Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 07, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Evolent Health, Inc. | |
Entity Central Index Key | 1,628,908 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Class A | ||
Entity Common Stock, Shares Outstanding | 52,576,422 | |
Class B | ||
Entity Common Stock, Shares Outstanding | 15,346,981 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 109,777,000 | $ 145,726,000 |
Restricted cash | 4,990,000 | 4,703,000 |
Accounts receivable, net (amounts related to affiliates: 2016 - $5,768; 2015 - $10,185) | 21,986,000 | 20,381,000 |
Prepaid expenses and other current assets (amounts related to affiliates: 2016 - $37; 2015 - $1,220) | 4,983,000 | 4,208,000 |
Investments, at amortized cost | 49,693,000 | 9,445,000 |
Total current assets | 191,429,000 | 184,463,000 |
Restricted cash | 1,580,000 | 1,582,000 |
Investments, at amortized cost | 0 | 44,618,000 |
Investments in and advances to affiliates | 2,538,000 | 0 |
Property and equipment, net | 21,123,000 | 12,796,000 |
Prepaid expenses and other non-current assets | 12,118,000 | 0 |
Intangible assets, net | 162,789,000 | 163,152,000 |
Goodwill | 459,703,000 | 608,903,000 |
Total assets | 851,280,000 | 1,015,514,000 |
Current liabilities: | ||
Accounts payable (amounts related to affiliates: 2016 - $11,506; 2015 - $13,311) | 14,486,000 | 16,699,000 |
Accrued liabilities (amounts related to affiliates: 2016 - $629; 2015 - $828) | 11,839,000 | 6,047,000 |
Accrued compensation and employee benefits | 21,287,000 | 21,925,000 |
Deferred revenue | 17,717,000 | 14,835,000 |
Total current liabilities | 65,329,000 | 59,506,000 |
Other long-term liabilities | 7,997,000 | 111,000 |
Deferred tax liabilities, net | 18,097,000 | 21,318,000 |
Total liabilities | 91,423,000 | 80,935,000 |
Commitments and Contingencies | ||
Shareholders' Equity (Deficit) | ||
Additional paid-in-capital | 397,603,000 | 342,063,000 |
Retained earnings (accumulated deficit) | 164,024,000 | 306,688,000 |
Total shareholders' equity (deficit) attributable to Evolent Health, Inc. | 562,228,000 | 649,341,000 |
Non-controlling interests | 197,629,000 | 285,238,000 |
Total equity (deficit) | 759,857,000 | 934,579,000 |
Total liabilities and shareholders' equity (deficit) | 851,280,000 | 1,015,514,000 |
Class A | ||
Shareholders' Equity (Deficit) | ||
Common stock | 448,000 | 415,000 |
Class B | ||
Shareholders' Equity (Deficit) | ||
Common stock | $ 153,000 | $ 175,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Accounts receivable, related parties | $ 5,768 | $ 10,185 |
Prepaid expenses and other current assets, related parties | 37 | 1,220 |
Accounts payable, related parties | 11,506 | 13,311 |
Accrued liabilities, related parties | $ 629 | $ 828 |
Class A | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 750,000,000 | 750,000,000 |
Common stock, shares, issued | 45,028,807 | 41,491,498 |
Common stock, shares, outstanding | 45,028,807 | 41,491,498 |
Class B | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares, issued | 15,346,981 | 17,524,596 |
Common stock, shares, outstanding | 15,346,981 | 17,524,596 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | ||
Revenue | |||||
Transformation | [1] | $ 7,757 | $ 6,783 | $ 26,259 | $ 9,486 |
Platform and operations | [1] | 52,453 | 33,623 | 139,918 | 41,334 |
Total revenue | 60,210 | 40,406 | 166,177 | 50,820 | |
Expenses | |||||
Cost of revenues (exclusive of depreciation and amortization expenses presented separately below) | [1] | 33,905 | 24,762 | 95,294 | 32,649 |
Selling, general and administrative expenses | [1] | 38,398 | 29,834 | 103,101 | 42,916 |
Depreciation and amortization expenses | 3,746 | 3,056 | 10,728 | 4,040 | |
Goodwill impairment | 0 | 0 | 160,600 | 0 | |
Total operating expenses | 76,049 | 57,652 | 369,723 | 79,605 | |
Operating income (loss) | (15,839) | (17,246) | (203,546) | (28,785) | |
Interest income (expense), net | 255 | 54 | 805 | 67 | |
Gain on consolidation | 0 | 0 | 0 | 414,133 | |
Income (loss) from affiliates | (448) | 0 | (462) | (28,165) | |
Other income (expense), net | 1 | 0 | 4 | 0 | |
Income (loss) before income taxes and non-controlling interests | (16,031) | (17,192) | (203,199) | 357,250 | |
Provision (benefit) for income taxes | (256) | (104) | (1,614) | 29,169 | |
Net income (loss) | (15,775) | (17,088) | (201,585) | 328,081 | |
Net income (loss) attributable to non-controlling interests | (4,567) | (5,108) | (59,250) | (8,532) | |
Net income (loss) attributable to Evolent Health, Inc. | (11,208) | (11,980) | (142,335) | 336,613 | |
Earnings (Loss) Available for Common Shareholders | |||||
Basic (in dollars) | (11,208) | (11,980) | (142,335) | 334,429 | |
Diluted (in dollars) | $ (11,208) | $ (11,980) | $ (142,335) | $ 328,081 | |
Earnings (Loss) per Common Share | |||||
Basic (in dollars per share) | $ (0.26) | $ (0.29) | $ (3.34) | $ 17.05 | |
Diluted (in dollars per share) | $ (0.26) | $ (0.29) | $ (3.34) | $ 7.93 | |
Weighted-Average Common Shares Outstanding | |||||
Basic (in shares) | 43,110 | 41,468 | 42,632 | 19,618 | |
Diluted (in shares) | 43,110 | 41,468 | 42,632 | 41,398 | |
Affiliates | |||||
Revenue | |||||
Transformation | $ 67 | $ 485 | $ 169 | $ 534 | |
Platform and operations | 8,636 | 10,732 | 24,342 | 14,660 | |
Expenses | |||||
Cost of revenues (exclusive of depreciation and amortization expenses presented separately below) | 3,723 | 6,470 | 14,209 | 8,303 | |
Selling, general and administrative expenses | $ 531 | $ 689 | $ 1,298 | $ 940 | |
[1] | Amounts related to affiliates included above are as follows (see Note 15) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash Flows from Operating Activities | ||
Net income (loss) | $ (201,585) | $ 328,081 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Gain on consolidation | 0 | (414,133) |
(Income) loss from affiliates | 462 | 28,165 |
Depreciation and amortization expenses | 10,728 | 4,040 |
Goodwill impairment | 160,600 | 0 |
Stock-based compensation expense | 13,844 | 10,536 |
Deferred tax provision (benefit) | (1,614) | 29,169 |
Other | 443 | 93 |
Changes in assets and liabilities: | ||
Accounts receivables, net | (1,605) | 3,663 |
Prepaid expenses and other current assets | (112) | (1,348) |
Accounts payable | (3,692) | 1,073 |
Accrued liabilities | 6,165 | (6,384) |
Accrued compensation and employee benefits | (638) | 6,322 |
Deferred revenue | 2,882 | (1,434) |
Other long-term liabilities | 117 | 0 |
Net cash provided by (used in) operating activities | (14,005) | (12,157) |
Cash Flows from Investing Activities | ||
Cash acquired upon consolidation of affiliate | 0 | 13,065 |
Cash paid for asset acquisition or business combination | (14,000) | 0 |
Purchases of investments | 0 | (2,023) |
Investments in and advances to affiliates | (3,000) | 0 |
Maturities and sales of investments | 4,099 | 4,000 |
Purchases of property and equipment | (11,116) | (3,907) |
Change in restricted cash | 1,194 | 0 |
Net cash provided by (used in) investing activities | (22,823) | 11,135 |
Cash Flows from Financing Activities | ||
Proceeds from initial public offering, net of offering costs | 0 | 209,087 |
Proceeds from stock option exercises | 1,244 | 92 |
Taxes withheld for vesting of restricted stock units | (365) | 0 |
Net cash provided by (used in) financing activities | 879 | 209,179 |
Net increase (decrease) in cash and cash equivalents | (35,949) | 208,157 |
Cash and cash equivalents as of beginning-of-period | 145,726 | 0 |
Cash and cash equivalents as of end-of-period | 109,777 | 208,157 |
Supplemental Disclosure of Non-cash Investing and Financing Activities | ||
Non-cash contribution of common stock to Evolent Health LLC prior to the Offering Reorganization | 0 | 21,810 |
Unsettled investment purchases | 0 | 22,048 |
Accrued property and equipment purchases | 374 | 53 |
Stock issued in connection with business combinations | 10,534 | 0 |
Effects of the Offering Reorganization: | ||
Reclassification of deferred offering costs acquired to additional paid-in capital | 0 | 3,154 |
Conversion of existing equity as part of the Offering Reorganization | 0 | 39,014 |
Assumption of non-controlling interest as a result of merger with TPG affiliate | 0 | 34,875 |
Effects of the Secondary Offering | ||
Decrease in non-controlling interests as a result of the Exchange | 0 | 39,014 |
Class B Common Stock | ||
Effects of the Offering Reorganization: | ||
Conversion of existing equity as part of the Offering Reorganization | 28,220 | 0 |
Issuance of Class B common stock | 0 | 196 |
Effects of the Secondary Offering | ||
Decrease in non-controlling interests as a result of the Exchange | $ 28,220 | $ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) AND REDEEMABLE PREFERRED STOCK - USD ($) shares in Thousands, $ in Thousands | Total | Class A Common Stock | Class B Common Stock | Preferred StockSeries A Redeemable Preferred Stock | Preferred StockSeries B Redeemable Preferred Stock | Preferred StockSeries B-1 Redeemable Preferred Stock | Preferred StockSeries A Preferred Stock | Common StockClass A Common Stock | Common StockClass B Common Stock | Additional Paid-in Capital | Additional Paid-in CapitalClass A Common Stock | Additional Paid-in CapitalClass B Common Stock | Retained Earnings (Accumulated Deficit) | Non-controlling Interests | Non-controlling InterestsClass B Common Stock |
Non-controlling interests | $ 0 | ||||||||||||||
Beginning balance, shares at Dec. 31, 2014 | 7,900 | 6,468 | 360 | ||||||||||||
Beginning balance, amount at Dec. 31, 2014 | $ 12,847 | $ 24,833 | $ 1,593 | ||||||||||||
Beginning balance, shares at Dec. 31, 2014 | 7,400 | 4,048 | 0 | ||||||||||||
Beginning balance, amount at Dec. 31, 2014 | $ (2,070) | $ 2 | $ 1 | $ 0 | $ 23,733 | $ (25,806) | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Non-cash issuance of common stock to Evolent Health, LLC | 21,810 | ||||||||||||||
Net income (loss) subsequent to Offering Reorganization, portion attributable to noncontrolling interest | (8,532) | ||||||||||||||
Net income (loss) attributable to Evolent Health, Inc. | 336,613 | ||||||||||||||
Net income (loss), including portion attributable to noncontrolling interest | 328,081 | ||||||||||||||
Beginning balance, shares at Dec. 31, 2014 | 7,900 | 6,468 | 360 | ||||||||||||
Beginning balance, amount at Dec. 31, 2014 | $ 12,847 | $ 24,833 | $ 1,593 | ||||||||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | |||||||||||||||
Conversion of existing equity, shares | (7,900) | (6,468) | (360) | ||||||||||||
Conversion of existing equity, amount | $ (12,847) | $ (24,833) | $ (1,593) | ||||||||||||
Ending balance, shares at Dec. 31, 2015 | 0 | 0 | 0 | ||||||||||||
Ending balance, amount at Dec. 31, 2015 | $ 0 | $ 0 | $ 0 | ||||||||||||
Beginning balance, shares at Dec. 31, 2014 | 7,400 | 4,048 | 0 | ||||||||||||
Beginning balance, amount at Dec. 31, 2014 | (2,070) | $ 2 | $ 1 | $ 0 | 23,733 | (25,806) | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Non-cash issuance of common stock to Evolent Health, LLC | 21,810 | 21,810 | |||||||||||||
Net income (loss) prior to Offering Reorganization | (28,165) | (28,165) | |||||||||||||
Conversion of existing equity, shares | (7,400) | 22,128 | |||||||||||||
Conversion of existing equity, amount | 39,273 | $ (2) | $ 261 | 39,014 | |||||||||||
Issuance of common stock, shares | 13,225 | 19,576 | |||||||||||||
Issuance of common stock, amount | $ 205,933 | $ 332,793 | $ 132 | $ 196 | $ 205,801 | $ (196) | $ 332,793 | ||||||||
Issuance of common stock for business combinations, shares | 2,051 | (2,051) | |||||||||||||
Issuance of common stock for business combinations, value | 0 | $ 21 | $ (21) | 34,875 | (34,875) | ||||||||||
Tax effect of the Offering Reorganization | 2,144 | 2,144 | |||||||||||||
Stock-based compensation subsequent to the Offering Reorganization | 14,730 | 14,730 | |||||||||||||
Exercise of stock options, shares | 39 | ||||||||||||||
Exercise of stock options, amount | 152 | 152 | |||||||||||||
Net income (loss) subsequent to Offering Reorganization, including portion attributable to noncontrolling interest | 360,659 | ||||||||||||||
Net income (loss) subsequent to Offering Reorganization, portion attributable to noncontrolling interest | (12,680) | ||||||||||||||
Net income (loss) subsequent to Offering Reorganization | 347,979 | ||||||||||||||
Ending balance, shares at Dec. 31, 2015 | 0 | 41,491 | 17,525 | ||||||||||||
Ending balance, amount at Dec. 31, 2015 | 934,579 | $ 0 | $ 415 | $ 175 | 342,063 | 306,688 | |||||||||
Non-controlling interests | 294,494 | ||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Net income (loss) subsequent to Offering Reorganization, portion attributable to noncontrolling interest | (5,108) | ||||||||||||||
Net income (loss) attributable to Evolent Health, Inc. | (11,980) | ||||||||||||||
Net income (loss), including portion attributable to noncontrolling interest | (17,088) | ||||||||||||||
Non-controlling interests | 289,386 | ||||||||||||||
Non-controlling interests | 285,238 | 285,238 | |||||||||||||
Beginning balance, shares at Dec. 31, 2015 | 0 | 0 | 0 | ||||||||||||
Beginning balance, amount at Dec. 31, 2015 | $ 0 | $ 0 | $ 0 | ||||||||||||
Ending balance, shares at Sep. 30, 2016 | 0 | 0 | 0 | ||||||||||||
Ending balance, amount at Sep. 30, 2016 | $ 0 | $ 0 | $ 0 | ||||||||||||
Beginning balance, shares at Dec. 31, 2015 | 0 | 41,491 | 17,525 | ||||||||||||
Beginning balance, amount at Dec. 31, 2015 | 934,579 | $ 0 | $ 415 | $ 175 | 342,063 | 306,688 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Non-cash issuance of common stock to Evolent Health, LLC | 0 | ||||||||||||||
Conversion of existing equity, shares | 2,178 | (2,178) | |||||||||||||
Conversion of existing equity, amount | $ 22 | $ (22) | 28,220 | ||||||||||||
Issuance of common stock for business combinations, shares | 1,067 | ||||||||||||||
Issuance of common stock for business combinations, value | 10,534 | $ 11 | 10,523 | ||||||||||||
Stock-based compensation subsequent to the Offering Reorganization | 13,844 | 13,844 | |||||||||||||
Exercise of stock options, shares | 217 | ||||||||||||||
Exercise of stock options, amount | 1,244 | 1,244 | |||||||||||||
Net income (loss) subsequent to Offering Reorganization, portion attributable to noncontrolling interest | (59,250) | (59,250) | |||||||||||||
Cumulative-effect adjustment from adoption of new accounting principle | 0 | 468 | (329) | (139) | |||||||||||
Restricted stock units vested, net of shares withheld for taxes, shares | 76 | ||||||||||||||
Restricted stock units vested, net of shares withheld for taxes, amount | (365) | (365) | |||||||||||||
Tax impact of Class B common stock exchange | 1,606 | 1,606 | |||||||||||||
Net income (loss) attributable to Evolent Health, Inc. | (142,335) | ||||||||||||||
Net income (loss), including portion attributable to noncontrolling interest | (201,585) | ||||||||||||||
Ending balance, shares at Sep. 30, 2016 | 0 | 45,029 | 15,347 | ||||||||||||
Ending balance, amount at Sep. 30, 2016 | 759,857 | $ 0 | $ 448 | $ 153 | 397,603 | 164,024 | |||||||||
Non-controlling interests | 230,416 | ||||||||||||||
Ending balance, shares at Sep. 30, 2016 | 0 | 0 | 0 | ||||||||||||
Ending balance, amount at Sep. 30, 2016 | $ 0 | $ 0 | $ 0 | ||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Conversion of existing equity, amount | (28,220) | ||||||||||||||
Net income (loss) subsequent to Offering Reorganization, portion attributable to noncontrolling interest | (4,567) | ||||||||||||||
Net income (loss) attributable to Evolent Health, Inc. | (11,208) | ||||||||||||||
Net income (loss), including portion attributable to noncontrolling interest | (15,775) | ||||||||||||||
Ending balance, shares at Sep. 30, 2016 | 0 | 45,029 | 15,347 | ||||||||||||
Ending balance, amount at Sep. 30, 2016 | 759,857 | $ 0 | $ 448 | $ 153 | $ 397,603 | $ 164,024 | |||||||||
Non-controlling interests | $ 197,629 | $ 197,629 |
Organization
