10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 _________________________

FORM 10-Q

_________________________

(Mark One)

S     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR 

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to               

Commission File Number:  001-37415

_________________________

Evolent Health, Inc.

(Exact name of registrant as specified in its charter)

_________________________

Delaware							32-0454912
(State or other jurisdiction of incorporation or organization)							(I.R.S. Employer Identification No.)
800 N. Glebe Road	,	Suite 500	,	Arlington	,	Virginia	22203
(Address of principal executive offices)							(Zip Code)

                           (571) 389-6000

Registrant’s telephone number, including area code

                         _________________________        

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock of Evolent Health, Inc., par value $0.01 per share	EVH	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes S No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer S Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No  S

As of April 28, 2023, there were 112,667,704 shares of the registrant’s Class A common stock outstanding.

Evolent Health, Inc.

Table of Contents

Item		Page
	PART I
1.	Financial Statements	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
3.	Quantitative and Qualitative Disclosures About Market Risk	47
4.	Controls and Procedures	48
	PART II
1	Legal Proceedings	49
1A.	Risk Factors	49
2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
3.	Defaults Upon Senior Securities	50
4.	Mine Safety Disclosures	50
5.	Other Information	50
6.	Exhibits	50
	Signatures	52

Explanatory Note

In this Quarterly Report on Form 10-Q, unless the context otherwise requires, “Evolent,” the “Company,” “we,” “our” and “us” refer to Evolent Health, Inc. and its consolidated subsidiaries. Evolent Health LLC, a subsidiary of Evolent Health, Inc. through which we conduct our operations, has owned all of our operating assets and substantially all of our business since inception. Evolent Health, Inc. is a holding company and its principal asset is all of the Class A common units of Evolent Health LLC.

FORWARD-LOOKING STATEMENTS - CAUTIONARY LANGUAGE

Certain statements made in this report and in other written or oral statements made by us or on our behalf are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: “believe,” “anticipate,” “expect,” “estimate,” “aim,” “predict,” “potential,” “continue,” “plan,” “project,” “will,” “should,” “shall,” “may,” “might” and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to our ability to grow our impact significantly throughout this year and beyond, future actions, trends in our businesses, prospective services, new partner additions/expansions, our guidance and business outlook and future performance or financial results, and the closing of pending transactions and the outcome of contingencies, such as legal proceedings. We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.

These statements are only predictions based on our current expectations and projections about future events. Forward-looking statements involve risks and uncertainties that may cause actual results, level of activity, performance or achievements to differ materially from the results contained in the forward-looking statements. Risks and uncertainties that may cause actual results to vary materially, some of which are described within the forward-looking statements, include, among others:

•risks relating to our ability to efficiently integrate NIA into our operations;

•the financial information of NIA and the pro forma financial information of NIA may not be indicative of future results or our financial condition;

•the significant portion of revenue we derive from our largest partners, and the potential loss, non-renewal, termination or renegotiation of our relationship or contract with any significant partner, or multiple partners in the aggregate;

•our ability to terminate certain leases and recognize impairment charges in connection with our repositioning plan;

•evolution of the healthcare regulatory and political framework;

•uncertainty in the health care regulatory framework, including the potential impact of policy changes;

•our ability to offer new and innovative products and services and our ability to keep pace with industry standards, technology and our partners’ needs;

•risks related to completed and future acquisitions, investments, alliances and joint ventures, including our acquisitions of IPG and NIA, which could divert management resources, result in unanticipated costs or dilute our stockholders;

•the financial benefits we expect to receive as a result of the sale of certain assets of Passport to Molina Healthcare, Inc. may not be realized;

•the growth and success of our partners and certain revenues from our engagements, which are difficult to predict and are subject to factors outside of our control, including governmental funding reductions and other policy changes;

•risks relating to our ability to maintain profitability for our total cost of care and New Century Health’s performance-based contracts and products, including capitation and risk-bearing contracts;

•our ability to effectively manage our growth and maintain an efficient cost structure, and to successfully implement cost cutting measures;

•changes in general economic conditions nationally and regionally in our markets, including increasing inflationary pressures and economic and business conditions and the impact thereof on the economy resulting from public health emergencies, epidemics, pandemics or contagious diseases such as the COVID-19 pandemic;

•risks related to the failure of any bank in which we deposit our funds, which could reduce the amount of cash we have available to meet our cash commitments and make additional investments;

•our ability to recover the significant upfront costs in our partner relationships and develop our partner relationships over time;

•our ability to attract new partners and successfully capture new opportunities;

•the increasing number of risk-sharing arrangements we enter into with our partners could limit or negatively impact our profitability;

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•our ability to estimate the size of our target markets for our services;

•our ability to maintain and enhance our reputation and brand recognition;

•consolidation in the health care industry;

•competition which could limit our ability to maintain or expand market share within our industry;

•risks related to audits by CMS and other governmental payers and actions, including whistleblower claims under the False Claims Act;

•our ability to partner with providers due to exclusivity provisions in our contracts in some of our partner and founder contracts;

•risks related to managing our offshore operations and cost reduction goals;

•our ability to contain health care costs, implement increases in premium rates on a timely basis, maintain adequate reserves for policy benefits or maintain cost effective provider agreements;

•our dependency on our key personnel, and our ability to attract, hire, integrate and retain key personnel;

•the impact of additional goodwill and intangible asset impairments on our results of operations;

•our indebtedness, our ability to service our indebtedness, and our ability to obtain additional financing on favorable terms or at all;

•our ability to achieve profitability in the future;

•the impact of litigation proceedings, government inquiries, reviews, audits or investigations;

•material weaknesses in the future may impact our ability to conclude that our internal control over financial reporting is not effective and we may be unable to produce timely and accurate financial statements;

•restrictions on the manner in which we access personal data and penalties as a result of privacy and data protection laws;

•liabilities and reputational risks related to our ability to safeguard the security and privacy of confidential data;

•data loss or corruption due to failures or errors in our systems and service disruptions at our data centers;

•adequate protection of our intellectual property, including trademarks;

•risks related to legal proceedings related to any alleged infringement, misappropriation or violation of third-party intellectual property rights;

•our use of “open source” software;

•our ability to protect the confidentiality of our trade secrets, know-how and other proprietary information;

•our reliance on third parties and licensed technologies;

•restrictions on our ability to use, disclose, de-identify or license data and to integrate third-party technologies;

•our reliance on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our partners;

•our reliance on third-party vendors to host and maintain our technology platform;

•our obligations to make material payments to certain of our pre-IPO investors for certain tax benefits we may claim in the future;

•our ability to utilize benefits under the tax receivables agreement described herein;

•our obligations to make payments under the tax receivables agreement that may be accelerated or may exceed the tax benefits we realize;

•the terms of agreements between us and certain of our pre-IPO investors may contain different terms than comparable agreement we may enter into with unaffiliated third parties;

•the conditional conversion features of the 2025 convertible notes, which, if triggered, could require us to settle the 2025 convertible notes in cash;

•interest rate risk under the Credit Agreement and the terms of our Series A Preferred Stock;

•our debt following the NIA acquisition and our ability to meet our obligations;

•our ability to service our debt and pay dividends on our Series A Preferred Stock;

•the potential volatility of our Class A common stock price;

•the potential decline of our Class A common stock price if a substantial number of shares are sold or become available for sale, including those issuable upon conversion of our Series A Preferred Stock;

•our Series A Preferred Stock has rights, preferences and privileges that are not held by and are preferential to the rights of holders of our Class A common stock, and could in the future substantially dilute the ownership interest of holders of our Class A common stock;

•provisions in our certificate of incorporation and by-laws and provisions of Delaware law that discourage or prevent strategic transactions, including a takeover of us;

•the ability of certain of our investors to compete with us without restrictions;

•provisions in our certificate of incorporation which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees; and

•our intention not to pay cash dividends on our Class A common stock.

The risks included here are not exhaustive. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Our Annual Report on Form 10-K for

ii

the year ended December 31, 2022 (the "2022 Form 10-K") and other documents filed with the SEC include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.

Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this report.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

EVOLENT HEALTH, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	March 31, 2023		December 31, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	157,519	$	188,200
Restricted cash and restricted investments	21,932		14,492
Accounts receivable, net (1)	262,764		254,684
Prepaid expenses and other current assets (1)	33,757		20,678
Total current assets	475,972		478,054
Restricted cash and restricted investments	12,519		12,466
Investments in equity method investees	4,112		4,475
Property and equipment, net	88,606		87,874
Right-of-use assets - operating	44,408		49,027
Prepaid expenses and other noncurrent assets (1)	3,543		2,378
Contract cost assets	16,497		17,461
Intangible assets, net	825,857		442,784
Goodwill	1,117,945		722,774
Total assets	$	2,589,459	$	1,817,293
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY
Liabilities
Current liabilities:
Accounts payable (1)	$	51,012	$	57,174
Accrued liabilities (1)	170,236		111,198
Operating lease liability - current	4,608		7,122
Accrued compensation and employee benefits	27,527		52,460
Deferred revenue	7,069		5,758
Reserve for claims and performance - based arrangements (1)	197,197		199,730
Total current liabilities	457,649		433,442
Long-term debt, net	632,277		412,986
Other long-term liabilities	4,473		4,744
Tax receivable agreement liability	112,134		45,950
Operating lease liabilities - noncurrent	54,274		56,010
Deferred tax liabilities, net	36,284		4,744
Total liabilities	1,297,091		957,876
Commitments and Contingencies (See Note 10)
Mezzanine Equity
Preferred class A common stock - $0.01 par value; 50,000,000 shares authorized; 175,000 shares issued	170,625		—
Shareholders' Equity
Class A common stock - $0.01 par value; 750,000,000 shares authorized; 112,552,160 and 101,500,558 shares issued, respectively	1,125		1,015
Additional paid-in-capital	1,768,999		1,486,857
Accumulated other comprehensive loss	(1,122)		(1,178)

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Retained earnings (accumulated deficit)	(626,136)		(606,154)
Treasury stock, at cost; 1,537,582 shares issued, respectively	(21,123)		(21,123)
Total shareholders' equity	1,121,743		859,417
Total liabilities, mezzanine equity and shareholders' equity	$	2,589,459	$	1,817,293

(1) See Note 18 for amounts attributable to related parties included in these line items.

See accompanying Notes to Consolidated Financial Statements

2

EVOLENT HEALTH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands, except per share data)

	For the Three Months Ended March 31,
	2023		2022
Revenue(1)	$	427,690	$	297,057
Expenses
Cost of revenue (1)	310,475		219,739
Selling, general and administrative expenses (1)	89,726		58,932
Depreciation and amortization expenses	29,275		15,106
Change in fair value of contingent consideration	8,569		6,078
Total operating expenses	438,045		299,855
Operating loss	(10,355)		(2,798)
Interest income	1,060		117
Interest expense	(12,895)		(2,241)
Gain from equity method investees	423		596
Change in tax receivable agreement liability	(66,184)		—
Other income (expense), net	(220)		178
Loss before income taxes	(88,171)		(4,148)
Provision for (benefit from) income taxes	(68,189)		1,202
Loss before preferred dividends and accretion of Series A Preferred Stock	(19,982)		(5,350)
Dividends and accretion of Series A Preferred Stock	(6,276)		—
Net loss attributable to common shareholders of Evolent Health, Inc.	$	(26,258)	$	(5,350)
Loss per common share
Basic and diluted	$	(0.24)	$	(0.06)
Weighted-average common shares outstanding
Basic and diluted	107,783		89,509
Comprehensive loss
Net loss	$	(26,258)	$	(5,350)
Other comprehensive loss, net of taxes, related to:
Foreign currency translation adjustment	56		(132)
Total comprehensive loss attributable to common shareholders of Evolent Health, Inc.	$	(26,202)	$	(5,482)

————————

(1)See Note 18 for amounts attributable to unconsolidated related parties included in these line items.

See accompanying Notes to Consolidated Financial Statements.

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EVOLENT HEALTH, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY

(unaudited, in thousands)

	For the Three Months Ended March 31, 2023
	Mezzanine Equity			Shareholders’ Equity
	Series A Preferred Stock			Class A Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Treasury Stock		Total Shareholders’ Equity
	Shares	Amount		Shares	Amount
Balance as of December 31, 2022	—	$	—	101,501	$	1,015	$	1,486,857	$	(1,178)	$	(606,154)	$	(21,123)	$	859,417
Stock-based compensation expense	—	—		—	—		10,710		—		—		—		10,710
Exercise of stock options	—	—		330	3		1,578		—		—		—		1,581
Restricted stock units vested, net of shares withheld for taxes	—	—		434	4		(8,636)		—		—		—		(8,632)
Performance stock units vested, net of shares withheld for taxes	—	—		202	2		(3,977)		—		—		—		(3,975)
Leveraged stock units vested, net of shares withheld for taxes	—	—		760	8		(8)		—		—		—		—
Shares issued for acquisition	—	—		8,475	85		261,186		—		—		—		261,271
Class A common stock issued for payment of earn-outs	—	—		850	8		27,565		—		—		—		27,573
Issuance of series A preferred stock, net of issuance costs	175	168,000		—	—		—		—		—		—		—
Foreign currency translation adjustment	—	—		—	—		—		56		—		—		56
Net loss attributable to common shareholders of Evolent Health, Inc.	—	2,625		—	—		(6,276)		—		(19,982)		—		(26,258)
Balance as of March 31, 2023	175	$	170,625	112,552	$	1,125	$	1,768,999	$	(1,122)	$	(626,136)	$	(21,123)	$	1,121,743
	For the Three Months Ended March 31, 2022
	Mezzanine Equity			Shareholders’ Equity
	Series A Preferred Stock			Class A Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Treasury Stock		Total Shareholders’ Equity
	Shares	Amount		Shares	Amount
Balance as of December 31, 2021	—	—		90,759	$	908	$	1,340,989	$	(362)	$	(626,779)	$	(21,123)	$	693,633
Cumulative-effect adjustment from adoption of ASC 2020-06	—	—		—	—		(106,172)		—		39,789		—		(66,383)
Stock-based compensation expense	—	—		—	—		5,346		—		—		—		5,346
Exercise of stock options	—	—		37	—		309		—		—		—		309
Restricted stock units vested, net of shares withheld for taxes	—	—		334	3		(4,986)		—		—		—		(4,983)
Leveraged stock units vested, net of shares withheld for taxes	—	—		458	5		(11,236)		—		—		—		(11,231)
Foreign currency translation adjustment	—	—		—	—		—		(132)		—		—		(132)
Net loss attributable to common shareholders of Evolent Health, Inc.	—	—		—	—		—		—		(5,350)		—		(5,350)
Balance as of March 31, 2022	—	$	—	91,588	$	916	$	1,224,250	$	(494)	$	(592,340)	$	(21,123)	$	611,209

See accompanying Notes to Consolidated Financial Statements

4

EVOLENT HEALTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	For the Three Months Ended March 31,
	2023		2022
Cash Flows Used In Operating Activities
Net loss before dividends declared and accretion of Series A preferred stock	$	(19,982)	$	(5,350)
Adjustments to reconcile net loss to net cash and restricted cash used in operating activities:
Change in fair value of contingent consideration	8,569		6,078
Gain from equity method investees	(423)		(596)
Depreciation and amortization expenses	29,275		15,106
Stock-based compensation expense	10,710		5,346
Deferred tax provision	(68,728)		(132)
Amortization of contract cost assets	2,290		11,689
Amortization of deferred financing costs	911		539
Change in tax receivable agreement liability	66,184		—
Right-of-use operating assets	4,620		1,718
Operating lease liabilities	(4,250)		(1,992)
Other current operating cash outflows, net	(56)		(357)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net and contract assets	19,832		(46,299)
Prepaid expenses and other current and non-current assets	(13,758)		(6,071)
Contract cost assets	(1,326)		(1,106)
Accounts payable	(13,585)		426
Accrued liabilities	4,785		2,220
Accrued compensation and employee benefits	(31,401)		(32,435)
Deferred revenue	1,169		1,344
Reserve for claims and performance-based arrangements	(2,533)		(7,056)
Other long-term liabilities	(277)		(514)
Net cash and restricted cash used in operating activities	(7,974)		(57,442)
Cash Flows Provided by (Used In) Investing Activities
Cash paid for asset acquisitions and business combinations	(386,724)		(70)
Proceeds from transfer of membership and release of Passport escrow	—		22,969
Return of equity method investments	786		2,375
Investments in internal-use software and purchases of property and equipment	(9,055)		(8,508)
Net cash and restricted cash provided by (used in) investing activities	(394,993)		16,766
Cash Flows Provided by (Used In) Financing Activities
Changes in working capital balances related to claims processing on behalf of partners	7,576		(34,371)
Proceeds from stock option exercises	1,581		309
Proceeds from issuance of long-term debt, net of offering costs	256,330		—
Repayment of long-term debt	(37,500)		—
Distributions to Sponsors	—		(1,100)
Proceeds from issuance of preferred stock, net of offering costs	168,000		—
Payment of preferred dividends	(3,651)		—
Taxes withheld and paid for vesting of equity awards	(12,607)		(16,214)
Net cash and restricted cash provided by (used in) financing activities	379,729		(51,376)
Effect of exchange rate on cash and cash equivalents and restricted cash	50		(104)
Net decrease in cash and cash equivalents and restricted cash	(23,188)		(92,156)

See accompanying Notes to Consolidated Financial Statements

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	For the Three Months Ended March 31,
	2023		2022
Cash and cash equivalents and restricted cash as of beginning-of-period	215,158		354,942
Cash and cash equivalents and restricted cash as of end-of-period	$	191,970	$	262,786

See accompanying Notes to Consolidated Financial Statements

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EVOLENT HEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization

Evolent Health, Inc. was incorporated in December 2014 in the state of Delaware and through its subsidiaries supports healthcare entities to improve the quality of care delivered for people with complex conditions through proven solutions that make health care simpler and more affordable.

The Company made organizational changes, including re-evaluating its reportable segments, as a result of growth in our value-based specialty care business, both organically and through acquisitions. Effective during the three months ended March 31, 2023, the Company changed its reportable segments to reflect changes in the way its chief operating decision maker evaluates the performance of its operations, develops strategy and allocates capital resources. Specifically, the Company collapsed its previous Evolent Health Services and Clinical Solutions segments into one segment. The Company's historical disclosures have been recast to be consistent with the current presentation.

As of March 31, 2023, the Company had unrestricted cash and cash equivalents of $157.5 million. The Company believes it has sufficient liquidity for at least the next twelve months as of the date the financial statements were available to be issued.

The Company’s headquarters is located in Arlington, Virginia.

Evolent Health LLC Governance

Our operations are conducted through Evolent Health LLC. Evolent Health, Inc. is a holding company whose only business is to act as the sole managing member of Evolent Health LLC. As such, it controls Evolent Health LLC’s business and affairs and is responsible for the management of its business.

Note 2. Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles

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 interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain footnote disclosures normally included in financial statements prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) have 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 2022 Form 10-K.

Summary of Significant Accounting Policies

Certain GAAP policies that significantly affect the determination of our financial position, results of operations and cash flows, are summarized below. See “Part II - Item 8. Financial Statements and Supplementary Data - Note 2” in our 2022 Form 10-K for a complete summary of our significant accounting policies.

Accounting Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses for the reporting period. Those estimates are inherently subject to change and actual results could differ from those estimates. In the accompanying interim consolidated financial statements, estimates are used for, but not limited to, the valuation of assets (including intangibles assets, goodwill and long-lived assets), liabilities, consideration related to business combinations and asset acquisitions, revenue recognition (including variable consideration), estimated selling prices for performance obligations in contracts with multiple performance obligations, reserves for claims and performance-based arrangements, credit losses, depreciable lives of assets, impairment of long-lived assets, stock-based compensation, deferred income taxes and valuation allowance, contingent liabilities, purchase price allocation in taxable stock transactions and useful lives of intangible assets.

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Principles of Consolidation

The interim consolidated financial statements include the accounts of Evolent Health, Inc. and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Cash and Cash Equivalents

We consider all highly liquid instruments with original maturities of three months or less to be cash equivalents. The Company holds materially all of our cash in bank deposits with FDIC participating banks, at cost, which approximates fair value. Cash and cash equivalents held in money market funds are carried at fair value, which approximates cost.

Restricted Cash and Restricted Investments

Restricted cash and restricted investments include cash and investments used to collateralize various contractual obligations (in thousands) as follows:

	March 31, 2023		December 31, 2022
Collateral for letters of credit for facility leases (1)	$	2,132	$	2,269
Collateral with financial institutions (2)	10,966		10,912
Claims processing services (3)	21,353		13,777
Total restricted cash and restricted investments	$	34,451	$	26,958
Current restricted cash	$	21,932	$	14,492
Total current restricted cash and restricted investments	$	21,932	$	14,492
Non-current restricted cash	$	12,519	$	12,466
Total non-current restricted cash and restricted investments	$	12,519	$	12,466

————————

(1)Represents restricted cash related to collateral for letters of credit required in conjunction with lease agreements. See Note 11 for further discussion of our lease commitments.

(2)Represents collateral held with financial institutions for risk-sharing and other arrangements which are held in a FDIC participating bank account. See Note 17 for discussion of fair value measurement and Note 10 for discussion of our risk-sharing arrangements.

(3)Represents cash held by the Company related to claims processing services on behalf of partners. These are pass-through amounts and can fluctuate materially from period to period depending on the timing of when the claims are processed.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows (in thousands):

	March 31,
	2023		2022
Cash and cash equivalents	$	157,519	$	210,158
Restricted cash and restricted investments	34,451		52,628
Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	191,970	$	262,786

Business Combinations

Companies acquired during each reporting period are reflected in the results of the Company effective from their respective dates of acquisition through the end of the reporting period. The Company allocates the fair value of purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Critical estimates used to value certain identifiable assets include, but are not limited to, expected long-term revenues, future expected operating expenses, cost of capital and appropriate discount rates.

The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed in the acquired entity is recorded as goodwill. Goodwill is assigned to the reporting unit that benefits from the synergies arising from the business combination. If the Company obtains new information about facts and circumstances that existed as of the acquisition date during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final

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determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded on the Company's consolidated statements of operations and comprehensive income (loss).

For contingent consideration recorded as a liability, the Company initially measures the amount at fair value as of the acquisition date and adjusts the liability, if needed, to fair value at each reporting period. Changes in the fair value of contingent consideration, other than measurement period adjustments, are recognized as operating income or expense. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. See Note 4 for additional discussion regarding business combinations.

Goodwill

We recognize the excess of the purchase price, plus the fair value of any non-controlling interests in the acquiree, over the fair value of identifiable net assets acquired as goodwill. Goodwill is not amortized, but is reviewed at least annually for indications of impairment, with consideration given to financial performance and other relevant factors. We perform impairment tests of goodwill at a reporting unit level on October 31 of each year. We perform impairment tests between annual tests if an event occurs, or circumstances change, that we believe would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Our goodwill impairment analysis first assesses qualitative factors to determine whether events or circumstances existed that would lead the Company to conclude it is more likely than not that the fair value of a reporting unit is below its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is below the carrying amount, a quantitative goodwill assessment is required. In the quantitative evaluation, the fair value of the relevant reporting unit is determined and compared to the carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value and a charge is reported in goodwill impairment on our consolidated statements of operations and comprehensive income (loss). See Note 8 for additional discussion regarding the goodwill impairment tests conducted during 2022.

Intangible Assets, Net

Identified intangible assets are recorded at their estimated fair values at the date of acquisition and are amortized over their respective estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are used.

The following summarizes the estimated useful lives by asset classification:

Corporate trade name	2 - 20 years
Customer relationships	11 - 25 years
Technology	5 years
Provider network contracts	3 - 5 years

As part of the organizational changes as a result of growth in our value-based specialty care business, we re-evaluated the useful lives of our intangible assets. As a result, we accelerated amortization such that all corporate trade names will be fully amortized by December 2024.

Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the asset’s carrying value. The Company evaluates recoverability by determining whether the undiscounted cash flows expected to result from the use and eventual disposition of that asset or group exceed the carrying value at the evaluation date. If the undiscounted cash flows are not sufficient to cover the carrying value, the Company measures an impairment loss as the excess of the carrying amount of the long-lived asset or group over its fair value. See Note 8 for additional discussion regarding our intangible assets.

Research and Development Costs

Research and development costs consist primarily of personnel and related expenses (including stock-based compensation and employee taxes and benefits) for employees engaged in research and development activities as well as third-party fees. All such costs are expensed as incurred. We focus our research and development efforts on activities that support our technology infrastructure, clinical program development, data analytics and network development capabilities. Research and development costs are recorded within cost of revenue and selling, general and administrative expenses on our consolidated statements of operations and comprehensive income (loss).

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Reserves for Claims and Performance-based Arrangements

Reserves for claims and performance-based arrangements reflect estimates of payments under performance-based arrangements and the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process) and other medical care expenses and services payable that are primarily composed of accruals for incentives and other amounts payable to health care professionals and facilities. The Company uses actuarial principles and assumptions that are consistently applied in each reporting period and recognizes the actuarial best estimate of the ultimate liability along with a margin for adverse deviation. This approach is consistent with actuarial standards of practice that the liabilities be adequate under moderately adverse conditions.

The process of estimating reserves involves a considerable degree of judgment by the Company and, as of any given date, is inherently uncertain. The methods for making such estimates and for establishing the resulting liability are continually reviewed and adjustments are reflected in current results of operations in the period in which they are identified as experience develops or new information becomes known. See Note 19 for additional discussion regarding our reserves for claims and performance-based arrangements.

Right of Offset

Certain customer arrangements give the Company the legal right to net payment for amounts due from customers and claims payable. As of both March 31, 2023 and December 31, 2022, approximately 47% of gross accounts receivable has been netted against claims payable in lieu of cash receipt. Furthermore, as of March 31, 2023, approximately 20% of our accounts receivable, net could ultimately be settled on a net basis, once the criteria for netting have been met.

Leases

The Company enters into various office space, data center and equipment lease agreements in conducting its normal business operations. At the inception of any contract, the Company evaluates the agreement to determine whether the contract contains a lease. If the contract contains a lease, the Company then evaluates the term and whether the lease is an operating or finance lease. Most leases include one or more options to renew or may have a termination option. The Company determines whether these options are reasonably certain to be exercised at the inception of the lease. The rent expense is recognized on a straight-line basis in the consolidated statements of operations and comprehensive income (loss) over the terms of the respective leases. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Further, the Company treats all lease and non-lease components as a single combined lease component for all classes of underlying assets.

The Company also enters into sublease agreements for some of its leased office space. Rental income attributable to subleases is immaterial and is offset against rent expense over the terms of the respective leases.

Refer to Note 11 for additional lease disclosures.

Revenue Recognition

Our revenue contracts are typically multi-year arrangements with customers to provide various clinical and administrative solutions. Our solutions are designed to lower the medical expenses of our partners and include our total cost of care and specialty care management services, provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers.

We use the following 5-step model, outlined in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), to determine revenue recognition from our contracts with customers:

• Identify the contract(s) with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to performance obligations

• Recognize revenue when (or as) the entity satisfies a performance obligation

See Note 5 for further discussion of our policies related to revenue recognition.

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Series A Senior Convertible Preferred Shares

In accordance with ASC 480, Distinguishing Liabilities from Equity, the shares of Series A Senior Convertible Preferred Shares are classified within temporary equity, as events outside the Company’s control triggers such shares to become redeemable. Costs associated with the issuance of redeemable preferred stock are presented as discounts to the fair value of the redeemable preferred stock and are amortized using the effective interest method, over the term of the respective series of preferred shares. Refer to Note 12 - Series A Senior Convertible Preferred Shares for further discussion.

Note 3. Recently Issued Accounting Standards

Adoption of New Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Specifically, the ASU removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature and no longer permits the use of the treasury stock method from calculating earnings per share. As a result, after adopting the ASU’s guidance, we do not separately present in equity an embedded conversion feature of such debt. Instead, we account for a convertible debt instrument wholly as debt unless (i) a convertible instrument contains features that require bifurcation as a derivative or (ii) a convertible debt instrument was issued at a substantial premium. Additionally, the ASU removes certain conditions for equity classification related to contracts in an entity’s own equity (e.g., warrants) and amends certain guidance related to the computation of earnings per share for convertible instruments and contracts on an entity’s own equity. The Company adopted the standard using a modified retrospective method on January 1, 2022, with adjustments which increased retained earnings by $39.8 million, reduced additional paid-in capital by $106.2 million and increased the net carrying amount of the 2024 and 2025 Notes by $25.1 million and $41.3 million, respectively.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. The Company adopted this standard starting in the first quarter of 2023, which did not have a material impact on our consolidated financial statements.

Note 4. Transactions

Business Combinations

National Imaging Associates Inc.

On January 20, 2023, the Company completed its acquisition of NIA, including all of the issued and outstanding shares of capital stock of NIA as well as certain assets held by Magellan Health, Inc. (“Magellan”) and certain of its subsidiaries that were used in the Magellan Specialty Health Division. NIA is a specialty benefit management organization that focuses on managing cost and quality in the areas of radiology, musculoskeletal, physical medicine and genetics. The transaction is expected to accelerate our strategy to become a leading provider of value-based specialty care solutions as well as diversify our revenue streams with a larger customer portfolio.

Total acquisition consideration, net of cash on hand and certain closing adjustments, was $715.7 million, based on the closing price of the Company’s Class A common stock on the NYSE on January 20, 2023. The acquisition consideration consisted of approximately $387.8 million of cash consideration (inclusive of certain post-closing adjustments), 8,474,576 shares of the Company’s Class A common stock, fair valued at $261.3 million as of January 20, 2023, and an earn-out consisting of additional consideration of up to $150.0 million payable in cash and, at the Company’s election, up to 50% in shares of the Company’s Class A common stock (the “Contingent Consideration”). As of January 20, 2023, the Contingent Consideration is fair valued at $66.6 million. See Note 17 for additional information regarding the fair value determination of the earn-out consideration.

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of January 20, 2023, as follows (in thousands):

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Purchase consideration:
Cash	$	387,823
Fair value of Class A common stock issued	261,271
Fair value of contingent consideration	66,600
Total consideration	$	715,694
Tangible assets acquired:
Accounts receivable	28,065
Prepaid expenses and other current assets	675
Total tangible assets acquired	28,740
Identifiable intangible assets acquired:
Customer relationships	345,100
Technology	50,700
Corporate trade name	8,200
Total identifiable intangible assets acquired	404,000
Liabilities assumed:
Accrued liabilities	5,409
Accrued compensation and employee benefits	6,173
Deferred tax liabilities, net	100,486
Deferred revenue	142
Total liabilities assumed	112,210
Goodwill	395,164
Net assets acquired	$	715,694

The fair value of the receivables acquired, as shown in the table above, approximates the gross contractual amounts and is expected to be collectible in full. Identifiable intangible assets associated with customer relationships, technology and the corporate trade name will be amortized on a straight-line basis over their preliminary estimated useful lives of 15 years, 5 years, and 2 years, respectively. The customer relationships are primarily attributable to existing contracts with current customers. The technology consists primarily of proprietary software that supports NIA’s core business applications and specialty business. The corporate trade name reflects the value that we believe the NIA brand name carries in the market. The fair value of the intangible assets was determined using the income approach and the relief from royalty approach. The income approach estimates fair value for an asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required rate of return that reflects the relative risk of achieving the cash flows and the time value of money. The relief from royalty approach estimates the fair value of an asset by calculating how much an entity would have to spend to lease a similar asset. Goodwill is calculated as the difference between the acquisition date fair value of the total consideration and the fair value of the net assets acquired and represents the future economic benefits that we expect to achieve as a result of the acquisition. The Company received carryover tax basis in the assets and liabilities acquired; accordingly, the Company recognized net deferred tax liabilities associated with the difference between the book basis and the tax basis for the assets and liabilities acquired. The goodwill is not deductible for tax purposes. Additionally, a discrete tax benefit of $56.1 million was recorded in the consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2023, to account for the valuation allowance release primarily related to the acquired intangible assets, which resulted in a deferred tax liability that provided a source of income supporting realization of other deferred tax assets.

The amounts above reflect management’s preliminary estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed. As of March 31, 2023, we had not finalized the determination of fair values allocated to the acquired intangible assets and deferred tax liability. Any necessary adjustments will be finalized within one year from the date of acquisition.

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We have included the financial results of NIA in our consolidated financial statements from January 20, 2023. The consolidated statements of operations and comprehensive income (loss) include $48.5 million of revenues and $(5.5) million of net loss attributable to NIA for the three months ended March 31, 2023.

Implantable Provider Group

On August 1, 2022, the Company completed its acquisition of IPG, including 100% of the voting equity interests. IPG is a leader in providing surgical management solutions for musculoskeletal conditions. The transaction is expected to accelerate our strategy to become a leading provider of value-based specialty care solutions as well as diversify our revenue streams with a larger customer portfolio. The transaction is expected to deepen our capabilities, allowing us to cross-sell across customers and enhance our value proposition to partners.

Total acquisition consideration, net of cash on hand and certain closing adjustments, was $461.7 million, based on the closing price of the Company’s Class A common stock on the NYSE on August 1, 2022. The acquisition consideration consisted of $256.5 million of cash consideration, 3.7 million shares of Class A common stock, fair valued at $130.2 million as of August 1, 2022, and an earn-out of up to $87.0 million, fair valued at $75.0 million as of August 1, 2022 is payable in cash and/or shares of the Company’s Class A Common Stock, at the Company’s option. See Note 17 for additional information regarding the fair value determination of the earn-out consideration.

