Evolent Health, Inc.
For the period ended Mar 31, 2025. Filed May 9, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
EVH$4.58+0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001628908-24-000114
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001628908-25-000066
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 125 previous paragraphs and 110 current paragraphs.
58 unchanged; 27 reworded; 25 added; 34 removed; 6 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (25)
Current report
During 2024, the medical claims costs in our Performance Suite grew at a significantly faster rate than historical norms, negatively impacting our financial results. This growth was driven in part by higher disease prevalence as well as higher cost per active patient. Based on commentary from other market participants, we believe these cost increases were industry-wide and not specific to Evolent. Our results in the three months ended March 31, 2025 were also impacted by growth in medical claims cost that continued to grow faster than our historical averages, though slower than the previous quarters.
Current report
Segment Reporting
Current report
We have one operating segment and one reportable segment as our CODM, who is our Chief Executive Officer, reviews financial information on a consolidated basis for purposes of evaluating financial performance and allocating resources.
Current report
See “Part I - Item 1. Financial Statements - Note 8” in this Form 10-Q for more information related to the 2024 goodwill impairment test. As of March 31, 2025, Evolent assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of its goodwill below its carrying amount and require an additional impairment test. The Company determined there had been no such indicators. Therefore, it was unnecessary to perform an additional goodwill impairment assessment as of March 31, 2025.
Current report
Adoption of New Accounting Standards
Current report
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements, including those companies with a single operating segment. ASU 2023-07 is effective retrospectively for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 for the year ended December 31, 2024. See “Part I - Item 1. Financial Statements - Note 20” in this Form 10-Q for more information related our segments.
Current report
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 includes requirements that an entity disclose specific categories in the rate reconciliation and provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate. The standard also requires that entities disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) each disaggregated between domestic and foreign. The Company adopted ASU 2023-09 effective January 1, 2025 however the adoption does not have a significant impact to our income tax disclosures.
Current report
In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 may be applied prospectively with the option for retrospective application for all prior periods presented. The Company is currently evaluating the impact of adopting this guidance on the Company’s current financial position, results of operations or financial statement disclosures.
Current report
In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20) “Induced Conversions of Convertible Debt Instruments” to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. Under the amendments, to account for a settlement of a convertible debt instrument as an induced conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable under the conversion privileges provided in the terms of the instrument. An entity should assess whether this criterion is satisfied as of the date the inducement offer is accepted by the holder. If, when applying this criterion, the convertible debt instrument had been exchanged or modified (without being deemed substantially different) within the one-year period leading up to the offer acceptance date, an entity should compare the terms provided in the inducement offer with the terms that existed one year before the offer acceptance date. The amendments in this Update also clarify that the induced conversion guidance applies to a convertible debt instrument that is not currently convertible as long as it had a substantive conversion feature as of both its issuance date and the date the inducement offer is accepted. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company is examining the impact this pronouncement may have on the Company’s consolidated financial statements.
Current report
Selling, General and Administrative Expenses
Current report
Total revenue decreased $156.0 million, or 24.4%, to $483.6 million for the three months ended March 31, 2025, compared to the same period in 2024. The decrease was primarily from contractual updates with certain customers in our Performance Suite, including (i) $127.4 million from transitioning a customer from Performance Suite to Specialty Technology and Services Suite, (ii) $25.7 million related to the narrowing of scope of a Performance Suite customer; and (iii) $16.0 million from lower gain share revenue. These reductions were offset in part by $15.6 million of growth in other Performance Suite and Specialty Technology and Services contracts, net of reductions in membership at certain of our health plan clients as a result of Medicaid redeterminations and certain customers exiting their Medicaid Advantage operations in certain markets, unrelated to Evolent.
Current report
Cost of revenue decreased by $154.4 million, or (28.8)%, to $381.2 million for the three months ended March 31, 2025, as compared to 2024, principally as a result of the 24.4% decrease in our revenue compared to year ended March 31, 2024. The decrease included approximately $138.7 million of lower claims cost compared to the prior year period, which is primarily attributable to transitioning certain Performance Suite to Specialty and Technology Service Suite and narrowing of scope. Additionally, we experienced decreases of $3.6 million from lower personnel costs compared to the prior year.
Current report
Selling, General and Administrative Expenses
Current report
Depreciation and amortization expenses decreased $5.4 million, or 18.5%, to $24.1 million for the three months ended March 31, 2025, as compared to 2024 primarily due to $5.7 million of accelerated amortization on our retired trade names during the three months ended March, 31, 2024, offset by $0.4 million of higher amortization on provider network contracts. Depreciation and amortization expenses include $13.4 million and $17.4 million for the three months ended March 31, 2025 and 2024, respectively, of amortization expense on intangible assets such as corporate trade names, customer, relationships, provider network contracts and existing technology related to acquisitions and business combinations.
Current report
Loss on Lease Termination
Current report
During the year ended December 31, 2024, the Company terminated its Chicago, IL lease effective October 31, 2024. We recorded an additional $1.9 million loss on lease termination related to negotiated termination payments and real estate commissions.