Organization | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Evolent Health, Inc. was incorporated in December 2014 in the state of Delaware, and is a managed services firm that supports leading health systems and physician organizations in their migration toward value-based care and population health management. The Company’s services include providing our customers, which we refer to as partners, with a population management platform, integrated data and analytics capabilities, pharmacy benefit management (“PBM”) services and comprehensive health plan administration services. Together these services enable health systems to manage patient health in a more cost-effective manner. The Company’s contracts are structured as a combination of advisory fees, monthly member service fees, percentage of plan premiums and shared medical savings arrangements. The Company’s headquarters is located in Arlington, Virginia. Our predecessor, Evolent Health Holdings, Inc. (“Evolent Health Holdings”), merged with and into Evolent Health, Inc. in connection with the Offering Reorganization. As a result, the consolidated financial statements of Evolent Health, Inc. reflect the historical accounting of Evolent Health Holdings. Prior to the organizational transactions noted below, due to certain participating rights granted to our investor, TPG Global, LLC and certain of its affiliates (“TPG”), Evolent Health Holdings did not control Evolent Health LLC, our operating subsidiary company, but was able to exert significant influence and, accordingly, accounted for its investment in Evolent Health LLC using the equity method of accounting through June 3, 2015. Subsequent to the Offering Reorganization (as defined below), initial public offering (“IPO”) and secondary offering described below, as of September 30, 2016 , Evolent Health, Inc. owns 74.6% of Evolent Health LLC, holds 100% of the voting rights, is the sole managing member and, therefore, controls its operations. Accordingly, the financial results of Evolent Health LLC are consolidated in the financial statements of Evolent Health, Inc. subsequent to the Offering Reorganization. Initial Public Offering In June 2015, we completed an IPO of 13.2 million shares of our Class A common stock at a public offering price of $17.00 per share. We received $209.1 million in proceeds, net of underwriting discounts and commissions. Offering expenses incurred were $3.2 million which were recorded as a reduction of proceeds from the offering. We used the net proceeds to purchase newly-issued Class A common units from Evolent Health LLC, our consolidated subsidiary. Evolent Health LLC will use the net proceeds for working capital and other general corporate and strategic purposes. See Note 4 for further details surrounding the IPO and related transactions. Organizational Transactions In connection with the IPO, we completed the following organizational transactions (the “Offering Reorganization”) as further described in Note 4: • We amended and restated our certificate of incorporation to, among other things, authorize two classes of common stock - Class A common stock and Class B exchangeable common stock. Both classes of stock will vote together as a single class. • We acquired, by merger, an affiliate of a member of Evolent Health LLC, for which we issued 2.1 million shares of Class A common stock. • We issued shares of our Class B exchangeable common stock to certain existing members of Evolent Health LLC. Secondary Offering In September 2016, the Company completed a secondary offering of 8.6 million shares of its Class A common stock at a price to the public of $22.50 per share. The shares sold in the offering were sold by certain affiliates of TPG Global, LLC, The Advisory Board Company, UPMC, Ptolemy Capital, LLC (together, the “Investor Stockholders”) and certain management selling stockholders (together with the Investor Stockholders, the “Selling Stockholders”). The Company did not receive any proceeds from the sale of the shares. The shares sold in the offering consisted of 6.4 million existing shares of the Company’s Class A common stock owned and held by the Selling Stockholders and 2.2 million newly-issued shares of the Company’s Class A common stock received by certain Investor Stockholders pursuant to the exercise of an existing exchange right. The newly-issued shares of the Company’s Class A common stock were issued to certain Investor Stockholders in exchange (the “Exchange”) for an equal number of shares of the Company’s Class B common stock (which were subsequently canceled) and an equal number of Evolent Health LLC’s Class B common units (“Class B units”). Class B units received by the Company from relevant Investor Stockholders were simultaneously exchanged for an equivalent number of Class A units of Evolent Health LLC, and Evolent Health LLC canceled the Class B units it received in the Exchange. As a result of the Exchange and Evolent Health LLC’s cancellation of the Class B units, the Company’s economic interest in Evolent Health LLC increased from 71.0% to 74.6% and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. The Company’s economic interest in Evolent Health LLC will increase if further exchanges occur. Since its inception, the Company has incurred losses from operations. As of September 30, 2016 , the Company had cash and cash equivalents of $109.8 million . The Company believes it has sufficient liquidity for the next twelve months as of September 30, 2016 . |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation In our opinion, the accompanying unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state our financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2015 , has been derived from audited financial statements as of that date. The interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain footnote disclosure normally included in financial statements prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) has been omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission (“SEC”). The disclosures provided herein should be read in conjunction with the audited financial statements and notes thereto included in our 2015 Form 10-K. As discussed in Note 4, amounts for the nine months ended September 30, 2015 , presented in our unaudited consolidated financial statements and notes to unaudited consolidated financial statements for that period, include the historical operations of our predecessor entity, Evolent Health Holdings, which did not consolidate the operations of Evolent Health LLC for the entire nine month period. The amounts as of and for the three and nine months ended September 30, 2016 , reflect our operations, which consolidate the operations of Evolent Health LLC. All inter-company accounts and transactions have been eliminated in consolidation. Summary of Significant Accounting Policies Certain GAAP policies, which significantly affect the determination of our financial position, results of operations and cash flows, are summarized in our 2015 Form 10-K unless otherwise updated below. Restricted Cash Restricted cash is carried at cost, which approximates fair value, and includes cash used to collateralize various contractual obligations as follows (in thousands): As of As of September 30, December 31, 2016 2015 Letters of credit for facility leases $ 2,516 $ 3,710 Pharmacy benefit management services 3,902 2,479 Other 152 96 Total restricted cash 6,570 6,285 Non-current restricted cash 1,580 1,582 Current restricted cash $ 4,990 $ 4,703 Change in Accounting Principle In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company elected to early adopt ASU 2016-09 during the second quarter of 2016. ASU 2016-09 requires that certain amendments resulting from the adoption of the new pronouncement be applied using a modified-retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the period in which the guidance is adopted. Thus, the Company decreased beginning retained earnings by approximately ($0.5) million on January 1, 2016, for amendments related to an accounting policy election to recognize share-based award forfeitures as they occur rather than applying an estimated forfeiture rate. For the three months ended March 31, 2016, our net loss decreased by $0.1 million due to a reduction in stock compensation expense as a result of accounting for forfeitures as they occur, instead of using an estimated forfeiture rate. Therefore, the net impact to retained earnings as of March 31, 2016, was approximately ($0.4) million . The following table summarizes the impact of the change in accounting principle to the Company’s consolidated statement of operations for the three months ended March 31, 2016 (in thousands): As Reported Adjustments As Adjusted Cost of revenue (exclusive of depreciation and amortization expenses) $ 28,562 $ 48 $ 28,610 Selling, general and administrative expenses 32,095 (149 ) 31,946 Total operating expenses 224,628 (101 ) 224,527 Operating income (loss) (175,179 ) 101 (175,078 ) Income (loss) before income taxes and non-controlling interests (174,900 ) 101 (174,799 ) Net income (loss) (173,912 ) 101 (173,811 ) Net income (loss) attributable to non-controlling interests (51,100 ) 29 (51,071 ) Net income (loss) attributable to Evolent Health, Inc. (122,812 ) 72 (122,740 ) The following table summarizes the impact of the change in accounting principle to the Company’s consolidated balance sheets, including the net amount charged to retained earnings as of March 31, 2016 (in thousands): As Reported Adjustments (1) As Adjusted Additional paid-in capital $ 357,047 $ 367 $ 357,414 Retained earnings (accumulated deficit) 183,876 (257 ) 183,619 Total shareholders’ equity (deficit) attributable to Evolent Health, Inc. 541,524 (257 ) 541,267 Non-controlling interests 234,138 (110 ) 234,028 (1) The adjustments are a result of a cumulative-effect adjustment to beginning retained earnings of $(0.5) million , partially offset by an adjustment of $0.1 million to net income (loss) for the three months ended March 31, 2016, related to the policy election to recognize share-based award forfeitures as they occur, as opposed to applying an estimated forfeiture rate. Approximately $(0.3) million of the net adjustment was allocated to Evolent Health, Inc. and approximately $(0.1) million of the net adjustment was allocated to non-controlling interests. In addition, the adoption of ASU 2016-09 changed how the Company recognizes excess tax benefits (“windfalls”) or deficiencies (“shortfalls”) related to share-based compensation. Prior to the adoption of ASU 2016-09, these windfalls and shortfalls were credited or charged, respectively, to additional paid-in capital in the Company’s consolidated balance sheets. Under the revised standard, these windfalls and shortfalls are recognized prospectively as discrete tax benefit or discrete tax expense, respectively, in the Company’s consolidated statement of operations. For the nine months ended September 30, 2016 , the Company recognized a discrete tax benefit related to net windfall tax benefits from share-based compensation, which increased the net operating loss (“NOL”) deferred tax asset and our valuation allowance. |
Recently Issued Accounting Stan
Recently Issued Accounting Standards | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Recently Issued Accounting Standards | Recently Issued Accounting Standards Adoption of New Accounting Standards In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The update simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. This standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted for any interim or annual period. The Company elected to early adopt this ASU during the second quarter of 2016, as described in Note 2 above. Future Adoption of New Accounting Standards In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments . This ASU provides updated guidance on eight specific cash flow issues to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We intend to adopt the requirements of this standard effective January 1, 2018 and are currently evaluating the impact of the adoption on our statement of cash flows. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments . With respect to assets measured at amortized cost, such as held-to-maturity assets, the update requires presentation of the amortized cost net of a credit loss allowance. The update eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments. The credit loss estimate can now reflect an entity’s current estimate of all future expected credit losses as opposed to the previous standard, when an entity only considered past events and current conditions. With respect to available for sale debt securities, the update requires that credit losses be presented as an allowance rather than as a write-down. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We intend to adopt the requirements of this standard effective January 1, 2020 and are currently evaluating the impact of the adoption on our financial condition and results of operations. In February 2016, the FASB issued ASU 2016-02, Leases , in order to establish the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This update introduces a new standard on accounting for leases, including a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related to evaluating when profit can be recognized). The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. We intend to adopt the requirements of this standard effective January 1, 2019, and are currently evaluating the impact of the adoption on our financial condition and results of operations. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , in order to clarify the principles of recognizing revenue. This standard establishes the core principle of recognizing revenue to depict the transfer of promised goods or services in an amount that reflects the consideration the entity expects to be entitled in exchange for those goods or services. The FASB defines a five-step process that systematically identifies the various components of the revenue recognition process, culminating with the recognition of revenue upon satisfaction of an entity’s performance obligation. By completing all five steps of the process, the core principles of revenue recognition will be achieved. In March 2016, the FASB issued an update to the new revenue standard (ASU 2014-09) in the form of ASU 2016-08, which amended the principal-versus-agent implementation guidance and illustrations in the new revenue guidance. The update clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued another update to the new revenue standard in the form of ASU 2016-10, which amended the guidance on identifying performance obligations and the implementation guidance on licensing. These ASUs were followed by two further updates issued during May 2016, including ASU 2016-11, which rescinds certain SEC guidance, such as the adoption of ASUs 2014-09 and 2014-16, including accounting for consideration given by a vendor to a customer, and ASU 2016-12, which is intended to clarify the objective of the collectability criterion while identifying the contract(s) with a customer. The new revenue standard (including updates) will be effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted only as of annual reporting periods beginning after December 15, 2016. We intend to adopt the requirements of this standard effective January 1, 2018, and, while we are evaluating the impact to our financial condition and results of operations, we expect the adoption of this ASU to require the inclusion of additional disclosures surrounding the nature and timing of our revenue. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . This standard requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards by requiring an assessment for a period of one year after the date that the financial statements are issued. Further, based on certain conditions and circumstances, additional disclosures may be required. This standard is effective beginning with the first annual period ending after December 15, 2016, and for all annual and interim periods thereafter. Early application is permitted. The Company does not expect this standard to have an impact on the Company’s financial statements or related disclosures. We have evaluated all other issued and unadopted ASUs and believe the adoption of these standards will not have a material impact on our results of operations, financial position, or cash flows. |
Acquisitions and Business Combi