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of August 1, 2022, as follows (in thousands):

Purchase consideration:
Cash	$	256,488
Fair value of Class A common stock issued	130,175
Fair value of contingent consideration	75,000
Total consideration	$	461,663
Tangible assets acquired:
Accounts receivable	34,155
Prepaid expenses and other current assets	636
Other non-current assets	1,393
Total tangible assets acquired	36,184
Identifiable intangible assets acquired:
Customer relationships	154,000
Technology	23,900
Corporate trade name	17,800
Total identifiable intangible assets acquired	195,700
Liabilities assumed:
Accounts payable	7,997
Accrued liabilities	8,083
Accrued compensation and employee benefits	423
Deferred tax liabilities, net	48,671
Deferred revenue	321
Operating lease liabilities	1,323
Total liabilities assumed	66,818

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Goodwill	296,597
Net assets acquired	$	461,663

The fair value of the receivables acquired, as shown in the table above, approximates the gross contractual amounts and is expected to be collectible in full. Identifiable intangible assets associated with customer relationships, technology and the corporate trade name will be amortized on a straight-line basis over their preliminary estimated useful lives of 20 years, 5 years, and 15 years, respectively. The customer relationships are primarily attributable to existing contracts with current customers. The technology consists primarily of a proprietary customer relationship management and analytics platform that supports reporting to payors with respect to medical device pricing and associated analytics. The corporate trade name reflects the value that we believe the IPG brand name carries in the market. The fair value of the intangible assets was determined using the income approach and the relief from royalty approach. The income approach estimates fair value for an asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required rate of return that reflects the relative risk of achieving the cash flows and the time value of money. The relief from royalty approach estimates the fair value of an asset by calculating how much an entity would have to spend to lease a similar asset. Goodwill is calculated as the difference between the acquisition date fair value of the total consideration and the fair value of the net assets acquired and represents the future economic benefits that we expect to achieve as a result of the acquisition. The Company received carryover tax basis in the assets and liabilities acquired; accordingly, the Company recognized net deferred tax liabilities associated with the difference between the book basis and the tax basis for the assets and liabilities acquired. The goodwill is not deductible for tax purposes. Additionally, a discrete tax benefit of $46.8 million was recorded in the consolidated statements of operations and comprehensive income (loss) for the year December 31, 2022, to account for the valuation allowance release primarily related to the acquired intangible assets, which resulted in a deferred tax liability that provided a source of income supporting realization of other deferred tax assets.

The amounts above reflect management’s preliminary estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed. As of March 31, 2023, we had not finalized the determination of fair values allocated to the deferred tax liability. Any necessary adjustments will be finalized within one year from the date of acquisition.

Pro forma financial information (unaudited)

The following unaudited condensed pro forma information presents combined financial information as if the acquisition of NIA had been effective as of January 1, 2022, the beginning of the 2022 fiscal year. The unaudited pro forma financial information includes adjustments to historical amounts including amortization of acquired intangible assets, depreciation of acquired property and equipment, interest expense for the financing of the transaction, alignment of NIA’s revenue recognition policy, and the associated income tax effects as if NIA had been included in the Company’s results of operations.

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 are 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 Months Ended March 31,
	2023		2022
Revenue	$	446,740	$	362,827
Net loss attributable to common shareholders of Evolent Health, Inc.	(15,730)		(10,240)

Pro forma financial information has not been presented for the IPG acquisition as the impact to the Company’s interim consolidated financial statements was not material.

Note 5. Revenue Recognition

Our revenue contracts are typically multi-year arrangements with customers to provide various clinical and administrative solutions. Our solutions are designed to lower the medical expenses of our partners and include our total cost of care and specialty care management services, provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers.

Our performance obligation in these arrangements is to provide an integrated suite of services, including access to our platform that is customized to meet the specialized needs of our customers and members. Generally, we will apply the series guidance to the performance obligation as we have determined that each time increment is distinct. We primarily utilize a variable fee structure for

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these services that typically includes a monthly payment that is calculated based on a specified per member per month rate, multiplied by the number of members that our partners are managing under a value-based care arrangement or a percentage of plan premiums. Our arrangements may also include other variable fees related to service level agreements, shared medical savings arrangements and other performance measures. Variable consideration is estimated using the most likely amount based on our historical experience and best judgment at the time. Due to the nature of our arrangements, certain estimates may be constrained if it is probable that a significant reversal of revenue will occur when the uncertainty is resolved. We recognize revenue over time using the time elapsed output method. Fixed consideration is recognized ratably over the contract term. In accordance with the series guidance, we allocate variable consideration to the period to which the fees relate.

Contracts with Multiple Performance Obligations

Our contracts with customers may contain multiple performance obligations, primarily when the customer has requested both implementation and on going services as these services are distinct from one another. When a contract has multiple performance obligations, we allocate the transaction price to each performance obligation based on the relative standalone selling price using the expected cost margin approach. This approach requires estimates regarding both the level of effort it will take to satisfy the performance obligation as well as fees that will be received under the variable pricing model. We also take into consideration customer demographics, current market conditions, the scope of services and our overall pricing strategy and objectives when determining the standalone selling price.

Principal vs. Agent

We occasionally use third parties to assist in satisfying our performance obligations. In order to determine whether we are the principal or agent in the arrangement, we review each third-party relationship on a contract by contract basis. As we integrate goods and services provided by third parties into our overall service, we control the services provided to the customer prior to its delivery. As such, we are the principal and we will recognize revenue on a gross basis. In certain cases, we act as an agent and do not control the services from third parties before it is delivered to the customer, thereby recognizing revenue on a net basis.

Disaggregation of Revenue

The following table represents Evolent’s revenue disaggregated by end-market and product type:

	For the Three Months Ended March 31,
	2023		2022
Medicaid	$	183,034	$	130,501
Medicare	127,669		104,399
Commercial and other	116,987		62,157
Total	$	427,690	$	297,057
Performance Suite	$	239,873	$	171,164
Specialty Technology and Services Suite	65,316		13,580
Administrative Services	83,067		106,859
Cases	39,434		5,454
Total	$	427,690	$	297,057

Transaction Price Allocated to the Remaining Performance Obligations

For contracts with a term greater than one year, we have allocated approximately $43.8 million of transaction price to performance obligations that are unsatisfied as of March 31, 2023. We do not include variable consideration that is allocated entirely to a wholly unsatisfied performance obligation accounted for under the series guidance in the calculation. As a result, the balance represents the value of the fixed consideration in our long-term contracts that we expect will be recognized as revenue in a future period and excludes the majority of our revenue, which is primarily derived based on variable consideration as discussed in Note 2. We expect to recognize revenue on approximately 69%, 92% and 100% of these remaining performance obligations by December 31, 2023, 2024 and 2025, respectively. However, because our existing contracts may be canceled or renegotiated including for reasons outside our control, the amount of revenue that we actually receive may be more or less than this estimate and the timing of recognition may not be as expected.

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Contract Balances

Contract balances consist of accounts receivable, contract assets and deferred revenue. Contract assets are recorded when the right to consideration for services is conditional on something other than the passage of time. Contract assets relating to unbilled receivables are transferred to accounts receivable when the right to consideration becomes unconditional. We classify contract assets as current or non-current based on the timing of our rights to the unconditional payments. Our contract assets are generally classified as current and recorded within prepaid expenses and other current assets on our consolidated balance sheets. Our current accounts receivables are classified within accounts receivable, net on our consolidated balance sheets and our non-current accounts receivable are classified within prepaid expenses and other non-current assets on our consolidated balance sheets.

Deferred revenue includes advance customer payments and billings in excess of revenue recognized. We classify deferred revenue as current or non-current based on the timing of when we expect to recognize revenue. Our current deferred revenue is recorded within deferred revenue on our consolidated balance sheets and non-current deferred revenue is recorded within other long-term liabilities on our consolidated balance sheets.

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023		December 31, 2022
Short-term receivables (1)	$	261,875	$	246,209
Short-term deferred revenue	7,069		5,758
Long-term deferred revenue	2,193		2,533

————————

(1)Excludes pharmacy claims receivable and premiums receivable.

Changes in deferred revenue for the three months ended March 31, 2023, are as follows (in thousands):

Deferred revenue
Balance as of beginning-of-period	$	8,291
Reclassification to revenue, as a result of performance obligations satisfied	(3,987)
Cash received in advance of satisfaction of performance obligations	4,958
Balance as of end of period	$	9,262

The amount of revenue, excluding customer discounts of $1.5 million, recognized from performance obligations satisfied (or partially satisfied) in a previous period was $4.8 million for the three months ended March 31, 2023, due primarily to net gain share as well as changes in other estimates.

Contract Cost Assets

Certain bonuses and commissions earned by our sales team are considered incremental costs of obtaining a contract with a customer that we expect to be recoverable. The capitalized contract acquisition costs are classified as non-current assets and recorded within contract cost assets on our consolidated balance sheets. Amortization expense is recorded within selling, general and administrative expenses on the accompanying consolidated statements of operations and comprehensive income (loss). As of March 31, 2023 and 2022, the Company had $3.4 million and $3.9 million, respectively, of contract acquisition cost assets, net of accumulated amortization recorded in contract cost assets on the consolidated balance sheets. In addition, the Company recorded amortization expense of $0.3 million and $1.4 million for the three months ended March 31, 2023 and 2022, respectively.

In our revenue contracts, we incur certain costs related to the implementation of our platform before we begin to satisfy our performance obligation to the customer. The costs, which we expect to recover, are considered costs to fulfill a contract. Our contract fulfillment costs primarily include our employee labor costs and third-party vendor costs. The capitalized contract fulfillment costs are classified as non-current and recorded within contract cost assets on our consolidated balance sheets. Amortization expense is recorded within cost of revenue on the accompanying consolidated statements of operations and comprehensive income (loss). As of March 31, 2023 and 2022, the Company had $13.1 million and $18.1 million, respectively, of contract fulfillment cost assets, net of accumulated amortization recorded in contract cost assets on the consolidated balance sheets. In addition, the Company recorded amortization expense including the acceleration of amortization of contract costs for certain customers of $2.0 million and $10.3 million for the three months ended March 31, 2023 and 2022, respectively.

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These costs are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be the shorter of the contract term or five years. The period of benefit was based on our technology, the nature of our customer arrangements and other factors.

Note 6. Credit Losses

We are exposed to credit losses primarily through our accounts receivable from revenue transactions, investments held at amortized cost and other notes receivable. We estimate expected credit losses based on past events, current conditions and reasonable and supportable forecasts. Expected credit losses are measured over the remaining contractual life of these assets. As part of our consideration of current and forward-looking economic conditions, current inflationary pressures on our customers’ and other third parties’ ability to pay. We did not observe notable increases in delinquencies during the three months ended March 31, 2023. Given the nature of our business, our past collection experience during recessionary and pre-recessionary periods, we did not record material changes in our allowances during the three months ended March 31, 2023.

Accounts Receivable from Revenue Transactions

Accounts receivable represent the amounts owed to the Company for goods or services provided to customers or third parties. Current accounts receivables are classified within accounts receivable, net on the Company’s consolidated balance sheets, while non-current accounts receivables are classified within prepaid expenses and other noncurrent assets on the Company’s consolidated balance sheets.

We monitor our ongoing credit exposure through active review of counterparty balances against contract terms, due dates and business strategy. Our activities include timely account reconciliation, dispute resolution and payment confirmation. We may employ legal counsel to pursue recovery of defaulted receivables. In addition, the Company will establish a general reserve based on delinquency rates. Historical loss rates are determined for each delinquency bucket in 30-day past-due intervals and then applied to the composition of the reporting date balance based on delinquency. The allowance implied from application of the historical loss rates is then adjusted, as necessary, for current conditions and reasonable and supportable forecasts.

Based on an aging analysis of our trade accounts receivable, non-trade accounts receivable and contract assets as of March 31, 2023, 70% were current, 23% were past due less than 60 days, with 26% past due less than 120 days and at December 31, 2022, 67% was current, 21% was past due less than 60 days, with 29% past due less than 120 days. As of March 31, 2023 and December 31, 2022, in total we reported on the consolidated balance sheet $284.7 million and $269.1 million of accounts receivable, certain non-trade accounts receivable included in prepaid expenses and other current assets, net of allowances of $15.1 million and $10.2 million, respectively. The following table summarizes the changes in allowance for credit losses on our accounts receivables, certain non-trade accounts receivable and contract assets (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Balance as of beginning of period	$	(10,180)	$	(3,374)
NIA acquisition	(240)		—
Provision for credit losses	(5,482)		1,203
Charge-offs	829		—
Balance as of end of period	$	(15,073)	$	(2,171)

Note 7. Property and Equipment, Net

The following summarizes our property and equipment (in thousands):

	March 31, 2023		December 31, 2022
Computer hardware	$	30,441	$	30,092
Furniture and equipment	4,246		4,214
Internal-use software development costs	197,174		189,119
Leasehold improvements	15,390		14,926
Total property and equipment	247,251		238,351
Accumulated depreciation and amortization expenses	(158,645)		(150,477)
Total property and equipment, net	$	88,606	$	87,874

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The Company capitalized $8.1 million and $6.4 million for the three months ended March 31, 2023 and 2022, respectively, of internal-use software development costs. The net book value of capitalized internal-use software development costs was $75.1 million and $73.7 million as of March 31, 2023 and December 31, 2022, respectively.

Depreciation expense related to property and equipment was $8.1 million and $7.6 million for the three months ended March 31, 2023 and 2022, respectively, of which amortization expense related to capitalized internal-use software development costs was $6.7 million for both the three months ended March 31, 2023 and 2022, respectively.

Note 8. 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.

Our assets and liabilities are employed in and relate to the operations of our reporting units. Therefore, the equity carrying value and future cash flows must be estimated each time a goodwill impairment analysis is performed on a reporting unit. As a result, our assets, liabilities and cash flows are assigned to reporting units using reasonable and consistent allocation methodologies.

Our annual goodwill impairment review occurs on October 31 of each fiscal year. We evaluate qualitative factors that could cause us to believe the estimated fair value of each of our reporting units may be lower than the carrying value and trigger a quantitative assessment, 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, revenues and earnings, (iv) a sustained decrease in share price and (v) other relevant entity-specific events including changes in management, strategy, partners, or litigation.

We did not identify any qualitative factors that would trigger a quantitative goodwill impairment test during the three months ended March 31, 2023. We will perform our annual impairment test of October 31, 2023.

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2022 Goodwill Impairment Test

On October 31, 2022, the Company performed its annual goodwill impairment test for fiscal year 2022. As a result of BHG announcing its plan to exit its IFP line of business in 2023, thus negatively impacting the Company’s future revenues from such partner, the Company elected to forego the qualitative assessment and proceeded directly to the quantitative assessment of the goodwill impairment test for that specific reporting unit. In doing so, we estimated the fair value of the reporting unit by considering an income approach. In determining the estimated fair value using the income approach, we projected future cash flows based on management’s estimates and long-term plans and applied a discount rate based on the Company’s weighted average cost of capital. This analysis required us to make judgments about revenues, expenses, fixed asset and working capital requirements, capital market assumptions, cash flows and discount rates. The quantitative analysis of the Evolent Health Services reporting unit showed that the fair value exceeded the carrying value. Contracts with our customers may be cancelled or renegotiated and future revenue growth is dependent on winning new contracts. Further, the impairment analysis is particularly sensitive to changes in the projected revenue growth rates and expenses and the discount rate. Changes in these key assumptions such as a significant unfavorable change to our forecasted cash flows due to being unsuccessful in winning certain contracts or certain of our contracts being cancelled or renegotiated by our customers, could result in a revision of management’s estimates and could result in impairment charges in the future, which could be material to our results of operations. We will continue to monitor for such changes in facts or circumstances, which may be indicators of potential impairment triggers.

For the remaining reporting units, after assessing the totality of events and circumstances including the results of our previous valuations, no events occurred or circumstances changed during the period under consideration that would, more likely than not, reduce the fair value of any reporting unit below their carrying amount. Therefore, the Company concluded that the quantitative assessment was not required. For all reporting units, it was determined that as of October 31, 2022, no impairment of goodwill had occurred.

Change in Goodwill

The following table summarizes the changes in the carrying amount of goodwill, for the periods presented (in thousands):

Balance as of December 31, 2022(1)	$	722,774
Goodwill acquired(2)	395,164
Foreign currency translation	7
Balance as of March 31, 2023	$	1,117,945
Balance as of December 31, 2021(1)	$	426,297
Foreign currency translation	(23)
Balance as of March 31, 2022	$	426,274

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(1)Net of cumulative inception to date impairment of $575.5 million as of December 31, 2022 and 2021.

(2)Goodwill acquired from the addition of NIA in January 2023.

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Intangible Assets, Net

Details of our intangible assets (in thousands, except weighted-average useful lives) are presented below:

	March 31, 2023							December 31, 2022
	Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Corporate trade name	1.8	$	51,965	$	16,967	$	34,998	12.7	$	43,600	$	11,726	$	31,874
Customer relationships	15.2	810,119		103,694		706,425		15.8	465,019		92,760		372,259
Technology	2.3	162,522		83,970		78,552		2.7	111,822		80,255		31,567
Below market lease, net	0.1	1,218		1,200		18		0.3	1,218		1,151		67
Provider network contracts	1.1	18,861		12,997		5,864		1.3	18,851		11,834		7,017
Total intangible assets, net		$	1,044,685	$	218,828	$	825,857		$	640,510	$	197,726	$	442,784

Amortization expense related to intangible assets was $21.1 million and $7.5 million for the three months ended March 31, 2023 and 2022, respectively.

Future estimated amortization of intangible assets (in thousands) as of March 31, 2023, is as follows:

2023	$	69,945
2024	87,529
2025	63,641
2026	63,293
2027	60,552
Thereafter	480,897
Total future amortization of intangible assets	$	825,857

As part of the organizational changes as a result of growth in our value-based specialty care business, we re-evaluated the useful lives of our intangible assets. As a result, we accelerated amortization such that all corporate trade names will be fully amortized by December 2024.

Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the assets’ carrying value. We did not identify any circumstances during the three months ended March 31, 2023, that would require an impairment test for our intangible assets.

Note 9. Long-term Debt

Credit Agreement

On August 1, 2022 (the “IPG Closing Date”), the Company entered into a credit agreement, by and among the Company, Evolent Health LLC, as the borrower (the “Borrower”), certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrative agent, collateral agent and revolver agent (the “Existing Credit Agreement” and as modified by the Amendment (defined below), the “Credit Agreement”), pursuant to which the lenders agreed to extend credit to the Borrower in the form of (i) initial term loans in an aggregate principal amount of $175.0 million (the “Initial Term Loan Facility”) and (ii) revolving credit commitments in an aggregate principal amount of $50.0 million (the “Initial Revolving Facility”), the availability of which shall be determined by reference to the lesser of $50.0 million and a borrowing base calculation. The Borrowers borrowed full amount under the Initial Term Loan Facility and the Initial Revolving Facility on the IPG Closing Date. A closing fee of (a) 2.00% of the aggregate amount of the commitments in respect of the Initial Term Loan Facility and (b) 2.00% of the aggregate amount of the commitments in respect of the Initial Revolving Facility was paid as of the IPG Closing Date.

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On January 20, 2023, (“the NIA Closing Date”), the Company entered into Amendment No. 1 to the Credit Agreement (the “Amendment”), pursuant to which the lenders agreed to extend credit to the Borrower in the form of (i) additional revolving commitments in an aggregate principal amount equal to $25.0 million (the “Incremental Revolving Facility” and together with the Initial Revolving Facility, the Revolving Facility”), and (ii) additional term loans in an aggregate principal amount equal to $240.0 million, (the “Incremental Term Loan Facility” and together with the Initial Term Loan Facility, the “Term Loan Facility”; the Revolving Facility and the Term Loan Facility are collectively referred to herein as the “Credit Facilities”). The Borrowers borrowed the full amount under the Incremental Term Loan Facility and the Incremental Revolving Facility on the NIA Closing Date to finance, together with the proceeds from the sale of the Series A Preferred Stock, the cash consideration payable in connection with the NIA acquisition on the NIA Closing Date and pay transaction fees and expenses. A closing fee of (a) 3.00% of the aggregate amount of the commitments in respect of the Incremental Term Loan Facility and (b) 3.00% of the aggregate amount of the commitments in respect of the Incremental Revolving Facility was paid as of the NIA Closing Date.

The Credit Facilities are guaranteed by the Company and the Company’s domestic subsidiaries, subject to certain customary exceptions. The Credit Facilities are secured by a first priority security interest in all of the capital stock of each borrower and guarantor (other than the Company) and substantially all of the assets of each borrower and guarantor, subject to certain customary exceptions.

All loans under the Credit Facilities will mature on the date that is the earliest of (a) the sixth anniversary of the NIA Closing Date, (b) the date on which the commitments are voluntarily terminated pursuant to the terms of the Credit Agreement, (c) the date on which all amounts outstanding under the Credit Agreement have been declared or have automatically become due and payable under the terms of the Credit Agreement and (d) the date that is ninety-one (91) days prior to the maturity date of any Junior Debt (as defined in the Existing Credit Agreement) unless certain liquidity conditions are satisfied.

The interest rate for the Loans is calculated, at the option of the Borrowers, (a) in the case of the Term Loan Facility, at either the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus 6.00%, or the base rate plus 5.00% and (b) in the case of the Revolving Facility, at either the Adjusted Term SOFR Rate plus 4.00%, or the base rate plus 3.00%. A closing fee of (a) 2.00% of the aggregate amount of the commitments in respect of the Incremental Term Loan Facility and (b) 2.00% of the aggregate amount of the commitments in respect of the Incremental Revolving Facility was paid as of the NIA Closing Date. The Company recorded $11.1 million in interest expense related to our Credit Agreement for the three months ended March 31, 2023.

Amounts outstanding under the Credit Facilities may be prepaid at the option of the Company, subject to the following prepayment premium (the “Prepayment Premium”): (1) 3.00% of the principal amount so prepaid after the NIA Closing Date but prior to the first anniversary of the NIA Closing Date; (2) 2.00% of the principal amount so prepaid after the first anniversary of the closing but prior to the second anniversary of the NIA Closing Date; (3) 1.00% of the principal amount so prepaid after the second anniversary of the NIA Closing Date but prior to the third anniversary of the NIA Closing Date; and (4) 0.00% of the principal amount so prepaid on or after the third anniversary of the NIA Closing Date. Amounts outstanding under the Credit Facility are subject to mandatory prepayment upon the occurrence of certain events and conditions, including non-ordinary course asset dispositions, receipt of certain casualty proceeds, issuances of certain debt obligations and a change of control transaction, in each case, subject to application of the Prepayment Premium.

The Credit Facilities contain customary borrowing conditions, affirmative, negative and reporting covenants, representations and warranties, and events of default, including cross-defaults to other material indebtedness. If an event of default occurs, the lenders would be entitled to take enforcement action, including foreclosure on collateral and acceleration of amounts owed under the Loans. We incurred $14.4 million of debt issuance costs in connection with the Loans, which was included in long-term debt, net of discount on our consolidated balance sheets and amortized into interest expense over the life of the Credit Agreement. The Company recorded $0.5 million in interest expense related to the amortization of the debt discount and the issuance costs for the three months ended March 31, 2023.

During the three months ended March 31, 2023, the Company repaid $37.5 million under the Revolving Facility.

2024 Notes

In August 2020, the Company issued $117.1 million aggregate principal amount of its 3.50% Convertible Senior Notes due 2024 (the “2024 Notes”) in privately negotiated exchange and/or subscription agreements, with certain holders of its outstanding 2021 Notes and certain new investors. The Company issued $84.2 million aggregate principal amount of 2024 Notes in exchange for $84.2 million aggregate principal amount of the 2021 Notes and an aggregate cash payment of $2.5 million, and issued $32.8 million aggregate principal amount of New Notes for cash at par. We incurred $3.0 million of debt issuance costs in connection with the 2024 Notes, which we are amortizing to non-cash interest expense using the straight-line method over the contractual term of the 2024 Notes,

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since this method was not materially different from the effective interest method. The closing of the private placement of the 2024 Notes occurred on August 19, 2020.

Holders of the 2024 Notes are entitled to cash interest payments, which are payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020, at a rate equal to 3.50% per annum. The 2024 Notes will mature on December 1, 2024, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. Upon maturity the principal amount of the notes may be settled via shares of the Company’s Class A common stock. We recorded interest expense of $0.2 million, $1.0 million for the three months ended March 31, 2023 and 2022, respectively.

The 2024 Notes are convertible into cash, shares of the Company's Class A common stock, or a combination of cash and shares of the Company's Class A common stock, at the Company's election, based on an initial conversion rate of 54.8667 shares of Class A common stock per $1,000 principal amount of the 2024 Notes, which is equivalent to an initial conversion price of approximately $18.23 per share of the Company’s Class A common stock. In the aggregate, the 2024 Notes are initially convertible into 6.4 million shares of the Company’s Class A common stock (excluding any shares issuable by the Company upon a conversion in connection with a make-whole provision upon a fundamental change or a notice of redemption under the governing indenture). The conversion rate may be adjusted under certain circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election.

The option to settle the 2024 Notes in cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election, resulted in a bifurcation of the carrying value of the 2024 Notes into a debt component and an equity component prior to the adoption of ASU 2020-06. The debt component was determined to be $78.9 million, before issuance costs, based on the fair value of a nonconvertible debt instrument with the same term. The equity component was determined to be $38.1 million before issuance costs and was recorded within additional paid-in capital. Issuance costs of $1.7 million and $1.3 million were allocated to the debt and equity components in proportion to the allocation of proceeds. Along with the equity component of $38.1 million, $1.7 million of issuance costs was amortized to interest expense on the consolidated statements of operations and comprehensive income (loss) using the effective interest method.

On January 1, 2022, we adopted ASU 2020-06 using the retrospective transition method. As a result, prior period financial information and disclosures are not adjusted and continue to be reported under the accounting standards that were in effect prior to the adoption of ASU 2020-06. The adoption of ASU 2020-06 resulted in the combination of the debt and equity components of the 2024 Notes into a single debt instrument recorded in long term debt, net on the consolidated balance sheet. This resulted in a $38.1 million decrease in additional paid-in capital and a $1.3 million increase in additional paid-in capital from the previously bifurcated equity component from deferred financing fees, respectively, and an $11.7 million decrease to the January 1, 2022 accumulated deficit, representing the cumulative non-cash interest expense recognized related to the amortization of the debt discount associated with the bifurcated equity component of the 2024 Notes. These adjustments resulted in an increase of $25.1 million to the debt component of the 2024 Notes. Additionally, the allocation of the issuance costs to the equity component and all issuance costs related to the 2024 Notes are being amortized to interest expense using the effective interest method over the contractual term of the 2024 Notes which is included in the cumulative adjustment to the opening balance of accumulated deficit. The Company recorded interest expense related to the amortization of the issuance costs of $0.2 million for the three months ended March 31, 2023 and 2022, respectively.

Holders of the 2024 Notes may require the Company to repurchase all or part of their notes upon the occurrence of a fundamental change at a price equal to 100.0% of the principal amount of the notes being repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The Company may not redeem the 2024 Notes prior to March 1, 2023. The Company may redeem for cash all or any portion of the 2024 Notes, at its option, on or after March 1, 2023, if the last reported sale price of the Company’s Class A common stock has been at least 130.0% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

On August 11, 2022, the Company entered into exchange agreements with certain holders of the 2024 Notes. Pursuant to the agreements, these holders exchanged $92.8 million in aggregate principal amount of such notes for shares of the Company’s Class A common stock. On August 17 and 18, 2022, the Company consummated the exchanges and issued an aggregate of 5,394,165 shares of Class A common stock to the holders.

The August 2022 exchanges of the 2024 Notes for Class A common stock resulted in a $10.2 million loss on extinguishment/repayment of debt, net, on the consolidated statements of operations and comprehensive income (loss).

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2025 Notes

In October 2018, the Company issued $172.5 million aggregate principal amount of its 1.50% Convertible Senior Notes due 2025 (the “2025 Notes”) in a private placement to qualified institutional buyers within the meaning of Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2025 Notes were issued at par for net proceeds of $166.6 million. We incurred $5.9 million of debt issuance costs in connection with the 2025 Notes. The closing of the private placement of $150.0 million aggregate principal amount of the 2025 Notes occurred on October 22, 2018 and the Company completed the offering and sale of an additional $22.5 million aggregate principal amount of the 2025 Notes on October 24, 2018, pursuant to the initial purchasers’ exercise in full of their option to purchase additional notes.

Holders of the 2025 Notes are entitled to cash interest payments, which are payable semiannually in arrears on April 15 and October 15 of each year, beginning on April 15, 2019, at a rate equal to 1.50% per annum. The 2025 Notes will mature on October 15, 2025, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. The Company recorded interest expense of $0.6 million for the three months ended March 31, 2023 and 2022, respectively.

Prior to the close of business on the business day immediately preceding April 15, 2025, the 2025 Notes will be convertible at the option of the holders only upon the satisfaction of certain conditions, as described in the indenture, dated as of October 22, 2018, between the Company and U.S. Bank National Association, as trustee. At any time on or after April 15, 2025, until the close of business on the business day immediately preceding the maturity date, holders may convert, at their option, all or any portion of their notes at the conversion rate.

The 2025 Notes will be convertible at an initial conversion rate of 29.9135 shares of Class A common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $33.43 per share of the Company’s Class A common stock. In the aggregate, the 2025 Notes are initially convertible into 5.2 million shares of the Company’s Class A common stock (excluding any shares issuable by the Company upon a conversion in connection with a make-whole fundamental change or a notice of redemption as described in the governing indenture). The conversion rate may be adjusted under certain circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election.

The option to settle the 2025 Notes in cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election, resulted in a bifurcation of the carrying value of the 2025 Notes into a debt component and an equity component prior to the adoption of ASU 2020-06. The debt component was determined to be $100.7 million, before issuance costs, based on the fair value of a nonconvertible debt instrument with the same term. The equity component was determined to be $71.8 million, before issuance costs, and was recorded within additional paid-in capital. The equity component is the difference between the aggregate principal amount of the debt and the debt component. Issuance costs of $3.4 million and $2.5 million are allocated to the debt and equity components in proportion to the allocation of proceeds. Along with the equity component of $71.8 million, $3.4 million of issuance costs will be amortized to interest expense on the consolidated statements of operations and comprehensive income (loss) using the effective interest method over the contractual term of the 2025 Notes.

On January 1, 2022, we adopted ASU 2020-06 using the retrospective transition method. As a result, prior period financial information and disclosures are not adjusted and continue to be reported under the accounting standards that were in effect prior to the adoption of ASU 2020-06. The adoption of ASU 2020-06 resulted in the combination of the debt and equity components of the 2024 Notes into a single debt instrument recorded in long term debt, net on the consolidated balance sheet. This resulted in a $71.8 million decrease in additional paid-in capital and a $2.5 million increase in additional paid-in capital from the previously bifurcated equity component from deferred financing fees, respectively, and a $28.1 million decrease to the January 1, 2022 accumulated deficit, representing the cumulative non-cash interest expense recognized related to the amortization of the debt discount associated with the bifurcated equity component of the 2025 Notes. These adjustments resulted in an increase of $41.3 million to the debt component of the 2025 Notes. Additionally, the allocation of the issuance costs to the equity component and all issuance costs related to the 2025 Notes are being amortized to interest expense using the effective interest method over the contractual term of the 2025 Notes which is included in the cumulative adjustment to the opening balance of accumulated deficit. The Company recorded interest expense related to the amortization of the issuance costs of $0.3 million for the three months ended March 31, 2023 and 2022, respectively.

Holders of the 2025 Notes may require the Company to repurchase all or part of their notes upon the occurrence of a fundamental change at a price equal to 100.0% of the principal amount of the notes being repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The Company may not redeem the 2025 Notes prior to October 20, 2022. The Company may redeem for cash all or any portion of the 2025 Notes, at its option, on or after October 20, 2022, if the last reported sale price of the Company’s Class A common stock has been at least 130.0% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a

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redemption price equal to 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Convertible Senior Notes Carrying Value

The 2024 Notes and 2025 Notes are recorded on our accompanying consolidated balance sheets at their net carrying values as of March 31, 2023. However, the 2024 Notes and 2025 Notes are privately traded by qualified institutional buyers (within the meaning of Rule 144A under the Securities Act) and their fair values are Level 2 inputs. The 2024 Notes and 2025 Notes also have embedded conversion options and contingent interest provisions, which have not been recorded as separate financial instruments. The following table summarizes the carrying value of the long-term convertible debt as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023		December 31, 2022
2024 Notes
Carrying value	$	23,971	$	23,925
Unamortized debt discount and issuance costs	310		356
Principal amount	$	24,281	$	24,281
Remaining amortization period (years)	1.7		1.9
Fair value(1)	$	38,000	$	38,000
2025 Notes
Carrying value	$	169,205	$	168,885
Unamortized debt discount and issuance costs	3,295		3,615
Principal amount	$	172,500	$	172,500
Remaining amortization period (years)	2.5		2.8
Fair value(1)	$	192,605	$	185,546

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(1)Fair values for notes are derived from available trading prices closest to the respective balance sheet date. The 2024 Notes have not been traded since December 31, 2022.

Note 10. Commitments and Contingencies

Commitments

Letters of Credit

As of both March 31, 2023 and December 31, 2022, the Company was party to irrevocable standby letters of credit with a bank for $13.1 million, respectively, for the benefit of regulatory authorities, real estate and risk-sharing agreements. As such, we held $13.1 million, respectively, in restricted cash and restricted investments as collateral as of March 31, 2023 and 2022, respectively. The letters of credit have current expiration dates between April 2023 and March 2032 and will automatically extend without amendment for an additional one-year period and will continue to automatically extend after each one-year term from the expiry date unless the bank elects not to extend beyond the initial or any extended expiry date.

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 interim consolidated financial statements.

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Pre-IPO Investor 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 shares of our Class A common stock, including those delivered in exchange for Class B common stock and Class B common units. 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.

We will 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. We did not incur any expenses related to secondary offerings or other sales of shares by our investor stockholders during the three months ended March 31, 2023 and 2022, respectively.

Guarantees

On July 16, 2020, EVH Passport, Evolent Health LLC and Molina Healthcare, Inc. (“Molina”) entered into an Asset Purchase Agreement (the “Molina APA”), which contemplated the sale by EVH Passport to Molina of certain assets, including certain intellectual property rights of EVH Passport and EVH Passport’s rights under the Passport Medicaid Contract. On September 1, 2020, EVH Passport and Molina consummated the transactions contemplated by the Molina APA (the “Molina Closing”) and the Passport Medicaid Contract was novated to Molina. In connection with the Molina Closing, the Company continued to provide administrative support services relating to the Passport Medicaid Contract to Molina through the end of 2020. Following the Molina Closing, EVH Passport began working with regulatory authorities including the Kentucky Department of Insurance (“KY DOI”) regarding the wind down of its operations throughout 2021 and 2022. As part of that wind down process, the Company, as the parent of EVH Passport, entered into a guarantee for the benefit of the KY DOI to satisfy any EVH Passport liability or obligation in the event EVH Passport is not able to meet its wind down liabilities or obligations. As of March 31, 2023, no amounts have been funded under this guarantee.

UPMC Reseller Agreement

The Company and UPMC are parties to a reseller, services and non-competition agreement, dated August 31, 2011, 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 a defined list of 20 of the Company’s customers. There were no expenses associated with the UPMC Reseller Agreement for the three months ended March 31, 2023, and $0.6 million for the three months ended March 31, 2022. The contract is currently being wound down.

Tax Receivables Agreement

In connection with the Offering Reorganization, the Company entered into the Tax Receivables Agreement (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.