Current report
Loss on Option Exercise
Current report
During the three months ended March 31, 2025, we agreed to purchase the portion of one of our equity method investments that we did not own from our joint venture partner for the price of $51.5 million. The purchase price was fixed based on a previously negotiated put/call structure. The loss of $52.3 million represents the difference between the purchase price under the put option and the estimated fair value of the interests acquired. The joint venture was primarily focused on a portfolio of oncology clinics, a member navigation platform and practice alignment arm. The oncology clinics in the joint venture were shut down or otherwise disposed of prior to the payment of the put option, and the joint venture will have no continuing operations.
Current report
Provision for Income Taxes
Current report
Cash flows provided by operating activities of $4.9 million for the three months ended March 31, 2024 were affected by decreases in accounts receivable from timing of our partner and vendor payments including higher cash receipts from certain performance-based customers as well as an increase of $8.9 million from contingent consideration, which was more than offset by payment for claims and performance-based arrangements of $(35.4) million and a reduction of our accrued compensation and employee benefits due to end of year bonus payments of $(27.3) million.
Current report
Cash flows used in financing activities of $107.9 million in the three months ended March 31, 2025 were primarily related to $221.0 million of borrowings under our Term Loan Facility, offset, in part by $62.5 million of repayments under our Revolving Facility and $41.5 million related to changes in working capital balances related to claims processing.
Current report
(1)During the year ended December 31, 2024, the Company terminated its Chicago, IL lease and recognized the impact in its operating lease liability - current and operating lease liability - noncurrent on its consolidated balance sheet. The remaining termination payments will be $25.2 million in 2025 and $12.9 million in 2026 including $1.2 million of leasing commissions to be paid in 2025, respectively.
Current report
During the three months ended March 31, 2025, the Company borrowed $200.0 million under its Term Loan Facility. As of March 31, 2025, there was $200.0 million and $62.5 million outstanding under the Company’s Term Loan Facility and Revolving Facility, respectively, all of which is subject to interest rates based on the SOFR. The interest rate for all Loans will be calculated, at the option of the borrowers, (a) in the case of the Revolving Facility, at either the Adjusted Term SOFR plus 4.00%, or the base rate plus 3.00% and (b) in the case of the Term Loan Facility, at either the Adjusted Term SOFR plus 5.50% or the base rate plus 4.50%, subject to step downs based on a total secured leverage ratio. The Company expects to use the funds borrowed under its Committed Facilities for general corporate purposes, including working capital and management of future liabilities, potentially including the Company’s 2025 Notes.
Current report
April 2025, we made a payment of $51.5 million to settle the exercise of the put option on one of our equity method investments. See “Part I - Item 1. Financial Statements - Note 16” for further details of the Company’s loss on option exercise.
Current report
Restricted Cash
Removed paragraphs (34)
Previous report
Business Combination
Previous report
On August 1, 2024, the Company completed its acquisition of certain assets of Machinify, Inc. and the exclusive, perpetual and royalty-free license of Machinify Auth, (“Machinify”), a software platform that leverages the latest advances in artificial intelligence. The acquisition consideration was $28.5 million which included $19.5 million of cash, $11.0 million which was paid upon closing and $8.5 million which was paid on November 1, 2024, as well as an earn-out consisting of additional consideration of up to $12.5 million payable in cash or shares of the Company’s Class A common stock at the election of the Company. See “Part I - Item 1. Financial Statements - Note 4” in this Form 10-Q for more information related to the acquisition of Machinify.
Previous report
Our results for the three months ended September 30, 2024 were impacted by higher-than-expected medical costs in our specialty Performance Suite business versus our previous expectations. This included two components:
Previous report
•Some of our partners submitted new claims data to us that we received and processed from September through early November. These data files included higher expenses for claims paid in quarters than what these partners had previously submitted to us.
Previous report
•The third quarter saw an acceleration in specialty pharmacy costs industry-wide, particularly in oncology, as referenced by many of the largest health insurers in the country.
Previous report
On October 31, 2023, the Company performed its annual goodwill impairment review for fiscal year 2023. In addition, the Company underwent organizational changes which required a reassessment of reporting units. As a result, the Company determined it has one reporting unit due to the economic similarity of the services provided to our partners. Based on our qualitative assessment, we did not identify sufficient indicators of impairment that would suggest the fair value of our reporting unit was below its respective carrying values. As a result, a quantitative goodwill impairment analysis was not required. We did not identify any qualitative factors that would trigger a quantitative goodwill impairment test during the three and nine months ended September 30, 2024. We will perform our annual impairment test of October 31, 2024.
Previous report
Contracts with Multiple Performance Obligations
Previous report
Our contracts with customers may contain multiple performance obligations, primarily when the partner has requested both administrative services and other services such as our specialty care management or total cost of care management services as these services are distinct from one another. When a contract has multiple performance obligations, we allocate the transaction price to each performance obligation based on the relative standalone selling price using the expected cost margin approach. This approach requires estimates regarding both the level of effort it will take to satisfy the performance obligation as well as fees that will be received under the variable pricing model. We also take into consideration customer demographics, current market conditions, the scope of services and our overall pricing strategy and objectives when determining the standalone selling price.