Acquisitions and Business Combinations | 9 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Acquisitions and Business Combinations | Acquisitions and Business Combinations Business Combinations Passport On February 1, 2016, the Company entered into a strategic alliance with University Health Care d/b/a Passport Health Plan (“Passport”), a nonprofit community-based and provider-sponsored health plan administering Kentucky Medicaid and federal Medicare Advantage benefits to over 280,000 Kentucky Medicaid and Medicare Advantage beneficiaries. As part of the transaction, we issued 1.1 million Class A common shares to acquire capabilities and assets from Passport to enable us to build out a Medicaid Center of Excellence based in Louisville, Kentucky. Additional equity consideration of up to $10.0 million may be earned by Passport should we obtain new third party Medicaid businesses in future periods. This transaction also includes a 10 -year arrangement under which we will provide various health plan management and managed care services to Passport. The Company has accounted for the transactions with Passport as a business combination using purchase accounting. The fair value of the total consideration transferred in connection with the close of the transaction was $18.2 million , of which the Class A common shares were valued at $10.5 million and the contingent equity consideration was valued at $7.8 million . The contingent consideration is recorded within “Other long-term liabilities” on our consolidated balance sheets. The fair value of the shares issued was determined based on the closing price of the Company’s Class A common stock on the NYSE as of February 1, 2016, and the quantity of shares issued was determined under a pricing collar set forth in the purchase agreement. The fair value of the contingent equity consideration was estimated based on the real options approach, a form of the income approach, which estimated the probability of the Company achieving future revenues under the agreement. Key assumptions include the discount rate and the probability-adjusted recurring revenue forecast. A further discussion of the fair value measurement of the contingent consideration is provided in Note 14. The purchase price was allocated to the assets acquired based on their estimated fair values as of February 1, 2016, as follows (in thousands): Purchase price $ 18,200 Less amount allocated to prepaid asset 6,900 Goodwill $ 11,300 The prepaid asset is related to an acquired facility license agreement as the Company was provided with leased facilities which house the acquired Passport employees at no future cost. The fair value of the acquired facility license agreement was determined by comparing the current market value of similar lease spaces to the facilities occupied by the acquired Passport personnel to obtain a market value of the occupied space, with the present value of the determined market value of the occupied space classified as the acquired facility license agreement prepaid asset. The goodwill is attributable partially to the acquired assembled workforce. The transaction was a taxable event for the Company and the amount of goodwill determined for tax purposes is deductible upon the beginning of the amortization period for tax purposes. Results for the three and nine months ended September 30, 2016 , include revenues and related expenses from our services agreement with Passport and amortization of the acquired intangibles for the period February 1, 2016, through September 30, 2016 . The consolidated statements of operations include $15.0 million and $31.1 million of revenues and $(3.0) million and $(4.4) million of net income (loss) attributable to Passport for the three and nine months ended September 30, 2016 , respectively. The Offering Reorganization Evolent Health, Inc. was incorporated as a Delaware corporation on December 12, 2014, for the purpose of pursuing the Company’s IPO. Immediately prior to the completion of the IPO in June 2015, we amended and restated our certificate of incorporation to, among other things, authorize two classes of common stock, Class A common stock and Class B common stock. Each share of our Class A common stock and Class B common stock entitles its holder to one vote on all matters to be voted on by stockholders, and holders of Class A common stock and holders of Class B common stock vote together as a single class on all matters presented to stockholders for their vote or approval (except as otherwise required by law). Pursuant to the Offering Reorganization: • Evolent Health Holdings merged with and into Evolent Health, Inc. and the surviving corporation of the merger was Evolent Health, Inc.; • An affiliate of TPG merged with and into Evolent Health, Inc. and the surviving corporation of the merger was Evolent Health, Inc.; • Each of the then-existing stockholders of Evolent Health Holdings received four shares of our Class A common stock and the right to certain payments under the Tax Receivables Agreement (“TRA”) in exchange for each share of Class A common stock held in Evolent Health Holdings; • TPG received 2.1 million shares of Class A common stock of Evolent Health, Inc., together with the right to certain payments under the TRA in exchange for 100% of the equity that it held in its affiliate that was merged with Evolent Health, Inc.; and • We issued shares of our Class B common stock and the right to certain payments under the TRA to The Advisory Board Company (“The Advisory Board”), TPG and another investor, each of which was a member of Evolent Health LLC prior to the Offering Reorganization. The existing shareholders of Evolent Health Holdings held the same economic and voting interest before and after the merger of Evolent Health Holdings with and into Evolent Health, Inc., which represents a transaction among entities with a high degree of common ownership. As such, the merger is viewed as non-substantive and the consolidated financial statements of Evolent Health, Inc. reflect the historical accounting of Evolent Health Holdings except that the legal capital reflects the capital of Evolent Health, Inc. In addition, in connection with the Offering Reorganization, Evolent Health LLC amended and restated its operating agreement to establish two classes of equity (voting Class A common units and non-voting Class B common units); after the amendment, the pre-reorganization members of Evolent Health LLC (other than Evolent Health, Inc.) hold 100% of the Class B common units and Evolent Health, Inc. holds the Class A voting common units. Evolent Health LLC’s Class B common units can be exchanged (together with a corresponding number of shares of our Class B common stock) for one share of our Class A common stock. As of September 30, 2016 , the Company owns 74.6% of the economic interests and 100% of the voting rights in Evolent Health LLC. Our operations will continue to be conducted through Evolent Health LLC and subsequent to the Offering Reorganization the financial results of Evolent Health LLC are consolidated in the financial statements of Evolent Health, Inc. Evolent Health, Inc. is a holding company whose principal asset is all of the Class A common units it holds in Evolent Health LLC, and its only business is to act as sole managing member of Evolent Health LLC. Pro Forma Financial Information (Unaudited) The unaudited pro forma statement of operations data presented below gives effect to (1) the Passport transaction as if it had occurred on January 1, 2015, and (2) the consolidation of Evolent Health LLC as if it had occurred on January 1, 2014. The following pro forma information includes adjustments to: • Remove transaction costs related to the Passport transaction of $0.3 million recorded during the nine months ended September 30, 2016 , and reclassify said amounts to the nine months ended September 30, 2015 ; • Remove transaction costs related to the Passport transaction of $0.2 million recorded in the fourth quarter of 2015 and reclassify said amounts to the nine months ended September 30, 2015 ; • Remove the gain recognized upon the consolidation of the previously held equity method investment in 2015 and reclassify said amount to 2014; • Remove transaction costs related to the Offering Reorganization of $1.2 million in 2015 and reclassify said amount to 2014; • Record amortization expenses related to intangible assets beginning January 1, 2014, for intangibles related to the Offering Reorganization; • Record rent expense related to Passport prepaid lease beginning January 1, 2015; and • Record adjustments of income taxes associated with these pro forma adjustments. This pro forma data is presented for informational purposes only and does not purport to be indicative of the results of future operations or of the results that would have occurred had the transactions described above occurred in the specified prior periods. The pro forma adjustments were based on available information and assumptions that the Company believes are reasonable to reflect the impact of these transactions on the Company’s historical financial information on a pro forma basis (in thousands). For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Revenue $ 60,210 $ 55,363 $ 169,370 $ 145,189 Net income (loss) (15,717 ) (12,015 ) (198,198 ) (57,637 ) Net income (loss) attributable to non-controlling interests (4,567 ) (3,505 ) (57,984 ) (21,494 ) Net income (loss) attributable to Evolent Health, Inc. (11,150 ) (8,510 ) (140,214 ) (36,143 ) Net income (loss) available to common shareholders: Basic (0.26 ) (0.20 ) (3.28 ) (1.75 ) Diluted (0.26 ) (0.20 ) (3.28 ) (1.75 ) Asset Acquisitions Vestica On March 1, 2016, the Company entered into an Asset Purchase Agreement between Vestica Healthcare, LLC (“Vestica”) and Evolent Health, LLC. As part of the transaction, we paid $7.5 million to acquire certain assets from Vestica to further align our interests with one of our existing partners. Vestica can earn an additional $4.0 million in consideration (the “Vestica earn-out”), which is being held in escrow, based on certain future events. This transaction also includes an arrangement under which Vestica will continue to perform certain services on our behalf related to the acquired assets. We accounted for the transaction as an asset acquisition where the assets acquired were measured based on the amount of cash paid to Vestica as well as transaction costs incurred as the fair value of the assets given was more readily determinable than the fair value of the assets received. We classified and designated identifiable assets acquired and we assessed and determined the useful lives of the acquired intangible assets subject to amortization. As a result, we recorded a $7.5 million customer relationship intangible asset with a useful life of thirteen years. The transaction was a taxable event. |
Investments
Investments | 9 Months Ended |
Sep. 30, 2016 | |
Investments [Abstract] | |
Investments | Investments The amortized cost, gross unrealized gains and losses, and fair value of our investments as measured using Level 2 inputs (in thousands) were as follows: As of September 30, 2016 As of December 31, 2015 Gross Gross Gross Gross Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair Costs Gains Losses Value Costs Gains Losses Value U.S. Treasury bills $ 28,166 $ 40 $ 11 $ 28,195 $ 28,306 $ 115 $ 181 $ 28,240 Corporate bonds 21,527 95 8 21,614 25,757 110 80 25,787 Total investments $ 49,693 $ 135 $ 19 $ 49,809 $ 54,063 $ 225 $ 261 $ 54,027 The amortized cost and fair value of our investments by contractual maturities (in thousands) were as follows: As of As of September 30, December 31, 2016 2016 Amortized Fair Amortized Fair Costs Value Costs Value Due in one year or less $ 49,693 $ 49,809 $ 9,445 $ 9,451 Due after one year through five years — — 44,618 44,576 Total $ 49,693 $ 49,809 $ 54,063 $ 54,027 |
Property and Equipment, Net
Property and Equipment, Net | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | Property and Equipment, Net The following summarizes our property and equipment (in thousands): As of As of September 30, December 31, 2016 2015 Computer hardware $ 266 $ 232 Furniture and equipment 1,609 1,604 Internal-use software development costs 17,065 6,363 Leasehold improvements 5,830 5,830 Total property and equipment 24,770 14,029 Accumulated depreciation and amortization (3,647 ) (1,233 ) Total property and equipment, net $ 21,123 $ 12,796 We had no property and equipment prior to the Offering Reorganization. The Company capitalized $3.6 million and $10.7 million of internal-use software development costs for the three and nine months ended September 30, 2016 , respectively, and $2.8 million and $3.8 million of internal-use software development costs for the three and nine months ended September 30, 2015 . The net book value of capitalized internal-use software development costs was $16.1 million and $6.3 million as of September 30, 2016 , and December 31, 2015 , respectively. Depreciation expense related to property and equipment was $0.9 million and $2.4 million for the three and nine months ended September 30, 2016 , respectively, and $0.5 million and $0.7 million for the three and nine months ended September 30, 2015 , of which amortization expense related to capitalized internal-use software development costs was $0.4 million and $0.9 million for the three and nine months ended September 30, 2016 , respectively, and less than $0.1 million for the three and nine months ended September 30, 2015 . |
Goodwill and Intangible Assets,
Goodwill and Intangible Assets, Net | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets, Net | Goodwill and Intangible Assets, Net Goodwill Goodwill has an estimated indefinite life and is not amortized; rather it is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In interim periods between annual goodwill reviews, we also evaluate qualitative factors that could cause us to believe our estimated fair value of our single reporting unit may be lower than the carrying value and trigger a Step 1 test including, but not limited to (i) macroeconomic conditions, (ii) industry and market considerations, (iii) our overall financial performance including an analysis of our current and projected cash flows, revenue and earnings, (iv) a sustained decrease in share price and (v) other relevant entity-specific events including changes in strategy, partners, or litigation. As a result of the Offering Reorganization, we revalued our consolidated balance sheet to the market value of our IPO share price of $17.00 and recorded $608.9 million in goodwill on our consolidated balance sheets. Subsequent to our 2015 annual impairment testing in the fourth quarter of 2015, our common stock price declined significantly, reaching our historic low in the first quarter of 2016. During the three months ended March 31, 2016, our common stock traded between $8.48 and $12.32 , or an average common stock price of $10.33 compared to an average common stock price of $19.51 and $14.73 during the three month periods ended September 30, 2015, and December 31, 2015, respectively. A sustained decline in our common stock price and the resulting impact on our market capitalization is one of several qualitative factors we consider each quarter when evaluating whether events or changes in circumstances indicate it is more likely than not that a potential goodwill impairment exists. We concluded that the further decline in common stock price observed during the first quarter of 2016 did represent a sustained decline and that triggering events occurred during the period requiring an interim goodwill impairment test as of March 31, 2016. As such, we performed a Step 1 impairment test of our goodwill as of March 31, 2016. Step 1 Results To determine the implied fair value for our single reporting unit, we used both a market multiple valuation approach (“market approach”) and a discounted cash flow valuation approach (“income approach”). In determining the estimated fair value, we considered the level of our Class A common stock price and assumptions that we believed market participants would make in valuing our reporting unit, including a control premium, as well as discounted cash flow calculations of management’s estimates of future financial performance and management’s long-term plans. This analysis also required us to make judgments about revenues, expenses, fixed asset and working capital requirements, the timing of exchanges of our Class B common shares, capital market assumptions and discount rates. In our March 31, 2016, Step 1 test, our most sensitive assumption for purposes of the market approach was our estimate of the control premium, and the most sensitive assumption related to the income approach, other than our cash flows, was the discount rate. As of March 31, 2016, our single reporting unit failed the Step 1 analysis as we determined that its implied fair value was less than its carrying value based on the weighting of the fair values determined under both the market and income approaches. As fair value was less than carrying value, we performed a Step 2 test to determine the implied fair value of our goodwill. Step 2 Results In our March 31, 2016, Step 2 test, the fair value of all assets and liabilities were estimated, including our tangible assets (corporate trade name, customer relationships and technology) for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of goodwill was then compared to the carrying amount of goodwill resulting in an impairment charge of $160.6 million on our consolidated statements of operations. The impairment was driven primarily by the sustained decline in our share price as our estimates of our future cash flows and the control premium have remained consistent, combined with an increase in the discount rate period over period. As noted above, our determination of fair value used a weighting of the fair values determined under both the market and income approaches, with the market approach driving the significant reduction in overall firm value and related impairment of goodwill. As part of the Passport transaction (refer to Note 4 for further information), we recorded an additional $11.3 million in goodwill on our consolidated balance sheets. The following table summarizes the changes in the carrying amount of goodwill (in thousands): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Balance as of beginning-of-period $ 459,703 $ 608,903 $ 608,903 $ — Goodwill Acquired (1) — — 11,400 608,903 Goodwill Impairment — — (160,600 ) — Balance as of end-of-period $ 459,703 $ 608,903 $ 459,703 $ 608,903 (1) Goodwill acquired as a result of the Offering Reorganization and the Passport transaction. See Note 4 for further discussion regarding both the Offering Reorganization and the Passport transaction. Intangible Assets, Net Details of our intangible assets (in thousands) are presented below: As of September 30, 2016 Weighted- Average Gross Net Remaining Carrying Accumulated Carrying Useful Life Amount Amortization Value Corporate trade name 18.7 $ 19,000 $ 1,266 $ 17,734 Customer relationships 23.0 127,500 6,733 120,767 Technology 5.7 30,000 5,712 24,288 Total $ 176,500 $ 13,711 $ 162,789 As of December 31, 2015 Weighted- Average Gross Net Remaining Carrying Accumulated Carrying Useful Life Amount Amortization Value Corporate trade name 19.4 $ 19,000 $ 554 $ 18,446 Customer relationships 24.4 120,000 2,797 117,203 Technology 6.4 30,000 2,497 27,503 Total $ 169,000 $ 5,848 $ 163,152 We had no intangible assets prior to the Offering Reorganization. We recorded additional customer relationship intangible assets of $7.5 million in relation to the closing of the Vestica transaction during