Due to the reduction in the Company’s valuation allowance primarily resulting from deferred tax liabilities established as part of the NIA acquisition, the Company has recorded the remaining TRA liability of $66.2 million for the three months ended March 31, 2023, resulting in a total TRA liability of $112.1 million as of March 31, 2023.

We will assess the realizability of the deferred tax assets at each reporting period, and a change in our estimate of our liability associated with the tax receivable agreement may result as additional information becomes available, including results of operations in future periods. The realizability of the deferred tax assets is evaluated based on all positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

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Contingencies

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.

On June 8, 2021, a shareholder of the Company filed a derivative action in the Delaware Chancery Court against some current and former Board members and against the Company as a nominal defendant, alleging that the Company’s Board was negligent in its oversight of the Company’s relationship with Passport Health Plan. The case is Lincolnshire Police Pension Fund, derivatively on behalf of Evolent Health, Inc., v. Blackley, Williams, Scott, Holder, Farner, D’Amato, Duffy, Felt, Samet, Hobart, and Payson, and Evolent Health, Inc. (“Derivative Action”). The Company and the Director-Defendants filed a motion to dismiss the complaint on August 27, 2021, and Plaintiffs responded by filing an amended complaint on October 26, 2021. Defendants filed a motion to dismiss the amended complaint on December 17, 2021. Plaintiffs filed a motion to dismiss the case without prejudice, which was granted by the Delaware Chancery Court on January 5, 2023. This matter is now resolved.

Credit and Concentration Risk

The Company is subject to significant concentrations of credit risk related to cash and cash equivalents and accounts receivable. As of March 31, 2023, approximately 99.1% of our $192.0 million of cash and cash equivalents, restricted cash and restricted investments were held in bank deposits with FDIC participating banks and approximately 0.9% were held in international banks. While the Company maintains its cash and cash equivalents 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 is closely monitoring ongoing events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally. The Company has not experienced any realized losses on cash and cash equivalents to date; however, no assurances can be provided.

The Company is also subject to significant concentration of accounts receivable risk as a substantial portion of our trade accounts receivable is derived from a small number of our partners. The following table summarizes the partners who represented at least 10.0% of our consolidated short-term trade accounts receivable, excluding pharmacy claims receivable and premiums receivable:

	March 31, 2023	December 31, 2022
Cook County Health and Hospitals System	34.6%	42.5%
Molina Healthcare	17.8%	12.0%
Bright Health Management, Inc.	*	11.3%

————————

*     Represents less than 10.0% of the respective balance.

In addition, the Company is subject to significant concentration of revenue risk as a substantial portion of our revenue is derived from a small number of contractual relationships with our operating partners.

The following table summarizes those partners who represented at least 10.0% of our consolidated revenue:

	For the Three Months Ended March 31,
	2023	2022
Cook County Health and Hospitals Systems	17.2%	23.9%
Florida Blue Medicare, Inc.	11.9%	11.9%
Molina Healthcare	13.2%	*

————————

*     Represents less than 10.0% of the respective balance

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We derive a significant portion of our revenues from our largest partners. The loss, termination or renegotiation of our relationship or contract with any significant partner or multiple partners in the aggregate could have a material adverse effect on the Company's financial condition and results of operations. 

Note 11. Leases

The Company enters into various office space, data center, and equipment lease agreements in conducting its normal business operations. At the inception of any contract, the Company evaluates the agreement to determine whether the contract contains a lease. If the contract contains a lease, the Company then evaluates the term and whether the lease is an operating or finance lease. Most leases include one or more options to renew or may have a termination option. The Company determines whether these options are reasonably certain to be exercised or not at the inception of the lease. In addition, some leases contain escalation clauses. The rent expense is recognized on a straight-line basis in the consolidated statements of operations and comprehensive income (loss) over the term of the lease. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Further, the Company treats all lease and non-lease components as a single combined lease component for all classes of underlying assets. The Company also enters into sublease agreements for some of its leased office space. Immaterial rental income attributable to subleases is offset against rent expense over the terms of the respective leases.

The Company leases office space and computer and other equipment under operating lease agreements expiring at various dates through 2032. Under the lease agreements, in addition to base rent, the Company is generally responsible for operating and maintenance costs and related fees. Several of these agreements include tenant improvement allowances, rent holidays or rent escalation clauses. When such items are included in a lease agreement, we record a deferred rent asset or liability on our consolidated balance sheets equal to the difference between rent expense and future minimum lease payments due. The rent expense related to these items is recognized on a straight-line basis over the terms of the leases. The Company’s primary office location is in Arlington, Virginia, which has served as its corporate headquarters since 2013. The Arlington, Virginia office lease expires in January 2032. Certain leases acquired as part of the Valence Health transaction included existing sublease agreements for office locations in Chicago, Illinois.

In connection with various lease agreements, the Company is required to maintain $2.1 million in letters of credit as of both March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023 and December 31, 2022, the Company held $2.1 million and $2.3 million in restricted cash and restricted investments on the consolidated balance sheet as collateral for the letters of credit, respectively.

The following table summarizes our primary office leases as of March 31, 2023 (in thousands, other than term):

Location	Lease Termination Term (in years)	Future Minimum Lease Commitments		Letter of Credit Amount Required
Arlington, VA	8.8	$	28,960	$	1,579
Riverside, IL	8.0	37,301		232
Edison, NJ	3.1	1,597		222
Alpharetta, GA	2.5	1,180		—
Pune, India	0.2	91		—
Brea, CA	4.2	4,004		—

The following table summarizes the components of our lease expense (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Operating lease cost	$	1,940	$	2,274
Variable lease cost	1,556		1,326
Total lease cost	$	3,496	$	3,600

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Maturity of lease liabilities (in thousands) as of March 31, 2023, is as follows:

	Operating lease expense
2023	$	5,694
2024	10,436
2025	10,052
2026	8,997
2027	8,685
Thereafter	31,692
Total lease payments	75,556
Less:
Interest	16,674
Present value of lease liabilities	$	58,882

Our weighted-average discount rate and our weighted remaining lease terms (in years) are as follows:

	March 31, 2023
Weighted average discount rate	6.34	%
Weighted average remaining lease term	8.0

Note 12. Convertible Preferred Equity

In connection with the NIA closing, on January 20, 2023, the Company entered into a Securities Purchase Agreement (Series A Convertible Preferred Shares) with the Purchasers listed on Schedule I thereto (the “Securities Purchase Agreement”) pursuant to which the Company offered and sold to the Purchasers an aggregate 175,000 shares of the Company’s newly created Cumulative Series A Preferred Shares, par value $0.01 (the “Series A Preferred Stock”), at a purchase price of $960.00 per share, resulting in total gross proceeds to the Company of $168.0 million. The proceeds from the offer and sale of the Series A Preferred Stock were used, together with the proceeds from the Priority ABL Incremental Facility and Term Loan Incremental Facility, to finance the cash consideration payable at Closing and pay transaction fees and expenses.

The Series A Preferred Stock ranks senior with respect to dividend and liquidation rights to the Company’s Class A common stock, par value $0.01 per share and all future series of the Company’s preferred stock. Each share of Series A Preferred Stock has an initial liquidation preference of $1,000.00 per share.

Regular dividends on the Series A Preferred Stock will be paid quarterly in cash in arrears at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designations (as defined below)) plus 6.00%. The liquidation preference of the Series A Preferred Stock will increase on the last day of each calendar quarter by the amount of any accrued and unpaid regular dividends that have not been paid in cash on the relevant dividend payment date. The regular dividend rate will also increase by 2.0% per annum upon the occurrence and during the continuance of certain triggering events, including a breach of the protective covenants contained in the Investor Rights Agreement or the Company’s failure to pay any regular dividends in cash. Holders of Series A Preferred Stock are also entitled to participate in and receive any dividends declared or paid on the Class A Common Stock on an as-converted basis.

Each holder of Series A Preferred Stock has the right, at its option, to convert its shares of Series A Preferred Stock into shares of Class A Common Stock at an initial conversion price per share of $40.00 of the then-current liquidation preference per share, subject to customary anti-dilution adjustments.

Holders of Series A Preferred Stock are not entitled to vote on any matters, except as required by law and for certain consent rights set forth in the Certificate of Designations.

The Company may not redeem the Series A Preferred Stock at its option prior to January 20, 2025. At any time on or after January 20, 2025, the Company may redeem any or all of the Series A Preferred Stock then outstanding for cash at a redemption price per share equal to 165.00% of the then-current liquidation preference of the Series A Preferred Stock, plus all accrued and unpaid dividends on the Series A Preferred Stock being redeemed.

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If not earlier redeemed, at any time on or after January 20, 2030, at the request of the holders of a majority of the convertible preferred stock, the Company will redeem all shares of Series A Preferred Stock then outstanding for cash at a redemption price per share equal to 150.00% of the then-current liquidation preference per share of the Series A Preferred Stock, plus all accrued and unpaid dividends on the Series A Preferred Stock being redeemed.

Upon the occurrence of a refinancing or replacement of the entirety of the indebtedness under the Credit Agreement prior to its maturity that is provided solely by lenders who are not affiliates or approved funds of Ares, the Company will be required to redeem all shares of Series A Preferred Stock then outstanding for cash at a redemption price per share equal to 165.00% of the then-current liquidation preference of the Series A Preferred Stock, plus all accrued and unpaid dividends on the Series A Preferred Stock being redeemed, plus, solely in the event such refinancing or replacement is consummated prior to January 20, 2025, the aggregate amount of dividends per share which would have otherwise been payable on the Series A Preferred Stock from the date of redemption until January 20, 2025.

If the Company undergoes a Change of Control (as defined in the Existing Credit Agreement), the Company will be required to redeem all shares of Series A Preferred Stock then outstanding for cash at a price per share equal to the greater of (x) 150.00% of the then-current liquidation preference per share of the Series A Preferred Stock, if such redemption occurs prior to January 20, 2025, and 135.00% of the then-current liquidation preference per share of the Series A Preferred Stock, if such redemption occurs on or after January 20, 2025, and (y) the value of the Class A Common Stock issuable upon conversion of a share of Series A Preferred Stock, which value shall be determined based on the value attributed to the Class A Common Stock in connection with such Change of Control.

In connection with the NIA closing, the Company entered into an Investors Rights Agreement with the Purchasers named in Schedule I thereto (the “Investors Rights Agreement”). The Investors Rights Agreement contains certain restrictions on the transfer of the Series A Preferred Stock and certain protective covenants in favor of the Purchasers. These covenants include, among other things, covenants limiting the incurrence of Funded Debt (as defined in the Investors Rights Agreement), the ability to make restricted payments and the ability to issue additional indebtedness senior to the Series A Preferred Stock. Each of these covenants is subject to certain exceptions set forth in the Investors Rights Agreement.

In connection with the NIA closing, on January 20, 2023, the Company entered into a Registration Rights Agreement with the Stockholders named in Schedule I thereto, which granted certain registration rights to Ares in respect of the shares of the Company’s Class A Common Stock issuable upon conversion of the Series A Preferred Stock.

During the three months ended March 31, 2023, the Company paid dividends of $3.7 million, or $20.86 per share of Series A Preferred Stock, and accreted $2.6 million of deferred issuance costs in additional paid-in-capital on the consolidated balance sheets.

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Note 13. 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 Months Ended March 31,
	2023		2022
Net loss attributable to common shareholders of Evolent Health, Inc.	$	(26,258)	$	(5,350)
Weighted-average common shares outstanding - basic and diluted	107,783		89,509
Loss per common share
Basic and diluted	$	(0.24)	$	(0.06)

Basic net loss per common share is calculated using the weighted average number of common shares outstanding during the period. Diluted net earnings per common share, if any, gives effect to diluted stock options (calculated based on the treasury stock method), shares issuable upon debt conversion (calculated using an as-if converted method).

Anti-dilutive shares excluded from the calculation of weighted-average common shares presented above are presented below (in thousands):

	For the Three Months Ended March 31,
	2023	2022
Restricted stock units ("RSUs"), performance-based RSUs (“PSUs”) and leveraged stock units ("LSUs")	1,923	2,161
Stock options	1,260	1,756
Series A Preferred Stock	4,375	—
Convertible senior notes	6,188	11,582
Total	13,746	15,499

Note 14. Stock-based Compensation

Total compensation expense by award type and line item in our interim consolidated financial statements was as follows (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Award Type
Stock options	$	60	$	162
RSUs	7,489		3,301
LSUs	284		775
PSUs	2,877		1,108
Total compensation expense by award type	$	10,710	$	5,346
Line Item
Cost of revenue	$	1,540	$	800
Selling, general and administrative expenses	9,170		4,546
Total compensation expense by financial statement line item	$	10,710	$	5,346

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No stock-based compensation was capitalized as software development costs during the three months ended March 31, 2023 and 2022, respectively.

Stock-based awards were granted as follows (in thousands):

	For the Three Months Ended March 31,
	2023	2022
RSUs	996	917
PSUs	424	479

Note 15. 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, adjusted for discrete items recognized during the interim period. Discrete items (e.g., significant or unusual items) are separately recognized in the quarter during which they occur and can cause the effective tax rate to vary from quarter to quarter.

An income tax provision (benefit) of $(68.2) million and $1.2 million was recognized for the three months ended March 31, 2023 and 2022, respectively, which resulted in effective tax rates of 77.3% and (29.0)%, respectively. The income tax benefit recorded during the three months ended March 31, 2023, primarily relates to $56.1 million for the reduction in the valuation allowance resulting from deferred tax liabilities established as part of the NIA acquisition accounting and $8.3 million for the TRA liabilities that will create current and future tax benefits upon settlement. The income tax expense recorded during the three months ended March 31, 2022, primarily related to state and foreign taxes.

As of March 31, 2023, the Company had unrecognized tax benefits of $1.6 million that, if recognized, would affect the overall effective tax rate. The Company is not currently subject to income tax audits in any U.S., state, or foreign 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 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 10 above for discussion of our TRA.

Note 16. Investments in Equity Method Investees

The Company holds ownership interests in joint ventures and other entities which are accounted for under the equity method. The Company evaluates its interests in these entities to determine whether they meet the definition of a VIE and whether the Company is required to consolidate these entities. A VIE is consolidated by its primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) a variable interest that could potentially be significant to the VIE. To determine whether or not a variable interest the Company holds could potentially be significant to the VIE, the Company considers both qualitative and quantitative factors regarding the nature, size and form of the Company's involvement with the VIE. The Company has determined that its interests in these entities meet the definition of a variable interest, however, the Company is not the primary beneficiary since it does not have the power to direct activities, therefore, the Company did not consolidate the VIEs.

As of March 31, 2023 and December 31, 2022, the Company’s economic interests in its equity method investments ranged between 4% and 38%, respectively, and voting interests in its equity method investments ranged between 25% and 40%, respectively. The Company determined that it has significant influence over these entities but that it does not have control over any of the entities. Accordingly, the investments are accounted for under the equity method of accounting and the Company is allocated its proportional share of the entities’ earnings and losses for each reporting period. The Company’s proportional share of the gain from these investments was approximately $0.4 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively.

The Company signed services agreements with certain of the aforementioned entities to provide certain management, operational and support services to help manage elements of their service offerings. Revenue related to these services agreements were $4.8 million and $3.6 million for the three months ended March 31, 2023 and 2022, respectively.

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Note 17. 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. These items are recorded in accrued liabilities on our consolidated balance sheets.

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):

	March 31, 2023
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration(1)	$	—	$	—	$	122,100	$	122,100
Total fair value of liabilities measured on a recurring basis	$	—	$	—	$	122,100	$	122,100

	December 31, 2022
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration	$	—	$	—	$	78,000	$	78,000
Total fair value of liabilities measured on a recurring basis	$	—	$	—	$	78,000	$	78,000

————————

(1) Represents the fair value of earn-out consideration related to the IPG and NIA transactions as described 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 during the three months ended March 31, 2023.

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.

The acquisitions of NIA and IPG include a provision for additional equity consideration, at the Company’s option, contingent upon the Company obtaining certain performance metrics. The earnout period for the NIA contingent consideration is the year ending December 31, 2023, and the earnout period for IPG is the nine months ended September 30, 2023. The fair value of the contingent equity considerations 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. The significant unobservable inputs used in the fair value measurements of the NIA and IPG contingent considerations are the risk-neutral (probability weighted) earnout consideration and the applicable discount rate. A significant increase in the risk-neutral (probability weighted) earnout consideration or decrease in discount rate in isolation would result in a significantly higher fair value of the contingent consideration.

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The changes in our liabilities measured at fair value for which the Company uses Level 3 inputs to determine fair value are as follows (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Balance as of beginning of period	$	78,000	$	28,700
Additions	69,761		—
Settlements	(29,961)		—
Unrealized (gain) loss, net	4,300		3,900
Balance as of end of period	$	122,100	$	32,600

The following table summarizes the fair value (in thousands), valuation techniques and significant unobservable inputs of our Level 3 fair value measurements as of the periods presented:

	March 31, 2023
	Fair		Valuation	Significant	Assumption or
	Value		Technique	Unobservable Inputs	Input Ranges
Contingent consideration	$	122,100	Real options approach	Risk-neutral expected earnout consideration	$	122,100
				Weighted average discount rate	8.80% - 16.64%

	December 31, 2022
	Fair		Valuation	Significant	Assumption or
	Value		Technique	Unobservable Inputs	Input Ranges
Contingent consideration	$	78,000	Real options approach	Risk-neutral expected earnout consideration	$	77,946
				Weighted average discount rate	9.85% - 10.01%

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 assets and liabilities recorded in business combinations or asset acquisitions, 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.

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, accounts payable, accrued liabilities and accrued compensation approximate their fair values because of the relatively short-term maturities of these items and financial instruments.

See Note 9 for information regarding the fair value of the 2024 Notes and 2025 Notes.

Note 18. Related Parties

The entities described below are considered related parties and the balances and/or transactions with them are reported in our interim consolidated financial statements.

As discussed in Note 16, the Company had economic interests in several entities that are accounted for under the equity method of accounting. The Company has allocated its proportional share of the investees’ earnings and losses each reporting period. In addition, Evolent has entered into services agreements with certain of the entities to provide certain management, operational and support services to help the entities manage elements of their service offerings.

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The Company also works with UPMC, one of its founding investors. The Company’s relationship with UPMC is a subcontractor relationship where UPMC has agreed to execute certain tasks (primarily TPA services) relating to certain customer commitments. This relationship is currently in wind-down.

The following table presents assets and liabilities attributable to our related parties (in thousands):

	March 31, 2023		December 31, 2022
Assets
Accounts receivable, net	$	9,360	$	8,787
Liabilities
Accounts payable	$	2	$	27
Accrued liabilities	—		192

The following table presents revenues and expenses attributable to our related parties (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Revenue	$	54,721	$	32,064
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses)	47,506		26,461
Selling, general and administrative expenses	242		66

Note 19. Reserve for Claims and Performance-Based Arrangements

The Company maintains reserves for its liabilities related to payments to providers and pharmacies under performance-based arrangements related to its total cost of care and specialty care management services.

Reserves for claims and performance-based arrangements reflect actual payments under performance-based arrangements and the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process), and other medical care expenses and services payable that are primarily composed of accruals for incentives and other amounts payable to health care professionals and facilities. Reserves for claims and performance-based arrangements also reflect estimated amounts owed under the reinsurance agreements, as discussed further in Note 10.

The Company uses actuarial principles and assumptions that are consistently applied each reporting period and recognizes the actuarial best estimate of the ultimate liability along with a margin for adverse deviation. This approach is consistent with actuarial standards of practice that the liabilities be adequate under moderately adverse conditions.

This liability predominately consists of incurred but not reported amounts and reported claims in process including expected development on reported claims. The liability for reserves related to its total cost of care and specialty care management services is primarily calculated using "completion factors" developed by comparing the claim incurred date to the date claims were paid. Completion factors are impacted by several key items including changes in: 1) electronic (auto-adjudication) versus manual claim processing, 2) provider claims submission rates, 3) membership and 4) the mix of products.

The Company’s policy for reserves related to its total cost of care and specialty care management services is to use historical completion factors combined with an analysis of current trends and operational factors to develop current estimates of completion factors. The Company estimates the liability for claims incurred in each month by applying the current estimates of completion factors to the current paid claims data. This approach implicitly assumes that historical completion rates will be a useful indicator for the current period.

For more recent months, and for newer lines of business where there is not sufficient paid claims history to develop completion factors, the Company expects to rely more heavily on medical cost trend and expected loss ratio analysis that reflects expected claim payment patterns and other relevant operational considerations, or authorization analysis. Medical cost trend is primarily impacted by medical service utilization and unit costs that are affected by changes in the level and mix of medical benefits offered, including inpatient, outpatient and pharmacy, the impact of copays and deductibles, changes in provider practices and changes in consumer

34

demographics and consumption behavior. Authorization analysis projects costs based on authorizations per thousand members basis and assigning an average cost per authorization. This is also adjusted for the impact of copays, deductibles, unit cost and historic discontinuation rates for treatment are considered.

For each reporting period, the Company compares key assumptions used to establish the reserves for claims and performance-based arrangements to actual experience. When actual experience differs from these assumptions, reserves for claims and performance-based arrangements are adjusted through current period net income. Additionally, the Company evaluates expected future developments and emerging trends that may impact key assumptions. The process used to determine this liability requires the Company to make critical accounting estimates that involve considerable judgment, reflecting the variability inherent in forecasting future claim payments. These estimates are highly sensitive to changes in the Company's key assumptions, specifically completion factors and medical cost trends.

Activity in reserves for claims and performance-based arrangements was as follows (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Balance, beginning of period	$	199,730	$	171,294
Incurred health care costs:
Current year to date period	180,675		102,664
Prior year to date period	(19,914)		6,511
Total claims incurred	160,761		109,175
Claims paid related to:
Current year to date period	(64,870)		(47,724)
Prior year to date period	(98,424)		(59,491)
Total claims paid	(163,294)		(107,215)
Other adjustments (1)	—		(9,016)
Balance, end of period	$	197,197	$	164,238

————————

(1) Other adjustments to reserves for claims and performance-based arrangements reflect changes in accrual for amounts payable to facilities and amounts owed to our payer partners for claims paid on our behalf.

Note 20. Supplemental Cash Flow Information

The following represents supplemental cash flow information (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Supplemental Disclosure of Non-cash Investing and Financing Activities
Accrued property and equipment purchases	$	30	$	670
Class A common stock issued in connection with business combinations	261,271		—
Accrued net working capital adjustment with business combinations	1,098		—
Effects of Leases
Operating cash flows from operating leases	3,528		3,830
Leased assets disposed of (obtained in) exchange for operating lease liabilities	(3,076)		(3)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the Company’s financial condition and results of operations. The MD&A is provided as a supplement to, and should be read in conjunction with our interim consolidated financial statements and the accompanying notes to our interim consolidated financial statements presented in “Part I – Item 1. Financial Statements” of this Form 10-Q; our 2022 Form 10-K, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; and our current reports on Form 8-K filed in 2023.

INTRODUCTION

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Business Overview

We are a market leader in the new era of value-based care, in which the delivery of health care is increasingly funded by at-risk payment models. We provide integrated solutions to both health care providers, including independent physicians and health systems, as well as payers, including health plans and other risk-bearing organizations, with a common end: to improve health care quality and outcomes while reducing cost. We consider value-based care to be the necessary convergence of health care payment and delivery. We believe the pace of this convergence is accelerating, driven by price pressure in traditional FFS health care, a market environment that is incentivizing value-based care models, growth in consumer-focused insurance programs, such as Medicare Advantage and managed Medicaid, and innovation in data and technology.

We were an early innovator in value-based care, founded in 2011 by members of our management team, UPMC, an integrated delivery system based in Pittsburgh, Pennsylvania, and The Advisory Board Company.

Segment Update

Between 2020 and 2022, we significantly grew our value-based specialty care business, both organically and through acquisitions. Given the pace of our growth, what we believe to be our high level of competitive differentiation, and the size of potential opportunities in the specialty care market, we began a process in 2023 of revising the way we manage the business, evaluate performance and allocate resources, resulting in an updated segment structure comprised of one segment. We now provide a broad spectrum of specialty care management services in oncology, cardiology, musculoskeletal markets and holistic total cost of care improvement along with an integrated platform for health plan administration and value-based business infrastructure under one go to market package. We began reporting under this new segment structure as of January 1, 2023. Prior year information has been adjusted to reflect the change in segment reporting.

All of our revenue is recognized in the United States and substantially all of our long-lived assets are located in the United States.

Recent Events

Impact of Inflation

We experience pricing pressures in the form of competitive prices in addition to rising costs for certain inflation-sensitive operating expenses such as labor, employee benefits and facility leases. We do not believe these impacts were material to our revenues or net income during the year ended March 31, 2023. However, significant sustained inflation driven by the macroeconomic environment or other factors could negatively impact our margins, profitability and results of operations in future periods.

Customers

The following table summarizes those partners who represented at least 10.0% of our consolidated revenue:

	For the Three Months Ended March 31,
	2022	2022
Cook County Health and Hospitals Systems	17.2%	23.9%
Florida Blue Medicare, Inc.	11.9%	11.9%
Molina Healthcare	13.2%	*

————————

*     Represents less than 10.0% of the respective balance

Transactions

The Company has undertaken several transactions, some of which may impact year-to-year comparisons. The following is a discussion of certain of those transactions.

Acquisition of NIA

On November 17, 2022, Evolent Health LLC, a wholly owned subsidiary of the Company, and the Company entered into a definitive agreement for the Company to acquire NIA. On January 20, 2023, we consummated the acquisition of NIA for $387.8 million in cash, $265.0 million in debt financing provided by Ares Capital Corporation and the issuance of 8.5 million shares of Class A common

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stock. NIA reports into Evolent’s specialty care management offering, New Century Health. Refer to “Part I - Item 1. Financial Statements - Note 4” for additional discussion regarding the NIA acquisition.

Credit Agreement Amendment

On January 20, 2023, (“the NIA Closing Date”), the Company entered into Amendment No. 1 to the Credit Agreement (the “Amendment”), pursuant to which the lenders agreed to extend credit to the Borrower in the form (i) additional revolving commitments in an aggregate principal amount equal to $25.0 million (the “Incremental Revolving Facility” and together with the Initial Revolving Facility, the “Revolving Facility”), and (ii) additional term loans in an aggregate principal amount equal to $240.0 million (the “Incremental Term Loan Facility” and together with the Initial Term Loan Facility, the “Term Loan Facility”; the Revolving Facility and the Term Loan Facility are collectively referred to herein as the “Credit Facilities”). The Borrowers borrowed full amount under the Incremental Term Loan Facility and the Incremental Revolving Facility on the NIA Closing Date to finance, together with the proceeds from the sale of the Series A Preferred Stock, the cash consideration payable in connection with the NIA acquisition on the NIA Closing Date and pay transaction fees and expenses. A closing fee of (a) 3.00% of the aggregate amount of the commitments in respect of the Incremental Term Loan Facility and (b) 3.00% of the aggregate amount of the commitments in respect of the Incremental Revolving Facility was paid as of the NIA Closing Date. Refer to “Part I - Item 1. Financial Statements - Note 9” for additional discussion regarding the amendment to the Credit Agreement.

Series A Preferred Stock

In connection with the consummation of the acquisition of NIA, on January 20, 2023, we entered into a Securities Purchase Agreement pursuant to which the Company offered and sold an aggregate 175,000 shares of Series A Preferred Stock, at a purchase price of $960.00 per share, resulting in total gross proceeds to us of $168.0 million. The proceeds from the offer and sale of the Series A Preferred Stock were used, together with the proceeds from the Priority ABL Incremental Facility and Term Loan Incremental Facility, to finance the cash consideration payable for the acquisition of NIA and pay transaction fees and expenses. Refer to “Part II - Item 8. Financial Statements - Note 12” for additional discussion regarding the sale of Series A Preferred Stock.

Repositioning Costs

We continually assess opportunities to improve operational effectiveness and efficiency to better align our expenses with revenues, while continuing to make investments in our solutions, systems and people that we believe are important to our long-term goals. In the first quarter of 2023, we committed to certain operational efficiency and profitability actions that we are taking in order to accomplish these objectives (“Repositioning Plan”). These actions included making organizational changes across our business as well as other profitability initiatives expected to result in reductions in force, re-aligning of resources as well as other operational efficiency and cost-reduction initiatives that will provide future benefit to the Company. During 2023, we expect to terminate certain leases and recognize impairment charges in connection with the Repositioning Plan.

Critical Accounting Policies and Estimates

Certain GAAP policies that significantly affect the determination of our financial position, results of operations and cash flows, are summarized below. See “Part II - Item 8. Financial Statements and Supplementary Data - Note 2” in our 2022 Form 10-K for a complete summary of our significant accounting policies.

Goodwill

We recognize the excess of the purchase price plus the fair value of any non-controlling interests in the acquiree over the fair value of identifiable net assets acquired as goodwill. Goodwill is not amortized, but is reviewed at least annually for indications of impairment, with consideration given to financial performance and other relevant factors. We perform impairment tests of goodwill at a reporting unit level. We perform impairment tests between annual tests if an event occurs, or circumstances change, that we believe would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Our goodwill impairment analysis first assesses qualitative factors to determine whether events or circumstances existed that would lead the Company to conclude it is more likely than not that the fair value of a reporting unit is below its carrying amount. Qualitative factors include macroeconomic, industry and market considerations, overall financial performance, industry, legal and other relevant events and factors affecting the reporting unit. Additionally, as part of this assessment, we may perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in measuring a reporting unit’s fair value.

If the Company determines that it is more likely than not that the fair value of a reporting unit is below the carrying amount, a quantitative goodwill assessment is required. In the quantitative evaluation, the fair value of the relevant reporting unit is determined

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and compared to the carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value and a charge is reported in goodwill impairment on our consolidated statements of operations and comprehensive income (loss). We use discounted cash flow analyses and market multiple analyses in order to estimate reporting unit fair values. Discounted cash flow analyses rely on significant judgement and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates and operating margins. These assumptions are based on estimates of future revenue and earnings after considering such factors as general economic and market conditions which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements. The weighted average cost of capital is based on market-based factors/inputs but also considers the specific risk characteristics of the reporting unit’s cash flow forecast. A significant change to these estimates and assumptions could cause the estimated fair values of our reporting units and intangible assets to decline and increase the risk of an impairment charge to earnings. Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

On October 31, 2022, the Company performed its annual goodwill impairment test for fiscal year 2022. As a result of BHG announcing its plan to exit its IFP line of business in 2023, thus negatively impacting the Company’s future revenues from such partner, the Company elected to forego the qualitative assessment and proceed directly to the quantitative assessment of the goodwill impairment test for that specific reporting unit. In doing so, we estimated the fair value of the reporting unit by considering a discounted cash flow valuation approach (“income approach”). In determining the estimated fair value using the income approach, we projected future cash flows based on management’s estimates and long-term plans and applied a discount rate based on the Company’s weighted average cost of capital. This analysis required us to make judgments about revenues, expenses, fixed asset and working capital requirements, capital market assumptions, cash flows and discount rates. The quantitative analysis of the reporting unit showed that the fair value exceeded the carrying value. Contracts with our customers may be cancelled or renegotiated and future revenue growth is dependent on winning new contracts. Further, the impairment analysis is particularly sensitive to changes in the projected revenue growth rates and expenses and the discount rate. Changes in these key assumptions such as a significant unfavorable change to our forecasted cash flows due to being unsuccessful in winning certain contracts or certain of our contracts being cancelled or renegotiated by our customers, could result in a revision of management’s estimates and could result in impairment charges in the future, which could be material to our results of operations. We will continue to monitor for such changes in facts or circumstances, which may be indicators of potential impairment triggers.

For the remaining reporting units, after assessing the totality of events and circumstances including the results of our previous valuations, no events occurred or circumstances changed during the period under consideration that would, more likely than not, reduce the fair value of any reporting unit below their carrying amount. Therefore, the Company concluded that the quantitative assessment was not required. For all reporting units, it was determined that as of October 31, 2022, no impairment of goodwill had occurred.

We did not identify any qualitative factors that would trigger a quantitative goodwill impairment test during the three months ended March 31, 2023. We will perform our annual impairment test of October 31, 2023.

Adoption of New Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Specifically, the ASU removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature and no longer permits the use of the treasury stock method from calculating earnings per share. As a result, after adopting the ASU’s guidance, we will not separately present in equity an embedded conversion feature of such debt. Instead, we will account for a convertible debt instrument wholly as debt unless (i) a convertible instrument contains features that require bifurcation as a derivative or (ii) a convertible debt instrument was issued at a substantial premium. Additionally, the ASU removes certain conditions for equity classification related to contracts in an entity’s own equity (e.g., warrants) and amends certain guidance related to the computation of earnings per share for convertible instruments and contracts on an entity’s own equity. The Company adopted the standard using a modified retrospective method as of January 1, 2022, with adjustments which reduced additional paid-in capital by $106.2 million and increased retained earnings by $39.8 million and increased the net carrying amount of the 2024 Notes and 2025 Notes by $25.1 million and $41.3 million.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. The Company adopted this standard starting in the first quarter of 2023, which did not have a material impact on our consolidated financial statements.

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RESULTS OF OPERATIONS

Evolent Health, Inc. is a holding company and its principal asset is all of the Class A common units in Evolent Health LLC, which has owned all of our operating assets and substantially all of our business since inception. The financial results of Evolent Health LLC are consolidated in the financial statements of Evolent Health, Inc.

Key Components of our Results of Operations

Revenue

Our revenue contracts are typically multi-year arrangements with customers to provide various clinical and administrative solutions. Our solutions are designed to lower the medical expenses of our partners and include our total cost of care and specialty care management services, provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers.

Our performance obligation in these arrangements is to provide an integrated suite of services, including access to our platform that is customized to meet the specialized needs of our customers and members. Generally, we will apply the series guidance to the performance obligation as we have determined that each time increment is distinct. We primarily utilize a variable fee structure for these services that typically includes a monthly payment that is calculated based on a specified per member per month rate, multiplied by the number of members that our partners are managing under a value-based care arrangement or a percentage of plan premiums. Our arrangements may also include other variable fees related to service level agreements, shared medical savings arrangements and other performance measures. Variable consideration is estimated using the most likely amount based on our historical experience and best judgment at the time.

We enter into capitation arrangements that may include performance-based arrangements and/or gainshare features. We recognize capitation revenue on a gross basis when we have established control over the services within our scope and recognize capitation revenue on a net basis when we do not have control over the services within our scope.

Due to the nature of our arrangements, certain estimates may be constrained if it is probable that a significant reversal of revenue will occur when the uncertainty is resolved. We recognize revenue from services over time using the time elapsed output method. Fixed consideration is recognized ratably over the contract term. In accordance with the series guidance, we allocate variable consideration to the period to which the fees relate.