Previous report
Total revenue increased by $110.4 million, or 21.6%, to $621.4 million for the three months ended September 30, 2024, as compared to 2023. This increase is primarily due to growth in our Performance Suite of $60.8 million, net of a $41.8 million true-down of revenue related to a narrowed scope of services in select markets retroactive to the beginning of the year, higher revenue from one of our customers of $22.4 million and higher revenue from transitioning certain Specialty Technology and Services Suite customers to
Previous report
Performance Suite of $28.2 million offset by lower run out services from our contract within our Administrative Services solution of $6.9 million.
Previous report
(1)The decrease in Performance Suite PMPM for the three months ended September 30, 20254 compared to 2023 is driven primarily by $41.8M truedown of revenue related to a narrowed scope of services in select markets retroactive to the beginning of the year.
Previous report
Cost of revenue increased by $154.1 million, or 39.9%, to $540.7 million for the three months ended September 30, 2024, as compared to 2023, due to growth in our revenue and a shift in mix towards our Performance Suite, which has a lower gross margin than our Specialty Technology and Services solutions. The increase in cost of revenue this quarter is driven primarily by $196.1 million of higher claims cost compared to the prior year period, which is attributable to acceleration in medical expenses in certain Performance Suite markets relating to higher disease prevalence and acuity of certain populations, higher specialty pharmaceutical costs and inclusive of $24.6 million related to transitioning certain Specialty and Technology Service Suite customers to Performance Suite. This increase in cost was offset by a $41.7 million true-down in claims expense for one of our Performance Suite customers related to a narrowed scope of services in select markets retroactive to the beginning of the year, a decrease that was offset by a corresponding decrease in revenue.
Previous report
Approximately $1.1 million and $51.0 thousand of total cost of revenue was attributable to stock-based compensation expense for the three months ended September 30, 2024, and 2023 respectively. Cost of revenue represented 87.0% and 75.7% of total revenue for the three months ended September 30, 2024, and 2023 respectively. The majority of the increase in cost of revenue as a percentage of revenue was due to the rapid growth of our Performance Suite solution, which has a lower gross margin and longer maturation profile than our other product types and acceleration in specialty oncology pharmacy costs. We expect the claims expense portion of our cost of revenue to grow at the pace of overall growth in specialty spend for cancer and cardiovascular conditions, offset by the impact of our clinical interventions.
Previous report
Selling, general, and administrative expenses decreased by $29.5 million, or 30.6%, to $67.1 million for the three months ended September 30, 2024, as compared to 2023, principally as a result of lower TSA fees related to our acquisition of NIA of $2.6 million, professional fees in the prior period of $9.8 million as a result of the 2023 Repositioning Plan and a $14.5 million decrease in personnel costs as a result of lower headcount and bonus accruals.
Previous report
Depreciation and amortization expenses decreased $2.7 million, or 8.3%, to $29.7 million for the three months ended September 30, 2024, as compared to 2023 due primarily to fully amortizing our NCH technology intangible and provider network contracts in 2023 resulting in lower amortization of $1.4 million and $0.5 million, respectively, offset, in part by $0.3 million of amortization of technology intangible assets acquired through our acquisition of Machinify.
Previous report
Revenue
Previous report
Total revenue increased by $500.4 million, or 35.5%, to $1,908.2 million for the nine months ended September 30, 2024, as compared to 2023. The increase in revenue is primarily from $343.3 million from new Performance Suite contracts, $90.6 million from transitioning a customer from Specialty Technology and Services Suite to the Performance Suite, $36.8 million from new Specialty Technology and Services Suite contracts and $44.8 million from new oncology and cardiology contracts. Growth was also offset in part by a $34.8 million reduction in revenue from the run out of an Administrative Services contract.
Previous report
(1)The decrease in Performance Suite PMPM for the nine months ended September 30, 20254 compared to 2023 is driven primarily by $41.8M truedown of revenue related to a narrowed scope of services in select markets retroactive to the beginning of the year.
Previous report
Cost of Revenue
Previous report
Cost of revenue increased by $567.6 million, or 54.1%, to $1,616.6 million for the nine months ended September 30, 2024, as compared to 2023, principally as a result of the 35.5% growth in our revenue compared to the nine months ended September 30, 2023. The increase included approximately $569.0 million of higher claims cost compared to the prior year period, which is attributable to higher medical expenses in certain Performance Suite markets relating to higher disease prevalence and acuity of certain populations inclusive of $77.1 million related to transitioning certain Specialty and Technology Service Suite customers to Performance Suite. This increase in cost was offset by a $41.7 million true-down in claims expense for one of our Performance Suite customers, a decrease that was offset by a corresponding decrease in revenue as well as $9.6 million in professional fees due primarily to consulting services. Overall, the company faced higher medical costs but managed to reduce some expenses through strategic measures. These increases were offset in part by a decrease of $11.3 million from lower personnel costs.
Previous report
Depreciation and Amortization Expenses
Previous report
Depreciation and amortization expenses decreased $4.7 million, or 5.1%, to $89.1 million for the for the nine months ended September 30, 2024, as compared to 2023 primarily to fully amortizing our NCH technology intangible and provider network contracts in 2023 resulting in lower amortization of $4.1 million and $1.4 million, respectively, offset, in part by $1.6 million higher amortization on intangibles from our acquisition of NIA and Machinify.
