) for both the three months ended September 30, 2021 and 2020, respectively.

Business Outlook

Full Year 2021 Guidance

Revenue for the year ending December 31, 2021 is expected to be in the range of approximately $884 million to $900 million, compared to previous guidance of $870 million to $900 million.

Adjusted EBITDA is expected to be in the range of approximately $56 million to $60 million, compared to previous guidance of $50 million to $58 million.

Fourth Quarter 2021 Guidance

For the three months ending December 31, 2021, revenue is expected to be in the range of approximately $225 million to $240 million. Adjusted EBITDA is expected to be in the range of approximately $14 million to $18 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 below 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 third quarter performance this evening, November 3, 2021, at 5:30 p.m., Eastern Time. To listen to a live broadcast via the internet and view the accompanying materials, please visit 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 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 (NYSE: EVH) delivers proven clinical and administrative solutions that improve whole-person health while making health care simpler and more affordable. Our solutions encompass total cost of care management, specialty care management, and administrative simplification. Evolent serves a national base of leading payers and providers, is the first company to receive the National Committee for Quality Assurance's Population Health Program Accreditation, and is consistently recognized as a top place to work in health care nationally. Learn more about how Evolent is changing the way health care is delivered by visiting evolenthealth.com.

Contacts:

Chelsea Griffin
Investor Relations
919.817.8045
[email protected] 

Dan Paladino
Media Relations
571.306.3470
[email protected]

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 Services Revenue, Adjusted Platform and Operations Services Revenue, Adjusted Cost of Revenue, Adjusted Selling, General and Administrative Expenses, Adjusted Depreciation and Amortization Expenses, Adjusted Total Operating Expenses, Adjusted Operating Income (Loss), Adjusted EBITDA, Adjusted Earnings (Loss) Available to Common Shareholders and Adjusted Earnings (Loss) per Share Available to Common Shareholders, which are all non-GAAP financial measures, as supplemental measures to help investors evaluate our fundamental operational performance.

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, severance costs, amortization of contract cost assets recorded as a result of a one-time ASC 606 transition adjustment, acquisition-related costs related to acquisitions and business combinations, securities offerings, discontinued operations and other 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 costs that are not expected to reoccur frequently (e.g. acquisition-related costs) and non-cash (e.g. stock-based compensation expenses) in nature. Additionally, these supplemental performance measures facilitate understanding a breakdown of our Adjusted Total Operating Expenses. Adjustments for acquisition-related costs incurred generally represent professional service fees and direct expenses related to acquisitions. Because we do not acquire businesses on a predictable cycle, we do not consider the amount of acquisition-related costs to be a representative component of the day-to-day operating performance of our business.

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 asset 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 further adjusted to exclude the impact of (gain) loss on disposal of assets and items arising from acquisitions and business combinations, such as changes in fair value of contingent consideration and indemnification assets.

Adjusted Operating Income (Loss) is defined as Adjusted Revenue less Adjusted Total Operating Expenses, and reflects the adjustments made in those non-GAAP measures. Management uses Adjusted Total Operating Expenses and Adjusted Operating Income (Loss) because the removal of acquisition costs, one-time or non-cash items (e.g. depreciation, amortization and stock-based compensation expenses) allows us to focus on operational performance, and believes these measures are useful to investors because they give investors insight into our core operating performance.

Adjusted EBITDA is defined as EBITDA (net loss attributable to common shareholders of Evolent Health, Inc. before interest income, interest expense, (provision) benefit for income taxes, depreciation and amortization expenses), adjusted to exclude equity method investment impairment, gain on the transfer of membership, loss on repayment of debt, loss on extinguishment of debt, goodwill impairment, gain (loss) from equity method investees, loss on disposal of assets and consolidation, changes in fair value of contingent consideration and indemnification asset, net loss attributable to non-controlling interests, other income (expense), net, repositioning costs, stock-based compensation expense, severance costs, amortization of contract cost assets, strategy and shareholder advisory expenses, acquisition-related costs and gain (loss) from discontinued operations.

Management uses Adjusted EBITDA as a supplemental performance measure because the removal of acquisition-related costs, one-time or non-cash items (e.g. 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 EBITDA Margin is as defined Adjusted EBITDA divided by Revenue. Management uses Adjusted EBITDA margin as a supplemental performance measure because it allows the investor to understand operational performance compared to revenues over time. 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 Common Shareholders is defined as earnings (loss) attributable to common shareholders adjusted to exclude gain from equity method investees, other income (expense), net, gain on transfer of membership, loss on repayment of debt, goodwill impairment, loss on disposal of assets, impairment of equity method investees, changes in fair value of contingent consideration and indemnification assets, net loss attributable to non-controlling interests, loss on extinguishment of debt, purchase accounting adjustments, repositioning costs, stock-based compensation expenses, severance costs, amortization of contract cost assets recorded as a result of a one-time ASC 606 transition adjustment, gain (loss) from discontinued operations, strategy and shareholder advisory services and acquisition-related costs.

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

Management uses Adjusted Earnings (Loss) Available to Common Shareholders and Adjusted Earnings (Loss) per Share Available to Common Shareholders because excluding non-cash items (e.g. depreciation, amortization and stock-based compensation expenses) allows us to focus on operational performance. We believe that these measures are also useful to investors for the same reason.

Revenue Excluding Divested Assets is defined as the sum of revenue, less revenue from our divested health plan assets of Passport, Lighthouse and Miami Children's.  Management uses Total Revenue Excluding Divested Assets as a supplemental performance measure because it reflects our on-going operational results. The measures are useful to investors because it reflects the full view of our operational performance in line with how we generate our long-term forecasts.