Contracts with Multiple Performance Obligations

Our contracts with customers may contain multiple performance obligations, primarily when the customer has requested both implementation and ongoing services as these services are distinct from one another. When a contract has multiple performance obligations, we allocate the transaction price to each performance obligation based on the relative standalone selling price using the expected cost margin approach. This approach requires estimates regarding both the level of effort it will take to satisfy the performance obligation as well as fees that will be received under the variable pricing model. We also take into consideration customer demographics, current market conditions, the scope of services and our overall pricing strategy and objectives when determining the standalone selling price.

Cost of Revenue (exclusive of depreciation and amortization)

Our cost of revenue includes direct expenses and shared resources that perform services in direct support of clients. Costs consist primarily of claims expense, employee-related expenses (including compensation, benefits and stock-based compensation), expenses for TPA support and other services, as well as other professional fees. In certain cases, our cost of revenue also includes claims and capitation payments to providers and payments for pharmaceutical treatments and other health care expenditures through performance-based arrangements.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses consist of employee-related expenses (including compensation, benefits and stock-based compensation) for selling and marketing, corporate development, finance, legal, human resources, corporate information technology, professional fees and other corporate expenses associated with these functional areas. Selling, general and administrative expenses also include costs associated with our centralized infrastructure and research and development activities to support our network development capabilities, claims processing services, including PBM administration, technology infrastructure, clinical program development and data analytics.

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Depreciation and Amortization Expense

Depreciation and amortization expenses consist of the amortization of intangible assets associated with the step up in fair value of Evolent Health LLC’s assets and liabilities for the Offering Reorganization, amortization of intangible assets recorded as part of our various business combinations and asset acquisitions and depreciation of property and equipment, including the amortization of capitalized software.

Lives on Platform and PMPM Fees

Performance Suite Lives on Platform are calculated by summing monthly members covered for oncology and cardiology specialty care services for contracts not under ASO arrangements, plus members managed by Evolent Care Partners in risk arrangements and divided by the number of months in the period. Specialty Technology and Services Suite Lives on Platform are calculated by summing monthly members covered for oncology, cardiology, musculoskeletal, advanced imaging and other diagnostics specialty care services for contracts under ASO arrangements divided by the number of months in the period. Administrative Services Lives on Platform are calculated by summing monthly members covered for EHS implementation and core performance services divided by the number of months in the period. Cases are calculated by summing the number of individuals receiving services through our IPG and Vital Decisions programs in a given period. Members covered for more than one category are counted in each category.

Performance Suite Average PMPM fee is defined as revenue pertaining to our Performance Suite during the period reported divided by Performance Suite Lives on Platform for the period divided by the number of months in the period. Specialty Technology and Services Suite Average PMPM fee is defined as revenue pertaining to the Specialty Technology and Services Suite during the period reported divided by Specialty Technology and Services Suite Lives on Platform for the period divided by the number of months in the period. Administrative Services Average PMPM fee is defined as revenue pertaining to the Administrative Services during the period reported divided by the Administrative Services Lives on Platform for the period divided by the number of months in the period. Revenue per Case is calculated by the revenue pertaining to IPG and Vital Decisions divided by the number of cases for a given period.

Average Unique Members are calculated by summing members covered by our Performance Suite, Specialty Technology and Services Suite and Administrative Services. In cases where clients cross between multiple products, we only capture members from the product with the maximum number of members.

Management uses Lives on Platform, PMPM fees, Cases, Revenue per Case and Average Unique Members because we believe that they provide insight into the unit economics of our services. We believe that these measures are also useful to investors because they allow further insight into the period over period operational performance. We believe that these measures are also useful to investors because they allow further insight into the period over period operational performance.

The Company has changed its calculation of Lives on Platform to more accurately reflect the membership that corresponds to quarterly revenue. The Company has recast prior periods to reflect the current presentation of Lives on Platform, PMPM fees, Cases and Revenue per Case. The current Performance Suite maps to the prior disclosure of the Clinical Solutions Performance Suite. The current Specialty Technology and Services Suite maps to the prior disclosure of the Clinical Solutions New Century Health Technology and Services Suite. The current Administrative Services maps to the prior disclosure of Evolent Health Services segment. There has been no change in the presentation of Cases from prior period.

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Evolent Health, Inc. Consolidated Results

(in thousands, except percentages)	For the Three Months Ended March 31, 2023						Change Over Prior Period
	2023			2022			$		%
Revenue	$	427,690		$	297,057		$	130,633	44.0%
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below)	310,475			219,739			90,736		41.3%
Selling, general and administrative expenses	89,726			58,932			30,794		52.3%
Depreciation and amortization expenses	29,275			15,106			14,169		93.8%
Change in fair value of contingent consideration	8,569			6,078			2,491		41.0%
Total operating expenses	438,045			299,855			138,190		46.1%
Operating loss	$	(10,355)		$	(2,798)		$	(7,557)	(270.1)%
Cost of revenue as a % of revenue	72.6		%	74.0		%
Selling, general and administrative expenses as a % of revenue	21.0		%	19.8		%

Comparison of the Results for Three Months Ended March 31, 2023 to 2022

Revenue

Total revenue increased by $130.6 million, or 44.0%, to $427.7 million for the three months ended March 31, 2023, as compared to 2022. This increase is primarily due to $82.5 million from our acquisitions of and launches of new integrated products with NIA, IPG and Vital Decisions, and $48.1 million from the addition of new partners and expansion with existing partners.

The following table represents Evolent’s revenue disaggregated by end-market (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Medicaid	$	183,034	$	130,501
Medicare	127,669		104,399
Commercial and other	116,987		62,157
Total	$	427,690	$	297,057

The following table represents the Company’s Lives on Platform, Cases, PMPM fees and revenue per case for the three months ended March 31, 2023 and 2022 (Lives on Platform in thousands):

	Average Lives on Platform/ Cases		Average PMPM Fees / Revenue per Case
	For the Three Months Ended March 31,		For the Three Months Ended March 31,
	2023	2022	2023		2022
Performance Suite	3,242	1,494	$	24.66	$	38.19
Specialty Technology and Services Suite	60,503	14,305	0.36		0.32
Administrative Services	1,857	2,054	14.91		17.34
Cases	15	5	2,555		1,052
Average Unique Members	41,268	15,123

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Cost of Revenue

Cost of revenue increased by $90.7 million, or 41.3%, to $310.5 million for the three months ended March 31, 2023, as compared to 2022, principally as a result of the growth in our revenue. The increase included approximately $56.8 million from higher claims cost from acquisitions and transition from ASO to risk based contracts for certain customers, $25.8 million of higher personnel costs due to increased headcount, employee benefit, bonus accruals for employees and severance payments to former employees and $25.5 million of surgical management costs at IPG. These increases were offset in part by a decrease of $8.1 million in professional fees due primarily to lower costs incurred for contracts that went live during the quarter and third-party service fees for existing customers and a decrease of $8.4 million for the acceleration of amortization of contract costs for certain customers. Approximately $1.5 million and $0.8 million of total personnel costs in costs of revenue was attributable to stock-based compensation expense for the three months ended March 31, 2023, and 2022, respectively. Cost of revenue represented 72.6% and 74.0% of total revenue for the three months ended March 31, 2023, and 2022, respectively. We expect our cost of revenue to decrease as a percentage of total revenue over the longer-term subject to the composition of our growth.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses increased by $30.8 million, or 52.3%, to $89.7 million for the three months ended March 31, 2023, as compared to 2022, principally as a result of the IPG and NIA acquisitions and employee costs across all business units. The increase was primarily driven by higher personnel fees due to increased headcount and expected benefit accruals to employees of $3.8 million, higher stock compensation of $4.6 million due to the achievement and change in projected achievement of certain performance measurements, higher bad debt expense of $4.6 million due to collection timing from our customers, technology services due to higher headcount of $1.4 million, $0.6 million of higher insurance costs, $0.3 million of severance costs and acquisition costs of $11.3 million, offset, in part by lower professional fees from cost savings initiatives of $1.5 million.

Approximately $9.2 million and $4.5 million of total personnel costs were attributable to stock-based compensation expense for the three months ended March 31, 2023, and 2022, respectively. Acquisition and severance costs accounted for approximately $12.3 million and $0.5 million of total selling, general and administrative expenses for the three months ended March 31, 2023, and 2022, respectively. Selling, general and administrative expenses represented 21.0% and 19.8% of total revenue for the three months ended March 31, 2023, as compared to 2022, respectively. While our selling, general and administrative expenses are expected to grow as we integrate NIA operations, we expect them to decrease as a percentage of our total revenue over the long-term due to cost saving initiatives.

Depreciation and Amortization Expenses

Depreciation and amortization expenses increased $14.2 million, or 93.8%, to $29.3 million for the three months ended March 31, 2023, as compared to 2022 due primarily to amortization of intangible assets acquired through our acquisitions. We expect depreciation and amortization expenses to increase in future periods as we continue to capitalize internal-use software and amortize intangible assets resulting from asset acquisitions and business combinations.

Change in Fair Value of Contingent Consideration

We recorded a loss on change in fair value of contingent consideration of $8.6 million for the three months ended March 31, 2023, related to the liabilities acquired as a result of the acquisitions of NIA in January 2023 and IPG in August 2022, and $6.1 million for the three months ended March 31, 2022, related to liabilities acquired as a result of the acquisition of Vital Decisions. See “Part I - Item 1. Financial Statements - Note 17” in this Form 10-Q for more information related to changes in the fair value of contingent consideration.

Discussion of Non-Operating Results

Interest Expense

Our interest expense is primarily attributable to our Credit Agreement with Ares Capital Corporation as well as the 2024 Notes and 2025 Convertible Notes. We recorded interest expense (including amortization of deferred financing costs) of approximately $12.9 million and $2.2 million for the three months ended March 31, 2023, and 2022, respectively. The increase in interest expense is driven primarily by the interest expense incurred on our Loans. We expect interest expense to increase during 2023, however, we are focused

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on deleveraging the balance sheet in the long-term thereby decreasing interest expense. See “Part I - Item 1. Financial Statements - Note 9” in this Form 10-Q for more information related to interest expense.

Change in Tax Receivable Agreement Liability

Due to the reduction in the Company’s valuation allowance primarily resulting from deferred tax liabilities established as part of the NIA acquisition, the Company has recorded the remaining TRA liability of $66.2 million for the three months ended March 31, 2023, resulting in a total TRA liability of $112.1 million as of March 31, 2023.

Provision for (Benefit from) Income Taxes

A provision for (benefit from) income taxes of $(68.2) million and $1.2 million was recognized for the three months ended March 31, 2023, and 2022, respectively, which resulted in effective tax rates of 77.3% and (29.0)%, respectively.

REVIEW OF CONSOLIDATED FINANCIAL CONDITION

Liquidity and Capital Resources

The Company reported operating losses of $(10.4) million and $(2.8) million for the three months ended March 31, 2023, and 2022, respectively. Net cash and restricted cash used in operating activities was $(8.0) million and $(57.4) million for the three months ended March 31, 2023, and 2022, respectively.

As of March 31, 2023, the Company had $157.5 million of cash and cash equivalents and $34.5 million in restricted cash and restricted investments.

We believe our current cash and cash equivalents will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities and the timing and extent of our spending to support our investment efforts and expansion into other markets. We may also seek to invest in, or acquire complementary businesses, applications or technologies, which may require us to seek sources of financing.

Cash Flows

The following summary of cash flows (in thousands) has been derived from our financial statements included in “Part I - Item 1. Financial Statements - Consolidated Statements of Cash Flows:”

	For the Three Months Ended March 31,
	2023		2022
Net cash and restricted cash used in operating activities	$	(7,974)	$	(57,442)
Net cash and restricted cash provided by (used in) investing activities	(394,993)		16,766
Net cash and restricted cash provided by (used in) financing activities	379,729		(51,376)

Operating Activities

Cash flows used in operating activities of $8.0 million for the three months ended March 31, 2023 were primarily due to our net loss of $20.0 million, non-cash items including depreciation and amortization expenses of $29.3 million, stock-based compensation expense of $10.7 million, deferred tax benefit of $(68.7) million, amortization of contract cost assets of $2.3 million, change in fair value of contingent consideration of $8.6 million and change in our tax receivable liability of $66.2 million. Our operating cash outflows were affected by the timing of our customer and vendor payments primarily driven by cash receipts from certain customers of approximately $39.8 million and a reduction of our accrued compensation and employee benefits due to end of year bonus payments and severance of $31.4 million, offset in part by increases in accounts receivable from our acquisition of NIA of $28.1 million.

Cash flows used in operating activities of $57.4 million for the three months ended March 31, 2022 were primarily due to our net loss of $5.4 million, non-cash items including depreciation and amortization expenses of $15.1 million, stock-based compensation expense of $5.3 million amortization of contract cost assets of $11.7 million and change in fair value of contingent consideration of $6.1 million. Our operating cash inflows were affected by the timing of our customer and vendor payments driven by increases in accounts receivables and prepaid expenses and other assets and reductions in reserves for claims and performance-based arrangements and accrued compensation and employee benefits contributed approximately $91.9 million to our cash outflows.

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Investing Activities

Cash flows used in investing activities of $395.0 million in the three months ended March 31, 2023 were primarily attributable to $386.7 million paid for acquisitions and $9.1 million of investments in internal-use software and purchases of property and equipment.

Cash flows provided by investing activities of $16.8 million in the three months ended March 31, 2022 were primarily attributable to $23.0 million from the transfer of membership and release of Passport escrow offset, in part by, $8.5 million of investments in internal-use software and purchases of property and equipment.

Financing Activities

Cash flows provided by financing activities of $379.7 million in the three months ended March 31, 2023, were primarily related to $256.3 million received from our Acquisition Facilities in connection with our Credit Agreement and $168.0 million from the issuance of preferred equity, offset in part, by $37.5 million of cash outflows related to the payment on our Revolving Facility, $3.7 million of preferred dividends paid on our Series A Preferred Stock and $12.6 million from taxes withheld for restricted stock unit vesting.

Cash flows used in financing activities of $51.4 million in the three months ended March 31, 2022 were primarily related to a $34.4 million decrease in net working capital balances held on behalf of our partners for claims processing services and $16.2 million from taxes withheld for restricted stock unit vesting.

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Contractual and Other Obligations

We believe that the amount of cash and cash equivalents on hand and cash flows from operations will be adequate for us to execute our business strategy and meet anticipated requirements for lease obligations, capital expenditures working capital and debt service for 2023. Our estimated contractual obligations (in thousands) as of March 31, 2023, were as follows:

	2023		2024-2025		2026-2027		2028+		Total
Operating leases for facilities(1)	$	6,086	$	21,601	$	18,909	$	31,851	$	78,447
Purchase obligations related to vendor contracts	8,206		3,907		1,466		—		13,579
Convertible notes interest payments	3,437		6,025		—		—		9,462
Convertible notes principal repayment	—		196,781		—		—		196,781
Contingent consideration	49,300		72,800		—		—		122,100
Total contractual obligations	$	67,029	$	301,114	$	20,375	$	31,851	$	420,369

————————

(1)Operating leases for facilities includes $392 thousand and $1.1 million and $1.2 million of leases not yet commenced for the 2023, 2024-2025 and 2026-2027 time periods, respectively.

As of March 31, 2023, we had $415.0 million of aggregate principal amount in a secured term loan, $37.5 million of aggregate principal amount in a secured revolving credit facility. All Loans under the Credit Agreement will mature in 2029. The interest rate for all Loans will be calculated, at the option of the borrowers, (a) in the case of a term loan, at either the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus 6.00%, or the base rate plus 5.00% and (b) in the case of a revolving loan, at either the Adjusted Term SOFR Rate plus 4.00%, or the base rate plus 3.00%.

Also, as of March 31, 2023, we had 175,000 shares of the Company’s newly created Cumulative Series A Convertible Preferred Shares. Regular dividends on the Series A Preferred Stock will be paid quarterly in cash in arrears at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designations) plus 6.00%. The regular dividend rate will also increase by 2.0% per annum upon the occurrence and during the continuance of certain triggering events.

Accounts Receivable, net

Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. During the three months ended March 31, 2023, accounts receivable, net, increased due primarily to the timing of cash receipts from certain customers combined with $28.1 million of receivables acquired as part of the IPG acquisition.

Restricted Cash and Restricted Investments

Restricted cash and restricted investments of $34.5 million is carried at cost and includes cash held on behalf of other entities for pharmacy and claims management services of $21.4 million, collateral for letters of credit required as security deposits for facility leases of $2.1 million, amounts held with financial institutions for risk-sharing arrangements of $11.0 million as of March 31, 2023. See “Part I - Item 1. Financial Statements - Note 2” for further details of the Company’s restricted cash balances.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are carried at cost and includes prepaid expenses and non-trade accounts receivable. During the three months ended March 31, 2023, prepaid insurance increased as a result of higher premiums and acquisition of NIA.

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Goodwill and Intangible Assets

We recognize the excess of the purchase price, plus the fair value of any non-controlling interests in the acquiree, over the fair value of identifiable net assets acquired as goodwill. Identified intangible assets are recorded at their estimated fair values at the date of acquisition and are amortized over their respective estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are used. As part of our acquisition of NIA in January 2023 we added $404.0 million of intangible assets and $395.2 million of goodwill. As part of our acquisition of IPG in August 2022, we added $195.7 million of intangible assets and $296.6 million of goodwill. See “Part I - Item 1. Financial Statements - Note 4” for further details of the Company’s restricted cash balances.

Tax Receivable Agreement

In connection with the Offering Reorganization, we entered into the TRA with the holders of Class B common units. The agreement requires us to pay to such holders 85% of the cash savings, if any, in U.S. federal, state and local, and foreign income tax (as applicable) we realize as a result of any deductions attributable to the increase in tax basis following the Class B Exchanges or deductions attributable to imputed interest or future increases in tax basis following payments made under the TRA. Additionally, pursuant to the same agreement we will pay the former stockholders of Evolent Health Holdings 85% of the amount of the cash savings, if any, in U.S. federal, state and local, and foreign income tax that we realize as a result of the utilization of the NOLs of Evolent Health Holdings (and the affiliate of TPG) attributable to periods prior to the Offering Reorganization, approximately $79.3 million, as well as deductions attributable to imputed interest on any payments made under the agreement. Payments under the TRA are due within 100 days of filing the Company’s annual U.S. Federal income tax return. The Company has recorded a TRA liability of $112.1 million as of March 31, 2023. See “Part I - Item 1. Financial Statements - Note 15” for further details of the Company’s TRA.

Uses of Capital

Our principal uses of cash are in the operation and expansion of our business, payment of interest on our convertible debt and secured borrowings and payment of preferred dividends. The Company does not anticipate paying a cash dividend on our Class A common stock in the foreseeable future.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.

Interest Rate Risk

As of March 31, 2023, the Company had cash and cash equivalents and restricted cash and restricted investments of $192.0 million, which consisted of bank deposits with FDIC participating banks of $190.3 million and bank deposits in international banks of $1.6 million.

Changes in interest rates affect the interest earned on our cash and cash equivalents (including restricted cash). We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

As of March 31, 2023, we had $196.8 million of aggregate principal amount of convertible notes outstanding, which are fixed rate instruments and not subject to fluctuations in interest rates. In addition, as of March 31, 2023, we had $415.0 million of aggregate principal amount in a secured term loan, $37.5 million of aggregate principal amount in a secured revolving credit facility and $175.0 million of Series A Preferred Stock outstanding, all of which are floating rate instruments based on the SOFR and subject to fluctuations in interest rates. In the case of (a) the term loan, interest is calculated at either the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus 6.00%, or the base rate plus 5.00%, (b) in the case of a revolving loan, interest is calculated at either the Adjusted Term SOFR Rate plus 4.00%, or the base rate plus 3.00% and (c) in the case of the Series A Preferred Stock, dividends are to be paid quarterly in cash in arrears at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designation) plus 6.00%. For every 1% increase in SOFR, the Company would record additional interest expense of $4.5 million per annum and preferred dividends of $1.8 million per annum.

Refer to the discussion in “Part I - Item 1. Financial Statements - Note 9” for additional information on our long-term debt.

Foreign Currency Exchange Risk

We have foreign currency risks related to our operating expenses denominated in currencies other than the U.S. dollar, primarily the Indian Rupee and the Philippine Peso. In general, we are a net payor of currencies other than the U.S. dollar. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may, in the future, negatively affect our operating results as expressed in U.S. dollars. At this time, we have not entered into, but in the future, we may enter into, derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. It is difficult to predict the effect hedging activities would have on our results of operations. We recognized a foreign currency translation income (loss) of $0.1 million and $(0.1) million for the three months ended March 31, 2023 and 2022, respectively.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q. The Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of March 31, 2023, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

Changes in Internal Control over Financial Reporting

On August 1, 2022 and January 20, 2023, we completed the acquisitions of IPG and NIA, respectively. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. In conducting our evaluation of the effectiveness of our internal control over financial reporting, we excluded IPG and NIA from our evaluation for the period ended March 31, 2023. We are in the process of integrating IPG and NIA into our system of internal control over financial reporting.

Other than the foregoing, there have been no changes in our internal control over financial reporting that occurred in the quarterly period covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Internal Controls

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II

Item 1. Legal Proceedings

The discussion of legal proceedings included within “Part I – Item 1. Financial Statements and Supplementary Data - Note 10 - Commitments and Contingencies - Litigation Matters” is incorporated by reference into this Item 1.

Item 1A. Risk Factors

Our significant business risks are described in Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). These risk factors are supplemented for the items described below. The risks and uncertainties we describe are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business or operations. Any adverse effect on our business, financial condition or operating results could result in a decline in the value of our securities and the loss of all or part of your investment.

Our business is subject to online security risks, and if we are unable to safeguard the security and privacy of confidential data, we may face significant liabilities and our reputation and business will be harmed.

Our services involve the collection, storage and analysis of confidential information, including intellectual property and personal information of employees, health providers and others, as well as protected health information of our partners’ patients. Because of the extreme sensitivity of this information, the security and privacy features of our computer, network, and communications systems infrastructure are very important. In certain cases, we provide such information to third parties, for example, to the service providers who provide hosting services for our technology platform, and we may be unable to control the use of such information or the security and privacy protections employed by such third parties. We may be required to expend significant capital and other resources to protect against security breaches and/or privacy incidents or to alleviate problems caused by security breaches and/or privacy incidents. Despite our implementation of security and privacy measures designed to help ensure data security and compliance with applicable laws and rules, our facilities and systems, and those of our third-party providers, are vulnerable to threats. Furthermore, our increased use of mobile and cloud technologies, including as a result of the shift to work-from-home arrangements as a result of the COVID-19 pandemic, has heightened these cybersecurity and privacy risks, including risks from cyber-attacks such as phishing, spam emails, hacking, social engineering, and malicious software including harmful malware and ransomware. Threat actors regularly attempt to gain access to our information and infrastructure through various techniques. These threats include cyber-attacks, the use of harmful malware or ransomware, security breaches, acts of vandalism or theft (including by employees), computer viruses, misplaced or lost data, programming and/or human errors, power outages, protected health information leakage from implementing third-party technology to process and share data, hardware failures or other similar events. To date we have not experienced a cybersecurity incident that has resulted in any material impact on our business, operations or financial results or on our ability to service our partners or run our business. However, past and future incidents, including if we are unable to effectively resolve breaches in a timely manner, could result in damage to the market perception of the effectiveness of our security and privacy measures and we could lose sales and partners, which could have a material adverse effect on our business, operations, and financial results. A cyber-attack that bypasses our, or our third-party providers’, security systems successfully could require us to expend significant resources to remediate any damage, and prevent future occurrences, interrupt our operations, damage our reputation and our relationship with our partners, expose us or other third parties to a risk of loss or misuse of confidential information, reduce demand for our products and services or subject us to significant liability through litigation as well as regulatory action.

Cyber-attacks continue to evolve in sophistication and volume and may remain undetected for an extended period. In addition, techniques used to obtain unauthorized access to information or to sabotage information technology systems change frequently. We have seen, and will continue to see, industry-wide vulnerabilities, such as the Log4j vulnerability reported in December 2021, which have and could in the future affect our or other parties’ systems. We expect to continue to experience such vulnerabilities in the future.

The costs of attempting to protect against cybersecurity risks and the costs of responding to cyber-attacks are significant. This could require us to expend significant resources to continue to modify or enhance our protective measures and to remediate any damage. While we maintain insurance covering certain security and privacy damages and claim expenses, we may not carry insurance or maintain coverage sufficient to compensate for all liability and such insurance may not be available for renewal on acceptable terms or at all, and in any event, insurance coverage would not address the reputational damage that could result from a security incident.

New data security and privacy laws and regulations are being implemented rapidly and are evolving, and we may not be able to timely comply with such requirements, and such requirements may not be compatible with our current processes. For example, regulators in the United States and globally are also inquiring more about and imposing greater monetary fines for privacy violations. In the last year, the FTC has announced that it will begin enforcing the Health Breach Notification Rule, and entered into a consent order with a $1.5 million fine. The FTC and many states (including California, Utah, Colorado, Virginia and Connecticut) have specific

49

requirements for collecting and processing certain data including data minimization, data de-identification, opt out rights, deletion and sharing. Changing our processes could be time consuming and expensive, and failure to timely implement required changes could subject us to liability for non-compliance.

The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.

The Federal Deposit Insurance Corporation only insures amounts up to $250,000 per depositor. It is likely that we will have cash and cash equivalents and restricted cash deposited in certain financial institutions in excess of federally insured levels. Recently, we have seen the abrupt failure of more than one regional bank. Although we did not experience any loss related to these failures, if any of the banking institutions in which we deposit funds ultimately fails, we may lose any amounts of our deposits over federally insured levels. The loss of our deposits could reduce the amount of cash we have available to distribute or invest and could result in a decline in our value.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 20, 2023, we issued 8,474,576 shares of our Class A common stock in connection with the purchase of NIA. The issuance was exempt from registration under the Securities Act in reliance upon Section 4(a)(2) and Rule 506(b) of the Securities Act as a transaction by an issuer not involving a public offering. We determined that the purchasers of shares of Class A common stock in the transaction were accredited investors. The Company did not engage in a general solicitation or advertising with regard to the issuance and contribution of the Class A common stock issued in connection with the transaction.

On February 1, 2023, we issued 849,715 shares of our Class A common stock in connection with a contingent consideration earn-out provision pursuant to the terms of an agreement between the Company and the previous owners of IPG. The issuance was exempt from registration under the Securities Act in reliance upon Section 4(a)(2) and Rule 506(b) of the Securities Act as a transaction by an issuer not involving a public offering. We determined that the purchasers of shares of Class A common stock in the transaction were accredited investors. The Company did not engage in a general solicitation or advertising with regard to the issuance and contribution of the Class A common stock issued in connection with the transaction.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

EVOLENT HEALTH, INC.

Exhibit Index

2.1*	Amendment No. 1 to Stock and Asset Purchase Agreement dated January 20, 2023, by and among Evolent Health, Inc., Evolent Health LLC, and Magellan Health, Inc. which was filed as Exhibit 2.6 to the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2023, and incorporated herein by reference.
2.2*	Amendment No. 2 to Stock and Asset Purchase Agreement dated February 17, 2023, by and among Evolent Health, Inc., Evolent Health LLC, and Magellan Health, Inc. which was filed as Exhibit 2.7 to the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2023, and incorporated herein by reference.
3.1*	Certificate of Designation of Series A Convertible Preferred Stock of the Company, dated as of January 19, 2023, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 23, 2023, and incorporated herein by reference.
10.1*	Securities Purchase Agreement, dated as of January 20, 2023, by and among the Purchasers listed on Schedule I thereto and the Company, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on January 23, 2023, and incorporated herein by reference.
10.2*	Investors Rights Agreement, dated as of January 20, 2023, by and among the Purchasers listed on Schedule I thereto and the Company, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on January 23, 2023, and incorporated herein by reference.
10.3*	Registration Rights Agreement, dated as of January 20, 2023, by and among the Stockholders named in Schedule I thereto and the Company, filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on January 23, 2023, and incorporated herein by reference.
10.4*	Registration Rights Agreement, dated as of January 20, 2023, by and between Magellan Health, Inc. and the Company, filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on January 23, 2023, and incorporated herein by reference.
10.5*	Amendment No. 1, dated as of January 20, 2023, to the Credit Agreement, dated as of August 1, 2022, by the Lenders party thereto, EVH LLC, as the Administrative Borrower, the other borrowers party thereto, the Company, as the Parent, each other Guarantor party thereto, Ares Capital Corporation, as Administrative Agent, and ACF Finco I LP, as Collateral Agent and Revolving Agent, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 23, 2023, and incorporated herein by reference.
10.6+	Amended and Restated Performance Stock Unit Award Agreement under the Evolent Health, Inc 2015 Omnibus Incentive Compensation Plan.
31.1	Certification of the Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
104	The cover page from this Annual Report on Form 10-K, formatted as Inline XBRL

————————

* The Company agrees to furnish supplementally to the SEC a copy of any omitted schedule or exhibit upon the request of the SEC in accordance with Item 601(b)(2) of Regulation S-K.

+ Constitutes a management contract or other compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EVOLENT HEALTH, INC.
Registrant
By:	/s/ John Johnson
Name:	John Johnson
Title:	Chief Financial Officer
By:	/s/ Aammaad Shams
Name:	Aammaad Shams
Title:	Chief Accounting Officer and Controller

Dated: May 3, 2023

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EX-10.6

EXHIBIT 10.6

EVOLENT HEALTH, INC.

2015 OMNIBUS INCENTIVE COMPENSATION PLAN

AMENDED AND RESTATED
PERFORMANCE STOCK UNIT AWARD AGREEMENT

PERFORMANCE STOCK UNIT award agreement under the EVOLENT HEALTH, INC. 2015 Omnibus Incentive Compensation Plan, dated as of [DATE] between EVOLENT HEALTH, INC., a Delaware corporation (the “Company”), and ____________.

This Performance Stock Unit Award Agreement, as amended and restated effective April  3, 2023 (this “Award Agreement”) sets forth the terms and conditions of an award for a target number of ______ (such number, the “Target Number”) performance stock units (this “Award”) (each such performance stock unit, a “PSU”) that are granted to you under the Evolent Health, Inc. 2015 Omnibus Incentive Compensation Plan (the “Plan”). This Award constitutes an unfunded and unsecured promise of the Company to deliver (or to cause to be delivered ) to you, subject to the terms of this Award Agreement, one share of the Company’s Class A Common Stock, $0.01 par value (each, a “Share”), or cash equal to the Fair Market Value of one Share, for each PSU ultimately earned by you, as set forth in this Award Agreement.

THIS AWARD IS SUBJECT TO ALL TERMS AND CONDITIONS OF THE PLAN AND THIS AWARD AGREEMENT, INCLUDING THE DISPUTE RESOLUTION PROVISIONS SET FORTH IN SECTION 13 OF THIS AWARD AGREEMENT. BY SIGNING YOUR NAME BELOW, YOU SHALL HAVE CONFIRMED YOUR ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AWARD AGREEMENT.

SECTION 1.    The Plan. This Award is made pursuant to the Plan, all the terms of which are hereby incorporated in this Award Agreement. In the event of any conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan shall govern.

SECTION 2.    Definitions. Capitalized terms used in this Award Agreement that are not defined in this Award Agreement have the meanings as used or defined in the Plan. As used in this Award Agreement, the following terms have the meanings set forth below:

“Acquired Business” has the meaning set forth in Section 3(c).

“Business Day” means a day that is not a Saturday, a Sunday or a day on which banking institutions are legally permitted to be closed in the City of New York.

“Company Value” has the meaning set forth in Section 3 (b) and (c).

“Cumulative Adjusted EBITDA” for the Performance Period means the Company’s cumulative earnings for the applicable Performance Period before interest, taxes, depreciation and amortization, and before stock-based compensation, acquisition expenses and similar non-recurring items, in a manner consistent with the Company’s publicly-reported adjusted EBITDA.

“Good Reason” means the occurrence, without your written consent, of any of the events or circumstances set forth in clauses (a) through (d) below:

(a)    a material reduction in your annual base salary or target bonus opportunity as the same may be increased from time to time;

1

(b)    your assignment to duties inconsistent in any material respect with your position, authority or responsibilities with the Company, or any other action or omission by the Company, which results in each case in a material diminution of your position, authority or responsibilities;

(c)    a relocation of your principal work location by more than 50 miles from such location as of immediately prior to the Change of Control; or

(d)    any material breach of this Award Agreement by the Company.

Good Reason shall not exist unless you give the Company notice of the event giving rise to Good Reason within 60 days of the date you have knowledge of such event. Such notice shall specifically delineate such claimed breach and shall inform the Company that it is required to cure such breach (if curable) within 90 days (the “Cure Period”) after such notice is given in accordance with Section 15 of this Award Agreement. If such breach is not so cured (or is not curable), you may resign for Good Reason within three months following the end of the Cure Period. If such breach is cured within the Cure Period or if such breach is not cured but you do not resign for Good Reason within three months following the end of the Cure Period, Good Reason shall not exist hereunder.

“Performance Period” means the period commencing on [.] and ending on [.].

“Replacement Award” means an award, which, upon a Change of Control, is provided to you as a replacement or substitution for this Award and which: (i) is of the same type as this Award (or a different type from this Award, provided that the Committee, as constituted immediately prior to the Change of Control, finds such type acceptable); (ii) has an intrinsic value at least equal to the value of this Award; (iii) relates to publicly traded equity securities of the Company or its successor in the Change of Control or another entity that is affiliated with the Company or its successor following the Change of Control; (iv) has terms and conditions that comply with the provisions of Section 6(c) of this Agreement; (v) has vesting conditions that continue on the same terms as set forth in this Award; and (vi) has other terms and conditions that are not less favorable to you than the terms and conditions of this Award (including the provisions that would apply in the event of a subsequent Change of Control). Without limiting the generality of the foregoing, a Replacement Award may take the form of a continuation of this Award if the requirements of the preceding sentence are satisfied. The determination of whether the conditions set forth in clauses (i) through (vi) are satisfied shall be made by the Committee, as constituted immediately before the Change of Control, in its sole discretion.

“Revenue” means the Company’s total recognized revenue from customers in a calendar year associated with the Company’s customer contracts, in a manner consistent with the Company’s publicly-reported financials.

“Revenue Ratio” means the lesser of (i) [.] and (ii) the Revenue of the Company for the Company’s [.] fiscal year divided by the Revenue of the Company for the Company’s [.] fiscal year. The Revenue of the Company for the [.] fiscal year was [.].