Previous report
Right-of-Use Asset Impairment
Previous report
During the nine months ended September 30, 2023, the Company decommissioned its Chicago, IL lease and wrote off the associated right-of-use asset, recognizing an impairment charge of $24.1 million in right-of-use assets impairment on the consolidated statements of operations and comprehensive income (loss). There were no such impairments in 2024.
Previous report
Our interest expense is attributable to borrowings under convertible senior notes and 2022 Credit Agreement with Ares. Interest expense and amortization of debt issuance costs activity were as follows (in thousands):
Previous report
Change in Tax Receivable Agreement Liability
Previous report
Due to the reduction in the Company’s valuation allowance primarily resulting from deferred tax liabilities established as part of the NIA acquisition, the Company has recorded the remaining TRA liability of $66.2 million for the nine months ended September 30, 2023.
Previous report
Provision for (Benefit from) Income Taxes
Previous report
Cash flows provided by operating activities of $53.2 million for the nine months ended September 30, 2023 were primarily due to our net loss of $79.6 million, non-cash items including depreciation and amortization expenses of $93.8 million, stock-based compensation expense of $29.9 million, deferred tax benefit of $(78.2) million, impairment of the right-of-use asset connected to our Chicago, IL office lease of $24.1 million and change in our tax receivables liability of $66.2 million. Our operating cash inflows were affected by the timing of our customer and vendor payments primarily driven by lower cash receipts from certain customers of approximately $98.4 million and additional increases in accounts receivable from our acquisition of NIA of $38.5 million combined with a reduction of our accrued compensation and employee benefits due to end of year bonus payments and severance of $(8.8) million, offset in part by higher reserve for claims and performance-based arrangements of $100.0 million and restricted cash held for claims processing services of $7.9 million.
Previous report
Cash flows used in financing activities of $97.5 million for the nine months ended September 30, 2024 were primarily related to $15.3 million of preferred dividends paid on our Series A Preferred Stock and $15.4 million from withholding taxes paid on of vested restricted stock units that were net settled. Additional cash used in financing activities include the portion of the NIA contingent consideration representing the fair value at the acquisition date of $66.6 million.
Previous report
As of September 30, 2024, we had $37.5 million of aggregate principal amount in a secured revolving credit facility which will mature in 2029. Subsequent to September 30, 2024, we drew the remaining $37.5 million of aggregate principal amount under our secured revolving credit facility as a result of a slow-down in collections from certain health plan partners in September 2024 and October 2024. The interest rate for the secured revolving credit facility will be calculated, at the option of the borrowers at either the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus 4.00%, or the base rate plus 3.00%.
Previous report
Financing Commitments
Previous report
Subsequent to September 30, 2024, Evolent entered into a debt financing commitment letter with Ares and Ares Capital Management, LLC pursuant to which Ares Capital LLC has committed to provide, subject to certain conditions, with secured debt financing to be available to the Company to fund acquisitions, ongoing working capital needs and other growth capital expenditure investments. See “Part II - Item 5. Other Information” for further details of the Company’s financing commitments.
Previous report
Restricted Cash and Restricted Investments
Reworded paragraphs (27)
Previous wording
Specialty care represents a significant and fast-growing portion of healthcare costs in the U.S., driven in part by the pace of development of new therapies and treatments. To manage these increasing costs, some health plans and other risk-bearing entities historically deployed cost containment strategies that can limit access to care and operate in narrow silos (for example, prior authorization for radiological studies being considered independently from a comprehensive chemotherapy regimen). We believe Evolent can bring an integrated approach to a patient’s condition across multiple specialties, using technology to recommend our evidence-based clinical pathways in a way that provides rapid feedback to the provider, seeks to remove barriers to care, and aligns financial incentives with the best evidence.
Current wording
Specialty care represents a significant and fast-growing portion of healthcare costs in the United States, driven in part by the pace of development of new therapies and treatments. To manage these increasing costs, some health plans and other risk-bearing entities historically deployed cost containment strategies that can limit access to care and operate in narrow silos (for example, prior authorization for radiological studies being considered independently from a comprehensive chemotherapy regimen). We believe Evolent can bring an integrated approach to a patient’s condition across multiple specialties, using technology to recommend our evidence-based clinical pathways in a way that provides rapid feedback to the provider, seeks to remove barriers to care, and aligns financial incentives with the best evidence.
Previous wording
We believe the high medical cost inflation in the third quarter in our specialty Performance Suite was driven by a confluence of factors, including significant increases in disease prevalence, Medicaid redetermination-based adverse selection, rapid increases in unit costs, post-COVID acuity increases and provider coding intensity. We are unable to predict how these broader dynamics will impact our business and results of operations in the future.
Current wording
We are unable to predict how these broader dynamics will impact our business and results of operations in the future, but they could continue to impact our financial condition and results of operations and such future impacts could be material.
Previous wording
We experience pricing pressures in the form of competitive prices in addition to rising costs for certain inflation-sensitive operating expenses such as labor, employee benefits and facility leases. We do not believe these impacts were material to our revenues or net income during the nine months ended September 30, 2024. However, significant sustained inflation driven by the macroeconomic environment or other factors could negatively impact our margins, profitability and results of operations in future periods.