the first quarter of 2016. Amortization expense related to intangible assets was $2.7 million and $7.9 million for the three and nine months ended September 30, 2016 , respectively, and $2.5 million and $3.3 million for the three and nine months ended September 30, 2015 . |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies UPMC Reseller Agreement The Company and the University of Pittsburgh Medical Center (“UPMC”) are parties to a Reseller, Services and Non-Competition Agreement, dated August 31, 2011 (the “Original UPMC Reseller Agreement”), which was amended and restated by the parties on June 27, 2013 (as amended through the date hereof, the “UPMC Reseller Agreement”). Under the terms of the UPMC Reseller Agreement, UPMC has appointed the Company as a non-exclusive reseller of certain services, subject to certain conditions and limitations specified in the UPMC Reseller Agreement. In consideration for the Company’s obligations under the UPMC Reseller Agreement and subject to certain conditions described therein, UPMC has agreed not to sell certain products and services directly to the Company’s customers and top prospects. The Advisory Board Company Reseller Agreement The Company and The Advisory Board are parties to a Services, Reseller, and Non-Competition Agreement, dated August 31, 2011 (the “Original Advisory Board Reseller Agreement”), which was amended and restated by the parties on June 27, 2013, and May 1, 2015 (as so amended, the “Advisory Board Company Reseller Agreement”). Under the terms of the Advisory Board Company Reseller Agreement, The Advisory Board provides certain services to the Company on an as-requested basis. In addition, The Advisory Board has a right of first offer to provide certain specified services during the term of the Agreement and has the right to collect certain fees for specified referrals. Contingencies Tax Receivables Agreement In connection with the Offering Reorganization, the Company entered into the TRA with certain of its investors, which provides for the payment by the Company to these investors of 85% of the amount of the tax benefits, if any, that the Company is deemed to realize as a result of increases in our tax basis related to exchanges of Class B common units as well as tax benefits attributable to the future utilization of pre-IPO NOLs. These payment obligations are obligations of the Company. For purposes of the TRA, the benefit deemed realized by the Company will be computed by comparing its actual income tax liability to the amount of such taxes that the Company would have been required to pay had there been no increase to the tax basis of the assets of the Company as a result of the exchanges or had the Company had no NOL carryforward balance. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including: • The timing of the exchanges and the price of the Class A shares at the time of the transaction, triggering a tax basis increase in the Company’s asset and a corresponding benefit to be realized under the TRA; and • The amount and timing of our taxable income - the Company will be required to pay 85% of the tax savings as and when realized, if any. If the Company does not have taxable income, it will not be required to make payments under the TRA for that taxable year because no tax savings were actually realized. Due to the items noted above, and the fact that the Company is in a full valuation allowance position such that the deferred tax assets related to the Company’s historical pre-IPO losses and tax basis increase benefit from exchanges have not been realized, the Company has not recorded a liability pursuant to the TRA. Litigation Matters We are engaged from time to time in certain legal disputes arising in the ordinary course of business, including employment claims. When the likelihood of a loss contingency becomes probable and the amount of the loss can be reasonably estimated, we accrue a liability for the loss contingency. We continue to review accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained, and our views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. We had no material accruals as of September 30, 2016 , and December 31, 2015 . Commitments Lease Commitments The Company has entered into lease agreements for its office location in Arlington, Virginia. In connection with these lease agreements, the Company is required to maintain a $2.5 million letter of credit, which declines annually throughout the term of the lease. As of September 30, 2016 , the restricted funds held in connection with the lease were $2.5 million . Total rental expense on operating leases was $1.1 million and $3.4 million for the three and nine months ended September 30, 2016 , respectively, and $0.9 million and $1.3 million for the three and nine months ended September 30, 2015 . Indemnifications The Company’s customer agreements generally include a provision by which the Company agrees to defend its partners against third party claims (a) for death, bodily injury, or damage to personal property caused by Company negligence or willful misconduct, (b) by former or current Company employees arising from such managed service agreements, (c) for intellectual property infringement under specified conditions and (d) for Company violation of applicable laws, and to indemnify them against any damages and costs awarded in connection with such claims. To date, the Company has not incurred any material costs as a result of such indemnities and has not accrued any liabilities related to such obligations in the accompanying financial statements. Registration rights agreement We entered into a registration rights agreement with The Advisory Board, UPMC, TPG and another investor to register for sale under the Securities Act of 1933, as amended (the “Securities Act”), shares of our Class A common stock, including those delivered in exchange for Class B common stock and Class B common units in the circumstances described above. Subject to certain conditions and limitations, this agreement provides these investors with certain demand, piggyback and shelf registration rights. The registration rights granted under the registration rights agreement will terminate upon the date the holders of shares that are a party thereto no longer hold any such shares that are entitled to registration rights. Pursuant to our contractual obligations under this agreement, we filed a registration statement on Form S-3 with the SEC on July 28, 2016, which was declared effective on August 12, 2016. Pursuant to certain terms of the registration rights agreement, the Investor Stockholders sold 8.6 million shares of the Company’s Class A common stock in a secondary offering in September 2016. See Note 1 for further discussion of our secondary offering. Pursuant to the terms of the registration rights agreement, we paid $2.1 million in expenses related to the secondary offering for the three months ended September 30, 2016 . We will continue to pay all expenses relating to any demand, piggyback or shelf registration, other than underwriting discounts and commissions and any transfer taxes, subject to specified conditions and limitations. The registration rights agreement includes customary indemnification provisions, including indemnification of the participating holders of shares of Class A common stock and their directors, officers and employees by us for any losses, claims, damages or liabilities in respect thereof and expenses to which such holders may become subject under the Securities Act, state law or otherwise. Credit and Concentration Risk The Company is subject to significant concentrations of credit risk related to cash and cash equivalents, investments and accounts receivable. The Company’s cash and cash equivalents and investments are held at financial institutions that management believes to be of high credit quality. While the Company maintains its cash and cash equivalents and investments with financial institutions with high credit ratings, it often maintains these deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses on cash and cash equivalents or investments to date. The following table summarizes those partners who represented at least 10% of our revenue for the periods presented: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Customer A 24.9 % * 18.7 % * Customer B 15.3 % 17.1 % 16.5 % 17.1 % Customer C 14.3 % 13.6 % 14.7 % 13.1 % Customer D * 12.7 % * 12.3 % Customer E * 10.6 % * 10.5 % Customer F * 15.7 % * 15.8 % Customer G * 14.3 % * 14.6 % * Represents less than 10.0% of the respective balance The following table summarizes those partners who represented at least 10% of our trade accounts receivable for the periods presented: As of As of September 30, December 31, 2016 2015 Customer A * * Customer B 14.5 % 12.9 % Customer C * * Customer D 33.2 % 28.1 % Customer E 11.2 % 11.4 % Customer F 10.5 % 23.2 % * Represents less than 10.0% of the respective balance The Company is subject to significant concentration risk as approximately 33% of our cash and cash equivalents are held in a single money market fund. As of September 30, 2016 , $35.8 million of cash and cash equivalents were held in a money market fund. |
Earnings (Loss) Per Common Shar
Earnings (Loss) Per Common Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Common Share | Earnings (Loss) Per Common Share The following table sets forth the computation of basic and diluted earnings per share available for common stockholders (in thousands, except per share data): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Net income (loss) $ (15,775 ) $ (17,088 ) $ (201,585 ) $ 328,081 Less: Net income (loss) attributable to non-controlling interests (4,567 ) (5,108 ) (59,250 ) (8,532 ) Undeclared cumulative preferred dividends — — — 2,184 Net income (loss) available for common shareholders - Basic (11,208 ) (11,980 ) (142,335 ) 334,429 Add: Net income (loss) attributable to non-controlling interests — — — (8,532 ) Undeclared cumulative preferred dividends converted during the period — — — 2,184 Net income (loss) available for common shareholders - Diluted (1) (2) $ (11,208 ) $ (11,980 ) $ (142,335 ) $ 328,081 Weighted-average common shares outstanding - Basic 43,110 41,468 42,632 19,618 Dilutive effect of restricted stock — — — 19 Dilutive effect of options — — — 1,623 Assumed conversion of convertible preferred stock at beginning-of-period — — — 12,563 Assumed conversion of Class B common shares to Class A common shares — — — 7,575 Weighted-average common shares outstanding - Diluted (2)(3) 43,110 41,468 42,632 41,398 Earnings (Loss) per Common Share Basic $ (0.26 ) $ (0.29 ) $ (3.34 ) $ 17.05 Diluted (0.26 ) (0.29 ) (3.34 ) 7.93 (1) For periods of net loss, net income (loss) available for common shareholders is the same for both basic and diluted purposes. (2) Each Class B common unit of Evolent Health LLC can be exchanged (together with a corresponding number of shares of our Class B common stock) for one share of our Class A common stock. As holders exchange their Class B common shares for Class A common shares, our interest in Evolent Health LLC will increase. Therefore, shares of our Class B common stock are not considered dilutive shares for the purposes of calculating our diluted earnings (loss) per common share as related adjustment to net income (loss) available for common shareholders would equally offset the additional shares, resulting in the same earnings (loss) per common share. (3) For periods of net loss, shares used in the earnings (loss) per common share calculation represent basic shares as using diluted shares would be anti-dilutive. Anti-dilutive shares (in thousands) excluded from the calculation of weighted-average common shares presented above are presented below: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Exchangeable Class B common stock 17,145 17,525 17,397 — Restricted stock units ("RSU") 416 55 196 — Options 3,193 1,847 1,672 — Total 20,754 19,427 19,265 — |
Stock-based Compensation
Stock-based Compensation | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based Compensation | Stock-based Compensation Total compensation expense (in thousands) by award type and line item in our consolidated financial statements (in thousands) were as follows: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Award Type Stock options $ 4,074 $ 3,982 $ 11,961 $ 5,148 Restricted stock — — — 4,875 RSUs 725 400 1,883 513 Total $ 4,799 $ 4,382 $ 13,844 $ 10,536 Line Item Cost of revenue $ 369 $ 384 $ 1,219 $ 793 Selling, general and administrative expenses 4,430 3,998 12,625 9,743 Total $ 4,799 $ 4,382 $ 13,844 $ 10,536 No stock-based compensation in the totals above was capitalized as software development costs for the three and nine months ended September 30, 2016 . Less than $0.1 million of stock-based compensation included in the totals above was capitalized as software development costs for the three and nine months ended September 30, 2015 . We did not recognize stock compensation in 2015 prior to the Offering Reorganization. As described in Note 2, the Company elected to early adopt ASU 2016-09 during the second quarter of 2016. This resulted in a reduction to stock compensation expense of approximately $0.1 million for the three months ended March 31, 2016. Stock-based awards granted were as follows: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Stock options — — 1,167,770 1,789,243 RSUs 32,238 — 445,569 318,336 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For interim periods, we recognize an income tax provision/(benefit) based on our estimated annual effective tax rate expected for the full year. The Company recorded $0.3 million and $1.6 million in income tax benefit for the three and nine months ended September 30, 2016 , respectively, which resulted in effective tax rates of 1.6% and 0.8% , respectively. As of December 31, 2015, $6.2 million of our book and tax basis difference deferred tax liability was expected to reverse outside of our NOL carryforward period. Current tax losses generated in 2016 by the Company allow this deferred tax liability to become a source of income for the realization of our deferred tax assets, which resulted in recording a tax benefit of $0.3 million as of September 30, 2016 . For the three and nine months ended September 30, 2015 , the effective tax rates were 0.6% and 8.2% . A portion of the basis difference is indefinite and relates to differences in profit and loss allocations before and after the Offering Reorganization. Resulting deferred tax expense is recorded as a component of the $29.2 million income tax provision for the nine months ended September 30, 2015 . As a result of the increase in our ownership of Evolent Health LLC following the secondary offering discussed in Note 1 above, the Company reduced by $1.6 million the indefinite portion of the deferred tax liability related to the book basis compared to the tax basis in our partnership interest in Evolent Health LLC. The effect of this change in the deferred tax liability was recorded as additional paid-in capital. As of each applicable period-end, the Company has not recognized any uncertain tax positions, penalties or interest as we have concluded that no such positions exist. The Company is not currently subject to income tax audits in any U.S. or state jurisdictions for any tax year. Tax Receivables Agreement In connection with the Offering Reorganization, the Company entered into the TRA with certain of its investors, which provides for the payment by the Company to these investors of 85% of the amount of the tax benefits, if any, that the Company is deemed to realize as a result of increases in our tax basis related to exchanges of Class B common units as well as tax benefits attributable to the future utilization of pre-IPO NOLs. See Note 11 in our 2015 Form 10-K for a detailed discussion of our TRA. |
Investments In and Advances to
Investments In and Advances to Affiliates | 9 Months Ended |
Sep. 30, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investments In and Advances to Affiliates | Investments In and Advances to Affiliates Georgia Physicians for Accountable Care LLC During the second quarter of 2016, the Company acquired 21,429 Class B Units of Georgia Physicians for Accountable Care, LLC (“GPAC”) for $3.0 million in cash. The investment represents a 27% economic interest and a 28% voting interest in GPAC. The Company has determined it has significant influence but that it does not have control over GPAC. Accordingly, the investment is accounted for under the equity method of accounting and the Company will be allocated its proportional share of GPAC’s profits and losses for each reporting period. For the three and nine months ended September 30, 2016 , Evolent Health, Inc.’s proportional share of the losses of GPAC were $0.4 million and $0.5 million , respectively. Concurrently, the Company also signed a long-term services agreement with GPAC to provide certain management, operational and support services to help GPAC manage elements of its service offerings. Revenue related to the long-term services agreement for the three and nine months ended September 30, 2016 , was approximately $0.1 million . Evolent Health LLC Prior to the Offering Reorganization, we did not control Evolent Health LLC, but were able to exert significant influence and, accordingly, accounted for our investment in Evolent Health LLC using the equity method of accounting. Subsequent to the Offering Reorganization, the Company consolidates the results of operations of Evolent Health LLC. The allocation of profits and losses to the shareholders of Evolent Health LLC were based upon the second amended and restated operating agreement of Evolent Health LLC. As part of recording our equity portion of the losses of Evolent Health LLC, the Company applied the hypothetical liquidation at book value basis of accounting which allocates profits and losses to the members based upon the value that would accrue to each member at each period end based upon a theoretical liquidation at book value at that time. During the nine months ended September 30, 2015 , Evolent Health, Inc.’s proportional share of the losses of Evolent Health LLC was $28.2 million , which included $0.8 million related to the amortization of a basis differential. From January 1, 2015, through June 3, 2015, Evolent Health LLC was accounted for as an equity method investment. The following is a summary of the operating results of Evolent Health LLC (in thousands) for that period: Total revenue $ 61,814 Cost of revenue (exclusive of depreciation and amortization expenses) 44,839 Gross profit 16,975 Operating income (loss) (44,119 ) Net income (loss) (44,079 ) |