“Section 409A” means Section 409A of the Code and the regulations and other interpretive guidance promulgated thereunder, as in effect from time to time.

SECTION 3.    Performance Goals.

(a)    Subject to the service-vesting provisions set forth in Section 4 of this Award Agreement, the total number of PSUs you earn will be determined at the end of the Performance Period based on the Company Value, as set forth on Appendix A.

2

(b)    Except as set forth in Section 3(c), “Company Value” means the product of (i) the Cumulative Adjusted EBITDA for the Performance Period, (ii) the Revenue Ratio, and (iii) [.].

(c)    In determining the portion of the Company Value attributable to any business that is acquired by the Company and becomes part of the Company during the Performance Period (“Acquired Business”), the following rules shall apply:

(i)    The Company Value shall first be determined without regard to the Acquired Business based on the Cumulative Adjusted EBITDA and Revenue Ratio for the Company (without taking the Acquired Business into account) in accordance with Section 3(b).

(ii)    The value of the Acquired Business shall be determined as follows:

(A)    The Cumulative Adjusted EBITDA attributable to the Acquired Business shall be determined by adding all Adjusted EBITDA referable to the Acquired Business from the date of acquisition by the Company through to [.].

(B)    The Revenue Ratio for the Acquired Business shall be the lesser of (i) [.] and (ii) the Revenue attributable to the Acquired Business for the [.] fiscal year of the Company divided by the annualized revenue of the Acquired Business for the most recent completed fiscal year of the Acquired Business prior to the date of acquisition by the Company.

(C)    Multiply the product of (A) and (B) above by [.].

(D)    The value determined in (C) shall be reduced by the product of (1) the purchase price to the Company of the Acquired Business and the (2) fraction obtained by dividing the number of full months in the Performance Period that follow the date of the acquisition of the Acquired Business by [.].

(iii)    The Company Value, including the value of the Acquired Company, for the Performance Period shall be the sum of the amounts in Section 3(c)(i) and Section 3(c)(ii)(D).

(iv)    In the event of a Change of Control following the date of the Company’s acquisition of the Acquired Business and prior to the last day of the Performance Period, the value attributable to the Acquired Business (prior to reduction for a portion of the purchase price to the Company of the Acquired Business in accordance with Section 3(c)(ii)(D)), shall be determined in accordance with Section 6(b); provided however that the target Cumulative Adjusted EBITDA and the target Revenue for the Acquired Business for any fiscal quarter that has not been completed through the date of the Change of Control shall be determined by the Committee in good faith, taking into account, among other things, the internal business targets for the Acquired Business established by the Company for the Performance Period in connection with the acquisition of the Acquired Business.

(d)    No later than 50 days following the end of the Performance Period, the Committee will review and certify in writing (i) the level of Cumulative Adjusted EBITDA achieved for the Performance Period, (ii) the Revenue Ratio, (iii) the Company Value, and (iv) the number of PSUs that you have earned, if any, for the Performance Period. The Committee’s

3

certification shall be final, conclusive and binding on you, and on all other persons, to the maximum extent permitted by law.

(e)    Notwithstanding the foregoing, the Committee shall, to the extent and in such manner as it deems appropriate, adjust or modify the Performance Goals set forth in Appendix A and Appendix B for the Performance Period (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development affecting the Company, or any of its Affiliates, Subsidiaries, divisions or operating units (to the extent applicable to such Performance Goal), (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company or any of its Affiliates, Subsidiaries, divisions or operating units (to the extent applicable to such Performance Goal), or the financial statements of the Company or any of its Affiliates, Subsidiaries, divisions or operating units (to the extent applicable to such Performance Goal), or (iii) in recognition of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles, law or business conditions.

SECTION 4.    Service Vesting. The PSUs are subject to forfeiture until vested, as described in this Award Agreement. Except as otherwise provided in Section 6 below, your PSUs will vest and become nonforfeitable on [.], provided that you remain continuously employed by the Company or any of its Subsidiaries from the grant date of this Award through such vesting date.

SECTION 5.    Forfeiture of PSUs. Except as set forth in Section 6, if your service with the Company and all of its Subsidiaries terminates for any reason before [.], all of your PSUs shall be immediately forfeited and you shall be entitled to no further payments or benefits with respect thereto. Further, if you breach any restrictive covenant contained in any arrangements with the Company or a Subsidiary (including this Award Agreement) to which you are subject, all your PSUs shall be immediately forfeited, and you shall be entitled to no further payments or benefits with respect thereto. Furthermore, any PSUs awarded pursuant to this Award Agreement and any Shares issued to you or cash paid to you under this Award Agreement upon settlement of such PSUs shall be subject to any recoupment or clawback policy the Company maintains, as in effect from time to time.

SECTION 6.    Change of Control.

(a)    If a Change of Control occurs during the Performance Period, and your Award does not remain outstanding following the Change of Control and the acquiror or successor entity neither assumes nor provides a substitute for your Award that meets the requirements of a Replacement Award, then you will be deemed to have earned that number of PSUs as described in Section 6(b) below, effective as of the date of the Change of Control, and your Award shall become vested and nonforfeitable pursuant to Section 4 on [.], provided that, except as set forth in Section 6(c) or (d) below, you remain continuously employed by the Company or any of its Subsidiaries through [.].

(b)    The number of PSUs earned shall be the determined in accordance with Appendix A, based on the Company Value determined as of the date of the Change of Control, as follows:

(i)    For any fiscal quarter in the Performance Period that has been completed as of the date of the Change of Control, Cumulative Adjusted EBITDA shall be determined based on the actual Adjusted EBITDA for such quarter;

(ii)    For any fiscal quarter in the Performance Period that has not been completed as of the date of the Change of Control, Cumulative Adjusted EBITDA shall

4

be determined based on the target Adjusted EBITDA for each such quarter, as set forth in Appendix B hereto; and

(iii)    The Revenue Ratio shall be determined by using the target Revenue of the Company for any quarter in [.] which has not been completed as of the Change of Control, as set forth in Appendix B hereto, and the actual Revenue of the Company for any quarter in [.] that has been completed prior to the Change of Control.

(c)    If you are not subject to a Severance and Change-in-Control Agreement with the Company, and if, within twelve (12) months following the date of the Change of Control but prior to [.], your employment is terminated by the Company or the acquiror or successor entity without Cause or by you for Good Reason, the service vesting requirements of Section 4 shall automatically be deemed satisfied, and all restrictions and forfeiture provisions related thereto shall lapse as of the date of such termination.

(d)    If you are subject to a Severance and Change-in-Control Agreement with the Company and, within the Change in Control Protection Period, as defined in your Severance and Change-in-Control Agreement, but prior to [.], your employment is terminated by the Company or the acquiror or successor entity without Cause or by you for Good Reason, as those terms are defined in your Severance and Change-in-Control Agreement, then, subject to satisfaction of the release and other requirements of your Severance and Change-in-Control Agreement, the service vesting requirements of Section 4 shall automatically be deemed satisfied, and all restrictions and forfeiture provisions related thereto shall lapse as of the date of such termination. For the avoidance of doubt, notwithstanding anything in your Severance and Change-in-Control Agreement to the contrary, any PSUs not earned at the time of the Change of Control pursuant to Section 6(b) above shall be forfeited at the time of the Change of Control.

SECTION 7.    Settlement of PSUs. Settlement of PSUs earned under this Award Agreement shall be, at the Committee’s sole discretion, either (i) in Shares, which the Company shall deliver to you or your legal representative, (ii) in an amount in cash equal to the Fair Market Value (which shall either have the meaning set forth in the Plan or shall have such other meaning as determined by the Committee in accordance with applicable withholding requirements) of the Shares to be delivered in satisfaction of the PSUs, or (iii) in a combination of Shares and cash. Settlement shall take place within sixty (60) days following the end of the Performance Period, or, in the event of a termination of employment described in Section 6(c) or (d), within sixty (60) days following your termination date.

SECTION 8.    No Rights as a Stockholder. You shall not have any rights or privileges of a stockholder with respect to the PSUs subject to this Award Agreement unless and until certificates representing such Shares are actually issued to you or your legal representative or an entry is recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator) in settlement of this Award.

SECTION 9.    Non-Transferability of PSUs. Unless otherwise provided by the Committee in its discretion, PSUs may not be sold, assigned, alienated, transferred, pledged, attached or otherwise encumbered except as provided in Section 9(a) of the Plan. Any purported sale, assignment, alienation, transfer, pledge, attachment or other encumbrance of PSUs in violation of the provisions of this Section 9 and Section 9(a) of the Plan shall be void.

SECTION 10.    Withholding, Consents and Legends.

(a)    Withholding. The delivery of Shares or cash pursuant to Section 7 of this Award Agreement is conditioned on satisfaction of any applicable withholding taxes in accordance with this Section 10 and Section 9(d) of the Plan. No later than the date as of which

5

an amount first becomes includible in your gross income for Federal, state, local or foreign income tax purposes with respect to any PSUs you shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any Federal, state, local and foreign taxes that are required by applicable laws and regulations to be withheld with respect to such amount. In the event that there is withholding tax liability in connection with the settlement of the PSUs you may satisfy, in whole or in part, any withholding tax liability by having the Company withhold from the number of Shares or cash you would be entitled to receive upon settlement of the PSUs an amount in cash or a number of Shares having a Fair Market Value (which shall either have the meaning set forth in the Plan or shall have such other meaning as determined by the Committee in accordance with applicable withholding requirements) equal to such withholding tax liability.

(b)    Consents. Your rights in respect of the PSUs are conditioned on the receipt to the full satisfaction of the Committee of any required consents that the Committee may determine to be necessary or advisable (including your consent to the Company’s supplying to any third-party recordkeeper of the Plan such personal information as the Committee deems advisable to administer the Plan).

(c)    Legends. The Company may affix to certificates for Shares issued pursuant to this Award Agreement any legend that the Committee determines to be necessary or advisable (including to reflect any restrictions to which you may be subject under any applicable securities laws). The Company may advise the transfer agent to place a stop order against any legended Shares.

SECTION 11.    Successors and Assigns of the Company. The terms and conditions of this Award Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns.

SECTION 12.    Committee Discretion. The Committee shall have full and plenary discretion with respect to any actions to be taken or determinations to be made in connection with this Award Agreement, and its determinations shall be final, binding and conclusive.

SECTION 13.    Dispute Resolution.

(a)    Jurisdiction and Venue. You and the Company irrevocably submit to the exclusive jurisdiction of (i) the United States District Court for the Eastern District of Virginia and (ii) the courts of the State of Virginia for the purposes of any suit, action or other proceeding arising out of this Award Agreement or the Plan. You and the Company agree to commence any such action, suit or proceeding either in the United States District Court for the Eastern District of Virginia or, if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the courts of the State of Virginia. You and the Company further agree that service of any process, summons, notice or document by U.S. registered mail to the other party’s address set forth below shall be effective service of process for any action, suit or proceeding in Virginia with respect to any matters to which you have submitted to jurisdiction in this Section 13(a). You and the Company irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this Award Agreement or the Plan in (A) the United States District Court for the Eastern District of Virginia or (B) the courts of the State of Virginia, and hereby and thereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

(b)    Waiver of Jury Trial. You and the Company hereby waive, to the fullest extent permitted by applicable law, any right either of you may have to a trial by jury in respect

6

to any litigation directly or indirectly arising out of, under or in connection with this Award Agreement or the Plan.

(c)    Confidentiality. You hereby agree to keep confidential the existence of, and any information concerning, a dispute described in this Section 13, except that you may disclose information concerning such dispute to the court that is considering such dispute or to your legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of the dispute).

SECTION 14.    Restrictive Covenants. In consideration of the grant of PSUs under this Award Agreement and as a condition to the receipt of the PSUs pursuant to this Award Agreement, you agree that:

(a)    Confidential Information.

(i)    You acknowledge that the Company and its Affiliates continually develop Confidential Information (as defined below), that you may develop Confidential Information for the Company or its Affiliates and that you may learn of Confidential Information during the course of your employment. You will comply with the policies and procedures of the Company and its Affiliates for protecting Confidential Information and shall not disclose to any person or use, other than as required by applicable law or for the proper performance of your duties and responsibilities to the Company and its Affiliates, any Confidential Information obtained by you incident to your employment or other association with the Company or any of its Affiliates. You understand that this restriction shall continue to apply after your employment terminates, regardless of the reason for such termination. The confidentiality obligation under this Section 14 shall not apply to information which is generally known or readily available to the public at the time of disclosure or becomes generally known through no wrongful act on the part of you or any other person having an obligation of confidentiality to the Company or any of its Affiliates or is required to be disclosed in order to enforce this Award Agreement.

(ii)    All documents, records, tapes and other media of every kind and description relating to the business, present or otherwise, of the Company or its Affiliates and any copies, in whole or in part, thereof (the “Documents”), whether or not prepared by the you, shall be the sole and exclusive property of the Company and its Affiliates. You shall safeguard all Documents and shall surrender to the Company at the time your employment terminates, or at such earlier time or times as the Board or its designee may specify, all Documents then in your possession or control.

(iii)    “Confidential Information” means any and all information of the Company and its Affiliates that is not generally known by those with whom the Company or any of its Affiliates competes or does business, or with whom the Company or any of its Affiliates plans to compete or do business, and any and all information, whether or not publicly known in whole or in part, which, if disclosed by the Company or any of its Affiliates, would assist in competition against them. Confidential Information includes without limitation such information relating to (A) the development, research, testing, manufacturing, marketing and financial activities of the Company and its Affiliates, (B) the products and services of the Company and its Affiliates, (C) the costs, sources of supply, financial performance and strategic plans of the Company and its Affiliates, (D) the identity and special needs of the customers of the Company and its Affiliates and (E) the people and organizations with whom the Company and its Affiliates have business relationships and the nature and substance of those relationships. Confidential Information also includes any information that the Company or any of its Affiliates has

7

received, or may receive hereafter, belonging to customers or others with any understanding, express or implied, that the information would not be disclosed.

(b)    Non-Competition and Non-Solicitation.

(i)    You agree and acknowledge that the business (the “Business”) of the Company is any business activity engaged in, or actively contemplated by the Company (or any Subsidiary) to be engaged in, by the Company (or any Subsidiary) and with which you are or were involved on or prior to your date of termination.

(ii)    You agree that, except as the Company expressly agrees in writing, during your employment with the Company and for the 12-month period following termination of your employment for any reason, you shall not within the Territory (defined below), directly or indirectly, as an owner, partner, affiliate, stockholder, joint venturer, director, employee, consultant, contractor, principal, trustee or licensor, or in any other similar capacity whatsoever, of or for any person or entity (other than for the Company):

(A)    engage in, own, manage, operate, sell, finance, control, advise or participate in the ownership, management, operation, sales, finance or control of, be employed or employed by, or be connected in any manner with, any business that competes with (1) the Business or (2) if you have provided services directly to any health maintenance organization, health insurance company or similar health insurance plan, owned or operated by a customer of the Company, during the twelve-month period preceding the termination of your employment with the Company, such customer (each, a “Competitor”). Notwithstanding this Section 14(b)(ii)(A), you may accept employment with a Competitor whose business is diversified, provided that (I) such employment is with a portion of the Competitor’s business that does not provide products or services that are the same as, are similar to, or compete with the Company’s products or services (“Competing Products or Services”) and (II) prior to your acceptance of such employment with Competitor, the Company receives separate written assurances satisfactory to the Company from such Competitor and from you that you will not provide any Competing Products or Services;

(B)    approach, solicit, divert, interfere with, or take away, the business or patronage of any of the actual or prospective members, customers, or clients of the Company, for a purpose that is competitive with the Business; or

(C)    contact, recruit, solicit, hire, retain, or employ (whether as an employee, consultant, agent, independent contractor, or otherwise) any person who is, or who at any time during the 6-month period prior to your date of termination had been, employed or engaged by the Company, or induce or take any action which is intended to induce any such person to terminate his or her employment or relationship, or otherwise cease his or her relationship, with the Company, or interfere in any manner with the contractual or employment relationship between the Company and any employee of or any other person engaged by the Company.

“Territory” shall mean the United States of America and any other country with respect to which you have been involved on behalf of the Company.

(iii)    Notwithstanding anything to the contrary in Section 14(b)(ii) of this Award Agreement, you are permitted to own, individually, as a passive investor

8

(with no director designation rights, voting rights or veto rights or other special governance or voting rights), up to a one percent (1%) interest in any publicly traded entity that is a Competitor.

(iv)    You shall disclose in writing all of your relationships as a director, employee, consultant, contractor, principal, trustee, licensor, agent, or otherwise, with a Competitor or other business entity, to the Company for the 12-month period after your date of termination. You shall not disparage the Company or any of its officers, directors, or employees; provided, however, that this Section 14(b)(iv) shall not prohibit or constrain truthful testimony by you compelled by any valid legal process or valid legal dispute resolution process. Notwithstanding anything herein to the contrary, nothing in this Section 14 shall prevent either party hereto from enforcing such party’s rights or remedies hereunder or that such party may otherwise be entitled to enforce or assert under any other agreement or applicable law, or shall limit such rights or remedies in any way.

(v)    During the 12-month period following your date of termination, you shall notify in writing any prospective new employer or entity otherwise seeking to engage you that the provisions of this Section 14 exist prior to accepting employment or such other engagement.

(c)    Enforcement. The terms of this Section 14 are reasonable and necessary in light of your position with the Company and responsibility and knowledge of the operations of the Company and its Subsidiaries and are not more restrictive than necessary to protect the legitimate interests of the parties hereto. In addition, any breach of the covenants contained in this Section 14 would cause irreparable harm to the Company, its Subsidiaries and Affiliates, and there would be no adequate remedy at law or in damages to compensate the Company, its Subsidiaries and Affiliates for any such breach.

(d)    Protected Rights; Defend Trade Secrets Act.

(i)    Notwithstanding the foregoing, this Award Agreement is not intended to, and shall be interpreted in a manner that does not, limit or restrict you from exercising any legally protected whistleblower rights (including pursuant to Rule 21F under the Exchange Act).

(ii)    Under the Defend Trade Secrets Act: (A) no person will be held criminally or civilly liable under federal or state trade secret law for disclosure of a trade secret (as defined in the Economic Espionage Act) that is: (1) made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and made solely for the purpose of reporting or investigating a suspected violation of law, or, (2) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public, and (B) a person who pursues a lawsuit for retaliation by an employer for reporting a suspected violation of the law may disclose the trade secret to the attorney of the person and use the trade secret information in the court proceeding, if the person files any document containing the trade secret under seal, and does not disclose the trade secret, except as permitted by court order.

SECTION 15.    Notice. All notices, requests, demands and other communications required or permitted to be given under the terms of this Award Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three Business Days after they have been mailed by U.S. certified or registered mail, return receipt requested, postage prepaid, addressed to the other party as set forth below:

9

If to Company:	Evolent Health, Inc. 800 N. Glebe Road, Suite 500 Arlington, VA 22203 Attention: General Counsel
If to you:	To your address as most recently supplied to the Company and set forth in the Company’s records

The parties may change the address to which notices under this Award Agreement shall be sent by providing written notice to the other in the manner specified above.

SECTION 16.    Governing Law. This Award Agreement shall be deemed to be made in the State of Delaware, and the validity, construction and effect of this Award Agreement in all respects shall be determined in accordance with the laws of the State of Delaware, without giving effect to the conflict of law principles thereof.

SECTION 17.    Headings and Construction. Headings are given to the Sections and subsections of this Award Agreement solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Award Agreement or any provision thereof. Whenever the words “include”, “includes” or “including” are used in this Award Agreement, they shall be deemed to be followed by the words “but not limited to”. The term “or” is not exclusive.

SECTION 18.    Amendment of this Award Agreement. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Award Agreement prospectively or retroactively; provided, however, that, except as set forth in Section 19(d) of this Award Agreement, any such waiver, amendment, alteration, suspension, discontinuance, cancelation or termination that would impair your rights under this Award Agreement shall not to that extent be effective without your consent (it being understood, notwithstanding the foregoing proviso, that this Award Agreement and the PSUs shall be subject to the provisions of Section 7(c) of the Plan).

SECTION 19.    Section 409A.

(a)    It is intended that the provisions of this Award Agreement be exempt from or comply with Section 409A, and all provisions of this Award Agreement shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A.

(b)    Neither you nor any of your creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A) payable under this Award Agreement to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to you or for your benefit under this Award Agreement may not be reduced by, or offset against, any amount owing by you to the Company or any of its Affiliates.

(c)    If, at the time of your separation from service (within the meaning of Section 409A), (i) you shall be a specified employee (within the meaning of Section 409A and using the identification methodology selected by the Company from time to time) and (ii) the Company shall make a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then the Company shall not pay such amount on the

10

otherwise scheduled payment date but shall instead pay it, without interest, on the first Business Day after such six-month period.

(d)    Notwithstanding any provision of this Award Agreement to the contrary, in light of the uncertainty with respect to the proper application of Section 409A, the Company reserves the right to make amendments to this Award Agreement as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A. In any case, you shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on you or for your account in connection with this Award Agreement (including any taxes and penalties under Section 409A), and neither the Company nor any of its Affiliates shall have any obligation to indemnify or otherwise hold you harmless from any or all of such taxes or penalties.

SECTION 20.    Counterparts. This Award Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. You and the Company hereby acknowledge and agree that signatures delivered by facsimile or electronic means (including by “pdf”) shall be deemed effective for all purposes.

11

APPENDIX A

12

APPENDIX B

13

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Seth Blackley, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Evolent Health, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	May 3, 2023	/s/ Seth Blackley
		Name: Seth Blackley
		Title: Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, John Johnson, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Evolent Health, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	May 3, 2023	/s/ John Johnson
		Name: John Johnson
		Title: Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906

Of the Sarbanes-Oxley Act of 2002

I, Seth Blackley, Chief Executive Officer of Evolent Health, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1.The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2023 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	May 3, 2023	/s/ Seth Blackley
		Name: Seth Blackley
		Title: Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906

Of the Sarbanes-Oxley Act of 2002

I, John Johnson, Chief Financial Officer of Evolent Health, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1.The Quarterly Report on Form 10-K of the Company for the quarter ended March 31, 2023 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	May 3, 2023	/s/ John Johnson
		Name: John Johnson
		Title: Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - shares	3 Months Ended
	Mar. 31, 2023	Apr. 28, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-37415
Entity Registrant Name	Evolent Health, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	32-0454912
Entity Address, Address Line One	800 N. Glebe Road
Entity Address, Address Line Two	Suite 500
Entity Address, City or Town	Arlington
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	22203
City Area Code	571
Local Phone Number	389-6000
Title of 12(b) Security	Class A Common Stock of Evolent Health, Inc., par value $0.01 per share
Trading Symbol	EVH
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		112,667,704
Entity Central Index Key	0001628908
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Document Year Focus	2023
Document Fiscal Period Focus	Q1

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents		$ 157,519	$ 188,200
Restricted cash and restricted investments		21,932	14,492
Accounts receivable, net	[1]	262,764	254,684
Prepaid expenses and other current assets	[1]	33,757	20,678
Total current assets		475,972	478,054
Restricted cash and restricted investments		12,519	12,466
Investments in equity method investees		4,112	4,475
Property and equipment, net		88,606	87,874
Right-of-use assets - operating		44,408	49,027
Prepaid expenses and other noncurrent assets	[1]	3,543	2,378
Contract cost assets		16,497	17,461
Intangible assets, net		825,857	442,784
Goodwill		1,117,945	722,774
Total assets		2,589,459	1,817,293
Current liabilities:
Accounts payable	[1]	51,012	57,174
Accrued liabilities	[1]	170,236	111,198
Operating lease liability - current		4,608	7,122
Accrued compensation and employee benefits		27,527	52,460
Deferred revenue		7,069	5,758
Reserve for claims and performance - based arrangements	[1]	197,197	199,730
Total current liabilities		457,649	433,442
Long-term debt, net		632,277	412,986
Other long-term liabilities		4,473	4,744
Tax receivable agreement liability		112,134	45,950
Operating lease liabilities - noncurrent		54,274	56,010
Deferred tax liabilities, net		36,284	4,744
Total liabilities		1,297,091	957,876
Commitments and Contingencies (See Note 10)
Mezzanine Equity
Preferred class A common stock - $0.01 par value; 50,000,000 shares authorized; 175,000 shares issued		170,625	0
Shareholders' Equity
Class A common stock - $0.01 par value; 750,000,000 shares authorized; 112,552,160 and 101,500,558 shares issued, respectively		1,125	1,015
Additional paid-in-capital		1,768,999	1,486,857
Accumulated other comprehensive loss		(1,122)	(1,178)
Retained earnings (accumulated deficit)		(626,136)	(606,154)
Treasury stock, at cost; 1,537,582 shares issued, respectively		(21,123)	(21,123)
Total shareholders' equity		1,121,743	859,417
Total liabilities, mezzanine equity and shareholders' equity		$ 2,589,459	$ 1,817,293

[1] See Note 18 for amounts attributable to related parties included in these line items.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Mezzanine Equity
Preferred class A common stock, par value (in dollars per share)	$ 0.01
Preferred class A common stock, shares authorized	50,000,000
Preferred class A common stock, shares issued	175,000	0
Shareholders' Equity
Class A common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Class A common stock, shares authorized	750,000,000	750,000,000
Class A common stock, shares issued	112,552,160	101,500,558
Treasury stock, shares issued	1,537,582	1,537,582

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022
Income Statement [Abstract]
Revenue	[1]	$ 427,690	$ 297,057
Expenses
Cost of revenue	[1]	310,475	219,739
Selling, general and administrative expenses	[1]	89,726	58,932
Depreciation and amortization expenses		29,275	15,106
Change in fair value of contingent consideration		8,569	6,078
Total operating expenses		438,045	299,855
Operating loss		(10,355)	(2,798)
Interest income		1,060	117
Interest expense		(12,895)	(2,241)
Gain from equity method investees		423	596
Change in tax receivable agreement liability		(66,184)	0
Other income (expense), net		(220)	178
Loss before income taxes		(88,171)	(4,148)
Provision for (benefit from) income taxes		(68,189)	1,202
Loss before preferred dividends and accretion of Series A Preferred Stock		(19,982)	(5,350)
Dividends and accretion of Series A Preferred Stock		(6,276)	0
Net loss attributable to common shareholders of Evolent Health, Inc - Basic		(26,258)	(5,350)
Net loss attributable to common shareholders of Evolent Health, Inc. - Diluted		$ (26,258)	$ (5,350)
Loss per common share
Basic (in dollars per share)		$ (0.24)	$ (0.06)
Diluted (in dollars per share)		$ (0.24)	$ (0.06)
Weighted-average common shares outstanding
Basic (in shares)		107,783	89,509
Diluted (in shares)		107,783	89,509
Comprehensive loss
Net income (loss)		$ (26,258)	$ (5,350)
Other comprehensive loss, net of taxes, related to:
Foreign currency translation adjustment		56	(132)
Total comprehensive loss attributable to common shareholders of Evolent Health, Inc.		$ (26,202)	$ (5,482)

[1] See Note 18 for amounts attributable to unconsolidated related parties included in these line items.

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CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY - USD ($) $ in Thousands	Total	Performance-Based Restricted Stock Units (PSUs)	Leveraged Stock Units (LSUs)	Cumulative-effect adjustment from adoption of ASC 2020-06	Class A Common Stock	Class A Common Stock Performance-Based Restricted Stock Units (PSUs)	Class A Common Stock Leveraged Stock Units (LSUs)	Additional Paid-In Capital	Additional Paid-In Capital Performance-Based Restricted Stock Units (PSUs)	Additional Paid-In Capital Leveraged Stock Units (LSUs)	Additional Paid-In Capital Cumulative-effect adjustment from adoption of ASC 2020-06	Accumulated Other Comprehensive Income (Loss)	Retained Earnings (Accumulated Deficit)	Retained Earnings (Accumulated Deficit) Cumulative-effect adjustment from adoption of ASC 2020-06	Treasury Stock
Beginning balance (in shares) at Dec. 31, 2021					90,759,000
Beginning balance at Dec. 31, 2021	$ 693,633			$ (66,383)	$ 908			$ 1,340,989			$ (106,172)	$ (362)	$ (626,779)	$ 39,789	$ (21,123)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	5,346							5,346
Exercise of stock options (in shares)					37,000
Exercise of stock options	309							309
Restricted stock units vested, net of shares withheld for taxes (in shares)					334,000
Restricted stock units vested, net of shares withheld for taxes	(4,983)				$ 3			(4,986)
Stock units vested, net of shares withheld for taxes (in shares)					458,000
Stock units vested, net of shares withheld for taxes	(11,231)				$ 5			(11,236)
Foreign currency translation adjustment	(132)											(132)
Net income (loss)	(5,350)												(5,350)
Ending balance (in shares) at Mar. 31, 2022					91,588,000
Ending balance at Mar. 31, 2022	$ 611,209				$ 916			1,224,250				(494)	(592,340)		(21,123)
Beginning balance (in shares) at Dec. 31, 2022	0
Beginning balance at Dec. 31, 2022	$ 0
Increase (Decrease) in Temporary Equity [Roll Forward]
Issuance of series A preferred stock, net of issuance costs (in shares)	175,000
Issuance of series A preferred stock, net of issuance costs	$ 168,000
Net income (loss)	$ 2,625
Ending balance (in shares) at Mar. 31, 2023	175,000
Ending balance at Mar. 31, 2023	$ 170,625
Beginning balance (in shares) at Dec. 31, 2022					101,501,000
Beginning balance at Dec. 31, 2022	859,417				$ 1,015			1,486,857				(1,178)	(606,154)		(21,123)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	10,710							10,710
Exercise of stock options (in shares)					330,000
Exercise of stock options	1,581				$ 3			1,578
Restricted stock units vested, net of shares withheld for taxes (in shares)					434,000
Restricted stock units vested, net of shares withheld for taxes	(8,632)				$ 4			(8,636)
Stock units vested, net of shares withheld for taxes (in shares)						202,000	760,000
Stock units vested, net of shares withheld for taxes		$ (3,975)	$ 0			$ 2	$ 8		$ (3,977)	$ (8)
Shares issued for acquisition (in shares)					8,475,000
Shares issued for acquisition	261,271				$ 85			261,186
Class A common stock issued for payment of earn-outs (in shares)					850,000
Class A common stock issued for payment of earn-outs	27,573				$ 8			27,565
Foreign currency translation adjustment	56											56
Net income (loss)	(26,258)							(6,276)					(19,982)
Ending balance (in shares) at Mar. 31, 2023					112,552,000
Ending balance at Mar. 31, 2023	$ 1,121,743				$ 1,125			$ 1,768,999				$ (1,122)	$ (626,136)		$ (21,123)

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash Flows Used In Operating Activities
Net loss before dividends declared and accretion of Series A preferred stock	$ (19,982)	$ (5,350)
Adjustments to reconcile net loss to net cash and restricted cash used in operating activities:
Change in fair value of contingent consideration	8,569	6,078
Gain from equity method investees	(423)	(596)
Depreciation and amortization expenses	29,275	15,106
Stock-based compensation expense	10,710	5,346
Deferred tax provision	(68,728)	(132)
Amortization of contract cost assets	2,290	11,689
Amortization of deferred financing costs	911	539
Change in tax receivable agreement liability	66,184	0
Right-of-use operating assets	(4,620)	(1,718)
Operating lease liabilities	(4,250)	(1,992)
Other current operating cash outflows, net	(56)	(357)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net and contract assets	19,832	(46,299)
Prepaid expenses and other current and non-current assets	(13,758)	(6,071)
Contract cost assets	(1,326)	(1,106)
Accounts payable	(13,585)	426
Accrued liabilities	4,785	2,220
Accrued compensation and employee benefits	(31,401)	(32,435)
Deferred revenue	1,169	1,344
Reserve for claims and performance-based arrangements	(2,533)	(7,056)
Other long-term liabilities	(277)	(514)
Net cash and restricted cash used in operating activities	(7,974)	(57,442)
Cash Flows Provided by (Used In) Investing Activities
Cash paid for asset acquisitions and business combinations	(386,724)	(70)
Proceeds from transfer of membership and release of Passport escrow	0	22,969
Return of equity method investments	786	2,375
Investments in internal-use software and purchases of property and equipment	(9,055)	(8,508)
Net cash and restricted cash provided by (used in) investing activities	(394,993)	16,766
Cash Flows Provided by (Used In) Financing Activities
Changes in working capital balances related to claims processing on behalf of partners	7,576	(34,371)
Proceeds from stock option exercises	1,581	309
Proceeds from issuance of long-term debt, net of offering costs	256,330	0
Repayment of long-term debt	(37,500)	0
Distributions to Sponsors	0	(1,100)
Proceeds from issuance of preferred stock, net of offering costs	168,000	0
Payment of preferred dividends	(3,651)	0
Taxes withheld and paid for vesting of equity awards	(12,607)	(16,214)
Net cash and restricted cash provided by (used in) financing activities	379,729	(51,376)
Effect of exchange rate on cash and cash equivalents and restricted cash	50	(104)
Net decrease in cash and cash equivalents and restricted cash	(23,188)	(92,156)
Cash and cash equivalents and restricted cash as of beginning-of-period	215,158	354,942
Cash and cash equivalents and restricted cash as of end-of-period	$ 191,970	$ 262,786

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Organization

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

Evolent Health, Inc. was incorporated in December 2014 in the state of Delaware and through its subsidiaries supports healthcare entities to improve the quality of care delivered for people with complex conditions through proven solutions that make health care simpler and more affordable.

The Company made organizational changes, including re-evaluating its reportable segments, as a result of growth in our value-based specialty care business, both organically and through acquisitions. Effective during the three months ended March 31, 2023, the Company changed its reportable segments to reflect changes in the way its chief operating decision maker evaluates the performance of its operations, develops strategy and allocates capital resources. Specifically, the Company collapsed its previous Evolent Health Services and Clinical Solutions segments into one segment. The Company's historical disclosures have been recast to be consistent with the current presentation.

As of March 31, 2023, the Company had unrestricted cash and cash equivalents of $157.5 million. The Company believes it has sufficient liquidity for at least the next twelve months as of the date the financial statements were available to be issued.

The Company’s headquarters is located in Arlington, Virginia.

Evolent Health LLC Governance

Our operations are conducted through Evolent Health LLC. Evolent Health, Inc. is a holding company whose only business is to act as the sole managing member of Evolent Health LLC. As such, it controls Evolent Health LLC’s business and affairs and is responsible for the management of its business.

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Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles

Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles

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 interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain footnote disclosures normally included in financial statements prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) have 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 2022 Form 10-K.

