Segment Reporting

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

We define our reportable segments based on the way the CODM, the chief executive officer, manages the operations for purposes of allocating resources and assessing performance. We classify our operations into two reportable segments as follows:

•Evolent Health Services, which houses our Administrative Simplification solution and certain supporting population health infrastructure; and

•Clinical Solutions, which includes our specialty care management and physician-oriented total cost of care solutions, along with the New Century Health and Evolent Care Partners brands.

In the ordinary course of business, our reportable segments enter into transactions with one another. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues and expenses recognized by the segment that is the counterparty to the transaction are eliminated in consolidation and do not affect consolidated results.

The CODM uses revenue in accordance with U.S. GAAP and Adjusted EBITDA as the relevant segment performance measures to evaluate the performance of the segments and allocate resources.

Adjusted EBITDA is a segment performance financial measure that offers a useful view of the overall operation of our businesses and may be different than similarly-titled segment performance financial measures used by other companies.

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

Management considers revenue and Adjusted EBITDA to be the appropriate metrics to evaluate and compare the ongoing operating performance of our segments on a consistent basis across reporting periods as they eliminate the effect of items which are not indicative of each segment's core operating performance.

The following tables present our segment information (in thousands):

	Evolent Health Services		Clinical Solutions		Intersegment Eliminations		Subtotal		Corporate (1)		Consolidated Total
Revenue
For the Three Months Ended September 30, 2022
Total revenue	$	107,033	$	245,257	$	295	$	352,585	$	—	$	352,585
For the Three Months Ended September 30, 2021
Total revenue	$	63,315	$	159,614	$	(458)	$	222,471	$	—	$	222,471

	Evolent Health Services		Clinical Solutions		Subtotal		Corporate (1)		Consolidated Total
For the Three Months Ended September 30, 2022
Adjusted EBITDA	$	18,507	$	16,303	$	34,810	$	(6,755)	$	28,055
For the Three Months Ended September 30, 2021
Adjusted EBITDA	$	(3,353)	$	23,883	$	20,530	$	(6,765)	$	13,765

	Evolent Health Services		Clinical Solutions		Intersegment Eliminations		Subtotal		Corporate (1)		Consolidated Total
Revenue
For the Nine Months Ended September 30, 2022
Total revenue	$	307,147	$	663,060	$	(626)	$	969,581	$	—	$	969,581
For the Nine Months Ended September 30, 2021
Total revenue	$	223,924	$	437,031	$	(1,356)	$	659,599	$	—	$	659,599
	Evolent Health Services		Clinical Solutions		Subtotal		Corporate (1)		Consolidated Total
For the Nine Months Ended September 30, 2022
Adjusted EBITDA	$	41,854	$	51,988	$	93,842	$	(19,793)	$	74,049
For the Nine Months Ended September 30, 2021
Adjusted EBITDA	$	9,120	$	53,456	$	62,576	$	(20,558)	$	42,018

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(1)Corporate includes various finance, human resources, legal, executive and other corporate infrastructure expenses.

The following table presents our reconciliation of consolidated segments total Adjusted EBITDA to net income (loss) attributable to common shareholders of Evolent Health, Inc. (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss) attributable to common shareholders of Evolent Health, Inc.	$	2,123	$	(13,040)	$	(7,815)	$	(31,954)
Less:
Interest income	425		120		765		311
Interest expense	(4,754)		(6,367)		(9,143)		(18,978)
Benefit from (provision for) income taxes	45,516		(234)		44,498		(936)
Change in tax receivable agreement liability	(42,870)		—		(42,870)		—
Depreciation and amortization expenses	(17,196)		(14,859)		(47,414)		(44,962)
Gain on transfer of membership	—		—		—		22,969
Loss on extinguishment/repayment of debt, net	(10,192)		—		(10,192)		(19,158)
Gain from equity method investees	1,392		63		3,940		12,725
Change in fair value of contingent consideration	12,700		225		5,822		819
Other income (expense), net	(345)		(41)		130		(73)
Repositioning costs	—		—		—		(6,043)
Stock-based compensation expense	(6,992)		(4,395)		(19,350)		(11,754)
Severance costs	(996)		—		(1,035)		(52)
Amortization of contract cost assets	(25)		(110)		(79)		(433)
Strategy and shareholder advisory expenses	—		—		—		(6,513)
Acquisition costs	(2,595)		(1,207)		(6,473)		(3,277)
Gain (loss) from discontinued operations (1)	—		—		(463)		1,383
Adjusted EBITDA	$	28,055	$	13,765	$	74,049	$	42,018

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(1)Includes $(0.5) million loss on disposal of discontinued operations for the nine months ended September 30, 2022 and $1.9 million gain on disposal of discontinued operations for the nine months ended September 30, 2021, respectively.

Asset information by segment is not a key measure of performance used by the CODM. Accordingly, we have not disclosed asset information by segment.