Current wording
We experience pricing pressures in the form of competitive prices in addition to rising costs for certain inflation-sensitive operating expenses such as labor, employee benefits and facility leases. We do not believe these impacts were material to our revenues or net income during the three months ended March 31, 2025. However, significant sustained inflation driven by the macroeconomic environment or other factors could negatively impact our margins, profitability and results of operations in future periods.
Previous wording
During the second quarter of 2023, the Company implemented a broad set of repositioning initiatives designed to further align the Company’s assets and talent towards the value-based specialty care opportunity, with the intent of streamlining its operations and supporting the goal of realizing long-term sustainable earnings growth (the “2023 Repositioning Plan’). These initiatives include making organizational changes across the business that resulted in severance, terminated benefits and related payroll taxes and dedicated employee costs associated with recent acquisitions as well as third-party professional fees. Dedicated employee costs primarily include project management and technology staff costs needed to migrate acquired businesses to Evolent’s integrated technology platform and costs related to the consolidation of brands, internal operations, strategies, processes and platforms. Dedicated employee costs are limited to employees that will have no role in ongoing operations and have no planned role at Evolent once the repositioning activities are completed. Professional services costs primarily relate to services provided by a third-party vendor to review our operating model and organizational design in order to improve our profitability, create value through our solutions and invest in strategic opportunities in future periods. Office space consolidation includes early termination penalties and associated expenses. Costs associated with the 2023 Reposition Plan were recorded in selling, general and administrative expenses on the consolidated statements of operations and comprehensive income (loss). The 2023 Repositioning Plan was completed during the second quarter of 2024.
Current wording
During the second quarter of 2023, the Company implemented a broad set of repositioning initiatives designed to further align the Company’s assets and talent towards the value-based specialty care opportunity, with the intent of streamlining its operations and supporting the goal of realizing long-term sustainable earnings growth (the “2023 Repositioning Plan”). These initiatives include making organizational changes across the business that resulted in severance, termination benefits and related payroll taxes and dedicated employee costs associated with recent acquisitions as well as third-party professional fees. Dedicated employee costs primarily include project management and technology staff costs needed to migrate acquired businesses to Evolent’s integrated technology platform and costs related to the consolidation of brands, internal operations, strategies, processes and platforms. Dedicated employee costs are limited to employees that had no role in ongoing operations and had no planned role at Evolent once the repositioning activities are completed. Professional services costs primarily relate to services provided by a third-party vendor to review our operating model and organizational design in order to improve our profitability, create value through our solutions and invest in strategic opportunities in future periods. Office space consolidation includes early termination penalties and associated expenses. Costs associated with the 2023 Repositioning Plan were recorded in selling, general and administrative expenses on the consolidated statements of operations and comprehensive income (loss). The 2023 Repositioning Plan was completed during the second quarter of 2024.
Previous wording
The following table provides a summary of our total costs associated with our repositioning plans for the nine months ended September 30, 2024, by major type of cost (in thousands):
Current wording
The following table provides a summary of our total costs associated with our repositioning plans the three months ended March 31, 2024 by major type of cost (in thousands):
Previous wording
We recognize the excess of the purchase price plus the fair value of any non-controlling interests in the acquiree over the fair value of identifiable net assets acquired as goodwill. Goodwill is not amortized, but is reviewed at least annually for indications of impairment, with consideration given to financial performance and other relevant factors. We perform impairment tests of goodwill at a reporting unit level. We perform impairment tests between annual tests if an event occurs, or circumstances change, that we believe would more likely than not reduce the fair value of a reporting unit below its carrying amount.
Current wording
We recognize the excess of the purchase price plus the fair value of any non-controlling interests in the acquiree over the fair value of identifiable net assets acquired as goodwill. Goodwill is not amortized, but is reviewed at least annually for indications of impairment, with consideration given to financial performance and other relevant factors. We perform impairment tests of goodwill at a reporting unit level. We perform impairment tests between annual tests if an event occurs, or circumstances change, that we believe would more likely than not reduce the fair value of our reporting unit below its carrying amount.
Previous wording
Comparison of the Results for Three Months Ended September 30, 2024 to 2023
Current wording
Comparison of the Results For the Three Months Ended March 31, 2025 to 2024
Previous wording
The following table represents the Company’s Lives on Platform, Cases, Average PMPM fees, Revenue per Case and Average Unique Members for the three and nine months ended September 30, 2024 and 2023 (Average Lives on Platform/Cases in thousands):
Current wording
The following table represents the Company’s Lives on Platform, Cases, Average PMPM fees, Revenue per Case and Average Unique Members (Average Lives on Platform/Cases in thousands):
Previous wording
Approximately $3.3 million and $1.6 million of total cost of revenue was attributable to stock-based compensation expense for the nine months ended September 30, 2024, and 2023, respectively. Cost of revenue represented 84.7% and 74.5% of total revenue for the nine months ended September 30, 2024, and 2023 respectively. Our cost of revenue increased as a percentage of our total revenue due to higher medical costs with the rapid growth of our Performance Suite solution, which has a lower gross margin and longer maturation profile than our other product types and acceleration in specialty oncology pharmacy costs. We expect the claims expense portion of our cost of revenue to grow at the pace of overall growth in specialty spend for cancer and cardiovascular conditions, offset by the impact of our clinical interventions.