Summary of Significant Accounting Policies

Certain GAAP policies that significantly affect the determination of our financial position, results of operations and cash flows, are summarized below. See “Part II - Item 8. Financial Statements and Supplementary Data - Note 2” in our 2022 Form 10-K for a complete summary of our significant accounting policies.

Accounting Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses for the reporting period. Those estimates are inherently subject to change and actual results could differ from those estimates. In the accompanying interim consolidated financial statements, estimates are used for, but not limited to, the valuation of assets (including intangibles assets, goodwill and long-lived assets), liabilities, consideration related to business combinations and asset acquisitions, revenue recognition (including variable consideration), estimated selling prices for performance obligations in contracts with multiple performance obligations, reserves for claims and performance-based arrangements, credit losses, depreciable lives of assets, impairment of long-lived assets, stock-based compensation, deferred income taxes and valuation allowance, contingent liabilities, purchase price allocation in taxable stock transactions and useful lives of intangible assets.

Principles of Consolidation

The interim consolidated financial statements include the accounts of Evolent Health, Inc. and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Cash and Cash Equivalents

We consider all highly liquid instruments with original maturities of three months or less to be cash equivalents. The Company holds materially all of our cash in bank deposits with FDIC participating banks, at cost, which approximates fair value. Cash and cash equivalents held in money market funds are carried at fair value, which approximates cost.

Restricted Cash and Restricted Investments

Restricted cash and restricted investments include cash and investments used to collateralize various contractual obligations (in thousands) as follows:

	March 31, 2023		December 31, 2022
Collateral for letters of credit for facility leases (1)	$	2,132	$	2,269
Collateral with financial institutions (2)	10,966		10,912
Claims processing services (3)	21,353		13,777
Total restricted cash and restricted investments	$	34,451	$	26,958
Current restricted cash	$	21,932	$	14,492
Total current restricted cash and restricted investments	$	21,932	$	14,492
Non-current restricted cash	$	12,519	$	12,466
Total non-current restricted cash and restricted investments	$	12,519	$	12,466

————————

(1)Represents restricted cash related to collateral for letters of credit required in conjunction with lease agreements. See Note 11 for further discussion of our lease commitments.

(2)Represents collateral held with financial institutions for risk-sharing and other arrangements which are held in a FDIC participating bank account. See Note 17 for discussion of fair value measurement and Note 10 for discussion of our risk-sharing arrangements.

(3)Represents cash held by the Company related to claims processing services on behalf of partners. These are pass-through amounts and can fluctuate materially from period to period depending on the timing of when the claims are processed.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows (in thousands):

	March 31,
	2023		2022
Cash and cash equivalents	$	157,519	$	210,158
Restricted cash and restricted investments	34,451		52,628
Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	191,970	$	262,786

Business Combinations

Companies acquired during each reporting period are reflected in the results of the Company effective from their respective dates of acquisition through the end of the reporting period. The Company allocates the fair value of purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Critical estimates used to value certain identifiable assets include, but are not limited to, expected long-term revenues, future expected operating expenses, cost of capital and appropriate discount rates.

The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed in the acquired entity is recorded as goodwill. Goodwill is assigned to the reporting unit that benefits from the synergies arising from the business combination. If the Company obtains new information about facts and circumstances that existed as of the acquisition date during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final

determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded on the Company's consolidated statements of operations and comprehensive income (loss).

For contingent consideration recorded as a liability, the Company initially measures the amount at fair value as of the acquisition date and adjusts the liability, if needed, to fair value at each reporting period. Changes in the fair value of contingent consideration, other than measurement period adjustments, are recognized as operating income or expense. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. See Note 4 for additional discussion regarding business combinations.

Goodwill

We recognize the excess of the purchase price, plus the fair value of any non-controlling interests in the acquiree, over the fair value of identifiable net assets acquired as goodwill. Goodwill is not amortized, but is reviewed at least annually for indications of impairment, with consideration given to financial performance and other relevant factors. We perform impairment tests of goodwill at a reporting unit level on October 31 of each year. We perform impairment tests between annual tests if an event occurs, or circumstances change, that we believe would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Our goodwill impairment analysis first assesses qualitative factors to determine whether events or circumstances existed that would lead the Company to conclude it is more likely than not that the fair value of a reporting unit is below its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is below the carrying amount, a quantitative goodwill assessment is required. In the quantitative evaluation, the fair value of the relevant reporting unit is determined and compared to the carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value and a charge is reported in goodwill impairment on our consolidated statements of operations and comprehensive income (loss). See Note 8 for additional discussion regarding the goodwill impairment tests conducted during 2022.

Intangible Assets, Net

Identified intangible assets are recorded at their estimated fair values at the date of acquisition and are amortized over their respective estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are used.

The following summarizes the estimated useful lives by asset classification:

Corporate trade name	2 - 20 years
Customer relationships	11 - 25 years
Technology	5 years
Provider network contracts	3 - 5 years

As part of the organizational changes as a result of growth in our value-based specialty care business, we re-evaluated the useful lives of our intangible assets. As a result, we accelerated amortization such that all corporate trade names will be fully amortized by December 2024.

Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the asset’s carrying value. The Company evaluates recoverability by determining whether the undiscounted cash flows expected to result from the use and eventual disposition of that asset or group exceed the carrying value at the evaluation date. If the undiscounted cash flows are not sufficient to cover the carrying value, the Company measures an impairment loss as the excess of the carrying amount of the long-lived asset or group over its fair value. See Note 8 for additional discussion regarding our intangible assets.

Research and Development Costs

Research and development costs consist primarily of personnel and related expenses (including stock-based compensation and employee taxes and benefits) for employees engaged in research and development activities as well as third-party fees. All such costs are expensed as incurred. We focus our research and development efforts on activities that support our technology infrastructure, clinical program development, data analytics and network development capabilities. Research and development costs are recorded within cost of revenue and selling, general and administrative expenses on our consolidated statements of operations and comprehensive income (loss).

Reserves for Claims and Performance-based Arrangements

Reserves for claims and performance-based arrangements reflect estimates of payments under performance-based arrangements and the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process) and other medical care expenses and services payable that are primarily composed of accruals for incentives and other amounts payable to health care professionals and facilities. The Company uses actuarial principles and assumptions that are consistently applied in each reporting period and recognizes the actuarial best estimate of the ultimate liability along with a margin for adverse deviation. This approach is consistent with actuarial standards of practice that the liabilities be adequate under moderately adverse conditions.

The process of estimating reserves involves a considerable degree of judgment by the Company and, as of any given date, is inherently uncertain. The methods for making such estimates and for establishing the resulting liability are continually reviewed and adjustments are reflected in current results of operations in the period in which they are identified as experience develops or new information becomes known. See Note 19 for additional discussion regarding our reserves for claims and performance-based arrangements.

Right of Offset

Certain customer arrangements give the Company the legal right to net payment for amounts due from customers and claims payable. As of both March 31, 2023 and December 31, 2022, approximately 47% of gross accounts receivable has been netted against claims payable in lieu of cash receipt. Furthermore, as of March 31, 2023, approximately 20% of our accounts receivable, net could ultimately be settled on a net basis, once the criteria for netting have been met.

Leases

The Company enters into various office space, data center and equipment lease agreements in conducting its normal business operations. At the inception of any contract, the Company evaluates the agreement to determine whether the contract contains a lease. If the contract contains a lease, the Company then evaluates the term and whether the lease is an operating or finance lease. Most leases include one or more options to renew or may have a termination option. The Company determines whether these options are reasonably certain to be exercised at the inception of the lease. The rent expense is recognized on a straight-line basis in the consolidated statements of operations and comprehensive income (loss) over the terms of the respective leases. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Further, the Company treats all lease and non-lease components as a single combined lease component for all classes of underlying assets.

The Company also enters into sublease agreements for some of its leased office space. Rental income attributable to subleases is immaterial and is offset against rent expense over the terms of the respective leases.

Refer to Note 11 for additional lease disclosures.

Revenue Recognition

Our revenue contracts are typically multi-year arrangements with customers to provide various clinical and administrative solutions. Our solutions are designed to lower the medical expenses of our partners and include our total cost of care and specialty care management services, provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers.

We use the following 5-step model, outlined in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), to determine revenue recognition from our contracts with customers:

• Identify the contract(s) with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to performance obligations

• Recognize revenue when (or as) the entity satisfies a performance obligation

See Note 5 for further discussion of our policies related to revenue recognition.

Series A Senior Convertible Preferred Shares

In accordance with ASC 480, Distinguishing Liabilities from Equity, the shares of Series A Senior Convertible Preferred Shares are classified within temporary equity, as events outside the Company’s control triggers such shares to become redeemable. Costs associated with the issuance of redeemable preferred stock are presented as discounts to the fair value of the redeemable preferred stock and are amortized using the effective interest method, over the term of the respective series of preferred shares. Refer to Note 12 - Series A Senior Convertible Preferred Shares for further discussion.

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Recently Issued Accounting Standards

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Recently Issued Accounting Standards

Recently Issued Accounting Standards

Adoption of New Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Specifically, the ASU removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature and no longer permits the use of the treasury stock method from calculating earnings per share. As a result, after adopting the ASU’s guidance, we do not separately present in equity an embedded conversion feature of such debt. Instead, we account for a convertible debt instrument wholly as debt unless (i) a convertible instrument contains features that require bifurcation as a derivative or (ii) a convertible debt instrument was issued at a substantial premium. Additionally, the ASU removes certain conditions for equity classification related to contracts in an entity’s own equity (e.g., warrants) and amends certain guidance related to the computation of earnings per share for convertible instruments and contracts on an entity’s own equity. The Company adopted the standard using a modified retrospective method on January 1, 2022, with adjustments which increased retained earnings by $39.8 million, reduced additional paid-in capital by $106.2 million and increased the net carrying amount of the 2024 and 2025 Notes by $25.1 million and $41.3 million, respectively.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. The Company adopted this standard starting in the first quarter of 2023, which did not have a material impact on our consolidated financial statements.

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Transactions

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Transactions

Transactions

Business Combinations

National Imaging Associates Inc.

On January 20, 2023, the Company completed its acquisition of NIA, including all of the issued and outstanding shares of capital stock of NIA as well as certain assets held by Magellan Health, Inc. (“Magellan”) and certain of its subsidiaries that were used in the Magellan Specialty Health Division. NIA is a specialty benefit management organization that focuses on managing cost and quality in the areas of radiology, musculoskeletal, physical medicine and genetics. The transaction is expected to accelerate our strategy to become a leading provider of value-based specialty care solutions as well as diversify our revenue streams with a larger customer portfolio.

Total acquisition consideration, net of cash on hand and certain closing adjustments, was $715.7 million, based on the closing price of the Company’s Class A common stock on the NYSE on January 20, 2023. The acquisition consideration consisted of approximately $387.8 million of cash consideration (inclusive of certain post-closing adjustments), 8,474,576 shares of the Company’s Class A common stock, fair valued at $261.3 million as of January 20, 2023, and an earn-out consisting of additional consideration of up to $150.0 million payable in cash and, at the Company’s election, up to 50% in shares of the Company’s Class A common stock (the “Contingent Consideration”). As of January 20, 2023, the Contingent Consideration is fair valued at $66.6 million. See Note 17 for additional information regarding the fair value determination of the earn-out consideration.

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of January 20, 2023, as follows (in thousands):

Purchase consideration:
Cash	$	387,823
Fair value of Class A common stock issued	261,271
Fair value of contingent consideration	66,600
Total consideration	$	715,694
Tangible assets acquired:
Accounts receivable	28,065
Prepaid expenses and other current assets	675
Total tangible assets acquired	28,740
Identifiable intangible assets acquired:
Customer relationships	345,100
Technology	50,700
Corporate trade name	8,200
Total identifiable intangible assets acquired	404,000
Liabilities assumed:
Accrued liabilities	5,409
Accrued compensation and employee benefits	6,173
Deferred tax liabilities, net	100,486
Deferred revenue	142
Total liabilities assumed	112,210
Goodwill	395,164
Net assets acquired	$	715,694

The fair value of the receivables acquired, as shown in the table above, approximates the gross contractual amounts and is expected to be collectible in full. Identifiable intangible assets associated with customer relationships, technology and the corporate trade name will be amortized on a straight-line basis over their preliminary estimated useful lives of 15 years, 5 years, and 2 years, respectively. The customer relationships are primarily attributable to existing contracts with current customers. The technology consists primarily of proprietary software that supports NIA’s core business applications and specialty business. The corporate trade name reflects the value that we believe the NIA brand name carries in the market. The fair value of the intangible assets was determined using the income approach and the relief from royalty approach. The income approach estimates fair value for an asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required rate of return that reflects the relative risk of achieving the cash flows and the time value of money. The relief from royalty approach estimates the fair value of an asset by calculating how much an entity would have to spend to lease a similar asset. Goodwill is calculated as the difference between the acquisition date fair value of the total consideration and the fair value of the net assets acquired and represents the future economic benefits that we expect to achieve as a result of the acquisition. The Company received carryover tax basis in the assets and liabilities acquired; accordingly, the Company recognized net deferred tax liabilities associated with the difference between the book basis and the tax basis for the assets and liabilities acquired. The goodwill is not deductible for tax purposes. Additionally, a discrete tax benefit of $56.1 million was recorded in the consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2023, to account for the valuation allowance release primarily related to the acquired intangible assets, which resulted in a deferred tax liability that provided a source of income supporting realization of other deferred tax assets.

The amounts above reflect management’s preliminary estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed. As of March 31, 2023, we had not finalized the determination of fair values allocated to the acquired intangible assets and deferred tax liability. Any necessary adjustments will be finalized within one year from the date of acquisition.

We have included the financial results of NIA in our consolidated financial statements from January 20, 2023. The consolidated statements of operations and comprehensive income (loss) include $48.5 million of revenues and $(5.5) million of net loss attributable to NIA for the three months ended March 31, 2023.

Implantable Provider Group

On August 1, 2022, the Company completed its acquisition of IPG, including 100% of the voting equity interests. IPG is a leader in providing surgical management solutions for musculoskeletal conditions. The transaction is expected to accelerate our strategy to become a leading provider of value-based specialty care solutions as well as diversify our revenue streams with a larger customer portfolio. The transaction is expected to deepen our capabilities, allowing us to cross-sell across customers and enhance our value proposition to partners.

Total acquisition consideration, net of cash on hand and certain closing adjustments, was $461.7 million, based on the closing price of the Company’s Class A common stock on the NYSE on August 1, 2022. The acquisition consideration consisted of $256.5 million of cash consideration, 3.7 million shares of Class A common stock, fair valued at $130.2 million as of August 1, 2022, and an earn-out of up to $87.0 million, fair valued at $75.0 million as of August 1, 2022 is payable in cash and/or shares of the Company’s Class A Common Stock, at the Company’s option. See Note 17 for additional information regarding the fair value determination of the earn-out consideration.

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of August 1, 2022, as follows (in thousands):

Purchase consideration:
Cash	$	256,488
Fair value of Class A common stock issued	130,175
Fair value of contingent consideration	75,000
Total consideration	$	461,663
Tangible assets acquired:
Accounts receivable	34,155
Prepaid expenses and other current assets	636
Other non-current assets	1,393
Total tangible assets acquired	36,184
Identifiable intangible assets acquired:
Customer relationships	154,000
Technology	23,900
Corporate trade name	17,800
Total identifiable intangible assets acquired	195,700
Liabilities assumed:
Accounts payable	7,997
Accrued liabilities	8,083
Accrued compensation and employee benefits	423
Deferred tax liabilities, net	48,671
Deferred revenue	321
Operating lease liabilities	1,323
Total liabilities assumed	66,818

Goodwill	296,597
Net assets acquired	$	461,663

The fair value of the receivables acquired, as shown in the table above, approximates the gross contractual amounts and is expected to be collectible in full. Identifiable intangible assets associated with customer relationships, technology and the corporate trade name will be amortized on a straight-line basis over their preliminary estimated useful lives of 20 years, 5 years, and 15 years, respectively. The customer relationships are primarily attributable to existing contracts with current customers. The technology consists primarily of a proprietary customer relationship management and analytics platform that supports reporting to payors with respect to medical device pricing and associated analytics. The corporate trade name reflects the value that we believe the IPG brand name carries in the market. The fair value of the intangible assets was determined using the income approach and the relief from royalty approach. The income approach estimates fair value for an asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required rate of return that reflects the relative risk of achieving the cash flows and the time value of money. The relief from royalty approach estimates the fair value of an asset by calculating how much an entity would have to spend to lease a similar asset. Goodwill is calculated as the difference between the acquisition date fair value of the total consideration and the fair value of the net assets acquired and represents the future economic benefits that we expect to achieve as a result of the acquisition. The Company received carryover tax basis in the assets and liabilities acquired; accordingly, the Company recognized net deferred tax liabilities associated with the difference between the book basis and the tax basis for the assets and liabilities acquired. The goodwill is not deductible for tax purposes. Additionally, a discrete tax benefit of $46.8 million was recorded in the consolidated statements of operations and comprehensive income (loss) for the year December 31, 2022, to account for the valuation allowance release primarily related to the acquired intangible assets, which resulted in a deferred tax liability that provided a source of income supporting realization of other deferred tax assets.

The amounts above reflect management’s preliminary estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed. As of March 31, 2023, we had not finalized the determination of fair values allocated to the deferred tax liability. Any necessary adjustments will be finalized within one year from the date of acquisition.

Pro forma financial information (unaudited)

The following unaudited condensed pro forma information presents combined financial information as if the acquisition of NIA had been effective as of January 1, 2022, the beginning of the 2022 fiscal year. The unaudited pro forma financial information includes adjustments to historical amounts including amortization of acquired intangible assets, depreciation of acquired property and equipment, interest expense for the financing of the transaction, alignment of NIA’s revenue recognition policy, and the associated income tax effects as if NIA had been included in the Company’s results of operations.

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 are 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 Months Ended March 31,
	2023		2022
Revenue	$	446,740	$	362,827
Net loss attributable to common shareholders of Evolent Health, Inc.	(15,730)		(10,240)

Pro forma financial information has not been presented for the IPG acquisition as the impact to the Company’s interim consolidated financial statements was not material.

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Revenue Recognition

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

Our revenue contracts are typically multi-year arrangements with customers to provide various clinical and administrative solutions. Our solutions are designed to lower the medical expenses of our partners and include our total cost of care and specialty care management services, provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers.

Our performance obligation in these arrangements is to provide an integrated suite of services, including access to our platform that is customized to meet the specialized needs of our customers and members. Generally, we will apply the series guidance to the performance obligation as we have determined that each time increment is distinct. We primarily utilize a variable fee structure for

these services that typically includes a monthly payment that is calculated based on a specified per member per month rate, multiplied by the number of members that our partners are managing under a value-based care arrangement or a percentage of plan premiums. Our arrangements may also include other variable fees related to service level agreements, shared medical savings arrangements and other performance measures. Variable consideration is estimated using the most likely amount based on our historical experience and best judgment at the time. Due to the nature of our arrangements, certain estimates may be constrained if it is probable that a significant reversal of revenue will occur when the uncertainty is resolved. We recognize revenue over time using the time elapsed output method. Fixed consideration is recognized ratably over the contract term. In accordance with the series guidance, we allocate variable consideration to the period to which the fees relate.

Contracts with Multiple Performance Obligations

Our contracts with customers may contain multiple performance obligations, primarily when the customer has requested both implementation and on going services as these services are distinct from one another. When a contract has multiple performance obligations, we allocate the transaction price to each performance obligation based on the relative standalone selling price using the expected cost margin approach. This approach requires estimates regarding both the level of effort it will take to satisfy the performance obligation as well as fees that will be received under the variable pricing model. We also take into consideration customer demographics, current market conditions, the scope of services and our overall pricing strategy and objectives when determining the standalone selling price.

Principal vs. Agent

We occasionally use third parties to assist in satisfying our performance obligations. In order to determine whether we are the principal or agent in the arrangement, we review each third-party relationship on a contract by contract basis. As we integrate goods and services provided by third parties into our overall service, we control the services provided to the customer prior to its delivery. As such, we are the principal and we will recognize revenue on a gross basis. In certain cases, we act as an agent and do not control the services from third parties before it is delivered to the customer, thereby recognizing revenue on a net basis.

Disaggregation of Revenue

The following table represents Evolent’s revenue disaggregated by end-market and product type:

	For the Three Months Ended March 31,
	2023		2022
Medicaid	$	183,034	$	130,501
Medicare	127,669		104,399
Commercial and other	116,987		62,157
Total	$	427,690	$	297,057
Performance Suite	$	239,873	$	171,164
Specialty Technology and Services Suite	65,316		13,580
Administrative Services	83,067		106,859
Cases	39,434		5,454
Total	$	427,690	$	297,057

Transaction Price Allocated to the Remaining Performance Obligations

For contracts with a term greater than one year, we have allocated approximately $43.8 million of transaction price to performance obligations that are unsatisfied as of March 31, 2023. We do not include variable consideration that is allocated entirely to a wholly unsatisfied performance obligation accounted for under the series guidance in the calculation. As a result, the balance represents the value of the fixed consideration in our long-term contracts that we expect will be recognized as revenue in a future period and excludes the majority of our revenue, which is primarily derived based on variable consideration as discussed in Note 2. We expect to recognize revenue on approximately 69%, 92% and 100% of these remaining performance obligations by December 31, 2023, 2024 and 2025, respectively. However, because our existing contracts may be canceled or renegotiated including for reasons outside our control, the amount of revenue that we actually receive may be more or less than this estimate and the timing of recognition may not be as expected.

Contract Balances

Contract balances consist of accounts receivable, contract assets and deferred revenue. Contract assets are recorded when the right to consideration for services is conditional on something other than the passage of time. Contract assets relating to unbilled receivables are transferred to accounts receivable when the right to consideration becomes unconditional. We classify contract assets as current or non-current based on the timing of our rights to the unconditional payments. Our contract assets are generally classified as current and recorded within prepaid expenses and other current assets on our consolidated balance sheets. Our current accounts receivables are classified within accounts receivable, net on our consolidated balance sheets and our non-current accounts receivable are classified within prepaid expenses and other non-current assets on our consolidated balance sheets.

Deferred revenue includes advance customer payments and billings in excess of revenue recognized. We classify deferred revenue as current or non-current based on the timing of when we expect to recognize revenue. Our current deferred revenue is recorded within deferred revenue on our consolidated balance sheets and non-current deferred revenue is recorded within other long-term liabilities on our consolidated balance sheets.

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023		December 31, 2022
Short-term receivables (1)	$	261,875	$	246,209
Short-term deferred revenue	7,069		5,758
Long-term deferred revenue	2,193		2,533

————————

(1)Excludes pharmacy claims receivable and premiums receivable.

Changes in deferred revenue for the three months ended March 31, 2023, are as follows (in thousands):

Deferred revenue
Balance as of beginning-of-period	$	8,291
Reclassification to revenue, as a result of performance obligations satisfied	(3,987)
Cash received in advance of satisfaction of performance obligations	4,958
Balance as of end of period	$	9,262

The amount of revenue, excluding customer discounts of $1.5 million, recognized from performance obligations satisfied (or partially satisfied) in a previous period was $4.8 million for the three months ended March 31, 2023, due primarily to net gain share as well as changes in other estimates.

Contract Cost Assets

Certain bonuses and commissions earned by our sales team are considered incremental costs of obtaining a contract with a customer that we expect to be recoverable. The capitalized contract acquisition costs are classified as non-current assets and recorded within contract cost assets on our consolidated balance sheets. Amortization expense is recorded within selling, general and administrative expenses on the accompanying consolidated statements of operations and comprehensive income (loss). As of March 31, 2023 and 2022, the Company had $3.4 million and $3.9 million, respectively, of contract acquisition cost assets, net of accumulated amortization recorded in contract cost assets on the consolidated balance sheets. In addition, the Company recorded amortization expense of $0.3 million and $1.4 million for the three months ended March 31, 2023 and 2022, respectively.

In our revenue contracts, we incur certain costs related to the implementation of our platform before we begin to satisfy our performance obligation to the customer. The costs, which we expect to recover, are considered costs to fulfill a contract. Our contract fulfillment costs primarily include our employee labor costs and third-party vendor costs. The capitalized contract fulfillment costs are classified as non-current and recorded within contract cost assets on our consolidated balance sheets. Amortization expense is recorded within cost of revenue on the accompanying consolidated statements of operations and comprehensive income (loss). As of March 31, 2023 and 2022, the Company had $13.1 million and $18.1 million, respectively, of contract fulfillment cost assets, net of accumulated amortization recorded in contract cost assets on the consolidated balance sheets. In addition, the Company recorded amortization expense including the acceleration of amortization of contract costs for certain customers of $2.0 million and $10.3 million for the three months ended March 31, 2023 and 2022, respectively.

These costs are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be the shorter of the contract term or five years. The period of benefit was based on our technology, the nature of our customer arrangements and other factors.

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Credit Losses

3 Months Ended

Mar. 31, 2023

Credit Loss [Abstract]

Credit Losses

Credit Losses

We are exposed to credit losses primarily through our accounts receivable from revenue transactions, investments held at amortized cost and other notes receivable. We estimate expected credit losses based on past events, current conditions and reasonable and supportable forecasts. Expected credit losses are measured over the remaining contractual life of these assets. As part of our consideration of current and forward-looking economic conditions, current inflationary pressures on our customers’ and other third parties’ ability to pay. We did not observe notable increases in delinquencies during the three months ended March 31, 2023. Given the nature of our business, our past collection experience during recessionary and pre-recessionary periods, we did not record material changes in our allowances during the three months ended March 31, 2023.

Accounts Receivable from Revenue Transactions

Accounts receivable represent the amounts owed to the Company for goods or services provided to customers or third parties. Current accounts receivables are classified within accounts receivable, net on the Company’s consolidated balance sheets, while non-current accounts receivables are classified within prepaid expenses and other noncurrent assets on the Company’s consolidated balance sheets.

We monitor our ongoing credit exposure through active review of counterparty balances against contract terms, due dates and business strategy. Our activities include timely account reconciliation, dispute resolution and payment confirmation. We may employ legal counsel to pursue recovery of defaulted receivables. In addition, the Company will establish a general reserve based on delinquency rates. Historical loss rates are determined for each delinquency bucket in 30-day past-due intervals and then applied to the composition of the reporting date balance based on delinquency. The allowance implied from application of the historical loss rates is then adjusted, as necessary, for current conditions and reasonable and supportable forecasts.

Based on an aging analysis of our trade accounts receivable, non-trade accounts receivable and contract assets as of March 31, 2023, 70% were current, 23% were past due less than 60 days, with 26% past due less than 120 days and at December 31, 2022, 67% was current, 21% was past due less than 60 days, with 29% past due less than 120 days. As of March 31, 2023 and December 31, 2022, in total we reported on the consolidated balance sheet $284.7 million and $269.1 million of accounts receivable, certain non-trade accounts receivable included in prepaid expenses and other current assets, net of allowances of $15.1 million and $10.2 million, respectively. The following table summarizes the changes in allowance for credit losses on our accounts receivables, certain non-trade accounts receivable and contract assets (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Balance as of beginning of period	$	(10,180)	$	(3,374)
NIA acquisition	(240)		—
Provision for credit losses	(5,482)		1,203
Charge-offs	829		—
Balance as of end of period	$	(15,073)	$	(2,171)

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Property and Equipment, Net

3 Months Ended

Mar. 31, 2023

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Property and Equipment, Net

The following summarizes our property and equipment (in thousands):

	March 31, 2023		December 31, 2022
Computer hardware	$	30,441	$	30,092
Furniture and equipment	4,246		4,214
Internal-use software development costs	197,174		189,119
Leasehold improvements	15,390		14,926
Total property and equipment	247,251		238,351
Accumulated depreciation and amortization expenses	(158,645)		(150,477)
Total property and equipment, net	$	88,606	$	87,874

The Company capitalized $8.1 million and $6.4 million for the three months ended March 31, 2023 and 2022, respectively, of internal-use software development costs. The net book value of capitalized internal-use software development costs was $75.1 million and $73.7 million as of March 31, 2023 and December 31, 2022, respectively.

Depreciation expense related to property and equipment was $8.1 million and $7.6 million for the three months ended March 31, 2023 and 2022, respectively, of which amortization expense related to capitalized internal-use software development costs was $6.7 million for both the three months ended March 31, 2023 and 2022, respectively.

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Goodwill and Intangible Assets, Net

3 Months Ended

Mar. 31, 2023

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.

Our assets and liabilities are employed in and relate to the operations of our reporting units. Therefore, the equity carrying value and future cash flows must be estimated each time a goodwill impairment analysis is performed on a reporting unit. As a result, our assets, liabilities and cash flows are assigned to reporting units using reasonable and consistent allocation methodologies.

Our annual goodwill impairment review occurs on October 31 of each fiscal year. We evaluate qualitative factors that could cause us to believe the estimated fair value of each of our reporting units may be lower than the carrying value and trigger a quantitative assessment, 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, revenues and earnings, (iv) a sustained decrease in share price and (v) other relevant entity-specific events including changes in management, strategy, partners, or litigation.

We did not identify any qualitative factors that would trigger a quantitative goodwill impairment test during the three months ended March 31, 2023. We will perform our annual impairment test of October 31, 2023.

2022 Goodwill Impairment Test

On October 31, 2022, the Company performed its annual goodwill impairment test for fiscal year 2022. As a result of BHG announcing its plan to exit its IFP line of business in 2023, thus negatively impacting the Company’s future revenues from such partner, the Company elected to forego the qualitative assessment and proceeded directly to the quantitative assessment of the goodwill impairment test for that specific reporting unit. In doing so, we estimated the fair value of the reporting unit by considering an income approach. In determining the estimated fair value using the income approach, we projected future cash flows based on management’s estimates and long-term plans and applied a discount rate based on the Company’s weighted average cost of capital. This analysis required us to make judgments about revenues, expenses, fixed asset and working capital requirements, capital market assumptions, cash flows and discount rates. The quantitative analysis of the Evolent Health Services reporting unit showed that the fair value exceeded the carrying value. Contracts with our customers may be cancelled or renegotiated and future revenue growth is dependent on winning new contracts. Further, the impairment analysis is particularly sensitive to changes in the projected revenue growth rates and expenses and the discount rate. Changes in these key assumptions such as a significant unfavorable change to our forecasted cash flows due to being unsuccessful in winning certain contracts or certain of our contracts being cancelled or renegotiated by our customers, could result in a revision of management’s estimates and could result in impairment charges in the future, which could be material to our results of operations. We will continue to monitor for such changes in facts or circumstances, which may be indicators of potential impairment triggers.

For the remaining reporting units, after assessing the totality of events and circumstances including the results of our previous valuations, no events occurred or circumstances changed during the period under consideration that would, more likely than not, reduce the fair value of any reporting unit below their carrying amount. Therefore, the Company concluded that the quantitative assessment was not required. For all reporting units, it was determined that as of October 31, 2022, no impairment of goodwill had occurred.

Change in Goodwill

The following table summarizes the changes in the carrying amount of goodwill, for the periods presented (in thousands):

Balance as of December 31, 2022(1)	$	722,774
Goodwill acquired(2)	395,164
Foreign currency translation	7
Balance as of March 31, 2023	$	1,117,945
Balance as of December 31, 2021(1)	$	426,297
Foreign currency translation	(23)
Balance as of March 31, 2022	$	426,274

————————

(1)Net of cumulative inception to date impairment of $575.5 million as of December 31, 2022 and 2021.

(2)Goodwill acquired from the addition of NIA in January 2023.

Intangible Assets, Net

Details of our intangible assets (in thousands, except weighted-average useful lives) are presented below:

	March 31, 2023							December 31, 2022
	Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Corporate trade name	1.8	$	51,965	$	16,967	$	34,998	12.7	$	43,600	$	11,726	$	31,874
Customer relationships	15.2	810,119		103,694		706,425		15.8	465,019		92,760		372,259
Technology	2.3	162,522		83,970		78,552		2.7	111,822		80,255		31,567
Below market lease, net	0.1	1,218		1,200		18		0.3	1,218		1,151		67
Provider network contracts	1.1	18,861		12,997		5,864		1.3	18,851		11,834		7,017
Total intangible assets, net		$	1,044,685	$	218,828	$	825,857		$	640,510	$	197,726	$	442,784

Amortization expense related to intangible assets was $21.1 million and $7.5 million for the three months ended March 31, 2023 and 2022, respectively.

Future estimated amortization of intangible assets (in thousands) as of March 31, 2023, is as follows:

2023	$	69,945
2024	87,529
2025	63,641
2026	63,293
2027	60,552
Thereafter	480,897
Total future amortization of intangible assets	$	825,857

As part of the organizational changes as a result of growth in our value-based specialty care business, we re-evaluated the useful lives of our intangible assets. As a result, we accelerated amortization such that all corporate trade names will be fully amortized by December 2024.

Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the assets’ carrying value. We did not identify any circumstances during the three months ended March 31, 2023, that would require an impairment test for our intangible assets.

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Long-term Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Long-term Debt

Long-term Debt

Credit Agreement

On August 1, 2022 (the “IPG Closing Date”), the Company entered into a credit agreement, by and among the Company, Evolent Health LLC, as the borrower (the “Borrower”), certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrative agent, collateral agent and revolver agent (the “Existing Credit Agreement” and as modified by the Amendment (defined below), the “Credit Agreement”), pursuant to which the lenders agreed to extend credit to the Borrower in the form of (i) initial term loans in an aggregate principal amount of $175.0 million (the “Initial Term Loan Facility”) and (ii) revolving credit commitments in an aggregate principal amount of $50.0 million (the “Initial Revolving Facility”), the availability of which shall be determined by reference to the lesser of $50.0 million and a borrowing base calculation. The Borrowers borrowed full amount under the Initial Term Loan Facility and the Initial Revolving Facility on the IPG Closing Date. A closing fee of (a) 2.00% of the aggregate amount of the commitments in respect of the Initial Term Loan Facility and (b) 2.00% of the aggregate amount of the commitments in respect of the Initial Revolving Facility was paid as of the IPG Closing Date.

On January 20, 2023, (“the NIA Closing Date”), the Company entered into Amendment No. 1 to the Credit Agreement (the “Amendment”), pursuant to which the lenders agreed to extend credit to the Borrower in the form of (i) additional revolving commitments in an aggregate principal amount equal to $25.0 million (the “Incremental Revolving Facility” and together with the Initial Revolving Facility, the Revolving Facility”), and (ii) additional term loans in an aggregate principal amount equal to $240.0 million, (the “Incremental Term Loan Facility” and together with the Initial Term Loan Facility, the “Term Loan Facility”; the Revolving Facility and the Term Loan Facility are collectively referred to herein as the “Credit Facilities”). The Borrowers borrowed the full amount under the Incremental Term Loan Facility and the Incremental Revolving Facility on the NIA Closing Date to finance, together with the proceeds from the sale of the Series A Preferred Stock, the cash consideration payable in connection with the NIA acquisition on the NIA Closing Date and pay transaction fees and expenses. A closing fee of (a) 3.00% of the aggregate amount of the commitments in respect of the Incremental Term Loan Facility and (b) 3.00% of the aggregate amount of the commitments in respect of the Incremental Revolving Facility was paid as of the NIA Closing Date.