Non-controlling Interests
Non-controlling Interests | 9 Months Ended |
Sep. 30, 2016 | |
Noncontrolling Interest [Abstract] | |
Non-controlling Interests | Non-controlling Interests Prior to the Offering Reorganization, we did not consolidate Evolent Health LLC, and therefore did not allocate our profits and losses to non-controlling interests. As of September 30, 2016 , we owned 74.6% of Evolent Health LLC. Changes in non-controlling interests (in thousands) were: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Non-controlling interests as of beginning-of-period $ 230,416 $ 294,494 $ 285,238 $ — Cumulative-effect adjustment from adoption of new accounting principle — — (139 ) — Increase in non-controlling interests as a result of the Offering Reorganization — — — 332,793 Decrease in non-controlling interests as a result of the merger of the TPG affiliate with and into Evolent Health, Inc. — — — (34,875 ) Decrease in non-controlling interests as a result of the exchange of Class B common stock for Class A common stock as part of the Secondary Offering (28,220 ) — (28,220 ) — Net income (loss) attributable to non-controlling interests (4,567 ) (5,108 ) (59,250 ) (8,532 ) Non-controlling interests as of end-of-period $ 197,629 $ 289,386 $ 197,629 $ 289,386 |
Fair Value Measurement
Fair Value Measurement | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | Fair Value Measurement GAAP defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) assuming an orderly transaction in the most advantageous market at the measurement date. GAAP also establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include: • Level 1 - inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date; • Level 2 - inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date and the fair value can be determined through the use of models or other valuation methodologies; and • Level 3 - inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the particular asset or liability being measured. Recurring Fair Value Measurements In accordance with GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands): As of September 30, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 35,758 $ — $ — $ 35,758 Liabilities Contingent consideration (2) $ — $ — $ 7,766 $ 7,766 As of December 31, 2015 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 122,328 $ — $ — $ 122,328 (1) Represents the cash and cash equivalents that were held in a money market fund as of September 30, 2016 , and December 31, 2015 , as presented in the tables above. (2) Represents the contingent earn-out consideration related to the Passport acquisition as described further in Note 4. The Company recognizes any transfers between levels within the hierarchy as of the beginning of the reporting period. There were no transfers between fair value levels for the three and nine month periods ended September 30, 2016 and 2015 , respectively. As discussed in Note 4, the strategic alliance with Passport includes a provision for additional equity consideration contingent upon the Company obtaining new third party Medicaid business in future periods. In the absence of observable market prices, the fair value is based on the best information available and involves a significant degree of judgment, taking into consideration a combination of internal and external factors, including the appropriate risk adjustments for non-performance and liquidity risks. With respect to Passport, the significant unobservable inputs used in the fair value measurement of the Company’s contingent consideration are expected recurring revenue projections for Passport and the applicable discount rate. A significant increase in the assumed recurring revenue projections or decrease in discount rate in isolation would result in a significantly higher fair value of the contingent consideration. The changes in our contingent consideration, measured at fair value, for which the Company uses Level 3 inputs to determine fair value are as follows (in thousands): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2016 Balance as of beginning-of-period $ 7,766 $ — Additions — 7,766 Balance as of end-of-period $ 7,766 $ 7,766 The Company did not have any assets or liabilities with Level 3 inputs for the three and nine month periods ended September 30, 2015 . The following table summarizes the fair value (in thousands), valuation techniques and significant unobservable inputs of our Level 3 fair value measurements as of September 30, 2016 : Fair Valuation Significant Assumption or Value Technique Unobservable Inputs Input Ranges Contingent consideration (1) $ 7,766 Real options approach Risk-adjusted expected growth rates 22.8% - 282.2% Discount rate/time value 3.4% - 5.6% (1) Related to additional Passport earn-out consideration as described further in Note 4. The Company did not hold any assets or liabilities with Level 3 inputs as of September 30, 2015 , or December 31, 2015 . Nonrecurring Fair Value Measurements In addition to the assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. This includes goodwill, intangible assets, property, plant and equipment, held-to-maturity investments and equity method investments. While not carried at fair value on a recurring basis, these items are continually monitored for indicators of impairment that would indicate current carrying value is greater than fair value. In those situations, the assets are considered impaired and written down to current fair value. Refer to Notes 6, 7 and 12 for further discussion of assets measured at fair value on a nonrecurring basis. Other Fair Value Disclosures The carrying amounts of cash and cash equivalents (those not held in a money market fund), restricted cash, receivables, prepaid expenses, accrued liabilities, accrued compensation and deferred rent approximate their fair values because of the relatively short-term maturities of these items and financial instruments. |
Related Parties
Related Parties | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Parties | Related Parties As discussed in Note 12, Evolent acquired a 27% economic interest in GPAC during the second quarter of 2016 and is considered to have significant influence. As a result, the Company accounts for the investment under the equity method of accounting and is allocated its proportional share of GPAC’s profits and losses for each reporting period. In addition, the Company signed a long-term services agreement with GPAC to provide certain management, operational and support services to help GPAC manage elements of its service offerings. The Company also works closely with both of its founding investors, The Advisory Board and UPMC. The relationship with The Advisory Board is centered on providing certain specified services and making valuable connections with CEOs of health systems that could become partners. The Company’s relationship with UPMC is a subcontractor relationship where UPMC has agreed to execute certain tasks (primarily third-party administration or “TPA” services) relating to certain customer commitments. We also conduct business with a company in which UPMC holds a significant equity interest. Additionally, prior to the Offering Reorganization, we issued shares of our stock to certain of our partners while concurrently entering into revenue contracts with those partners. Those partners were considered related parties and the balances and/or transactions with them were reported on our consolidated financial statements for the periods in which they held an equity interest in Evolent Health, Inc. Subsequent to December 31, 2015, only one of our partners holds an equity interest in Evolent Health, Inc. That same partner represents a significant portion of our revenue and has a member of their management on our board of directors. That partner, our founding investors and their related businesses are considered related parties and the balances and/or transactions with them are reported on our consolidated financial statements. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On October 3, 2016 , the Company completed its previously announced acquisition of Valence Health. The closing merger consideration, net of certain closing adjustments was $219.4 million based on the closing price of Evolent’s Class A common stock on the New York Stock Exchange on October 3, 2016, and consisted of 7.0 million shares of Evolent Class A common stock and $50.3 million in cash. The shares issued to Valence Health stockholders represent approximately 10.5% of the Company’s issued and outstanding Class A common stock and Class B common stock after the transaction. The terms of the transaction were amended relative to the agreement announced at signing and the closing merger consideration incorporates payments under the original earn-out related to a new contract signed by Valence Health prior to closing along with an adjusted mix of cash and stock to provide cash to fund the business that the sellers are retaining to serve state insurance cooperatives. The transaction also includes additional earn-out potential of up to $12.4 million , payable by January 30, 2017, in Evolent Class A common stock, tied to new business activity contracted on or before December 31, 2016. Shares to be issued in relation to the earn-out are limited to approximately one million shares. The shares issued at closing were, and those issued pursuant to the earn-out will be, issued in transactions exempt from registration under the Securities Act. Accounting for the transaction is currently being finalized and we expect to account for this transaction as a business combination. Upon closing of the Valence Health acquisition, UPMC, TPG and The Advisory Board Company no longer control a majority of the voting power of the Company’s outstanding common stock. As such, the Company is no longer a “controlled company” under the New York Stock Exchange rules. On November 1, 2016 , the Company completed the acquisition of Aldera Holdings, Inc. (“Aldera”), including the source code for licensed software. Aldera is the primary software provider for the Valence Health TPA platform. The closing merger consideration, net of certain closing adjustments was $34.4 million based on the closing price of Evolent’s Class A common stock on the New York Stock Exchange on November 1, 2016 , and consisted of approximately 0.5 million shares of Evolent Class A common stock and $24.5 million in cash. The shares issued in connection with the acquisition represent less than 1.0% of the Company’s issued and outstanding Class A common stock and Class B common stock. The shares issued in connection with the acquisition were issued in transactions exempt from registration under the Securities Act. Accounting for the transaction is currently being finalized and we expect to account for this transaction as a business combination. As the Valence Health and Aldera acquisitions closed after September 30, 2016 , neither Valence Health nor Aldera results are included in our results for the three and nine months ended September 30, 2016 . |
Basis of Presentation and Sum23
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of Presentation In our opinion, the accompanying unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state our financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2015 , has been derived from audited financial statements as of that date. The interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain footnote disclosure normally included in financial statements prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) has been omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission (“SEC”). The disclosures provided herein should be read in conjunction with the audited financial statements and notes thereto included in our 2015 Form 10-K. |
Consolidation | As discussed in Note 4, amounts for the nine months ended September 30, 2015 , presented in our unaudited consolidated financial statements and notes to unaudited consolidated financial statements for that period, include the historical operations of our predecessor entity, Evolent Health Holdings, which did not consolidate the operations of Evolent Health LLC for the entire nine month period. The amounts as of and for the three and nine months ended September 30, 2016 , reflect our operations, which consolidate the operations of Evolent Health LLC. All inter-company accounts and transactions have been eliminated in consolidation. |
Restricted cash | Restricted Cash Restricted cash is carried at cost, which approximates fair value, and includes cash used to collateralize various contractual obligations |
Adoption of new accounting standards and future adoption of new accounting standards | Adoption of New Accounting Standards In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The update simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. This standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted for any interim or annual period. The Company elected to early adopt this ASU during the second quarter of 2016, as described in Note 2 above. Future Adoption of New Accounting Standards In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments . This ASU provides updated guidance on eight specific cash flow issues to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We intend to adopt the requirements of this standard effective January 1, 2018 and are currently evaluating the impact of the adoption on our statement of cash flows. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments . With respect to assets measured at amortized cost, such as held-to-maturity assets, the update requires presentation of the amortized cost net of a credit loss allowance. The update eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments. The credit loss estimate can now reflect an entity’s current estimate of all future expected credit losses as opposed to the previous standard, when an entity only considered past events and current conditions. With respect to available for sale debt securities, the update requires that credit losses be presented as an allowance rather than as a write-down. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We intend to adopt the requirements of this standard effective January 1, 2020 and are currently evaluating the impact of the adoption on our financial condition and results of operations. In February 2016, the FASB issued ASU 2016-02, Leases , in order to establish the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This update introduces a new standard on accounting for leases, including a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related to evaluating when profit can be recognized). The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. We intend to adopt the requirements of this standard effective January 1, 2019, and are currently evaluating the impact of the adoption on our financial condition and results of operations. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , in order to clarify the principles of recognizing revenue. This standard establishes the core principle of recognizing revenue to depict the transfer of promised goods or services in an amount that reflects the consideration the entity expects to be entitled in exchange for those goods or services. The FASB defines a five-step process that systematically identifies the various components of the revenue recognition process, culminating with the recognition of revenue upon satisfaction of an entity’s performance obligation. By completing all five steps of the process, the core principles of revenue recognition will be achieved. In March 2016, the FASB issued an update to the new revenue standard (ASU 2014-09) in the form of ASU 2016-08, which amended the principal-versus-agent implementation guidance and illustrations in the new revenue guidance. The update clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued another update to the new revenue standard in the form of ASU 2016-10, which amended the guidance on identifying performance obligations and the implementation guidance on licensing. These ASUs were followed by two further updates issued during May 2016, including ASU 2016-11, which rescinds certain SEC guidance, such as the adoption of ASUs 2014-09 and 2014-16, including accounting for consideration given by a vendor to a customer, and ASU 2016-12, which is intended to clarify the objective of the collectability criterion while identifying the contract(s) with a customer. The new revenue standard (including updates) will be effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted only as of annual reporting periods beginning after December 15, 2016. We intend to adopt the requirements of this standard effective January 1, 2018, and, while we are evaluating the impact to our financial condition and results of operations, we expect the adoption of this ASU to require the inclusion of additional disclosures surrounding the nature and timing of our revenue. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . This standard requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards by requiring an assessment for a period of one year after the date that the financial statements are issued. Further, based on certain conditions and circumstances, additional disclosures may be required. This standard is effective beginning with the first annual period ending after December 15, 2016, and for all annual and interim periods thereafter. Early application is permitted. |