Current wording
Approximately $0.7 million and $1.0 million of total cost of revenue was attributable to stock-based compensation expense for the three months ended March 31, 2025, and 2024, respectively. Cost of revenue represented 78.8% and 83.7% of total revenue for the three months ended March 31, 2025, and 2024 respectively. Our cost of revenue decreased as a percentage of our total revenue due to a shift in mix in our business towards higher margin product types. We anticipate continued growth in the cost of treatment for cancer and cardiovascular patients over time, which we expect to be offset in part by contractual protections within our Performance Suite and the impact of our clinical interventions.
Previous wording
Selling, general, and administrative expenses decreased by $61.3 million, or 22.2%, to $215.3 million for the nine months ended September 30, 2024, as compared to 2023. The decrease was primarily driven by lower TSA fees related to our NIA acquisition of $13.5 million recorded in 2023, $31.6 million of lower professional fees as a result of the 2023 Repositioning Plan, a $17.2 million decrease in personnel costs as a result of lower headcount and bonus accruals and lower bad debt expense of $9.5 million due to collection timing from our customers, offset by higher stock compensation of $14.3 million due to the achievement and change in projected achievement of certain performance measurements.
Current wording
Selling, general, and administrative expenses decreased by $0.7 million, or 0.9%, to $78.4 million for the three months ended March 31, 2025, as compared to 2024. The decrease was primarily driven by lower stock compensation of $7.4 million due to the achievement and change in projected achievement of certain performance measurements, offset by a $3.5 million increase in bad debt expense versus the prior period reflecting a return to normal collections timing and $1.7 million increase in personnel costs.
Previous wording
Approximately $42.5 million and $28.3 million of total selling, general and administrative expenses were attributable to stock-based compensation expense for the nine months ended September 30, 2024 and 2023, respectively. Acquisition and severance costs accounted for approximately $5.1 million and $15.2 million of total selling, general and administrative expenses for the nine months ended September 30, 2024 and 2023, respectively. Selling, general and administrative expenses represented 11.3% and 19.7% of total revenue for the nine months ended September 30, 2024, as compared to 2023, respectively, driven in part by the Company’s 2023 Repositioning Plan which concluded in the second quarter of 2024.
Current wording
Approximately $10.4 million and $17.8 million of total selling, general and administrative expenses were attributable to stock-based compensation expense for the three months ended March 31, 2025 and 2024, respectively. Acquisition and severance costs accounted for approximately $1.7 million and $0.4 million of total selling, general and administrative expenses for the three months ended March 31, 2025 and 2024, respectively. Selling, general and administrative expenses represented 16.2% and 12.4% of total revenue for the three months ended March 31, 2025, as compared to 2024, respectively, driven in part by the Company’s 2023 Repositioning Plan which concluded in the second quarter of 2024.
Previous wording
We recorded a loss on change in fair value of contingent consideration of $0.2 million for the three months ended September 30, 2024 primarily related to the liabilities acquired as a result of the acquisitions of Machinify in August 2024 and $11.3 million for the three months ended September 30, 2023, related to the liabilities acquired as a result of the acquisitions of Machinify in August 2024, NIA in January 2023 and IPG in August 2022. See “Part I - Item 1. Financial Statements and Supplementary Data - Note 17” in this Form 10-Q for more information related to changes in the fair value of contingent consideration.
Current wording
We recorded a loss on change in fair value of contingent consideration of $(0.3) million for the three months ended March 31, 2025 related to our Machinify earnout. We recorded $8.9 million the three months ended March 31, 2024 related to the liabilities acquired as a result of the acquisitions of NIA. See “Part I - Item 1. Financial Statements - Note 17” in this Form 10-Q for more information related to changes in the fair value of contingent consideration.
Previous wording
The decrease in interest expense for the three and nine months ended September 30, 2024 compared to the same periods in 2023 is primarily due to repayment of the Term Loan Facility of the Credit Agreement in 2023, offset by interest expense incurred on our 2029 Notes. See “Part I - Item 1. Financial Statements - Note 9” in this Form 10-Q for more information related to interest expense by debt issuance.
Current wording
Our interest expense for the three months ended March 31, 2025 is primarily attributable to our Credit Agreement with Ares as well as the 2025 Notes and 2029 Notes. We recorded interest expense (including amortization of deferred financing costs) of approximately $10.4 million and $6.0 million for the three months ended March 31, 2025 and 2024, respectively. The increase in interest expense for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is driven primarily by interest incurred Ares Term Loan Facility borrowings in January 2025 and Ares Revolving Facility in December 2024. See “Part I - Item 1. Financial Statements - Note 9” in this Form 10-Q for more information related to interest expense by debt issuance.
Previous wording
An income tax benefit of $0.6 million and $0.3 million was recognized for the three and nine months ended September 30, 2024, respectively, which resulted in effective tax rates of 2.6% and 0.7%, respectively. An income tax benefit of $5.6 million and $74.7 million was recognized for the three and nine months ended September 30, 2023, respectively, which resulted in effective tax rates of 18.0% and 48.4%, respectively. The income tax benefit recorded during the nine months ended September 30, 2024 primarily relates to the expected tax effect of net losses, partially offset by state and foreign taxes. The income tax benefit recorded during the nine months ended September 30, 2023, primarily relates to the reduction in the valuation allowance resulting from deferred tax liabilities established as part of the NIA acquisition accounting, partially offset by state and foreign taxes.
