- Composed of 3.2 million lives in our Performance Suite with an average PMPM of $24.66 , 60.5 million in our Specialty Technology and Services Suite with an average PMPM of $0.36 and 1.9 million on our Administrative Services platform with an average PMPM of $14.91 .
- Average unique members of 41.3 million, up from 15.1 million from the three months ended March 31, 2022 .
Evolent highlighted the following two commercial arrangements to add to the 2023-year sales cycle, taking the total year-to-date count of new partnerships and significant expansions to four versus its target of six to eight:
- As announced in late March, the Company signed a significant specialty technology and services expansion with Centene whereby they will expand their use of Evolent Health's oncology solution across Centene and WellCare Medicare Advantage ("MA") members nationally during 2023; and
- The Company announced today that a long standing national payer customer has entered into an agreement with AMSURG, a leading Ambulatory Surgery Care ("ASC") chain, to utilize the Company's surgical management solution as the preferred implant provider nationally.
Seth Blackley , Chief Executive Officer, and Co-Founder of Evolent Health stated, "We achieved strong first quarter results and a positive start to 2023. Our revenue growth and Adjusted EBITDA margins give us confidence in our financial outlook for 2023 and year-end 2024 Adjusted EBITDA run-rate target. We welcomed NIA into the Evolent family in January and integration is proceeding as anticipated. Through the discipline of our three core operating priorities, Evolent seeks to continue to strengthen our position in specialty value-based care for years to come."
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 results in accordance with U.S. generally accepted accounting principles ("GAAP"):
- Revenue of $427.7 million and $297.1 million for the three months ended March 31, 2023 and 2022, respectively.
- Cost of revenue of $310.5 million and $219.7 million for the three months ended March 31, 2023 and 2022, respectively.
- Selling, general and administrative expenses of $89.7 million and $58.9 million for the three months ended March 31, 2023 and 2022, respectively.
- Net loss attributable to common shareholders of Evolent Health, Inc. of $(26.3) million and $(5.4) million for the three months ended March 31, 2023 and 2022, respectively.
- Net loss margin of (6.1)% and (1.8)% for the three months ended March 31, 2023 and 2022, respectively.
Total cash and cash equivalents was $157.5 million as of March 31, 2023.
Adjusted Results
- Adjusted cost of revenue of $308.2 million and $218.5 million for the three months ended March 31, 2023 and 2022, respectively.
- Adjusted selling, general and administrative expenses of $68.9 million and $54.3 million for the three months ended March 31, 2023 and 2022, respectively.
- Adjusted EBITDA of $50.5 million and $24.3 million for the three months ended March 31, 2023 and 2022, respectively.
- Adjusted EBITDA margin of 11.8% and 8.2% for the three months ended March 31, 2023 and 2022, respectively.
- Adjusted income per share attributable to common shareholders of $0.20 and $0.12 for the three months ended March 31, 2023 and 2022, respectively.
Business Outlook
We do not believe we can meaningfully reconcile guidance for non-GAAP Adjusted EBITDA to net income (loss) attributable to common shareholders of Evolent Health, Inc. because the company cannot provide guidance for the more significant reconciling items between net income (loss) attributable to common shareholders of Evolent Health, Inc. and Adjusted EBITDA without unreasonable effort. This is due to the fact that future period non-GAAP guidance includes adjustments for items not indicative of our core operations, and as a result from changes to our business due to acquisitions and other events. Such items may, from time to time, include gain on transfer of membership; loss on repayment/extinguishment of debt; gain from equity method investees, change in fair value of contingent consideration, change in tax receivable agreement liability, other income (expense), repositioning costs, stock-based compensation expense, severance costs, amortization of contract cost assets, strategy and shareholder advisory expenses, acquisition-related costs, loss from discontinued operations, dividends and accretion on Series A Preferred Stock and certain other items the company believes to be non-indicative of its ongoing operations. Such adjustments may be affected by changes in ongoing assumptions, judgements, as well as nonrecurring, unusual or unanticipated charges, expenses or gains (losses) or other items that may not directly correlate to the underlying performance of our business operations. The exact amount of these adjustments are not currently determinable but may be significant.
Second Quarter 2023 Guidance
For the three months ending June 30, 2023 , revenue is expected to be in the range of approximately $455 million to $470 million . Adjusted EBITDA is expected to be in the range of approximately $45 million to $49 million .
Full Year 2023 Guidance
The Company is raising its guidance for revenue and reiterating its previously-stated Adjusted EBITDA guidance for the year ending December 31, 2023 , with revenue expected to be in the range of approximately $1.935 billion to $1.965 billion and Adjusted EBITDA expected to be in the range of approximately $180 million to $200 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").
Additional Outlook Information
Cash deployed for software development is expected to be in the range of $35 million - $40 million for the year ended December 31, 2023 .
Web and Conference Call Information
Evolent Health, Inc. will hold a conference call to discuss its first quarter performance this evening, May 3, 2023, at 5:00 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. PLEASE NOTE: Use the following updated numbers to participate by telephone, dial 888.396.8049 or 416.764.8646 for international callers, and use the conference ID #55348964. 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.
Investor Day
In addition, Chief Executive Officer and Co-Founder Seth Blackley and Evolent's executive team will host an Investor Day for the financial community via webcast and in person in Arlington, VA . on Tuesday, May 23, 2023 .
The event will feature presentations from Evolent's executive leadership team on the company's long-term corporate strategy, innovative value-based care solutions, and financial outlook. Management will also host a Q&A session with attendees.