Fair value measurement | Nonrecurring Fair Value Measurements In addition to the assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. This includes goodwill, intangible assets, property, plant and equipment, held-to-maturity investments and equity method investments. While not carried at fair value on a recurring basis, these items are continually monitored for indicators of impairment that would indicate current carrying value is greater than fair value. In those situations, the assets are considered impaired and written down to current fair value. Refer to Notes 6, 7 and 12 for further discussion of assets measured at fair value on a nonrecurring basis. Other Fair Value Disclosures The carrying amounts of cash and cash equivalents (those not held in a money market fund), restricted cash, receivables, prepaid expenses, accrued liabilities, accrued compensation and deferred rent approximate their fair values because of the relatively short-term maturities of these items and financial instruments. |
Basis of Presentation and Sum24
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Schedule of restricted cash and cash equivalents | Restricted cash is carried at cost, which approximates fair value, and includes cash used to collateralize various contractual obligations as follows (in thousands): As of As of September 30, December 31, 2016 2015 Letters of credit for facility leases $ 2,516 $ 3,710 Pharmacy benefit management services 3,902 2,479 Other 152 96 Total restricted cash 6,570 6,285 Non-current restricted cash 1,580 1,582 Current restricted cash $ 4,990 $ 4,703 |
Schedule of changes in accounting principles | The following table summarizes the impact of the change in accounting principle to the Company’s consolidated statement of operations for the three months ended March 31, 2016 (in thousands): As Reported Adjustments As Adjusted Cost of revenue (exclusive of depreciation and amortization expenses) $ 28,562 $ 48 $ 28,610 Selling, general and administrative expenses 32,095 (149 ) 31,946 Total operating expenses 224,628 (101 ) 224,527 Operating income (loss) (175,179 ) 101 (175,078 ) Income (loss) before income taxes and non-controlling interests (174,900 ) 101 (174,799 ) Net income (loss) (173,912 ) 101 (173,811 ) Net income (loss) attributable to non-controlling interests (51,100 ) 29 (51,071 ) Net income (loss) attributable to Evolent Health, Inc. (122,812 ) 72 (122,740 ) The following table summarizes the impact of the change in accounting principle to the Company’s consolidated balance sheets, including the net amount charged to retained earnings as of March 31, 2016 (in thousands): As Reported Adjustments (1) As Adjusted Additional paid-in capital $ 357,047 $ 367 $ 357,414 Retained earnings (accumulated deficit) 183,876 (257 ) 183,619 Total shareholders’ equity (deficit) attributable to Evolent Health, Inc. 541,524 (257 ) 541,267 Non-controlling interests 234,138 (110 ) 234,028 (1) The adjustments are a result of a cumulative-effect adjustment to beginning retained earnings of $(0.5) million , partially offset by an adjustment of $0.1 million to net income (loss) for the three months ended March 31, 2016, related to the policy election to recognize share-based award forfeitures as they occur, as opposed to applying an estimated forfeiture rate. Approximately $(0.3) million of the net adjustment was allocated to Evolent Health, Inc. and approximately $(0.1) million of the net adjustment was allocated to non-controlling interests. |
Acquisitions and Business Com25
Acquisitions and Business Combinations (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Schedule of business acquisitions, allocation of purchase price | The purchase price was allocated to the assets acquired based on their estimated fair values as of February 1, 2016, as follows (in thousands): Purchase price $ 18,200 Less amount allocated to prepaid asset 6,900 Goodwill $ 11,300 |
Business acquisition, pro forma information | The pro forma adjustments were based on available information and assumptions that the Company believes are reasonable to reflect the impact of these transactions on the Company’s historical financial information on a pro forma basis (in thousands). For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Revenue $ 60,210 $ 55,363 $ 169,370 $ 145,189 Net income (loss) (15,717 ) (12,015 ) (198,198 ) (57,637 ) Net income (loss) attributable to non-controlling interests (4,567 ) (3,505 ) (57,984 ) (21,494 ) Net income (loss) attributable to Evolent Health, Inc. (11,150 ) (8,510 ) (140,214 ) (36,143 ) Net income (loss) available to common shareholders: Basic (0.26 ) (0.20 ) (3.28 ) (1.75 ) Diluted (0.26 ) (0.20 ) (3.28 ) (1.75 ) |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Investments [Abstract] | |
Summary investment holdings | As of September 30, 2016 As of December 31, 2015 Gross Gross Gross Gross Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair Costs Gains Losses Value Costs Gains Losses Value U.S. Treasury bills $ 28,166 $ 40 $ 11 $ 28,195 $ 28,306 $ 115 $ 181 $ 28,240 Corporate bonds 21,527 95 8 21,614 25,757 110 80 25,787 Total investments $ 49,693 $ 135 $ 19 $ 49,809 $ 54,063 $ 225 $ 261 $ 54,027 |
Investments classified by contractual maturity date | The amortized cost and fair value of our investments by contractual maturities (in thousands) were as follows: As of As of September 30, December 31, 2016 2016 Amortized Fair Amortized Fair Costs Value Costs Value Due in one year or less $ 49,693 $ 49,809 $ 9,445 $ 9,451 Due after one year through five years — — 44,618 44,576 Total $ 49,693 $ 49,809 $ 54,063 $ 54,027 |
Schedule of unrealized loss on held-to-maturity securities | The following table summarizes our held-to-maturity securities in an unrealized loss position as of the periods noted below. These securities are aggregated by major security type and length of time that the individual securities have been in a continuous unrealized loss position (in thousands, except number of securities): As of September 30, 2016 As of December 31, 2015 Number of Fair Unrealized Number of Fair Unrealized Securities Value Losses Securities Value Losses Unrealized loss for less than twelve months: U.S. Treasury bills 2 $ 8,045 $ 4 7 $ 28,240 $ 181 Corporate Bonds — — — 14 21,674 80 Total 2 $ 8,045 $ 4 21 $ 49,914 $ 261 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Summary of property and equipment | The following summarizes our property and equipment (in thousands): As of As of September 30, December 31, 2016 2015 Computer hardware $ 266 $ 232 Furniture and equipment 1,609 1,604 Internal-use software development costs 17,065 6,363 Leasehold improvements 5,830 5,830 Total property and equipment 24,770 14,029 Accumulated depreciation and amortization (3,647 ) (1,233 ) Total property and equipment, net $ 21,123 $ 12,796 |
Goodwill and Intangible Asset28
Goodwill and Intangible Assets, Net (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill | The following table summarizes the changes in the carrying amount of goodwill (in thousands): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Balance as of beginning-of-period $ 459,703 $ 608,903 $ 608,903 $ — Goodwill Acquired (1) — — 11,400 608,903 Goodwill Impairment — — (160,600 ) — Balance as of end-of-period $ 459,703 $ 608,903 $ 459,703 $ 608,903 (1) Goodwill acquired as a result of the Offering Reorganization and the Passport transaction. See Note 4 for further discussion regarding both the Offering Reorganization and the Passport transaction. |
Schedule of intangible assets | Details of our intangible assets (in thousands) are presented below: As of September 30, 2016 Weighted- Average Gross Net Remaining Carrying Accumulated Carrying Useful Life Amount Amortization Value Corporate trade name 18.7 $ 19,000 $ 1,266 $ 17,734 Customer relationships 23.0 127,500 6,733 120,767 Technology 5.7 30,000 5,712 24,288 Total $ 176,500 $ 13,711 $ 162,789 As of December 31, 2015 Weighted- Average Gross Net Remaining Carrying Accumulated Carrying Useful Life Amount Amortization Value Corporate trade name 19.4 $ 19,000 $ 554 $ 18,446 Customer relationships 24.4 120,000 2,797 117,203 Technology 6.4 30,000 2,497 27,503 Total $ 169,000 $ 5,848 $ 163,152 |
Commitments and Contingencies
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Summary of major customers | The following table summarizes those partners who represented at least 10% of our revenue for the periods presented: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Customer A 24.9 % * 18.7 % * Customer B 15.3 % 17.1 % 16.5 % 17.1 % Customer C 14.3 % 13.6 % 14.7 % 13.1 % Customer D * 12.7 % * 12.3 % Customer E * 10.6 % * 10.5 % Customer F * 15.7 % * 15.8 % Customer G * 14.3 % * 14.6 % * Represents less than 10.0% of the respective balance The following table summarizes those partners who represented at least 10% of our trade accounts receivable for the periods presented: As of As of September 30, December 31, 2016 2015 Customer A * * Customer B 14.5 % 12.9 % Customer C * * Customer D 33.2 % 28.1 % Customer E 11.2 % 11.4 % Customer F 10.5 % 23.2 % * Represents less than 10.0% of the respective balance |
Earnings (Loss) Per Common Sh30
Earnings (Loss) Per Common Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Computation of basic and diluted earnings per share | The following table sets forth the computation of basic and diluted earnings per share available for common stockholders (in thousands, except per share data): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Net income (loss) $ (15,775 ) $ (17,088 ) $ (201,585 ) $ 328,081 Less: Net income (loss) attributable to non-controlling interests (4,567 ) (5,108 ) (59,250 ) (8,532 ) Undeclared cumulative preferred dividends — — — 2,184 Net income (loss) available for common shareholders - Basic (11,208 ) (11,980 ) (142,335 ) 334,429 Add: Net income (loss) attributable to non-controlling interests — — — (8,532 ) Undeclared cumulative preferred dividends converted during the period — — — 2,184 Net income (loss) available for common shareholders - Diluted (1) (2) $ (11,208 ) $ (11,980 ) $ (142,335 ) $ 328,081 Weighted-average common shares outstanding - Basic 43,110 41,468 42,632 19,618 Dilutive effect of restricted stock — — — 19 Dilutive effect of options — — — 1,623 Assumed conversion of convertible preferred stock at beginning-of-period — — — 12,563 Assumed conversion of Class B common shares to Class A common shares — — — 7,575 Weighted-average common shares outstanding - Diluted (2)(3) 43,110 41,468 42,632 41,398 Earnings (Loss) per Common Share Basic $ (0.26 ) $ (0.29 ) $ (3.34 ) $ 17.05 Diluted (0.26 ) (0.29 ) (3.34 ) 7.93 (1) For periods of net loss, net income (loss) available for common shareholders is the same for both basic and diluted purposes. (2) Each Class B common unit of Evolent Health LLC can be exchanged (together with a corresponding number of shares of our Class B common stock) for one share of our Class A common stock. As holders exchange their Class B common shares for Class A common shares, our interest in Evolent Health LLC will increase. Therefore, shares of our Class B common stock are not considered dilutive shares for the purposes of calculating our diluted earnings (loss) per common share as related adjustment to net income (loss) available for common shareholders would equally offset the additional shares, resulting in the same earnings (loss) per common share. (3) For periods of net loss, shares used in the earnings (loss) per common share calculation represent basic shares as using diluted shares would be anti-dilutive. |
Schedule of antidilutive securities excluded from computation of earnings per share | Anti-dilutive shares (in thousands) excluded from the calculation of weighted-average common shares presented above are presented below: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Exchangeable Class B common stock 17,145 17,525 17,397 — Restricted stock units ("RSU") 416 55 196 — Options 3,193 1,847 1,672 — Total 20,754 19,427 19,265 — |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based compensation expense | Total compensation expense (in thousands) by award type and line item in our consolidated financial statements (in thousands) were as follows: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Award Type Stock options $ 4,074 $ 3,982 $ 11,961 $ 5,148 Restricted stock — — — 4,875 RSUs 725 400 1,883 513 Total $ 4,799 $ 4,382 $ 13,844 $ 10,536 Line Item Cost of revenue $ 369 $ 384 $ 1,219 $ 793 Selling, general and administrative expenses 4,430 3,998 12,625 9,743 Total $ 4,799 $ 4,382 $ 13,844 $ 10,536 |
Stock-based awards granted | Stock-based awards granted were as follows: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Stock options — — 1,167,770 1,789,243 RSUs 32,238 — 445,569 318,336 |
Investments In and Advances t32
Investments In and Advances to Affiliates (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity method investments | The following is a summary of the operating results of Evolent Health LLC (in thousands) for that period: Total revenue $ 61,814 Cost of revenue (exclusive of depreciation and amortization expenses) 44,839 Gross profit 16,975 Operating income (loss) (44,119 ) Net income (loss) (44,079 ) |
Non-controlling Interests (Tabl
Non-controlling Interests (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Noncontrolling Interest [Abstract] | |
Schedule of changes in non-controlling interests | Changes in non-controlling interests (in thousands) were: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2015 2016 2015 Non-controlling interests as of beginning-of-period $ 230,416 $ 294,494 $ 285,238 $ — Cumulative-effect adjustment from adoption of new accounting principle — — (139 ) — Increase in non-controlling interests as a result of the Offering Reorganization — — — 332,793 Decrease in non-controlling interests as a result of the merger of the TPG affiliate with and into Evolent Health, Inc. — — — (34,875 ) Decrease in non-controlling interests as a result of the exchange of Class B common stock for Class A common stock as part of the Secondary Offering (28,220 ) — (28,220 ) — Net income (loss) attributable to non-controlling interests (4,567 ) (5,108 ) (59,250 ) (8,532 ) Non-controlling interests as of end-of-period $ 197,629 $ 289,386 $ 197,629 $ 289,386 |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Summary of assets at fair value on recurring basis | The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands): As of September 30, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 35,758 $ — $ — $ 35,758 Liabilities Contingent consideration (2) $ — $ — $ 7,766 $ 7,766 As of December 31, 2015 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 122,328 $ — $ — $ 122,328 (1) Represents the cash and cash equivalents that were held in a money market fund as of September 30, 2016 , and December 31, 2015 , as presented in the tables above. (2) Represents the contingent earn-out consideration related to the Passport acquisition as described further in Note 4. |
Summary of liabilities at fair value on recurring basis | The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands): As of September 30, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 35,758 $ — $ — $ 35,758 Liabilities Contingent consideration (2) $ — $ — $ 7,766 $ 7,766 As of December 31, 2015 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 122,328 $ — $ — $ 122,328 (1) Represents the cash and cash equivalents that were held in a money market fund as of September 30, 2016 , and December 31, 2015 , as presented in the tables above. (2) Represents the contingent earn-out consideration related to the Passport acquisition as described further in Note 4. |
Changes in contingent consideration measured at fair value | The changes in our contingent consideration, measured at fair value, for which the Company uses Level 3 inputs to determine fair value are as follows (in thousands): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2016 Balance as of beginning-of-period $ 7,766 $ — Additions — 7,766 Balance as of end-of-period $ 7,766 $ 7,766 |