Current wording
A provision for income taxes of $1.5 million and $0.6 million was recognized for the three months ended March 31, 2025 and 2024, respectively, which resulted in effective tax rates of (2.3)% and (3.4)%, respectively.
Previous wording
We pay quarterly regular cash dividends on the Series A Preferred Stock at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designation) plus 6.00%. In addition, we accrete deferred financing costs and the redemption value in excess of par value in additional paid-in-capital on the consolidated balance sheets. The Company paid $5.1 million and $15.3 million of dividends and accreted $3.0 million and $8.7 million of deferred issuance costs and redemption value for the three and nine months ended September 30, 2024, respectively.
Current wording
We pay quarterly regular cash dividends on the Series A Preferred Stock at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designation) plus 6.00%. In addition, we accrete deferred financing costs and the redemption value in excess of par value in additional paid-in-capital on the consolidated balance sheets. The Company paid dividends and recorded accretion of deferred issuance costs and redemption value related to the Series A Preferred Stock as presented below (in thousands):
Previous wording
The Company reported net loss attributable to common shareholders of Evolent Health, Inc. of $62.8 million and $100.9 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the Company had $96.6 million of cash and cash equivalents and $31.3 million in restricted cash and restricted investments.
Current wording
The Company reported net loss attributable to common shareholders of Evolent Health, Inc. of $72.3 million and $25.2 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, the Company had $246.5 million of cash and cash equivalents and $31.3 million in restricted cash.
Previous wording
Cash flows provided by operating activities of $45.0 million for the nine months ended September 30, 2024 were affected by decreases in accounts receivable of $38.8 million from timing of our partner and vendor payments including higher cash receipts from certain performance-based customers, offset by higher payment for claims and performance-based arrangements of $91.4 million, a reduction in accrued compensation and benefits of $24.8 million due to year end bonus payments and severance of $2.9 million and payments for office lease consolidation of $6.7 million. Of the total $88.8 million in NIA contingent consideration paid in the period, $22.2 million represented a change in fair value of NIA contingent consideration in excess of the initial fair value at the acquisition date through payment date, and is therefore presented in cash flows provided by operating activities under changes in accrued expenses.
Current wording
Cash flows provided by operating activities of $4.6 million for the three months ended March 31, 2025 were affected by increases in accounts receivable of $15.8 million from timing of our partner and vendor payments lower higher cash receipts from certain performance-based customers, offset by a reduction reserve for claims and performance-based arrangements of $15.1 million due to the timing of claims payments and a reduction in accrued compensation and benefits of $2.2 million due to the timing of 2024 bonus payments and severance of $1.0 million.
Previous wording
Cash flows used in investing activities of $43.0 million for the nine months ended September 30, 2024 were primarily attributable to cash paid for asset acquisitions and business combinations of $16.9 million which is inclusive of $11.0 million for the purchase of Machinify and $3.0 million for investment in future equity notes, and $18.7 million of investments in internal-use software and purchases of property and equipment.
Current wording
Cash flows used in investing activities of $13.1 million in the three months ended March 31, 2025 were primarily attributable to cash paid for asset acquisitions and business combinations of $4.5 million and $8.6 million of investments in internal-use software and purchases of property and equipment.
Previous wording
Cash flows used in investing activities of $409.5 million in the nine months ended September 30, 2023 were primarily attributable to $388.2 million paid for the acquisition of NIA and $22.7 million of investments in internal-use software and purchases of property and equipment.
Current wording
Cash flows used in investing activities of $9.7 million in the three months ended March 31, 2024 were primarily attributable to a purchase of investments for $3.0 million and $5.3 million of investments in internal-use software and purchases of property and equipment.
Previous wording
Cash flows provided by financing activities of $365.7 million in the nine months ended September 30, 2023, were primarily related to $256.1 million received from our Acquisition Facilities in connection with our Credit Agreement and $168.0 million from the issuance of preferred equity, offset in part, by $47.5 million of cash outflows related to repayment on our Acquisition Facilities, $13.6 million of preferred dividends paid on our Series A Preferred Stock and $14.3 million from withholding taxes paid in respect of vested restricted stock units that were net settled.
Current wording
Cash flows provided by financing activities of $14.9 million in three months ended March 31, 2024, were primarily related to $37.5 million of restricted cash inflows from working capital related to claims processing offset, in part by $3.8 million from the payment of contingent consideration, $5.1 million of preferred dividends paid on our Series A Preferred Stock and $14.3 million from withholding taxes paid in respect of vested restricted stock units that were net settled.
