Evolent Health Announces Second Quarter 2021 Results

WASHINGTON, Aug. 4, 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 June 30, 2021.

Highlights from the second quarter of 2021 announcement include:

Quarter ended June 30, 2021:

• GAAP revenue of $222.1 million, an increase of $4.8 million, or 2.2%, from the three months ended June 30, 2020.
• Organic revenue growth excluding revenue from divested assets of 42.3%.
• Net loss attributable to common shareholders of Evolent Health, Inc. of $(9.1) million.
• Achieved Adjusted EBITDA of $13.3 million, an increase of $2.8 million from the three months ended June 30, 2020.
• Total lives managed of 12.2 million as of June 30, 2021, composed of 1.5 million lives in our Evolent Health Services segment and 10.7 million lives in our Clinical Solutions segment.

Additional announcements:

• Evolent Health enters into a definitive agreement to acquire Vital Decisions, a leading technology-enabled services business specializing in advance care planning
• Evolent adds two new provider partnerships with Bond Clinic in Florida and Patient Physician Network in Texas, in addition to expanding total cost of care management services for Medicare Advantage and commercial lives with a large national payer in the State of Texas
• Evolent signs agreement with Molina Ohio to provide New Century Health Performance Suite for cardiology

Seth Blackley, Chief Executive Officer and Co-Founder of Evolent Health, commented, "Overall, we are very pleased with our results for the quarter exceeding our targets and we are raising guidance for the full-year 2021. We remain focused on driving shareholder value and continue to be on track towards our medium-term target of mid-teens organic top-line growth and mid-teens Adjusted EBITDA margins. We continue to see strong momentum in the market for our value-based care solutions."

Mr. Blackley continued, "Today we are excited to announce Evolent Care Partners has entered into two new partnerships with Patient Physicians Network in Texas and Bond Clinic in Florida. These two new, high-quality physician groups represent an exciting expansion of Evolent Care Partners' presence in Texas and initial market entry into Florida and present opportunities for future growth. The expansions announced today bring Evolent Care Partners' national footprint to seven states. Additionally, we are excited to announce New Century Health has signed an agreement with Molina Ohio for cardiology services for approximately 160,000 Medicaid and Exchange members. This signing further demonstrates our ability to expand organically with our base of large, national payers and risk-bearing providers, as well as our ability to convert New Century Health's Technology and Services Suite into the full Performance Suite."

Mr. Blackley commented, "We are also excited to announce the acquisition of Vital Decisions. The acquisition is EBITDA per share accretive before any synergies and we believe that Vital Decisions will add to the growth and profitability of New Century Health. As the asset is integrated into New Century Health, we also believe this transaction will add important patient engagement, telehealth and end-of-life management capabilities as additional levers for ensuring patients with complex illnesses receive high-quality, coordinated care."

Mr. Blackley concluded, "In summary, we remain confident in the execution of our investment themes of strong organic growth, expanding margins and efficient capital allocation. We feel very good about our performance thus far in 2021, and we feel confident in our momentum heading 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: Clinical Solutions

• Revenue of $147.2 million and $130.8 million for the three months ended June 30, 2021 and 2020, respectively, representing 12.6% growth year-over-year.
• Organic revenue growth excluding revenue from divested assets of 50.2%
• Adjusted EBITDA of $13.6 million and $12.2 million for the three months ended June 30, 2021 and 2020, respectively.
• Adjusted EBITDA margin of 9.2% and 9.3% for the three months ended June 30, 2021 and 2020, respectively.
• Membership in our Performance Suite was 1.5 million lives with a PMPM of $32.39 and in our New Century Technology & Services Suite was 9.2 million lives with a PMPM of $0.37 as of June 30, 2021.

Segment Highlights: Evolent Health Services

• Revenue of $75.3 million and $87.2 million for the three months ended June 30, 2021 and 2020, respectively.
• Organic revenue growth excluding revenue from divested assets of 28.0%
• Adjusted EBITDA of $6.5 million and $6.9 million for the three months ended June 30, 2021 and 2020, respectively.
• Adjusted EBITDA margin of 8.7% and 8.0% for the three months ended June 30, 2021 and 2020, respectively.
• Membership was 1.5 million lives with a PMPM of $13.81.