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.

Lives on Platform and Per Member Per Month ("PMPM") Fee

Total Lives Managed are calculated by summing our Evolent Health Services Lives on Platform, our Clinical Solutions Lives on Platform. Evolent Health Services Lives on Platform are calculated by summing members on our value-based care and comprehensive health plan administrative platform. Clinical Solutions Lives on Platform are calculated by summing the Clinical Solutions Lives on Platform in our Performance suite and New Century Technology and Services suite Lives on Platform. Clinical Solutions Lives on Platform in our Performance suite are calculated by summing members covered for oncology specialty care services and members covered for cardiology specialty care services for contracts not under ASO arrangements. New Century Technology and Services suite Lives on Platform are calculated by summing members covered for oncology specialty care services and members covered for cardiology specialty care services for contracts under ASO arrangements. Members covered for more than one category are counted in each category.

Evolent Health Services Average per member per month ("PMPM") fee is defined as platform and operations revenue pertaining to the Evolent Health Services segment in the quarter divided by the average of the beginning and ending Evolent Health Services segment membership during quarter divided by the number of months in the period. Clinical Solutions Performance suite Average PMPM fee is defined as platform and operations services revenue pertaining to our Clinical Solutions performance suite in the quarter divided by the average of the beginning and ending Clinical Solutions performance suite membership during quarter divided by the number of months in the period. New Century Technology and Services suite Average PMPM fee is defined as platform and operations revenue pertaining to the New Century Technology and Services suite in the quarter divided by the average of the beginning and ending New Century Technology and Services Suite membership during quarter divided by the number of months in the period.

Management uses lives on platform and PMPM fees because we believe that they provide insight into the unit economics of our services. We believe that these measures are also useful to investors because they allow further insight into the period over period operational performance. We believe that these measures are also useful to investors because they allow further insight into the period over period operational performance.

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 report and in other written or oral statements made by us or on our behalf are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is a statement that is not a historical fact and, without 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 ability to achieve our goals. 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 significant portion of revenue we derive from our largest partners, and the potential loss, non-renewal, termination or renegotiation of our relationship or contract with any significant partner, or multiple partners in the aggregate;
• evolution in the market for value-based care;
• uncertainty in the health care regulatory framework, including the potential impact of policy changes;
• our ability to offer new and innovative products and services;
• risks related to completed and future acquisitions, investments, alliances and joint ventures, including the acquisition of Vital Decisions which may be difficult to integrate, divert management resources, or result in unanticipated costs or dilute our stockholders;
• the financial benefits we expect to receive as a result of the sale of certain assets of Passport may not be realized;
• the growth and success of our partners, which is difficult to predict and is subject to factors outside of our control, including governmental funding reductions and other policy changes, enrollment numbers for our partners' plans, premium pricing reductions, selection bias in at-risk membership and the ability to control and, if necessary, reduce health care costs;
• risks relating to our ability to maintain profitability for our total cost of care and New Century Health's performance-based contracts and products, including capitation and risk-bearing contracts;
• our ability to effectively manage our growth and maintain an efficient cost structure, and to successfully implement cost cutting measures;
• the potential negative impact of the COVID-19 pandemic and other public health emergencies;
• our ability to recover the significant upfront costs in our partner relationships;
• our ability to attract new partners and successfully capture new growth opportunities;
• the increasing number of risk-sharing arrangements we enter into with our partners;
• our ability to estimate the size of our target markets;
• 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;
• risks related to governmental payer audits and actions, including whistleblower claims;
• our ability to partner with providers due to exclusivity provisions in our contracts;
• risks related to our offshore operations;
• our ability to contain health care costs, implement increases in premium rates on a timely basis, maintain adequate reserves for policy benefits or maintain cost effective provider agreements;
• our dependency on our key personnel, and our ability to attract, hire, integrate and retain key personnel;
• the impact of additional goodwill and intangible asset impairments on our results of operations;
• our indebtedness, our ability to service our indebtedness, and our ability to obtain additional financing;
• our ability to achieve profitability in the future;
• the impact of litigation, including the ongoing class action lawsuit;
• material weaknesses in the future may impact our ability to conclude that our internal control over financial reporting is not effective and we may be unable to produce timely and accurate financial statements;
• restrictions and penalties as a result of privacy and data protection laws;
• data loss or corruption due to failures or errors in our systems and service disruptions at our data centers;
• 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;
• our reliance on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our partners;
• our reliance on third-party vendors to host and maintain our technology platform;
• 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 obligations to make payments under the tax receivables agreement that may be accelerated or may exceed the tax benefits we realize;
• the terms of agreements between us and certain of our pre-IPO investors;
• the conditional conversion features of the 2024 and 2025 convertible notes, which, if triggered, could require us to settle the 2024 or 2025 convertible notes in cash;
• the impact of the accounting method for convertible debt securities that may be settled in cash;
• the potential volatility of our Class A common stock price;
• the potential impact of our securities class action litigation;
• the potential decline of our Class A common stock price if a substantial number of shares are sold or become available for sale;
• provisions in our second amended and restated certificate of incorporation and third 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 second 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; and
• our intention not to pay cash dividends on our Class A common stock.

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 periodic reports 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 undertake no obligation to publicly update any forward-looking statements to reflect events or circumstances that occur after the date of this release.

SOURCE Evolent Health

Related Links

http://www.evolenthealth.com