Previous wording
We believe that the amount of cash and cash equivalents on hand and cash flows from operations, plus borrowings under our credit facilities and if necessary, additional funding through other forms of financing, will be adequate for us to execute our business strategy and meet anticipated requirements for lease obligations, capital expenditures working capital and debt service for the next twelve months. Our estimated known contractual and other obligations (in thousands) as of September 30, 2024, were as follows (including as discussed in the narrative below):
Current wording
We believe that the amount of cash and cash equivalents on hand and cash flows from operations, plus borrowings under our credit facilities and if necessary, additional funding through other forms of financing, will be adequate for us to execute our business strategy and meet anticipated requirements for lease obligations, capital expenditures working capital and debt service for the next twelve months and in the long-term. Our estimated known contractual and other obligations (in thousands) as of March 31, 2025, were as follows (including as discussed in the narrative below):
Previous wording
(1)Refer to the discussion in “Part I - Item 1. Financial Statements - Note 9” for additional information on payment dates for our convertible notes interest.
Current wording
(2)Refer to the discussion in “Part I - Item 1. Financial Statements - Note 9” for additional information on payment dates for our convertible notes interest.
Previous wording
(2)Represents the fair value of earn-out consideration related to the Machinify transaction. See “Part I - Item 1. Financial Statements - Note 17” for further details of the Company’s contingent consideration obligation.
Current wording
(3)Represents the fair value of earn-out consideration primarily related to the Machinify transaction. See “Part I - Item 1. Financial Statements - Note 17” for further details of the Company’s contingent consideration obligations.
Previous wording
The Company holds ownership interests in joint ventures and other entities which are accounted for under the equity method. Our joint ventures and other investments from time to time may, and some do, include put or call features under which we could be contractually required to purchase interests from our joint venture partner at an exercise price determined in reference to a multiple of the dollar amount of our joint venture partner’s total capital contributions, the performance of the joint venture, and other factors. One of our investments includes a put option that can be exercised by our joint venture partner in the first half of 2025 which, if exercised, would require us to acquire the interests in the joint venture that we do not own for a price that may be up to $50.0 million.
Current wording
The Company holds ownership interests in joint ventures and other entities which are accounted for under the equity method. Our joint ventures and other investments from time to time may, and some do, include put or call features under which we could be contractually required to purchase interests from our joint venture partner at an exercise price determined in reference to a multiple of the dollar amount of our joint venture partner’s total capital contributions, the performance of the joint venture, and other factors. In
Previous wording
Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. During the nine months ended September 30, 2024, accounts receivable, net, decreased primarily due to the timing of cash receipts from certain customers.
Current wording
Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. During the three months ended March 31, 2025, accounts receivable, net, decreased primarily due to the timing of cash receipts from certain customers.
Previous wording
Restricted cash and restricted investments of $31.3 million is carried at cost and includes cash held on behalf of other entities for pharmacy and claims management services of $12.8 million, collateral for letters of credit required as security deposits for facility leases of $1.9 million, amounts held with financial institutions for risk-sharing arrangements of $16.5 million as of September 30, 2024. See “Part I - Item 1. Financial Statements - Note 2” for further details of the Company’s restricted cash balances.
Current wording
Restricted cash of $31.3 million is carried at cost and includes cash held on behalf of other entities for pharmacy and claims management services of $14.3 million, collateral for letters of credit required as security deposits for facility leases of $0.3 million, amounts held with financial institutions for risk-sharing arrangements of $16.7 million as of March 31, 2025. See “Part I - Item 1. Financial Statements - Note 2” for further details of the Company’s restricted cash balances.
Previous wording
Prepaid expenses and other current assets are carried at cost and includes prepaid expenses and non-trade accounts receivable. During the nine months ended September 30, 2024, prepaid and other current assets decreased due to lower non-trade accounts receivable of $1.9 million, offset by trade receivables related to certain customers that have the legal right to net payment for amounts due from customers and claims payable of $5.4 million
Current wording
Prepaid expenses and other current assets are carried at cost and includes prepaid expenses and non-trade accounts receivable. During the three months ended March 31, 2025, prepaid and other current assets increased due to higher non-trade accounts receivable of $4.3 million.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
The following table represents the Company’s Lives on Platform, Cases, PMPM fees and revenue per case for the three months ended September 30, 2024 and 2023 (Average Lives on Platform/Cases in thousands):
Previous report — wording carried elsewhere
Approximately $13.3 million and $10.2 million of total selling, general and administrative costs were attributable to stock-based compensation expense for the three months ended September 30, 2024, and 2023, respectively. Selling, general and administrative expenses represented 10.8% and 18.9% of total revenue for the three months ended September 30, 2024, as compared to 2023, respectively, driven in part by the Company’s 2023 Repositioning Plan which concluded in the second quarter of 2024.
Previous report — wording carried elsewhere
Comparison of the Results for The Nine Months Ended September 30, 2024 to 2023
Previous report — wording carried elsewhere
The following table represents Evolent’s revenue disaggregated by line of business (in thousands):
Previous report — wording carried elsewhere
Change in Fair Value of Contingent Consideration
Previous report — wording carried elsewhere
We recorded a loss on change in fair value of contingent consideration of $9.1 million for the nine months ended September 30, 2024 primarily related to the liabilities acquired as a result of the acquisitions of Machinify in August 2024 and NIA in January 2023 and $12.0 million for the nine months ended September 30, 2023, related to the liabilities acquired as a result of the acquisitions of NIA and IPG in August 2022. See “Part I - Item 1. Financial Statements - Note 17” in this Form 10-Q for more information related to changes in the fair value of contingent consideration.