Reported Results

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

• Revenue of $222.1 million and $217.3 million for the three months ended June 30, 2021 and 2020, respectively.
• Cost of revenue of $172.1 million and $164.4 million for the three months ended June 30, 2021 and 2020, respectively.
• Selling, general and administrative expenses of $42.7 million and $47.3 million for the three months ended June 30, 2021 and 2020, respectively.
• Net loss attributable to common shareholders of Evolent Health, Inc. of $(9.1) million and $(203.5) million for the three months ended June 30, 2021 and 2020, respectively.
• Loss attributable to common shareholders of Evolent Health, Inc., per basic and diluted share, of $(0.11) and $(2.38) for the three months ended June 30, 2021 and 2020, respectively.

Total cash and cash equivalents was $207.3 million as of June 30, 2021.

Adjusted Results

• Adjusted cost of revenue of $171.1 million and $163.3 million for the three months ended June 30, 2021 and 2020, respectively.
• Adjusted selling, general and administrative expenses of $37.6 million and $43.5 million for the three months ended June 30, 2021 and 2020, respectively.
• Adjusted EBITDA of $13.3 million and $10.5 million for the three months ended June 30, 2021 and 2020, respectively.
• Adjusted EBITDA margin of 6.0% and 4.8% for the three months ended June 30, 2021 and 2020, respectively.
• Adjusted Loss Available to Common Shareholders of $(1.9) million and $(1.0) million for the three months ended June 30, 2021 and 2020, respectively.
• Adjusted Loss per Share Available to Common Shareholders of $(0.02) and $(0.01) for the three months ended June 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 $870 million to $900 million, compared to previous guidance of $845 million to $880 million.

Adjusted EBITDA is expected to be in the range of approximately $50 million to $58 million, compared to previous guidance of $42 million to $52 million.

Third Quarter 2021 Guidance

For the three months ending September 30, 2021, revenue is expected to be in the range of approximately $215 million to $230 million. Adjusted EBITDA is expected to be in the range of approximately $11 million to $15 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 second quarter performance this evening, August 4, 2021, at 6:00 p.m., Eastern Time. The conference call will be available via live webcast on the Company's Investor Relations website at https://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
cgriffin@evolenthealth.com 

Dan Paladino
Media Relations
571.306.3470
dpaladino@evolenthealth.com

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, goodwill impairment, gain (loss) from equity method investees, gain (loss) on disposal of assets and consolidation, changes in fair value of contingent consideration and indemnification asset, other income (expense), net, repositioning costs, stock-based compensation expense, severance costs, amortization of contract cost assets, shareholder advisory services, 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.

Adjusted Earnings (Loss) Available to Common Shareholders is defined as earnings (loss) attributable to common shareholders adjusted to exclude income (loss) from equity method investees, other income (expense), net, gain on transfer of membership, loss on repayment of debt, loss on disposal of assets, impairment of equity method investees, changes in fair value of contingent consideration and indemnification assets, 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, 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.

Total Revenue Excluding Divested Assets is defined as the sum of revenue from our Clinical Solutions and Evolent Health Services segments, less revenue from our divested health plan assets of Passport, Lighthouse and Miami Children's. For purposes of calculating Total Revenue Excluding Divested Assets, the Company treats is former investment in True Health as a discontinued operation and excludes it from the calculation. 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

Lives on platform are calculated by summing members on our value-based care and comprehensive health plan administrative platform, as well as members covered for oncology specialty care services and members covered for cardiology specialty care services. Lives on New Century Technology & Services Suite 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 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 PMPM fee is defined as platform and operations services revenue pertaining to our Performance Suite in the quarter divided by the average of the beginning and ending Performance Suite membership during quarter divided by the number of months in the period. New Century Technology & Services Suite PMPM fee is defined as platform and operations revenue pertaining to the New Century Technology & Services Suite in the quarter divided by the average of the beginning and ending New Century Technology & Services Suite membership during quarter divided by the number of months in the period.

Management uses Lives on our 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.