A live audio and visual webcast of this event, along with supporting materials, will be available the day of the event on Evolent's investor relations website at ir.evolenthealth.com/. A replay, presentations and transcript will also be available after the event. An audio playback of the event will be available on Evolent's investor relations website, ir.evolenthealth.com, for 90 days after the call.
The event will be held at the Westin in Arlington (801 N Glebe Rd, Arlington, VA 22203) Tuesday, May 23, 2023 , at 10 a.m. Eastern Time and is anticipated to end at approximately 1 p.m. Eastern Time .
About Evolent Health
Evolent (NYSE: EVH) specializes in better health outcomes for people with complex conditions through proven solutions that make health care simpler and more affordable. Evolent serves a national base of leading payers and providers 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.
Non-GAAP Financial Measures
In addition to disclosing financial results that are determined in accordance with GAAP, we present Adjusted Cost of Revenue, Adjusted Selling, General and Administrative Expenses, Adjusted Depreciation and Amortization Expenses, Adjusted Total Operating Expenses, Adjusted Change in the Fair Value of Contingent Consideration, Adjusted Operating Income (Loss), Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Income Attributable to Common Shareholders and Adjusted Income per Common Share Attributable 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. 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 acquisition-related costs, severance and termination payments and non-cash items such as stock-based compensation expenses. 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. 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 Change in the Fair Value of Contingent Consideration is defined as changes in the fair value of contingent consideration adjusted to exclude the impact of contingent consideration related to contingent consideration incurred through asset acquisitions and business combinations. Management uses Adjusted Change in the Fair Value of Contingent Consideration 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.
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, severance 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 net loss attributable to common shareholders of Evolent Health, Inc. before interest income, interest expense, benefit from (provision for) income taxes, depreciation and amortization expenses, adjusted to exclude gain from equity method investees, changes in fair value of contingent consideration, change in the tax receivable agreement liability, other income (expense), net, stock-based compensation expense, severance costs, amortization of contract cost assets, dividends and accretion on Series A Preferred Stock and acquisition-related costs. Acquisition-related costs include but are not limited to integration consultants, investor outreach services, external valuation and accounting advisory services, legal fees, dedicated integration employee salaries, bonuses, expenses and related payroll taxes, and transaction bonuses paid to certain employees.
Management uses Adjusted EBITDA as a supplemental performance measure because the removal of acquisition-related costs, severance 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 Income Attributable to Common Shareholders is defined as net loss attributable to common shareholders of Evolent Health, Inc. adjusted to exclude gain from equity method investees, provision (benefit) for income taxes, other income (expense), net, changes in fair value of contingent consideration, change in tax receivable agreement liability, purchase accounting adjustments, stock-based compensation expenses, severance costs, amortization of contract cost assets recorded as a result of a one-time ASC 606 transition adjustment, dividends and accretion on Series A Preferred Stock and acquisition-related costs.
Adjusted Income per Share Attributable to Common Shareholders is defined as Adjusted Income Attributable to Common Shareholders divided by Weighted-Average Common Shares, and reflects the adjustments made in those non-GAAP measures.
Management uses Adjusted Income Attributable to Common Shareholders and Adjusted Income per Share Attributable 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.
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
Performance Suite Lives on Platform are calculated by summing monthly members covered for oncology and cardiology specialty care services for contracts not under ASO arrangements, plus members managed by Evolent Care Partners in risk arrangements and divided by the number of months in the period. Specialty Technology and Services Suite Lives on Platform are calculated by summing monthly members covered for oncology, cardiology, musculoskeletal, advanced imaging and other diagnostics specialty care services for contracts under ASO arrangements divided by the number of months in the period. Administrative Services Lives on Platform are calculated by summing monthly members covered for EHS implementation and core performance services divided by the number of months in the period. Cases are calculated by summing the number of individuals receiving services through our IPG and Vital Decisions programs in a given period. Members covered for more than one category are counted in each category.
Performance Suite Average PMPM fee is defined as revenue pertaining to our Performance Suite during the period reported divided by Performance Suite Lives on Platform for the period divided by the number of months in the period. Specialty Technology and Services Suite Average PMPM fee is defined as revenue pertaining to the Specialty Technology and Services Suite during the period reported divided by Specialty Technology and Services Suite Lives on Platform for the period divided by the number of months in the period. Administrative Services Average PMPM fee is defined as revenue pertaining to the Administrative Services during the period reported divided by the Administrative Services Lives on Platform for the period divided by the number of months in the period. Revenue per Case is calculated by the revenue pertaining to IPG and Vital Decisions divided by the number of cases for a given period.
Average Unique Members are calculated by summing members covered by our Performance Suite, Specialty Technology and Services Suite and Administrative Services. In cases where clients cross between multiple products, we only capture members from the product with the maximum number of members.
Management uses Lives on Platform, PMPM fees, Cases, Revenue per Case and Average Unique Members 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 Company has changed its calculation of Lives on Platform to more accurately reflect the monthly membership that corresponds to quarterly revenue. The Company has recast prior periods to reflect the current presentation of Lives on Platform, PMPM fees, Cases and Revenue per Case. The current Performance Suite maps to the prior disclosure of the Clinical Solutions Performance Suite. The current Specialty Technology and Services Suite maps to the prior disclosure of the Clinical Solutions New Century Health Technology and Services Suite. The current Administrative Services maps to the prior disclosure of Evolent Health Services segment. There has been no change in the presentation of Cases from prior period.
Evolent Health, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(unaudited, in thousands, except per share data)
For the Three Months
Ended March 31,