The Credit Facilities are guaranteed by the Company and the Company’s domestic subsidiaries, subject to certain customary exceptions. The Credit Facilities are secured by a first priority security interest in all of the capital stock of each borrower and guarantor (other than the Company) and substantially all of the assets of each borrower and guarantor, subject to certain customary exceptions.

All loans under the Credit Facilities will mature on the date that is the earliest of (a) the sixth anniversary of the NIA Closing Date, (b) the date on which the commitments are voluntarily terminated pursuant to the terms of the Credit Agreement, (c) the date on which all amounts outstanding under the Credit Agreement have been declared or have automatically become due and payable under the terms of the Credit Agreement and (d) the date that is ninety-one (91) days prior to the maturity date of any Junior Debt (as defined in the Existing Credit Agreement) unless certain liquidity conditions are satisfied.

The interest rate for the Loans is calculated, at the option of the Borrowers, (a) in the case of the Term Loan Facility, at either the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus 6.00%, or the base rate plus 5.00% and (b) in the case of the Revolving Facility, at either the Adjusted Term SOFR Rate plus 4.00%, or the base rate plus 3.00%. A closing fee of (a) 2.00% of the aggregate amount of the commitments in respect of the Incremental Term Loan Facility and (b) 2.00% of the aggregate amount of the commitments in respect of the Incremental Revolving Facility was paid as of the NIA Closing Date. The Company recorded $11.1 million in interest expense related to our Credit Agreement for the three months ended March 31, 2023.

Amounts outstanding under the Credit Facilities may be prepaid at the option of the Company, subject to the following prepayment premium (the “Prepayment Premium”): (1) 3.00% of the principal amount so prepaid after the NIA Closing Date but prior to the first anniversary of the NIA Closing Date; (2) 2.00% of the principal amount so prepaid after the first anniversary of the closing but prior to the second anniversary of the NIA Closing Date; (3) 1.00% of the principal amount so prepaid after the second anniversary of the NIA Closing Date but prior to the third anniversary of the NIA Closing Date; and (4) 0.00% of the principal amount so prepaid on or after the third anniversary of the NIA Closing Date. Amounts outstanding under the Credit Facility are subject to mandatory prepayment upon the occurrence of certain events and conditions, including non-ordinary course asset dispositions, receipt of certain casualty proceeds, issuances of certain debt obligations and a change of control transaction, in each case, subject to application of the Prepayment Premium.

The Credit Facilities contain customary borrowing conditions, affirmative, negative and reporting covenants, representations and warranties, and events of default, including cross-defaults to other material indebtedness. If an event of default occurs, the lenders would be entitled to take enforcement action, including foreclosure on collateral and acceleration of amounts owed under the Loans. We incurred $14.4 million of debt issuance costs in connection with the Loans, which was included in long-term debt, net of discount on our consolidated balance sheets and amortized into interest expense over the life of the Credit Agreement. The Company recorded $0.5 million in interest expense related to the amortization of the debt discount and the issuance costs for the three months ended March 31, 2023.

During the three months ended March 31, 2023, the Company repaid $37.5 million under the Revolving Facility.

2024 Notes

In August 2020, the Company issued $117.1 million aggregate principal amount of its 3.50% Convertible Senior Notes due 2024 (the “2024 Notes”) in privately negotiated exchange and/or subscription agreements, with certain holders of its outstanding 2021 Notes and certain new investors. The Company issued $84.2 million aggregate principal amount of 2024 Notes in exchange for $84.2 million aggregate principal amount of the 2021 Notes and an aggregate cash payment of $2.5 million, and issued $32.8 million aggregate principal amount of New Notes for cash at par. We incurred $3.0 million of debt issuance costs in connection with the 2024 Notes, which we are amortizing to non-cash interest expense using the straight-line method over the contractual term of the 2024 Notes,

since this method was not materially different from the effective interest method. The closing of the private placement of the 2024 Notes occurred on August 19, 2020.

Holders of the 2024 Notes are entitled to cash interest payments, which are payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020, at a rate equal to 3.50% per annum. The 2024 Notes will mature on December 1, 2024, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. Upon maturity the principal amount of the notes may be settled via shares of the Company’s Class A common stock. We recorded interest expense of $0.2 million, $1.0 million for the three months ended March 31, 2023 and 2022, respectively.

The 2024 Notes are convertible into cash, shares of the Company's Class A common stock, or a combination of cash and shares of the Company's Class A common stock, at the Company's election, based on an initial conversion rate of 54.8667 shares of Class A common stock per $1,000 principal amount of the 2024 Notes, which is equivalent to an initial conversion price of approximately $18.23 per share of the Company’s Class A common stock. In the aggregate, the 2024 Notes are initially convertible into 6.4 million shares of the Company’s Class A common stock (excluding any shares issuable by the Company upon a conversion in connection with a make-whole provision upon a fundamental change or a notice of redemption under the governing indenture). The conversion rate may be adjusted under certain circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election.

The option to settle the 2024 Notes in cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election, resulted in a bifurcation of the carrying value of the 2024 Notes into a debt component and an equity component prior to the adoption of ASU 2020-06. The debt component was determined to be $78.9 million, before issuance costs, based on the fair value of a nonconvertible debt instrument with the same term. The equity component was determined to be $38.1 million before issuance costs and was recorded within additional paid-in capital. Issuance costs of $1.7 million and $1.3 million were allocated to the debt and equity components in proportion to the allocation of proceeds. Along with the equity component of $38.1 million, $1.7 million of issuance costs was amortized to interest expense on the consolidated statements of operations and comprehensive income (loss) using the effective interest method.

On January 1, 2022, we adopted ASU 2020-06 using the retrospective transition method. As a result, prior period financial information and disclosures are not adjusted and continue to be reported under the accounting standards that were in effect prior to the adoption of ASU 2020-06. The adoption of ASU 2020-06 resulted in the combination of the debt and equity components of the 2024 Notes into a single debt instrument recorded in long term debt, net on the consolidated balance sheet. This resulted in a $38.1 million decrease in additional paid-in capital and a $1.3 million increase in additional paid-in capital from the previously bifurcated equity component from deferred financing fees, respectively, and an $11.7 million decrease to the January 1, 2022 accumulated deficit, representing the cumulative non-cash interest expense recognized related to the amortization of the debt discount associated with the bifurcated equity component of the 2024 Notes. These adjustments resulted in an increase of $25.1 million to the debt component of the 2024 Notes. Additionally, the allocation of the issuance costs to the equity component and all issuance costs related to the 2024 Notes are being amortized to interest expense using the effective interest method over the contractual term of the 2024 Notes which is included in the cumulative adjustment to the opening balance of accumulated deficit. The Company recorded interest expense related to the amortization of the issuance costs of $0.2 million for the three months ended March 31, 2023 and 2022, respectively.

Holders of the 2024 Notes may require the Company to repurchase all or part of their notes upon the occurrence of a fundamental change at a price equal to 100.0% of the principal amount of the notes being repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The Company may not redeem the 2024 Notes prior to March 1, 2023. The Company may redeem for cash all or any portion of the 2024 Notes, at its option, on or after March 1, 2023, if the last reported sale price of the Company’s Class A common stock has been at least 130.0% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

On August 11, 2022, the Company entered into exchange agreements with certain holders of the 2024 Notes. Pursuant to the agreements, these holders exchanged $92.8 million in aggregate principal amount of such notes for shares of the Company’s Class A common stock. On August 17 and 18, 2022, the Company consummated the exchanges and issued an aggregate of 5,394,165 shares of Class A common stock to the holders.

The August 2022 exchanges of the 2024 Notes for Class A common stock resulted in a $10.2 million loss on extinguishment/repayment of debt, net, on the consolidated statements of operations and comprehensive income (loss).

2025 Notes

In October 2018, the Company issued $172.5 million aggregate principal amount of its 1.50% Convertible Senior Notes due 2025 (the “2025 Notes”) in a private placement to qualified institutional buyers within the meaning of Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2025 Notes were issued at par for net proceeds of $166.6 million. We incurred $5.9 million of debt issuance costs in connection with the 2025 Notes. The closing of the private placement of $150.0 million aggregate principal amount of the 2025 Notes occurred on October 22, 2018 and the Company completed the offering and sale of an additional $22.5 million aggregate principal amount of the 2025 Notes on October 24, 2018, pursuant to the initial purchasers’ exercise in full of their option to purchase additional notes.

Holders of the 2025 Notes are entitled to cash interest payments, which are payable semiannually in arrears on April 15 and October 15 of each year, beginning on April 15, 2019, at a rate equal to 1.50% per annum. The 2025 Notes will mature on October 15, 2025, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. The Company recorded interest expense of $0.6 million for the three months ended March 31, 2023 and 2022, respectively.

Prior to the close of business on the business day immediately preceding April 15, 2025, the 2025 Notes will be convertible at the option of the holders only upon the satisfaction of certain conditions, as described in the indenture, dated as of October 22, 2018, between the Company and U.S. Bank National Association, as trustee. At any time on or after April 15, 2025, until the close of business on the business day immediately preceding the maturity date, holders may convert, at their option, all or any portion of their notes at the conversion rate.

The 2025 Notes will be convertible at an initial conversion rate of 29.9135 shares of Class A common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $33.43 per share of the Company’s Class A common stock. In the aggregate, the 2025 Notes are initially convertible into 5.2 million shares of the Company’s Class A common stock (excluding any shares issuable by the Company upon a conversion in connection with a make-whole fundamental change or a notice of redemption as described in the governing indenture). The conversion rate may be adjusted under certain circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election.

The option to settle the 2025 Notes in cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election, resulted in a bifurcation of the carrying value of the 2025 Notes into a debt component and an equity component prior to the adoption of ASU 2020-06. The debt component was determined to be $100.7 million, before issuance costs, based on the fair value of a nonconvertible debt instrument with the same term. The equity component was determined to be $71.8 million, before issuance costs, and was recorded within additional paid-in capital. The equity component is the difference between the aggregate principal amount of the debt and the debt component. Issuance costs of $3.4 million and $2.5 million are allocated to the debt and equity components in proportion to the allocation of proceeds. Along with the equity component of $71.8 million, $3.4 million of issuance costs will be amortized to interest expense on the consolidated statements of operations and comprehensive income (loss) using the effective interest method over the contractual term of the 2025 Notes.

On January 1, 2022, we adopted ASU 2020-06 using the retrospective transition method. As a result, prior period financial information and disclosures are not adjusted and continue to be reported under the accounting standards that were in effect prior to the adoption of ASU 2020-06. The adoption of ASU 2020-06 resulted in the combination of the debt and equity components of the 2024 Notes into a single debt instrument recorded in long term debt, net on the consolidated balance sheet. This resulted in a $71.8 million decrease in additional paid-in capital and a $2.5 million increase in additional paid-in capital from the previously bifurcated equity component from deferred financing fees, respectively, and a $28.1 million decrease to the January 1, 2022 accumulated deficit, representing the cumulative non-cash interest expense recognized related to the amortization of the debt discount associated with the bifurcated equity component of the 2025 Notes. These adjustments resulted in an increase of $41.3 million to the debt component of the 2025 Notes. Additionally, the allocation of the issuance costs to the equity component and all issuance costs related to the 2025 Notes are being amortized to interest expense using the effective interest method over the contractual term of the 2025 Notes which is included in the cumulative adjustment to the opening balance of accumulated deficit. The Company recorded interest expense related to the amortization of the issuance costs of $0.3 million for the three months ended March 31, 2023 and 2022, respectively.

Holders of the 2025 Notes may require the Company to repurchase all or part of their notes upon the occurrence of a fundamental change at a price equal to 100.0% of the principal amount of the notes being repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The Company may not redeem the 2025 Notes prior to October 20, 2022. The Company may redeem for cash all or any portion of the 2025 Notes, at its option, on or after October 20, 2022, if the last reported sale price of the Company’s Class A common stock has been at least 130.0% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a

redemption price equal to 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Convertible Senior Notes Carrying Value

The 2024 Notes and 2025 Notes are recorded on our accompanying consolidated balance sheets at their net carrying values as of March 31, 2023. However, the 2024 Notes and 2025 Notes are privately traded by qualified institutional buyers (within the meaning of Rule 144A under the Securities Act) and their fair values are Level 2 inputs. The 2024 Notes and 2025 Notes also have embedded conversion options and contingent interest provisions, which have not been recorded as separate financial instruments. The following table summarizes the carrying value of the long-term convertible debt as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023		December 31, 2022
2024 Notes
Carrying value	$	23,971	$	23,925
Unamortized debt discount and issuance costs	310		356
Principal amount	$	24,281	$	24,281
Remaining amortization period (years)	1.7		1.9
Fair value(1)	$	38,000	$	38,000
2025 Notes
Carrying value	$	169,205	$	168,885
Unamortized debt discount and issuance costs	3,295		3,615
Principal amount	$	172,500	$	172,500
Remaining amortization period (years)	2.5		2.8
Fair value(1)	$	192,605	$	185,546

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(1)Fair values for notes are derived from available trading prices closest to the respective balance sheet date. The 2024 Notes have not been traded since December 31, 2022.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Commitments

Letters of Credit

As of both March 31, 2023 and December 31, 2022, the Company was party to irrevocable standby letters of credit with a bank for $13.1 million, respectively, for the benefit of regulatory authorities, real estate and risk-sharing agreements. As such, we held $13.1 million, respectively, in restricted cash and restricted investments as collateral as of March 31, 2023 and 2022, respectively. The letters of credit have current expiration dates between April 2023 and March 2032 and will automatically extend without amendment for an additional one-year period and will continue to automatically extend after each one-year term from the expiry date unless the bank elects not to extend beyond the initial or any extended expiry date.

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 interim consolidated financial statements.

Pre-IPO Investor 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 shares of our Class A common stock, including those delivered in exchange for Class B common stock and Class B common units. 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.

We will 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. We did not incur any expenses related to secondary offerings or other sales of shares by our investor stockholders during the three months ended March 31, 2023 and 2022, respectively.

Guarantees

On July 16, 2020, EVH Passport, Evolent Health LLC and Molina Healthcare, Inc. (“Molina”) entered into an Asset Purchase Agreement (the “Molina APA”), which contemplated the sale by EVH Passport to Molina of certain assets, including certain intellectual property rights of EVH Passport and EVH Passport’s rights under the Passport Medicaid Contract. On September 1, 2020, EVH Passport and Molina consummated the transactions contemplated by the Molina APA (the “Molina Closing”) and the Passport Medicaid Contract was novated to Molina. In connection with the Molina Closing, the Company continued to provide administrative support services relating to the Passport Medicaid Contract to Molina through the end of 2020. Following the Molina Closing, EVH Passport began working with regulatory authorities including the Kentucky Department of Insurance (“KY DOI”) regarding the wind down of its operations throughout 2021 and 2022. As part of that wind down process, the Company, as the parent of EVH Passport, entered into a guarantee for the benefit of the KY DOI to satisfy any EVH Passport liability or obligation in the event EVH Passport is not able to meet its wind down liabilities or obligations. As of March 31, 2023, no amounts have been funded under this guarantee.

UPMC Reseller Agreement

The Company and UPMC are parties to a reseller, services and non-competition agreement, dated August 31, 2011, 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 a defined list of 20 of the Company’s customers. There were no expenses associated with the UPMC Reseller Agreement for the three months ended March 31, 2023, and $0.6 million for the three months ended March 31, 2022. The contract is currently being wound down.

Tax Receivables Agreement

In connection with the Offering Reorganization, the Company entered into the Tax Receivables Agreement (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.

Due to the reduction in the Company’s valuation allowance primarily resulting from deferred tax liabilities established as part of the NIA acquisition, the Company has recorded the remaining TRA liability of $66.2 million for the three months ended March 31, 2023, resulting in a total TRA liability of $112.1 million as of March 31, 2023.

We will assess the realizability of the deferred tax assets at each reporting period, and a change in our estimate of our liability associated with the tax receivable agreement may result as additional information becomes available, including results of operations in future periods. The realizability of the deferred tax assets is evaluated based on all positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

Contingencies

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.

On June 8, 2021, a shareholder of the Company filed a derivative action in the Delaware Chancery Court against some current and former Board members and against the Company as a nominal defendant, alleging that the Company’s Board was negligent in its oversight of the Company’s relationship with Passport Health Plan. The case is Lincolnshire Police Pension Fund, derivatively on behalf of Evolent Health, Inc., v. Blackley, Williams, Scott, Holder, Farner, D’Amato, Duffy, Felt, Samet, Hobart, and Payson, and Evolent Health, Inc. (“Derivative Action”). The Company and the Director-Defendants filed a motion to dismiss the complaint on August 27, 2021, and Plaintiffs responded by filing an amended complaint on October 26, 2021. Defendants filed a motion to dismiss the amended complaint on December 17, 2021. Plaintiffs filed a motion to dismiss the case without prejudice, which was granted by the Delaware Chancery Court on January 5, 2023. This matter is now resolved.

Credit and Concentration Risk

The Company is subject to significant concentrations of credit risk related to cash and cash equivalents and accounts receivable. As of March 31, 2023, approximately 99.1% of our $192.0 million of cash and cash equivalents, restricted cash and restricted investments were held in bank deposits with FDIC participating banks and approximately 0.9% were held in international banks. While the Company maintains its cash and cash equivalents 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 is closely monitoring ongoing events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally. The Company has not experienced any realized losses on cash and cash equivalents to date; however, no assurances can be provided.

The Company is also subject to significant concentration of accounts receivable risk as a substantial portion of our trade accounts receivable is derived from a small number of our partners. The following table summarizes the partners who represented at least 10.0% of our consolidated short-term trade accounts receivable, excluding pharmacy claims receivable and premiums receivable:

	March 31, 2023	December 31, 2022
Cook County Health and Hospitals System	34.6%	42.5%
Molina Healthcare	17.8%	12.0%
Bright Health Management, Inc.	*	11.3%

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*     Represents less than 10.0% of the respective balance.

In addition, the Company is subject to significant concentration of revenue risk as a substantial portion of our revenue is derived from a small number of contractual relationships with our operating partners.

The following table summarizes those partners who represented at least 10.0% of our consolidated revenue:

	For the Three Months Ended March 31,
	2023	2022
Cook County Health and Hospitals Systems	17.2%	23.9%
Florida Blue Medicare, Inc.	11.9%	11.9%
Molina Healthcare	13.2%	*

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*     Represents less than 10.0% of the respective balance

We derive a significant portion of our revenues from our largest partners. The loss, termination or renegotiation of our relationship or contract with any significant partner or multiple partners in the aggregate could have a material adverse effect on the Company's financial condition and results of operations.

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Leases

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Leases

Leases

The Company enters into various office space, data center, and equipment lease agreements in conducting its normal business operations. At the inception of any contract, the Company evaluates the agreement to determine whether the contract contains a lease. If the contract contains a lease, the Company then evaluates the term and whether the lease is an operating or finance lease. Most leases include one or more options to renew or may have a termination option. The Company determines whether these options are reasonably certain to be exercised or not at the inception of the lease. In addition, some leases contain escalation clauses. The rent expense is recognized on a straight-line basis in the consolidated statements of operations and comprehensive income (loss) over the term of the lease. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Further, the Company treats all lease and non-lease components as a single combined lease component for all classes of underlying assets. The Company also enters into sublease agreements for some of its leased office space. Immaterial rental income attributable to subleases is offset against rent expense over the terms of the respective leases.

The Company leases office space and computer and other equipment under operating lease agreements expiring at various dates through 2032. Under the lease agreements, in addition to base rent, the Company is generally responsible for operating and maintenance costs and related fees. Several of these agreements include tenant improvement allowances, rent holidays or rent escalation clauses. When such items are included in a lease agreement, we record a deferred rent asset or liability on our consolidated balance sheets equal to the difference between rent expense and future minimum lease payments due. The rent expense related to these items is recognized on a straight-line basis over the terms of the leases. The Company’s primary office location is in Arlington, Virginia, which has served as its corporate headquarters since 2013. The Arlington, Virginia office lease expires in January 2032. Certain leases acquired as part of the Valence Health transaction included existing sublease agreements for office locations in Chicago, Illinois.

In connection with various lease agreements, the Company is required to maintain $2.1 million in letters of credit as of both March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023 and December 31, 2022, the Company held $2.1 million and $2.3 million in restricted cash and restricted investments on the consolidated balance sheet as collateral for the letters of credit, respectively.

The following table summarizes our primary office leases as of March 31, 2023 (in thousands, other than term):

Location	Lease Termination Term (in years)	Future Minimum Lease Commitments		Letter of Credit Amount Required
Arlington, VA	8.8	$	28,960	$	1,579
Riverside, IL	8.0	37,301		232
Edison, NJ	3.1	1,597		222
Alpharetta, GA	2.5	1,180		—
Pune, India	0.2	91		—
Brea, CA	4.2	4,004		—

The following table summarizes the components of our lease expense (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Operating lease cost	$	1,940	$	2,274
Variable lease cost	1,556		1,326
Total lease cost	$	3,496	$	3,600

Maturity of lease liabilities (in thousands) as of March 31, 2023, is as follows:

	Operating lease expense
2023	$	5,694
2024	10,436
2025	10,052
2026	8,997
2027	8,685
Thereafter	31,692
Total lease payments	75,556
Less:
Interest	16,674
Present value of lease liabilities	$	58,882

Our weighted-average discount rate and our weighted remaining lease terms (in years) are as follows:

	March 31, 2023
Weighted average discount rate	6.34	%
Weighted average remaining lease term	8.0

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Convertible Preferred Equity

3 Months Ended

Mar. 31, 2023

Temporary Equity Disclosure [Abstract]

Convertible Preferred Equity

Convertible Preferred Equity

In connection with the NIA closing, on January 20, 2023, the Company entered into a Securities Purchase Agreement (Series A Convertible Preferred Shares) with the Purchasers listed on Schedule I thereto (the “Securities Purchase Agreement”) pursuant to which the Company offered and sold to the Purchasers an aggregate 175,000 shares of the Company’s newly created Cumulative Series A Preferred Shares, par value $0.01 (the “Series A Preferred Stock”), at a purchase price of $960.00 per share, resulting in total gross proceeds to the Company of $168.0 million. The proceeds from the offer and sale of the Series A Preferred Stock were used, together with the proceeds from the Priority ABL Incremental Facility and Term Loan Incremental Facility, to finance the cash consideration payable at Closing and pay transaction fees and expenses.

The Series A Preferred Stock ranks senior with respect to dividend and liquidation rights to the Company’s Class A common stock, par value $0.01 per share and all future series of the Company’s preferred stock. Each share of Series A Preferred Stock has an initial liquidation preference of $1,000.00 per share.

Regular dividends on the Series A Preferred Stock will be paid quarterly in cash in arrears at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designations (as defined below)) plus 6.00%. The liquidation preference of the Series A Preferred Stock will increase on the last day of each calendar quarter by the amount of any accrued and unpaid regular dividends that have not been paid in cash on the relevant dividend payment date. The regular dividend rate will also increase by 2.0% per annum upon the occurrence and during the continuance of certain triggering events, including a breach of the protective covenants contained in the Investor Rights Agreement or the Company’s failure to pay any regular dividends in cash. Holders of Series A Preferred Stock are also entitled to participate in and receive any dividends declared or paid on the Class A Common Stock on an as-converted basis.

Each holder of Series A Preferred Stock has the right, at its option, to convert its shares of Series A Preferred Stock into shares of Class A Common Stock at an initial conversion price per share of $40.00 of the then-current liquidation preference per share, subject to customary anti-dilution adjustments.

Holders of Series A Preferred Stock are not entitled to vote on any matters, except as required by law and for certain consent rights set forth in the Certificate of Designations.

The Company may not redeem the Series A Preferred Stock at its option prior to January 20, 2025. At any time on or after January 20, 2025, the Company may redeem any or all of the Series A Preferred Stock then outstanding for cash at a redemption price per share equal to 165.00% of the then-current liquidation preference of the Series A Preferred Stock, plus all accrued and unpaid dividends on the Series A Preferred Stock being redeemed.

If not earlier redeemed, at any time on or after January 20, 2030, at the request of the holders of a majority of the convertible preferred stock, the Company will redeem all shares of Series A Preferred Stock then outstanding for cash at a redemption price per share equal to 150.00% of the then-current liquidation preference per share of the Series A Preferred Stock, plus all accrued and unpaid dividends on the Series A Preferred Stock being redeemed.

Upon the occurrence of a refinancing or replacement of the entirety of the indebtedness under the Credit Agreement prior to its maturity that is provided solely by lenders who are not affiliates or approved funds of Ares, the Company will be required to redeem all shares of Series A Preferred Stock then outstanding for cash at a redemption price per share equal to 165.00% of the then-current liquidation preference of the Series A Preferred Stock, plus all accrued and unpaid dividends on the Series A Preferred Stock being redeemed, plus, solely in the event such refinancing or replacement is consummated prior to January 20, 2025, the aggregate amount of dividends per share which would have otherwise been payable on the Series A Preferred Stock from the date of redemption until January 20, 2025.

If the Company undergoes a Change of Control (as defined in the Existing Credit Agreement), the Company will be required to redeem all shares of Series A Preferred Stock then outstanding for cash at a price per share equal to the greater of (x) 150.00% of the then-current liquidation preference per share of the Series A Preferred Stock, if such redemption occurs prior to January 20, 2025, and 135.00% of the then-current liquidation preference per share of the Series A Preferred Stock, if such redemption occurs on or after January 20, 2025, and (y) the value of the Class A Common Stock issuable upon conversion of a share of Series A Preferred Stock, which value shall be determined based on the value attributed to the Class A Common Stock in connection with such Change of Control.

In connection with the NIA closing, the Company entered into an Investors Rights Agreement with the Purchasers named in Schedule I thereto (the “Investors Rights Agreement”). The Investors Rights Agreement contains certain restrictions on the transfer of the Series A Preferred Stock and certain protective covenants in favor of the Purchasers. These covenants include, among other things, covenants limiting the incurrence of Funded Debt (as defined in the Investors Rights Agreement), the ability to make restricted payments and the ability to issue additional indebtedness senior to the Series A Preferred Stock. Each of these covenants is subject to certain exceptions set forth in the Investors Rights Agreement.

In connection with the NIA closing, on January 20, 2023, the Company entered into a Registration Rights Agreement with the Stockholders named in Schedule I thereto, which granted certain registration rights to Ares in respect of the shares of the Company’s Class A Common Stock issuable upon conversion of the Series A Preferred Stock.

During the three months ended March 31, 2023, the Company paid dividends of $3.7 million, or $20.86 per share of Series A Preferred Stock, and accreted $2.6 million of deferred issuance costs in additional paid-in-capital on the consolidated balance sheets.

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Loss Per Common Share

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Loss Per Common Share

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 Months Ended March 31,
	2023		2022
Net loss attributable to common shareholders of Evolent Health, Inc.	$	(26,258)	$	(5,350)
Weighted-average common shares outstanding - basic and diluted	107,783		89,509
Loss per common share
Basic and diluted	$	(0.24)	$	(0.06)

Basic net loss per common share is calculated using the weighted average number of common shares outstanding during the period. Diluted net earnings per common share, if any, gives effect to diluted stock options (calculated based on the treasury stock method), shares issuable upon debt conversion (calculated using an as-if converted method).

Anti-dilutive shares excluded from the calculation of weighted-average common shares presented above are presented below (in thousands):

	For the Three Months Ended March 31,
	2023	2022
Restricted stock units ("RSUs"), performance-based RSUs (“PSUs”) and leveraged stock units ("LSUs")	1,923	2,161
Stock options	1,260	1,756
Series A Preferred Stock	4,375	—
Convertible senior notes	6,188	11,582
Total	13,746	15,499

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Stock-based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock-based Compensation

Stock-based Compensation

Total compensation expense by award type and line item in our interim consolidated financial statements was as follows (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Award Type
Stock options	$	60	$	162
RSUs	7,489		3,301
LSUs	284		775
PSUs	2,877		1,108
Total compensation expense by award type	$	10,710	$	5,346
Line Item
Cost of revenue	$	1,540	$	800
Selling, general and administrative expenses	9,170		4,546
Total compensation expense by financial statement line item	$	10,710	$	5,346

No stock-based compensation was capitalized as software development costs during the three months ended March 31, 2023 and 2022, respectively.

Stock-based awards were granted as follows (in thousands):

	For the Three Months Ended March 31,
	2023	2022
RSUs	996	917
PSUs	424	479

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Income Taxes

3 Months Ended

Mar. 31, 2023

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, adjusted for discrete items recognized during the interim period. Discrete items (e.g., significant or unusual items) are separately recognized in the quarter during which they occur and can cause the effective tax rate to vary from quarter to quarter.

An income tax provision (benefit) of $(68.2) million and $1.2 million was recognized for the three months ended March 31, 2023 and 2022, respectively, which resulted in effective tax rates of 77.3% and (29.0)%, respectively. The income tax benefit recorded during the three months ended March 31, 2023, primarily relates to $56.1 million for the reduction in the valuation allowance resulting from deferred tax liabilities established as part of the NIA acquisition accounting and $8.3 million for the TRA liabilities that will create current and future tax benefits upon settlement. The income tax expense recorded during the three months ended March 31, 2022, primarily related to state and foreign taxes.

As of March 31, 2023, the Company had unrecognized tax benefits of $1.6 million that, if recognized, would affect the overall effective tax rate. The Company is not currently subject to income tax audits in any U.S., state, or foreign 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 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 10 above for discussion of our TRA.

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Investments in Equity Method Investees

3 Months Ended

Mar. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Investments in Equity Method Investees

Investments in Equity Method Investees

The Company holds ownership interests in joint ventures and other entities which are accounted for under the equity method. The Company evaluates its interests in these entities to determine whether they meet the definition of a VIE and whether the Company is required to consolidate these entities. A VIE is consolidated by its primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) a variable interest that could potentially be significant to the VIE. To determine whether or not a variable interest the Company holds could potentially be significant to the VIE, the Company considers both qualitative and quantitative factors regarding the nature, size and form of the Company's involvement with the VIE. The Company has determined that its interests in these entities meet the definition of a variable interest, however, the Company is not the primary beneficiary since it does not have the power to direct activities, therefore, the Company did not consolidate the VIEs.

As of March 31, 2023 and December 31, 2022, the Company’s economic interests in its equity method investments ranged between 4% and 38%, respectively, and voting interests in its equity method investments ranged between 25% and 40%, respectively. The Company determined that it has significant influence over these entities but that it does not have control over any of the entities. Accordingly, the investments are accounted for under the equity method of accounting and the Company is allocated its proportional share of the entities’ earnings and losses for each reporting period. The Company’s proportional share of the gain from these investments was approximately $0.4 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively.

The Company signed services agreements with certain of the aforementioned entities to provide certain management, operational and support services to help manage elements of their service offerings. Revenue related to these services agreements were $4.8 million and $3.6 million for the three months ended March 31, 2023 and 2022, respectively.

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Fair Value Measurement

3 Months Ended

Mar. 31, 2023

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. These items are recorded in accrued liabilities on our consolidated balance sheets.

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):

	March 31, 2023
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration(1)	$	—	$	—	$	122,100	$	122,100
Total fair value of liabilities measured on a recurring basis	$	—	$	—	$	122,100	$	122,100

	December 31, 2022
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration	$	—	$	—	$	78,000	$	78,000
Total fair value of liabilities measured on a recurring basis	$	—	$	—	$	78,000	$	78,000

————————

(1) Represents the fair value of earn-out consideration related to the IPG and NIA transactions as described 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 during the three months ended March 31, 2023.

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.

The acquisitions of NIA and IPG include a provision for additional equity consideration, at the Company’s option, contingent upon the Company obtaining certain performance metrics. The earnout period for the NIA contingent consideration is the year ending December 31, 2023, and the earnout period for IPG is the nine months ended September 30, 2023. The fair value of the contingent equity considerations 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. The significant unobservable inputs used in the fair value measurements of the NIA and IPG contingent considerations are the risk-neutral (probability weighted) earnout consideration and the applicable discount rate. A significant increase in the risk-neutral (probability weighted) earnout consideration or decrease in discount rate in isolation would result in a significantly higher fair value of the contingent consideration.

The changes in our liabilities measured at fair value for which the Company uses Level 3 inputs to determine fair value are as follows (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Balance as of beginning of period	$	78,000	$	28,700
Additions	69,761		—
Settlements	(29,961)		—
Unrealized (gain) loss, net	4,300		3,900
Balance as of end of period	$	122,100	$	32,600

The following table summarizes the fair value (in thousands), valuation techniques and significant unobservable inputs of our Level 3 fair value measurements as of the periods presented:

	March 31, 2023
	Fair		Valuation	Significant	Assumption or
	Value		Technique	Unobservable Inputs	Input Ranges
Contingent consideration	$	122,100	Real options approach	Risk-neutral expected earnout consideration	$	122,100
				Weighted average discount rate	8.80% - 16.64%

	December 31, 2022
	Fair		Valuation	Significant	Assumption or
	Value		Technique	Unobservable Inputs	Input Ranges
Contingent consideration	$	78,000	Real options approach	Risk-neutral expected earnout consideration	$	77,946
				Weighted average discount rate	9.85% - 10.01%

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 assets and liabilities recorded in business combinations or asset acquisitions, 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.

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, accounts payable, accrued liabilities and accrued compensation approximate their fair values because of the relatively short-term maturities of these items and financial instruments.

See Note 9 for information regarding the fair value of the 2024 Notes and 2025 Notes.

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Related Parties

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Related Parties

Related Parties

The entities described below are considered related parties and the balances and/or transactions with them are reported in our interim consolidated financial statements.

As discussed in Note 16, the Company had economic interests in several entities that are accounted for under the equity method of accounting. The Company has allocated its proportional share of the investees’ earnings and losses each reporting period. In addition, Evolent has entered into services agreements with certain of the entities to provide certain management, operational and support services to help the entities manage elements of their service offerings.

The Company also works with UPMC, one of its founding investors. The Company’s relationship with UPMC is a subcontractor relationship where UPMC has agreed to execute certain tasks (primarily TPA services) relating to certain customer commitments. This relationship is currently in wind-down.