Valuation techniques and significant unobservable inputs of Level 3 fair value measurements | The following table summarizes the fair value (in thousands), valuation techniques and significant unobservable inputs of our Level 3 fair value measurements as of September 30, 2016 : Fair Valuation Significant Assumption or Value Technique Unobservable Inputs Input Ranges Contingent consideration (1) $ 7,766 Real options approach Risk-adjusted expected growth rates 22.8% - 282.2% Discount rate/time value 3.4% - 5.6% (1) Related to additional Passport earn-out consideration as described further in Note 4. |
Organization (Details)
Organization (Details) $ / shares in Units, shares in Thousands, $ in Thousands | Jun. 05, 2015USD ($)class$ / sharesshares | Sep. 30, 2016USD ($)$ / sharesshares | Sep. 30, 2016USD ($)$ / shares | Sep. 30, 2016USD ($)$ / sharesshares | Sep. 30, 2015USD ($)$ / shares | Dec. 31, 2015USD ($)$ / sharesshares | Sep. 29, 2016 | Mar. 31, 2016$ / shares | Dec. 31, 2014USD ($) |
Organization [Line Items] | |||||||||
Share price (in usd per share) | $ / shares | $ 19.51 | $ 14.73 | $ 10.33 | ||||||
Proceeds from initial public offering, net of offering costs | $ | $ 209,100 | $ 0 | $ 209,087 | ||||||
Payments of stock issuance costs | $ | $ 3,200 | $ 2,100 | |||||||
Number of classes of stock | class | 2 | ||||||||
Cash and cash equivalents | $ | $ 109,777 | $ 109,777 | $ 109,777 | $ 208,157 | $ 145,726 | $ 0 | |||
Common Stock | Class A Common Stock | |||||||||
Organization [Line Items] | |||||||||
Issuance of common stock (in shares) | 13,200 | 8,600 | 13,225 | ||||||
Share price (in usd per share) | $ / shares | $ 17 | $ 22.50 | $ 22.50 | $ 22.50 | |||||
Number of classes of stock | class | 2 | ||||||||
Issuance of common stock for business combinations (in shares) | 2,100 | 1,067 | 2,051 | ||||||
Investor Stockholders | Common Stock | Class A Common Stock | |||||||||
Organization [Line Items] | |||||||||
Issuance of common stock (in shares) | 2,200 | ||||||||
Evolent Health LLC | |||||||||
Organization [Line Items] | |||||||||
Number of classes of stock | class | 2 | ||||||||
Evolent Health LLC | Pre-Organization Members | |||||||||
Organization [Line Items] | |||||||||
Evolent Health LLC ownership interest | 100.00% | 100.00% | |||||||
Evolent Health, Selling Stockholders | Common Stock | Class A Common Stock | |||||||||
Organization [Line Items] | |||||||||
Issuance of common stock (in shares) | 6,400 | ||||||||
Evolent Health LLC | |||||||||
Organization [Line Items] | |||||||||
Parent's ownership percentage | 74.60% | 74.60% | 74.60% | 71.00% |
Basis of Presentation and Sum36
Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Total restricted cash | $ 6,570 | $ 6,285 |
Non-current restricted cash | 1,580 | 1,582 |
Current restricted cash | 4,990 | 4,703 |
Letters of credit for facility leases | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Total restricted cash | 2,516 | 3,710 |
Pharmacy benefit management services | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Total restricted cash | 3,902 | 2,479 |
Other | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Total restricted cash | $ 152 | $ 96 |
Basis of Presentation and Sum37
Basis of Presentation and Summary of Significant Accounting Policies - Change in Accounting Principle (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2014 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||
Additional paid-in-capital | $ 397,603 | $ 397,603 | $ 342,063 | |||||||
Cost of revenue (exclusive of depreciation and amortization expenses) | [1] | 33,905 | $ 24,762 | 95,294 | $ 32,649 | |||||
Selling, general and administrative expenses | [1] | 38,398 | 29,834 | 103,101 | 42,916 | |||||
Total operating expenses | 76,049 | 57,652 | 369,723 | 79,605 | ||||||
Operating income (loss) | (15,839) | (17,246) | (203,546) | (28,785) | ||||||
Income (loss) before income taxes and non-controlling interests | (16,031) | (17,192) | (203,199) | 357,250 | ||||||
Net income (loss) | (15,775) | (17,088) | (201,585) | 328,081 | ||||||
Net income (loss) attributable to non-controlling interests | (4,567) | (5,108) | (59,250) | (8,532) | ||||||
Net income (loss) attributable to Evolent Health, Inc. | (11,208) | (11,980) | (142,335) | 336,613 | ||||||
Retained earnings (accumulated deficit) | 164,024 | 164,024 | 306,688 | |||||||
Total shareholders' equity (deficit) attributable to Evolent Health, Inc. | 562,228 | 562,228 | 649,341 | |||||||
Non-controlling interests | 197,629 | 197,629 | 285,238 | |||||||
Non-controlling Interests | ||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||
Net income (loss) attributable to non-controlling interests | (59,250) | (12,680) | ||||||||
Non-controlling interests | $ 197,629 | $ 289,386 | $ 197,629 | $ 289,386 | 285,238 | $ 230,416 | $ 294,494 | $ 0 | ||
ASU 2016-09 | ||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||
Additional paid-in-capital | $ 357,414 | |||||||||
Cost of revenue (exclusive of depreciation and amortization expenses) | 28,610 | |||||||||
Selling, general and administrative expenses | 31,946 | |||||||||
Total operating expenses | 224,527 | |||||||||
Operating income (loss) | (175,078) | |||||||||
Income (loss) before income taxes and non-controlling interests | (174,799) | |||||||||
Net income (loss) | (173,811) | |||||||||
Net income (loss) attributable to non-controlling interests | (51,071) | |||||||||
Net income (loss) attributable to Evolent Health, Inc. | (122,740) | |||||||||
Retained earnings (accumulated deficit) | 183,619 | |||||||||
Total shareholders' equity (deficit) attributable to Evolent Health, Inc. | 541,267 | |||||||||
Non-controlling interests | 234,028 | |||||||||
As Reported | ASU 2016-09 | ||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||
Additional paid-in-capital | 357,047 | |||||||||
Cost of revenue (exclusive of depreciation and amortization expenses) | 28,562 | |||||||||
Selling, general and administrative expenses | 32,095 | |||||||||
Total operating expenses | 224,628 | |||||||||
Operating income (loss) | (175,179) | |||||||||
Income (loss) before income taxes and non-controlling interests | (174,900) | |||||||||
Net income (loss) | (173,912) | |||||||||
Net income (loss) attributable to non-controlling interests | (51,100) | |||||||||
Net income (loss) attributable to Evolent Health, Inc. | (122,812) | |||||||||
Retained earnings (accumulated deficit) | 183,876 | |||||||||
Total shareholders' equity (deficit) attributable to Evolent Health, Inc. | 541,524 | |||||||||
Non-controlling interests | 234,138 | |||||||||
Adjustments | ASU 2016-09 | ||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||
Additional paid-in-capital | 367 | |||||||||
Cost of revenue (exclusive of depreciation and amortization expenses) | 48 | |||||||||
Selling, general and administrative expenses | (149) | |||||||||
Total operating expenses | (101) | |||||||||
Operating income (loss) | 101 | |||||||||
Income (loss) before income taxes and non-controlling interests | 101 | |||||||||
Net income (loss) | 101 | |||||||||
Net income (loss) attributable to non-controlling interests | 29 | |||||||||
Net income (loss) attributable to Evolent Health, Inc. | 72 | |||||||||
Retained earnings (accumulated deficit) | (257) | |||||||||
Total shareholders' equity (deficit) attributable to Evolent Health, Inc. | (257) | |||||||||
Non-controlling interests | (110) | |||||||||
Adjustments | ASU 2016-09 | Parent | ||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||
Retained earnings (accumulated deficit) | (300) | |||||||||
Adjustments | ASU 2016-09 | Non-controlling Interests | ||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||
Retained earnings (accumulated deficit) | (100) | |||||||||
Adjustments | Cumulative-effect Adjustment | ||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||
Retained earnings (accumulated deficit) | $ (500) | |||||||||
Adjustments | Share-based Award Forfeitures Policy | ||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||
Retained earnings (accumulated deficit) | $ 100 | |||||||||
[1] | Amounts related to affiliates included above are as follows (see Note 15) |
Basis of Presentation and Sum38
Basis of Presentation and Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Jan. 01, 2016 | Dec. 31, 2015 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Increase(decrease) in retained earnings | $ 164,024 | $ 164,024 | $ 306,688 | ||||
Decrease to net loss | $ (15,775) | $ (17,088) | $ (201,585) | $ 328,081 | |||
ASU 2016-09 | Election to Recognize Share-based Award Forfeitures As They Occur | |||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Increase(decrease) in retained earnings | $ (400) | $ (500) | |||||
Decrease to net loss | $ 100 |
Acquisitions and Business Com39
Acquisitions and Business Combinations - Passport (Details) beneficiary in Thousands, shares in Millions | Feb. 01, 2016USD ($)beneficiaryshares | Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Dec. 31, 2015USD ($) | Sep. 30, 2015USD ($) | Jun. 30, 2015USD ($) | Jun. 05, 2015USD ($) | Dec. 31, 2014USD ($) |
Business Acquisition [Line Items] | |||||||||
Goodwill | $ 459,703,000 | $ 459,703,000 | $ 459,703,000 | $ 608,903,000 | $ 608,903,000 | $ 608,903,000 | $ 608,900,000 | $ 0 | |
Passport | |||||||||
Business Acquisition [Line Items] | |||||||||
Number of Medicaid and Medicare Advantage beneficiaries (over) | beneficiary | 280 | ||||||||
Contingent consideration (up to) | $ 10,000,000 | ||||||||
Term of health plan management and managed care services arrangement | 10 years | ||||||||
Consideration transferred | $ 18,200,000 | ||||||||
Equity interests transferred, value | 10,500,000 | ||||||||
Contingent liability | 7,800,000 | ||||||||
Purchase price | 18,200,000 | ||||||||
Less amount allocated to prepaid asset | 6,900,000 | ||||||||
Goodwill | $ 11,300,000 | ||||||||
Net income (loss) | 15,000,000 | 31,100,000 | |||||||
Revenue | $ (3,000,000) | $ (4,400,000) | |||||||
Passport | Common Stock | Class A | |||||||||
Business Acquisition [Line Items] | |||||||||
Stock issued for the purchase of assets (in shares) | shares | 1.1 |
Acquisitions and Business Com40
Acquisitions and Business Combinations - Offering Reorganization (Details) $ / shares in Units, $ in Thousands | Jun. 05, 2015classvoteshares | Sep. 30, 2016USD ($)$ / shares | Dec. 31, 2015USD ($) | Sep. 30, 2015USD ($)$ / shares | Sep. 30, 2016USD ($)$ / sharesshares | Sep. 30, 2015USD ($)$ / shares | Dec. 31, 2015USD ($)shares | Dec. 31, 2014USD ($) | Sep. 29, 2016 |
Business Acquisition [Line Items] | |||||||||
Number of classes of stock | class | 2 | ||||||||
Adjustment for removal of transaction costs | $ (1,200) | $ 1,200 | |||||||
Revenue | $ 60,210 | $ 55,363 | $ 169,370 | $ 145,189 | |||||
Net income (loss) | (15,717) | (12,015) | (198,198) | (57,637) | |||||
Net income (loss) attributable to noncontrolling interest | (4,567) | (3,505) | (57,984) | (21,494) | |||||
Net income (loss) attributable to Evolent Health, Inc. | $ (11,150) | $ (8,510) | $ (140,214) | $ (36,143) | |||||
Net income (loss) available to common shareholders, basic (in dollars per share) | $ / shares | $ (0.26) | $ (0.20) | $ (3.28) | $ (1.75) | |||||
Net income (loss) available to common shareholders, diluted (in dollars per share) | $ / shares | $ (0.26) | $ (0.20) | $ (3.28) | $ (1.75) | |||||
Evolent Health LLC | |||||||||
Business Acquisition [Line Items] | |||||||||
Number of classes of stock | class | 2 | ||||||||
Evolent Health LLC | |||||||||
Business Acquisition [Line Items] | |||||||||
Parent's ownership percentage | 74.60% | 74.60% | 71.00% | ||||||
Pre-Organization Members | Evolent Health LLC | |||||||||
Business Acquisition [Line Items] | |||||||||
Equity method investment, ownership percentage | 100.00% | ||||||||
Evolent Health LLC ownership interest | 100.00% | 100.00% | |||||||
Passport | |||||||||
Business Acquisition [Line Items] | |||||||||
Adjustment for removal of transaction costs | $ (200) | $ (300) | $ 200 | ||||||
Class A | |||||||||
Business Acquisition [Line Items] | |||||||||
Number of votes per share of common stock | vote | 1 | ||||||||
Class A | Common Stock | |||||||||
Business Acquisition [Line Items] | |||||||||
Number of classes of stock | class | 2 | ||||||||
Issuance of common stock for business combinations, shares | shares | 2,100,000 | 1,067,000 | 2,051,000 | ||||||
Class A | Evolent Health Holdings, Inc. Merger | |||||||||
Business Acquisition [Line Items] | |||||||||
Number of shares receivable to shareholders of acquired company per common stock share held | shares | 4 | ||||||||
Class A | Affiliate of TPG Merger | Texas Pacific Group | |||||||||
Business Acquisition [Line Items] | |||||||||
Percent of common stock held in affiliate exchanged for shares of common stock and payments under tax receivables agreement | 100.00% |
Acquisitions and Business Com41
Acquisitions and Business Combinations - Vestica (Details) - Vestica $ in Millions | Mar. 01, 2016USD ($) |
Business Acquisition [Line Items] | |
Cash paid for business combination | $ 7.5 |
Contingent liability | 4 |
Customer relationships | |
Business Acquisition [Line Items] | |
Consideration transferred | $ 7.5 |
Useful life | 13 years |
Investments - Investment Summar
Investments - Investment Summary (Details) - Level 2 - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Schedule of Held-to-maturity Securities [Line Items] | ||
Investments, Amortized Costs | $ 49,693 | $ 54,063 |
Gross Unrealized Gains | 135 | 225 |
Gross Unrealized Losses | 19 | 261 |
Fair Value | 49,809 | 54,027 |
U.S. Treasury bills | ||
Schedule of Held-to-maturity Securities [Line Items] | ||
Investments, Amortized Costs | 28,166 | 28,306 |
Gross Unrealized Gains | 40 | 115 |
Gross Unrealized Losses | 11 | 181 |
Fair Value | 28,240 | |
Corporate bonds | ||
Schedule of Held-to-maturity Securities [Line Items] | ||
Investments, Amortized Costs | 21,527 | 25,757 |
Gross Unrealized Gains | 95 | 110 |
Gross Unrealized Losses | $ 8 | 80 |
Fair Value | $ 25,787 |
Investments - Contractual Matur
Investments - Contractual Maturity (Details) - Level 2 $ in Thousands | Sep. 30, 2016USD ($)security | Dec. 31, 2015USD ($)security |
Schedule of Held-to-maturity Securities [Line Items] | ||
Due in one year or less, Amortized Cost | $ 49,693 | $ 9,445 |
Due in one year or less, Fair Value | 49,809 | 9,451 |
Due after one year through five years, Amortized Cost | 0 | 44,618 |
Due after one year through five years, Fair Value | 0 | 44,576 |
Investments, Amortized Costs | 49,693 | 54,063 |
Investments, Fair Value | 49,809 | 54,027 |
Aggregate fair value of securities in an unrealized loss position for less than 12 months | $ 8,045 | $ 49,914 |
Number of positions in an unrealized loss position for less than 12 months | security | 2 | 21 |
Corporate bonds | ||
Schedule of Held-to-maturity Securities [Line Items] | ||
Investments, Amortized Costs | $ 21,527 | $ 25,757 |
Investments, Fair Value | 25,787 | |
Aggregate fair value of securities in an unrealized loss position for less than 12 months | $ 0 | $ 21,674 |
Number of positions in an unrealized loss position for less than 12 months | security | 0 | 14 |
Investments - Unrealized Losses
Investments - Unrealized Losses (Details) - Level 2 $ in Thousands | Sep. 30, 2016USD ($)security | Dec. 31, 2015USD ($)security |
Schedule of Held-to-maturity Securities [Line Items] | ||
Unrealized loss for less than twelve months, Number of Securities | security | 2 | 21 |
Unrealized loss for less than twelve months, Fair Value | $ 8,045 | $ 49,914 |
Unrealized loss for less than twelve months, Unrealized Losses | $ 4 | $ 261 |
U.S. Treasury bills | ||
Schedule of Held-to-maturity Securities [Line Items] | ||
Unrealized loss for less than twelve months, Number of Securities | security | 2 | 7 |
Unrealized loss for less than twelve months, Fair Value | $ 8,045 | $ 28,240 |
Unrealized loss for less than twelve months, Unrealized Losses | $ 4 | $ 181 |
Corporate bonds | ||
Schedule of Held-to-maturity Securities [Line Items] | ||
Unrealized loss for less than twelve months, Number of Securities | security | 0 | 14 |
Unrealized loss for less than twelve months, Fair Value | $ 0 | $ 21,674 |
Unrealized loss for less than twelve months, Unrealized Losses | $ 0 | $ 80 |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | May 31, 2015 | |
Property, Plant and Equipment [Line Items] | ||||||
Property, plant and equipment, gross | $ 24,770,000 | $ 24,770,000 | $ 14,029,000 | |||
Accumulated depreciation and amortization | (3,647,000) | (3,647,000) | (1,233,000) | |||
Total property and equipment, net | 21,123,000 | 21,123,000 | 12,796,000 | $ 0 | ||
Depreciation expense | 900,000 | $ 500,000 | 2,400,000 | $ 700,000 | ||
Capitalized computer software, amortization (2015 - less than 0.1 million) | 400,000 | 100,000 | 900,000 | 100,000 | ||
Computer hardware | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Property, plant and equipment, gross | 266,000 | 266,000 | 232,000 | |||
Furniture and equipment | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Property, plant and equipment, gross | 1,609,000 | 1,609,000 | 1,604,000 | |||
Internal-use Software Development Costs | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Property, plant and equipment, gross | 17,065,000 | 17,065,000 | 6,363,000 | |||
Total property and equipment, net | 16,100,000 | 16,100,000 | 6,300,000 | |||
Capitalized computer software additions | 3,600,000 | $ 2,800,000 | 10,700,000 | $ 3,800,000 | ||
Leasehold Improvements | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Property, plant and equipment, gross | $ 5,830,000 | $ 5,830,000 | $ 5,830,000 |
Goodwill and Intangible Asset46
Goodwill and Intangible Assets, Net (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Jun. 30, 2016 | Mar. 31, 2016 | Feb. 01, 2016 | Jun. 30, 2015 | Jun. 05, 2015 | May 31, 2015 | Dec. 31, 2014 | |
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Share price (in usd per share) | $ 19.51 | $ 19.51 | $ 14.73 | $ 10.33 | ||||||||
Goodwill | $ 459,703,000 | $ 608,903,000 | $ 459,703,000 | $ 608,903,000 | $ 608,903,000 | $ 459,703,000 | $ 608,903,000 | $ 608,900,000 | $ 0 | |||
Goodwill impairment | 0 | 0 | 160,600,000 | 0 | ||||||||
Gross Carrying Amount | 176,500,000 | 176,500,000 | 169,000,000 | |||||||||
Accumulated Amortization | 13,711,000 | 13,711,000 | 5,848,000 | |||||||||
Net Carrying Value | 162,789,000 | 162,789,000 | $ 163,152,000 | $ 0 | ||||||||
Amortization of intangible assets | 2,700,000 | $ 2,500,000 | $ 7,900,000 | $ 3,300,000 | ||||||||
Corporate trade name | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Weighted-Average Remaining Useful Life | 18 years 8 months 12 days | 19 years 4 months 26 days | ||||||||||
Gross Carrying Amount | 19,000,000 | $ 19,000,000 | $ 19,000,000 | |||||||||
Accumulated Amortization | 1,266,000 | 1,266,000 | 554,000 | |||||||||
Net Carrying Value | 17,734,000 | $ 17,734,000 | $ 18,446,000 | |||||||||
Customer relationships | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Weighted-Average Remaining Useful Life | 23 years | 24 years 4 months 26 days | ||||||||||
Gross Carrying Amount | 127,500,000 | $ 127,500,000 | $ 120,000,000 | |||||||||
Accumulated Amortization | 6,733,000 | 6,733,000 | 2,797,000 | |||||||||
Net Carrying Value | 120,767,000 | $ 120,767,000 | $ 117,203,000 | |||||||||
Acquired intangible assets | $ 7,500,000 | |||||||||||
Technology | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Weighted-Average Remaining Useful Life | 5 years 8 months 12 days | 6 years 4 months 26 days | ||||||||||
Gross Carrying Amount | 30,000,000 | $ 30,000,000 | $ 30,000,000 | |||||||||
Accumulated Amortization | 5,712,000 | 5,712,000 | 2,497,000 | |||||||||
Net Carrying Value | $ 24,288,000 | $ 24,288,000 | $ 27,503,000 | |||||||||
Passport | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Goodwill | $ 11,300,000 | |||||||||||
Acquired intangible assets | $ 6,900,000 | |||||||||||
Minimum | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Share price (in usd per share) | $ 8.48 | |||||||||||
Maximum | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Share price (in usd per share) | $ 12.32 | |||||||||||
Common Stock | Class A | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Share price (in usd per share) | $ 22.50 | $ 22.50 | $ 17 |
Goodwill and Intangible Asset47
Goodwill and Intangible Assets, Net - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Goodwill [Roll Forward] | ||||
Balance as of beginning-of-period | $ 459,703 | $ 608,903 | $ 608,903 | $ 0 |
Goodwill Acquired | 0 | 0 | 11,400 | 608,903 |
Goodwill impairment | 0 | 0 | (160,600) | 0 |
Balance as of end-of-period | $ 459,703 | $ 608,903 | $ 459,703 | $ 608,903 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) - USD ($) shares in Thousands, $ in Thousands | Jun. 05, 2015 | Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 |
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||
Tax receivables agreement, percent of tax savings to be paid | 85.00% | 85.00% | 85.00% | ||||
Restricted funds | $ 6,570 | $ 6,570 | $ 6,570 | $ 6,285 | |||
Rent expense | 1,100 | $ 900 | 3,400 | $ 1,300 | |||
Payments of stock issuance costs | $ 3,200 | 2,100 | |||||
Letters of credit for facility leases | |||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||
Restricted funds | 2,516 | 2,516 | 2,516 | $ 3,710 | |||
Minimum | Letters of credit for facility leases | |||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||
Letters of credit outstanding, minimum | $ 2,500 | $ 2,500 | $ 2,500 | ||||
Class A | Common Stock | |||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||
Issuance of common stock (in shares) | 13,200 | 8,600 | 13,225 |
Commitments and Contingencies49
Commitments and Contingencies - Concentration Risk (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Asset Concentration Risk | Money Market Funds | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 33.00% | ||||
Customer A | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 24.90% | 18.70% | |||
Customer B | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 15.30% | 17.10% | 16.50% | 17.10% | |
Customer B | Customer Concentration Risk | Accounts Receivable | Customer Receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 14.50% | 12.90% | |||
Customer C | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 14.30% | 13.60% | 14.70% | 13.10% | |
Customer D | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 12.70% | 12.30% | |||
Customer D | Customer Concentration Risk | Accounts Receivable | Customer Receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 33.20% | 28.10% | |||
Customer E | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 10.60% | 10.50% | |||
Customer E | Customer Concentration Risk | Accounts Receivable | Customer Receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 11.20% | 11.40% | |||
Customer F | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 15.70% | 15.80% | |||
Customer F | Customer Concentration Risk | Accounts Receivable | Customer Receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 10.50% | 23.20% | |||
Customer G | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 14.30% | 14.60% |
Earnings (Loss) Per Common Sh50
Earnings (Loss) Per Common Share - Computation of Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Net income (loss) | $ (15,775) | $ (17,088) | $ (201,585) | $ 328,081 |
Less: | ||||
Net income (loss) attributable to non-controlling interests | (4,567) | (5,108) | (59,250) | (8,532) |
Undeclared cumulative preferred dividends | 0 | 0 | 0 | 2,184 |
Net income (loss) available for common shareholders - Basic | (11,208) | (11,980) | (142,335) | 334,429 |
Add: | ||||
Net income (loss) attributable to non-controlling interests | 0 | 0 | 0 | (8,532) |
Undeclared cumulative preferred dividends converted during the period | 0 | 0 | 0 | 2,184 |
Net income (loss) available for common shareholders - Diluted | $ (11,208) | $ (11,980) | $ (142,335) | $ 328,081 |
Weighted-average common shares outstanding (in shares) | 43,110,000 | 41,468,000 | 42,632,000 | 19,618,000 |
Assumed conversion of convertible preferred stock at beginning-of-period (in shares) | 0 | 0 | 0 | 12,563,000 |
Assumed conversion of Class B common shares to Class A common shares (in shares) | 0 | 0 | 0 | 7,575,000 |
Weighted-average common shares outstanding - Diluted (in shares) | 43,110,000 | 41,468,000 | 42,632,000 | 41,398,000 |
Earnings (Loss) per Common Share | ||||
Basic (in dollars per share) | $ (0.26) | $ (0.29) | $ (3.34) | $ 17.05 |
Diluted (in dollars per share) | $ (0.26) | $ (0.29) | $ (3.34) | $ 7.93 |
Class B Common Stock | ||||
Earnings (Loss) per Common Share | ||||
Convertible preferred stock, shares issued upon conversion (in shares) | 1 | 1 | ||
Restricted stock | ||||
Add: | ||||
Dilutive effect of options (in shares) | 0 | 0 | 0 | 19,000 |
Stock options | ||||
Add: | ||||
Dilutive effect of options (in shares) | 0 | 0 | 0 | 1,623,000 |
Earnings (Loss) Per Common Sh51
Earnings (Loss) Per Common Share - Antidilutive Securities (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Number of antidilutive securities excluded from the calculation of earning per share (in shares) | 20,754 | 19,427 | 19,265 | 0 |
Exchangeable Class B Common Stock | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Number of antidilutive securities excluded from the calculation of earning per share (in shares) | 17,145 | 17,525 | 17,397 | 0 |
Restricted stock and restricted stock units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Number of antidilutive securities excluded from the calculation of earning per share (in shares) | 416 | 55 | 196 | 0 |
Options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Number of antidilutive securities excluded from the calculation of earning per share (in shares) | 3,193 | 1,847 | 1,672 | 0 |
Stock-based Compensation - Comp
Stock-based Compensation - Compensation Expense (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||||
Share-based compensation expense | $ 4,799,000 | $ 4,382,000 | $ 13,844,000 | $ 10,536,000 | |
Share-based compensation expense capitalized as software development costs (less than $0.1 million - September 30, 2015) | 0 | 100,000 | 0 | 100,000 | |
Adjustments | ASU 2016-09 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||||
Share-based compensation expense | $ 100,000 | ||||
Cost of revenue | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||||
Share-based compensation expense | 369,000 | 384,000 | 1,219,000 | 793,000 | |
Selling, general and administrative expenses | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||||
Share-based compensation expense | 4,430,000 | 3,998,000 | 12,625,000 | 9,743,000 | |
Stock options | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||||
Share-based compensation expense | 4,074,000 | 3,982,000 | 11,961,000 | 5,148,000 | |
Restricted stock | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||||
Share-based compensation expense | 0 | 0 | 0 | 4,875,000 | |
Restricted stock units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||||
Share-based compensation expense | $ 725,000 | $ 400,000 | $ 1,883,000 | $ 513,000 |
Stock-based Compensation - Awar
Stock-based Compensation - Awards Granted (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based awards granted (in shares) | 0 | 0 | 1,167,770 | 1,789,243 |
Restricted stock units (RSUs) | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based awards granted (in shares) | 32,238 | 0 | 445,569 | 318,336 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |||||
Provision (benefit) for income taxes | $ (256) | $ (104) | $ (1,614) | $ 29,169 | |
Effective tax rate | 1.60% | 0.60% | 0.80% | 8.20% | |
Book and tax basis difference expected to reverse outside of carryforward period | $ 6,200 | ||||
Current income tax expense (benefit) | $ (300) | ||||
Tax receivables agreement, percent of tax savings to be paid | 85.00% | 85.00% | |||
Income Tax Contingency [Line Items] | |||||
Effect of change in deferred tax liability | $ 1,606 | ||||
Additional Paid-in Capital | |||||
Income Tax Contingency [Line Items] | |||||
Effect of change in deferred tax liability | 1,606 | ||||
Evolent Health LLC | Additional Paid-in Capital | |||||
Income Tax Contingency [Line Items] | |||||
Increase (decrease) in deferred tax liability related to the book basis compared to the tax basis of partnership interest | (1,600) | ||||
Effect of change in deferred tax liability | $ 1,600 |
Investments In and Advances t55
Investments In and Advances to Affiliates (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Schedule of Equity Method Investments [Line Items] | ||||
Proportionate share of losses | $ (448) | $ 0 | $ (462) | $ (28,165) |
Revenue related to long-term services agreement (less than $0.1 million) | 100 | 100 | ||
GPAC | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Equity method investment, cost | $ 3,000 | $ 3,000 | ||
Economic interest percentage | 27.00% | 27.00% | ||
Equity method investment, ownership percentage | 28.00% | 28.00% | ||
Proportionate share of losses | $ 400 | $ 500 | ||
Evolent Health LLC | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Proportionate share of losses | 28,200 | |||
Amortization of basis differential | $ 800 | |||
Class B | GPAC | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Equity method investment, shares acquired | 21,429 |
Investments In and Advances t56
Investments In and Advances to Affiliates - Summarized Financial Information (Details) - Evolent Health LLC $ in Thousands | 5 Months Ended |
Jun. 03, 2015USD ($) | |
Schedule of Equity Method Investments [Line Items] | |
Total revenue | $ 61,814 |
Cost of revenue (exclusive of depreciation and amortization expenses) | 44,839 |
Gross profit | 16,975 |
Operating income (loss) | (44,119) |
Net income (loss) | $ (44,079) |
Non-controlling Interests (Deta
Non-controlling Interests (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Sep. 29, 2016 | |
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | ||||||
Non-controlling interests as of beginning-of-period | $ 285,238 | |||||
Cumulative-effect adjustment from adoption of new accounting principle | 0 | |||||
Net income (loss) attributable to non-controlling interests | $ (4,567) | $ (5,108) | (59,250) | $ (8,532) | ||
Non-controlling interests as of end-of-period | 197,629 | 197,629 | $ 285,238 | |||
Non-controlling Interests | ||||||
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | ||||||
Non-controlling interests as of beginning-of-period | 230,416 | 294,494 | 285,238 | 0 | 0 | |
Cumulative-effect adjustment from adoption of new accounting principle | (139) | |||||
Increase in non-controlling interests as a result of the Offering Reorganization | 0 | 0 | 0 | 332,793 | ||
Decrease in non-controlling interests as a result of the merger of the TPG affiliate with and into Evolent Health, Inc. | 0 | 0 | 0 | (34,875) | ||
Decrease in non-controlling interests as a result of the exchange of Class B common stock for Class A common stock as part of the Secondary Offering | (28,220) | 0 | (28,220) | 0 | ||
Net income (loss) attributable to non-controlling interests | (59,250) | (12,680) | ||||
Non-controlling interests as of end-of-period | $ 197,629 | $ 289,386 | $ 197,629 | $ 289,386 | $ 285,238 | |
Evolent Health LLC | ||||||
Noncontrolling Interest [Line Items] | ||||||
Parent's ownership percentage | 74.60% | 74.60% | 71.00% |
Fair Value Measurement - Assets
Fair Value Measurement - Assets and Liabilities on Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Mar. 01, 2016 | Feb. 01, 2016 | Dec. 31, 2015 |
Passport | ||||
Liabilities | ||||
Contingent liability | $ 7,800 | |||
Vestica | ||||
Liabilities | ||||
Contingent liability | $ 4,000 | |||
Level 2 | ||||
Assets | ||||
Held-to-maturity investments | $ 49,809 | $ 54,027 | ||
Level 2 | U.S. Treasury bills | ||||
Assets | ||||
Held-to-maturity investments | 28,195 | |||
Level 2 | Corporate bonds | ||||
Assets | ||||
Held-to-maturity investments | 21,614 | |||
Recurring | ||||
Assets | ||||
Cash and cash equivalents | 35,758 | 122,328 | ||
Liabilities | ||||
Contingent liability | 7,766 | |||
Recurring | Level 1 | ||||
Assets | ||||
Cash and cash equivalents | 35,758 | 122,328 | ||
Liabilities | ||||
Contingent liability | 0 | |||
Recurring | Level 2 | ||||
Assets | ||||
Cash and cash equivalents | 0 | 0 | ||
Liabilities | ||||
Contingent liability | 0 | |||
Recurring | Level 3 | ||||
Assets | ||||
Cash and cash equivalents | 0 | $ 0 | ||
Liabilities | ||||
Contingent liability | $ 7,766 |
Fair Value Measurement - Change
Fair Value Measurement - Changes in Contingent Consideration (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2016 | Sep. 30, 2016 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance as of beginning of period | $ 7,766 | $ 0 |
Additions | 0 | 7,766 |
Balance as of end of period | $ 7,766 | $ 7,766 |
Fair Value Measurement - Valuat
Fair Value Measurement - Valuation Techniques and Significant Unobservable Inputs (Details) - Contingent consideration - Real options approach - Level 3 $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | |
Liabilities, at fair value | $ 7,766 |
Minimum | |
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | |
Risk-adjusted expected growth rates | 22.80% |
Discount rate/time value | 3.40% |
Maximum | |
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | |
Risk-adjusted expected growth rates | 282.20% |
Discount rate/time value | 5.60% |
Related Parties (Details)
Related Parties (Details) | Sep. 30, 2016partner |
Related Party Transaction [Line Items] | |
Number of partners holding equity interest | 1 |
GPAC | |
Related Party Transaction [Line Items] | |
Economic interest percentage | 27.00% |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event - USD ($) shares in Millions, $ in Millions | Nov. 01, 2016 | Oct. 03, 2016 |
Valence Health | ||
Subsequent Event [Line Items] | ||
Consideration transferred | $ 219.4 | |
Cash paid for business combination | $ 50.3 | |
Consideration transferred, percentage of issued and outstanding common stock (less than 1.0% - November 1, 2016) | 10.50% | |
Contingent earn-out payment (up to) | $ 12.4 | |
Contingent consideration, shares | 1 | |
Valence Health | Class A | ||
Subsequent Event [Line Items] | ||
Consideration transferred, shares | 7 | |
Aldera | ||
Subsequent Event [Line Items] | ||
Consideration transferred | $ 34.4 | |
Cash paid for business combination | $ 24.5 | |
Consideration transferred, percentage of issued and outstanding common stock (less than 1.0% - November 1, 2016) | 1.00% | |
Aldera | Class A | ||
Subsequent Event [Line Items] | ||
Consideration transferred, shares | 0.5 |