The following table presents assets and liabilities attributable to our related parties (in thousands):

	March 31, 2023		December 31, 2022
Assets
Accounts receivable, net	$	9,360	$	8,787
Liabilities
Accounts payable	$	2	$	27
Accrued liabilities	—		192

The following table presents revenues and expenses attributable to our related parties (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Revenue	$	54,721	$	32,064
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses)	47,506		26,461
Selling, general and administrative expenses	242		66

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Reserves for Claims and Performance-Based Arrangements

3 Months Ended

Mar. 31, 2023

Insurance [Abstract]

Reserves for Claims and Performance-Based Arrangements

Reserve for Claims and Performance-Based Arrangements

The Company maintains reserves for its liabilities related to payments to providers and pharmacies under performance-based arrangements related to its total cost of care and specialty care management services.

Reserves for claims and performance-based arrangements reflect actual payments under performance-based arrangements and the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process), and other medical care expenses and services payable that are primarily composed of accruals for incentives and other amounts payable to health care professionals and facilities. Reserves for claims and performance-based arrangements also reflect estimated amounts owed under the reinsurance agreements, as discussed further in Note 10.

The Company uses actuarial principles and assumptions that are consistently applied each reporting period and recognizes the actuarial best estimate of the ultimate liability along with a margin for adverse deviation. This approach is consistent with actuarial standards of practice that the liabilities be adequate under moderately adverse conditions.

This liability predominately consists of incurred but not reported amounts and reported claims in process including expected development on reported claims. The liability for reserves related to its total cost of care and specialty care management services is primarily calculated using "completion factors" developed by comparing the claim incurred date to the date claims were paid. Completion factors are impacted by several key items including changes in: 1) electronic (auto-adjudication) versus manual claim processing, 2) provider claims submission rates, 3) membership and 4) the mix of products.

The Company’s policy for reserves related to its total cost of care and specialty care management services is to use historical completion factors combined with an analysis of current trends and operational factors to develop current estimates of completion factors. The Company estimates the liability for claims incurred in each month by applying the current estimates of completion factors to the current paid claims data. This approach implicitly assumes that historical completion rates will be a useful indicator for the current period.

For more recent months, and for newer lines of business where there is not sufficient paid claims history to develop completion factors, the Company expects to rely more heavily on medical cost trend and expected loss ratio analysis that reflects expected claim payment patterns and other relevant operational considerations, or authorization analysis. Medical cost trend is primarily impacted by medical service utilization and unit costs that are affected by changes in the level and mix of medical benefits offered, including inpatient, outpatient and pharmacy, the impact of copays and deductibles, changes in provider practices and changes in consumer

demographics and consumption behavior. Authorization analysis projects costs based on authorizations per thousand members basis and assigning an average cost per authorization. This is also adjusted for the impact of copays, deductibles, unit cost and historic discontinuation rates for treatment are considered.

For each reporting period, the Company compares key assumptions used to establish the reserves for claims and performance-based arrangements to actual experience. When actual experience differs from these assumptions, reserves for claims and performance-based arrangements are adjusted through current period net income. Additionally, the Company evaluates expected future developments and emerging trends that may impact key assumptions. The process used to determine this liability requires the Company to make critical accounting estimates that involve considerable judgment, reflecting the variability inherent in forecasting future claim payments. These estimates are highly sensitive to changes in the Company's key assumptions, specifically completion factors and medical cost trends.

Activity in reserves for claims and performance-based arrangements was as follows (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Balance, beginning of period	$	199,730	$	171,294
Incurred health care costs:
Current year to date period	180,675		102,664
Prior year to date period	(19,914)		6,511
Total claims incurred	160,761		109,175
Claims paid related to:
Current year to date period	(64,870)		(47,724)
Prior year to date period	(98,424)		(59,491)
Total claims paid	(163,294)		(107,215)
Other adjustments (1)	—		(9,016)
Balance, end of period	$	197,197	$	164,238

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(1) Other adjustments to reserves for claims and performance-based arrangements reflect changes in accrual for amounts payable to facilities and amounts owed to our payer partners for claims paid on our behalf.

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Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2023

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

The following represents supplemental cash flow information (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Supplemental Disclosure of Non-cash Investing and Financing Activities
Accrued property and equipment purchases	$	30	$	670
Class A common stock issued in connection with business combinations	261,271		—
Accrued net working capital adjustment with business combinations	1,098		—
Effects of Leases
Operating cash flows from operating leases	3,528		3,830
Leased assets disposed of (obtained in) exchange for operating lease liabilities	(3,076)		(3)

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Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles (Policies)

3 Months Ended

Mar. 31, 2023

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 interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain footnote disclosures normally included in financial statements prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) have 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 2022 Form 10-K.

Accounting Estimates and Assumptions

Accounting Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses for the reporting period. Those estimates are inherently subject to change and actual results could differ from those estimates. In the accompanying interim consolidated financial statements, estimates are used for, but not limited to, the valuation of assets (including intangibles assets, goodwill and long-lived assets), liabilities, consideration related to business combinations and asset acquisitions, revenue recognition (including variable consideration), estimated selling prices for performance obligations in contracts with multiple performance obligations, reserves for claims and performance-based arrangements, credit losses, depreciable lives of assets, impairment of long-lived assets, stock-based compensation, deferred income taxes and valuation allowance, contingent liabilities, purchase price allocation in taxable stock transactions and useful lives of intangible assets.

Principles of Consolidation

Principles of Consolidation

The interim consolidated financial statements include the accounts of Evolent Health, Inc. and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Cash and Cash Equivalents

Cash and Cash Equivalents

We consider all highly liquid instruments with original maturities of three months or less to be cash equivalents. The Company holds materially all of our cash in bank deposits with FDIC participating banks, at cost, which approximates fair value. Cash and cash equivalents held in money market funds are carried at fair value, which approximates cost.

Restricted Cash and Restricted Investments

Restricted Cash and Restricted Investments

Restricted cash and restricted investments include cash and investments used to collateralize various contractual obligations (in thousands) as follows:

	March 31, 2023		December 31, 2022
Collateral for letters of credit for facility leases (1)	$	2,132	$	2,269
Collateral with financial institutions (2)	10,966		10,912
Claims processing services (3)	21,353		13,777
Total restricted cash and restricted investments	$	34,451	$	26,958
Current restricted cash	$	21,932	$	14,492
Total current restricted cash and restricted investments	$	21,932	$	14,492
Non-current restricted cash	$	12,519	$	12,466
Total non-current restricted cash and restricted investments	$	12,519	$	12,466

————————

(1)Represents restricted cash related to collateral for letters of credit required in conjunction with lease agreements. See Note 11 for further discussion of our lease commitments.

(2)Represents collateral held with financial institutions for risk-sharing and other arrangements which are held in a FDIC participating bank account. See Note 17 for discussion of fair value measurement and Note 10 for discussion of our risk-sharing arrangements.

(3)Represents cash held by the Company related to claims processing services on behalf of partners. These are pass-through amounts and can fluctuate materially from period to period depending on the timing of when the claims are processed.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows (in thousands):

	March 31,
	2023		2022
Cash and cash equivalents	$	157,519	$	210,158
Restricted cash and restricted investments	34,451		52,628
Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	191,970	$	262,786

Business Combinations

Business Combinations

Companies acquired during each reporting period are reflected in the results of the Company effective from their respective dates of acquisition through the end of the reporting period. The Company allocates the fair value of purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Critical estimates used to value certain identifiable assets include, but are not limited to, expected long-term revenues, future expected operating expenses, cost of capital and appropriate discount rates.

The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed in the acquired entity is recorded as goodwill. Goodwill is assigned to the reporting unit that benefits from the synergies arising from the business combination. If the Company obtains new information about facts and circumstances that existed as of the acquisition date during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final

determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded on the Company's consolidated statements of operations and comprehensive income (loss). For contingent consideration recorded as a liability, the Company initially measures the amount at fair value as of the acquisition date and adjusts the liability, if needed, to fair value at each reporting period. Changes in the fair value of contingent consideration, other than measurement period adjustments, are recognized as operating income or expense. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

Goodwill

Goodwill

We recognize the excess of the purchase price, plus the fair value of any non-controlling interests in the acquiree, over the fair value of identifiable net assets acquired as goodwill. Goodwill is not amortized, but is reviewed at least annually for indications of impairment, with consideration given to financial performance and other relevant factors. We perform impairment tests of goodwill at a reporting unit level on October 31 of each year. We perform impairment tests between annual tests if an event occurs, or circumstances change, that we believe would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Our goodwill impairment analysis first assesses qualitative factors to determine whether events or circumstances existed that would lead the Company to conclude it is more likely than not that the fair value of a reporting unit is below its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is below the carrying amount, a quantitative goodwill assessment is required. In the quantitative evaluation, the fair value of the relevant reporting unit is determined and compared to the carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value and a charge is reported in goodwill impairment on our consolidated statements of operations and comprehensive income (loss).

Intangible Assets, Net

Intangible Assets, Net

Identified intangible assets are recorded at their estimated fair values at the date of acquisition and are amortized over their respective estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are used.

The following summarizes the estimated useful lives by asset classification:

Corporate trade name	2 - 20 years
Customer relationships	11 - 25 years
Technology	5 years
Provider network contracts	3 - 5 years

As part of the organizational changes as a result of growth in our value-based specialty care business, we re-evaluated the useful lives of our intangible assets. As a result, we accelerated amortization such that all corporate trade names will be fully amortized by December 2024.

Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the asset’s carrying value. The Company evaluates recoverability by determining whether the undiscounted cash flows expected to result from the use and eventual disposition of that asset or group exceed the carrying value at the evaluation date. If the undiscounted cash flows are not sufficient to cover the carrying value, the Company measures an impairment loss as the excess of the carrying amount of the long-lived asset or group over its fair value. See Note 8 for additional discussion regarding our intangible assets.

Research and Development Costs

Research and Development Costs

Research and development costs consist primarily of personnel and related expenses (including stock-based compensation and employee taxes and benefits) for employees engaged in research and development activities as well as third-party fees. All such costs are expensed as incurred. We focus our research and development efforts on activities that support our technology infrastructure, clinical program development, data analytics and network development capabilities. Research and development costs are recorded within cost of revenue and selling, general and administrative expenses on our consolidated statements of operations and comprehensive income (loss).

Reserves for Claims and Performance-based Arrangements

Reserves for Claims and Performance-based Arrangements

Reserves for claims and performance-based arrangements reflect estimates of payments under performance-based arrangements and the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process) and other medical care expenses and services payable that are primarily composed of accruals for incentives and other amounts payable to health care professionals and facilities. The Company uses actuarial principles and assumptions that are consistently applied in each reporting period and recognizes the actuarial best estimate of the ultimate liability along with a margin for adverse deviation. This approach is consistent with actuarial standards of practice that the liabilities be adequate under moderately adverse conditions.

The process of estimating reserves involves a considerable degree of judgment by the Company and, as of any given date, is inherently uncertain. The methods for making such estimates and for establishing the resulting liability are continually reviewed and adjustments are reflected in current results of operations in the period in which they are identified as experience develops or new information becomes known.

Right of Offset

Right of Offset

Certain customer arrangements give the Company the legal right to net payment for amounts due from customers and claims payable. As of both March 31, 2023 and December 31, 2022, approximately 47% of gross accounts receivable has been netted against claims payable in lieu of cash receipt. Furthermore, as of March 31, 2023, approximately 20% of our accounts receivable, net could ultimately be settled on a net basis, once the criteria for netting have been met.

Leases

Leases

The Company enters into various office space, data center and equipment lease agreements in conducting its normal business operations. At the inception of any contract, the Company evaluates the agreement to determine whether the contract contains a lease. If the contract contains a lease, the Company then evaluates the term and whether the lease is an operating or finance lease. Most leases include one or more options to renew or may have a termination option. The Company determines whether these options are reasonably certain to be exercised at the inception of the lease. The rent expense is recognized on a straight-line basis in the consolidated statements of operations and comprehensive income (loss) over the terms of the respective leases. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Further, the Company treats all lease and non-lease components as a single combined lease component for all classes of underlying assets.

The Company also enters into sublease agreements for some of its leased office space. Rental income attributable to subleases is immaterial and is offset against rent expense over the terms of the respective leases.

Revenue Recognition

Revenue Recognition

Our revenue contracts are typically multi-year arrangements with customers to provide various clinical and administrative solutions. Our solutions are designed to lower the medical expenses of our partners and include our total cost of care and specialty care management services, provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers.

We use the following 5-step model, outlined in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), to determine revenue recognition from our contracts with customers:

• Identify the contract(s) with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to performance obligations

• Recognize revenue when (or as) the entity satisfies a performance obligation

Our revenue contracts are typically multi-year arrangements with customers to provide various clinical and administrative solutions. Our solutions are designed to lower the medical expenses of our partners and include our total cost of care and specialty care management services, provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers.

Our performance obligation in these arrangements is to provide an integrated suite of services, including access to our platform that is customized to meet the specialized needs of our customers and members. Generally, we will apply the series guidance to the performance obligation as we have determined that each time increment is distinct. We primarily utilize a variable fee structure for

these services that typically includes a monthly payment that is calculated based on a specified per member per month rate, multiplied by the number of members that our partners are managing under a value-based care arrangement or a percentage of plan premiums. Our arrangements may also include other variable fees related to service level agreements, shared medical savings arrangements and other performance measures. Variable consideration is estimated using the most likely amount based on our historical experience and best judgment at the time. Due to the nature of our arrangements, certain estimates may be constrained if it is probable that a significant reversal of revenue will occur when the uncertainty is resolved. We recognize revenue over time using the time elapsed output method. Fixed consideration is recognized ratably over the contract term. In accordance with the series guidance, we allocate variable consideration to the period to which the fees relate.

Contracts with Multiple Performance Obligations

Our contracts with customers may contain multiple performance obligations, primarily when the customer has requested both implementation and on going services as these services are distinct from one another. When a contract has multiple performance obligations, we allocate the transaction price to each performance obligation based on the relative standalone selling price using the expected cost margin approach. This approach requires estimates regarding both the level of effort it will take to satisfy the performance obligation as well as fees that will be received under the variable pricing model. We also take into consideration customer demographics, current market conditions, the scope of services and our overall pricing strategy and objectives when determining the standalone selling price.

Principal vs. Agent

We occasionally use third parties to assist in satisfying our performance obligations. In order to determine whether we are the principal or agent in the arrangement, we review each third-party relationship on a contract by contract basis. As we integrate goods and services provided by third parties into our overall service, we control the services provided to the customer prior to its delivery. As such, we are the principal and we will recognize revenue on a gross basis. In certain cases, we act as an agent and do not control the services from third parties before it is delivered to the customer, thereby recognizing revenue on a net basis.

Series A Senior Convertible Preferred Shares

Series A Senior Convertible Preferred SharesIn accordance with ASC 480, Distinguishing Liabilities from Equity, the shares of Series A Senior Convertible Preferred Shares are classified within temporary equity, as events outside the Company’s control triggers such shares to become redeemable. Costs associated with the issuance of redeemable preferred stock are presented as discounts to the fair value of the redeemable preferred stock and are amortized using the effective interest method, over the term of the respective series of preferred shares.

Adoption of New Accounting Standards

Adoption of New Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Specifically, the ASU removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature and no longer permits the use of the treasury stock method from calculating earnings per share. As a result, after adopting the ASU’s guidance, we do not separately present in equity an embedded conversion feature of such debt. Instead, we account for a convertible debt instrument wholly as debt unless (i) a convertible instrument contains features that require bifurcation as a derivative or (ii) a convertible debt instrument was issued at a substantial premium. Additionally, the ASU removes certain conditions for equity classification related to contracts in an entity’s own equity (e.g., warrants) and amends certain guidance related to the computation of earnings per share for convertible instruments and contracts on an entity’s own equity. The Company adopted the standard using a modified retrospective method on January 1, 2022, with adjustments which increased retained earnings by $39.8 million, reduced additional paid-in capital by $106.2 million and increased the net carrying amount of the 2024 and 2025 Notes by $25.1 million and $41.3 million, respectively.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. The Company adopted this standard starting in the first quarter of 2023, which did not have a material impact on our consolidated financial statements.

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. These items are recorded in accrued liabilities on our consolidated balance sheets.

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 assets and liabilities recorded in business combinations or asset acquisitions, 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.

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, accounts payable, accrued liabilities and accrued compensation approximate their fair values because of the relatively short-term maturities of these items and financial instruments.

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Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles (Tables)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Schedule of Restricted Cash And Cash Equivalents

Restricted cash and restricted investments include cash and investments used to collateralize various contractual obligations (in thousands) as follows:

	March 31, 2023		December 31, 2022
Collateral for letters of credit for facility leases (1)	$	2,132	$	2,269
Collateral with financial institutions (2)	10,966		10,912
Claims processing services (3)	21,353		13,777
Total restricted cash and restricted investments	$	34,451	$	26,958
Current restricted cash	$	21,932	$	14,492
Total current restricted cash and restricted investments	$	21,932	$	14,492
Non-current restricted cash	$	12,519	$	12,466
Total non-current restricted cash and restricted investments	$	12,519	$	12,466

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(1)Represents restricted cash related to collateral for letters of credit required in conjunction with lease agreements. See Note 11 for further discussion of our lease commitments.

(2)Represents collateral held with financial institutions for risk-sharing and other arrangements which are held in a FDIC participating bank account. See Note 17 for discussion of fair value measurement and Note 10 for discussion of our risk-sharing arrangements.

(3)Represents cash held by the Company related to claims processing services on behalf of partners. These are pass-through amounts and can fluctuate materially from period to period depending on the timing of when the claims are processed.

Schedule of Cash And Cash Equivalents

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows (in thousands):

	March 31,
	2023		2022
Cash and cash equivalents	$	157,519	$	210,158
Restricted cash and restricted investments	34,451		52,628
Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	191,970	$	262,786

Schedule of Intangible Assets

The following summarizes the estimated useful lives by asset classification:

Corporate trade name	2 - 20 years
Customer relationships	11 - 25 years
Technology	5 years
Provider network contracts	3 - 5 years

Details of our intangible assets (in thousands, except weighted-average useful lives) are presented below:

	March 31, 2023							December 31, 2022
	Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Corporate trade name	1.8	$	51,965	$	16,967	$	34,998	12.7	$	43,600	$	11,726	$	31,874
Customer relationships	15.2	810,119		103,694		706,425		15.8	465,019		92,760		372,259
Technology	2.3	162,522		83,970		78,552		2.7	111,822		80,255		31,567
Below market lease, net	0.1	1,218		1,200		18		0.3	1,218		1,151		67
Provider network contracts	1.1	18,861		12,997		5,864		1.3	18,851		11,834		7,017
Total intangible assets, net		$	1,044,685	$	218,828	$	825,857		$	640,510	$	197,726	$	442,784

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Transactions (Tables)

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Schedule of Allocation of Purchase Price

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of January 20, 2023, as follows (in thousands):

Purchase consideration:
Cash	$	387,823
Fair value of Class A common stock issued	261,271
Fair value of contingent consideration	66,600
Total consideration	$	715,694
Tangible assets acquired:
Accounts receivable	28,065
Prepaid expenses and other current assets	675
Total tangible assets acquired	28,740
Identifiable intangible assets acquired:
Customer relationships	345,100
Technology	50,700
Corporate trade name	8,200
Total identifiable intangible assets acquired	404,000
Liabilities assumed:
Accrued liabilities	5,409
Accrued compensation and employee benefits	6,173
Deferred tax liabilities, net	100,486
Deferred revenue	142
Total liabilities assumed	112,210
Goodwill	395,164
Net assets acquired	$	715,694

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of August 1, 2022, as follows (in thousands):

Purchase consideration:
Cash	$	256,488
Fair value of Class A common stock issued	130,175
Fair value of contingent consideration	75,000
Total consideration	$	461,663
Tangible assets acquired:
Accounts receivable	34,155
Prepaid expenses and other current assets	636
Other non-current assets	1,393
Total tangible assets acquired	36,184
Identifiable intangible assets acquired:
Customer relationships	154,000
Technology	23,900
Corporate trade name	17,800
Total identifiable intangible assets acquired	195,700
Liabilities assumed:
Accounts payable	7,997
Accrued liabilities	8,083
Accrued compensation and employee benefits	423
Deferred tax liabilities, net	48,671
Deferred revenue	321
Operating lease liabilities	1,323
Total liabilities assumed	66,818

Goodwill	296,597
Net assets acquired	$	461,663

Schedule of Net Assets Acquired

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of January 20, 2023, as follows (in thousands):

Purchase consideration:
Cash	$	387,823
Fair value of Class A common stock issued	261,271
Fair value of contingent consideration	66,600
Total consideration	$	715,694
Tangible assets acquired:
Accounts receivable	28,065
Prepaid expenses and other current assets	675
Total tangible assets acquired	28,740
Identifiable intangible assets acquired:
Customer relationships	345,100
Technology	50,700
Corporate trade name	8,200
Total identifiable intangible assets acquired	404,000
Liabilities assumed:
Accrued liabilities	5,409
Accrued compensation and employee benefits	6,173
Deferred tax liabilities, net	100,486
Deferred revenue	142
Total liabilities assumed	112,210
Goodwill	395,164
Net assets acquired	$	715,694

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of August 1, 2022, as follows (in thousands):

Purchase consideration:
Cash	$	256,488
Fair value of Class A common stock issued	130,175
Fair value of contingent consideration	75,000
Total consideration	$	461,663
Tangible assets acquired:
Accounts receivable	34,155
Prepaid expenses and other current assets	636
Other non-current assets	1,393
Total tangible assets acquired	36,184
Identifiable intangible assets acquired:
Customer relationships	154,000
Technology	23,900
Corporate trade name	17,800
Total identifiable intangible assets acquired	195,700
Liabilities assumed:
Accounts payable	7,997
Accrued liabilities	8,083
Accrued compensation and employee benefits	423
Deferred tax liabilities, net	48,671
Deferred revenue	321
Operating lease liabilities	1,323
Total liabilities assumed	66,818

Goodwill	296,597
Net assets acquired	$	461,663

Schedule of Pro Forma Adjustments

The pro forma adjustments are 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 Months Ended March 31,
	2023		2022
Revenue	$	446,740	$	362,827
Net loss attributable to common shareholders of Evolent Health, Inc.	(15,730)		(10,240)

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Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregation of Revenue

The following table represents Evolent’s revenue disaggregated by end-market and product type:

	For the Three Months Ended March 31,
	2023		2022
Medicaid	$	183,034	$	130,501
Medicare	127,669		104,399
Commercial and other	116,987		62,157
Total	$	427,690	$	297,057
Performance Suite	$	239,873	$	171,164
Specialty Technology and Services Suite	65,316		13,580
Administrative Services	83,067		106,859
Cases	39,434		5,454
Total	$	427,690	$	297,057

Schedule of Contract with Customer, Asset and Liability

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023		December 31, 2022
Short-term receivables (1)	$	261,875	$	246,209
Short-term deferred revenue	7,069		5,758
Long-term deferred revenue	2,193		2,533

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(1)Excludes pharmacy claims receivable and premiums receivable.

Changes in deferred revenue for the three months ended March 31, 2023, are as follows (in thousands):

Deferred revenue
Balance as of beginning-of-period	$	8,291
Reclassification to revenue, as a result of performance obligations satisfied	(3,987)
Cash received in advance of satisfaction of performance obligations	4,958
Balance as of end of period	$	9,262

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Credit Losses (Tables)

3 Months Ended

Mar. 31, 2023

Credit Loss [Abstract]

Schedule of Changes in Allowance for Accounts Receivable

The following table summarizes the changes in allowance for credit losses on our accounts receivables, certain non-trade accounts receivable and contract assets (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Balance as of beginning of period	$	(10,180)	$	(3,374)
NIA acquisition	(240)		—
Provision for credit losses	(5,482)		1,203
Charge-offs	829		—
Balance as of end of period	$	(15,073)	$	(2,171)

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Property and Equipment, Net (Tables)

3 Months Ended

Mar. 31, 2023

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

The following summarizes our property and equipment (in thousands):

	March 31, 2023		December 31, 2022
Computer hardware	$	30,441	$	30,092
Furniture and equipment	4,246		4,214
Internal-use software development costs	197,174		189,119
Leasehold improvements	15,390		14,926
Total property and equipment	247,251		238,351
Accumulated depreciation and amortization expenses	(158,645)		(150,477)
Total property and equipment, net	$	88,606	$	87,874

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Goodwill and Intangible Assets, Net (Tables)

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following table summarizes the changes in the carrying amount of goodwill, for the periods presented (in thousands):

Balance as of December 31, 2022(1)	$	722,774
Goodwill acquired(2)	395,164
Foreign currency translation	7
Balance as of March 31, 2023	$	1,117,945
Balance as of December 31, 2021(1)	$	426,297
Foreign currency translation	(23)
Balance as of March 31, 2022	$	426,274

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(1)Net of cumulative inception to date impairment of $575.5 million as of December 31, 2022 and 2021.

(2)Goodwill acquired from the addition of NIA in January 2023.

Schedule of Intangible Assets Details

The following summarizes the estimated useful lives by asset classification:

Corporate trade name	2 - 20 years
Customer relationships	11 - 25 years
Technology	5 years
Provider network contracts	3 - 5 years

Details of our intangible assets (in thousands, except weighted-average useful lives) are presented below:

	March 31, 2023							December 31, 2022
	Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Corporate trade name	1.8	$	51,965	$	16,967	$	34,998	12.7	$	43,600	$	11,726	$	31,874
Customer relationships	15.2	810,119		103,694		706,425		15.8	465,019		92,760		372,259
Technology	2.3	162,522		83,970		78,552		2.7	111,822		80,255		31,567
Below market lease, net	0.1	1,218		1,200		18		0.3	1,218		1,151		67
Provider network contracts	1.1	18,861		12,997		5,864		1.3	18,851		11,834		7,017
Total intangible assets, net		$	1,044,685	$	218,828	$	825,857		$	640,510	$	197,726	$	442,784

Schedule of Future Estimated Amortization of Intangible Assets

Future estimated amortization of intangible assets (in thousands) as of March 31, 2023, is as follows:

2023	$	69,945
2024	87,529
2025	63,641
2026	63,293
2027	60,552
Thereafter	480,897
Total future amortization of intangible assets	$	825,857

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Long-term Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Schedule of Convertible Debt

The following table summarizes the carrying value of the long-term convertible debt as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023		December 31, 2022
2024 Notes
Carrying value	$	23,971	$	23,925
Unamortized debt discount and issuance costs	310		356
Principal amount	$	24,281	$	24,281
Remaining amortization period (years)	1.7		1.9
Fair value(1)	$	38,000	$	38,000
2025 Notes
Carrying value	$	169,205	$	168,885
Unamortized debt discount and issuance costs	3,295		3,615
Principal amount	$	172,500	$	172,500
Remaining amortization period (years)	2.5		2.8
Fair value(1)	$	192,605	$	185,546

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(1)Fair values for notes are derived from available trading prices closest to the respective balance sheet date. The 2024 Notes have not been traded since December 31, 2022.

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of Major Customers

The following table summarizes the partners who represented at least 10.0% of our consolidated short-term trade accounts receivable, excluding pharmacy claims receivable and premiums receivable:

	March 31, 2023	December 31, 2022
Cook County Health and Hospitals System	34.6%	42.5%
Molina Healthcare	17.8%	12.0%
Bright Health Management, Inc.	*	11.3%

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*     Represents less than 10.0% of the respective balance.

The following table summarizes those partners who represented at least 10.0% of our consolidated revenue:

	For the Three Months Ended March 31,
	2023	2022
Cook County Health and Hospitals Systems	17.2%	23.9%
Florida Blue Medicare, Inc.	11.9%	11.9%
Molina Healthcare	13.2%	*

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*     Represents less than 10.0% of the respective balance

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Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Schedule of Primary Office Leases and Maturity of Lease Liabilities

The following table summarizes our primary office leases as of March 31, 2023 (in thousands, other than term):

Location	Lease Termination Term (in years)	Future Minimum Lease Commitments		Letter of Credit Amount Required
Arlington, VA	8.8	$	28,960	$	1,579
Riverside, IL	8.0	37,301		232
Edison, NJ	3.1	1,597		222
Alpharetta, GA	2.5	1,180		—
Pune, India	0.2	91		—
Brea, CA	4.2	4,004		—

Maturity of lease liabilities (in thousands) as of March 31, 2023, is as follows:

	Operating lease expense
2023	$	5,694
2024	10,436
2025	10,052
2026	8,997
2027	8,685
Thereafter	31,692
Total lease payments	75,556
Less:
Interest	16,674
Present value of lease liabilities	$	58,882

Schedule of Components of Lease Expense, Weighted-Average Discount Rate and Weighted-remaining Lease Terms

The following table summarizes the components of our lease expense (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Operating lease cost	$	1,940	$	2,274
Variable lease cost	1,556		1,326
Total lease cost	$	3,496	$	3,600

Our weighted-average discount rate and our weighted remaining lease terms (in years) are as follows:

	March 31, 2023
Weighted average discount rate	6.34	%
Weighted average remaining lease term	8.0

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Loss Per Common Share (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Schedule of 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 Months Ended March 31,
	2023		2022
Net loss attributable to common shareholders of Evolent Health, Inc.	$	(26,258)	$	(5,350)
Weighted-average common shares outstanding - basic and diluted	107,783		89,509
Loss per common share
Basic and diluted	$	(0.24)	$	(0.06)

Basic net loss per common share is calculated using the weighted average number of common shares outstanding during the period. Diluted net earnings per common share, if any, gives effect to diluted stock options (calculated based on the treasury stock method), shares issuable upon debt conversion (calculated using an as-if converted method).

Schedule of Antidilutive Securities Excluded From Computation of Earnings Per Share

Anti-dilutive shares excluded from the calculation of weighted-average common shares presented above are presented below (in thousands):

	For the Three Months Ended March 31,
	2023	2022
Restricted stock units ("RSUs"), performance-based RSUs (“PSUs”) and leveraged stock units ("LSUs")	1,923	2,161
Stock options	1,260	1,756
Series A Preferred Stock	4,375	—
Convertible senior notes	6,188	11,582
Total	13,746	15,499

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Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of Stock-Based Compensation Expense

Total compensation expense by award type and line item in our interim consolidated financial statements was as follows (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Award Type
Stock options	$	60	$	162
RSUs	7,489		3,301
LSUs	284		775
PSUs	2,877		1,108
Total compensation expense by award type	$	10,710	$	5,346
Line Item
Cost of revenue	$	1,540	$	800
Selling, general and administrative expenses	9,170		4,546
Total compensation expense by financial statement line item	$	10,710	$	5,346

Schedule of Share-Based Awards Granted

Stock-based awards were granted as follows (in thousands):

	For the Three Months Ended March 31,
	2023	2022
RSUs	996	917
PSUs	424	479

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Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities on Recurring Basis

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):

	March 31, 2023
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration(1)	$	—	$	—	$	122,100	$	122,100
Total fair value of liabilities measured on a recurring basis	$	—	$	—	$	122,100	$	122,100

	December 31, 2022
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration	$	—	$	—	$	78,000	$	78,000
Total fair value of liabilities measured on a recurring basis	$	—	$	—	$	78,000	$	78,000

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(1) Represents the fair value of earn-out consideration related to the IPG and NIA transactions as described in Note 4.

Schedule of Changes in Contingent Consideration Measured at Fair Value

The changes in our liabilities measured at fair value for which the Company uses Level 3 inputs to determine fair value are as follows (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Balance as of beginning of period	$	78,000	$	28,700
Additions	69,761		—
Settlements	(29,961)		—
Unrealized (gain) loss, net	4,300		3,900
Balance as of end of period	$	122,100	$	32,600

Schedule of Valuation Techniques and Significant Unobservable Inputs

The following table summarizes the fair value (in thousands), valuation techniques and significant unobservable inputs of our Level 3 fair value measurements as of the periods presented:

	March 31, 2023
	Fair		Valuation	Significant	Assumption or
	Value		Technique	Unobservable Inputs	Input Ranges
Contingent consideration	$	122,100	Real options approach	Risk-neutral expected earnout consideration	$	122,100
				Weighted average discount rate	8.80% - 16.64%

	December 31, 2022
	Fair		Valuation	Significant	Assumption or
	Value		Technique	Unobservable Inputs	Input Ranges
Contingent consideration	$	78,000	Real options approach	Risk-neutral expected earnout consideration	$	77,946
				Weighted average discount rate	9.85% - 10.01%

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Related Parties (Tables)

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Schedule of Related Parties

The following table presents assets and liabilities attributable to our related parties (in thousands):

	March 31, 2023		December 31, 2022
Assets
Accounts receivable, net	$	9,360	$	8,787
Liabilities
Accounts payable	$	2	$	27
Accrued liabilities	—		192

The following table presents revenues and expenses attributable to our related parties (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Revenue	$	54,721	$	32,064
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses)	47,506		26,461
Selling, general and administrative expenses	242		66

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Reserves for Claims and Performance-Based Arrangements (Tables)

3 Months Ended

Mar. 31, 2023

Insurance [Abstract]

Schedule of Activity in Claims Reserves

Activity in reserves for claims and performance-based arrangements was as follows (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Balance, beginning of period	$	199,730	$	171,294
Incurred health care costs:
Current year to date period	180,675		102,664
Prior year to date period	(19,914)		6,511
Total claims incurred	160,761		109,175
Claims paid related to:
Current year to date period	(64,870)		(47,724)
Prior year to date period	(98,424)		(59,491)
Total claims paid	(163,294)		(107,215)
Other adjustments (1)	—		(9,016)
Balance, end of period	$	197,197	$	164,238

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(1) Other adjustments to reserves for claims and performance-based arrangements reflect changes in accrual for amounts payable to facilities and amounts owed to our payer partners for claims paid on our behalf.

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Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2023

Supplemental Cash Flow Elements [Abstract]

Schedule of Supplemental Cash Flow Information

The following represents supplemental cash flow information (in thousands):

	For the Three Months Ended March 31,
	2023		2022
Supplemental Disclosure of Non-cash Investing and Financing Activities
Accrued property and equipment purchases	$	30	$	670
Class A common stock issued in connection with business combinations	261,271		—
Accrued net working capital adjustment with business combinations	1,098		—
Effects of Leases
Operating cash flows from operating leases	3,528		3,830
Leased assets disposed of (obtained in) exchange for operating lease liabilities	(3,076)		(3)

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Organization (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) segment	Dec. 31, 2022 USD ($)	Mar. 31, 2022 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments | segment	1
Cash and cash equivalents | $	$ 157,519	$ 188,200	$ 210,158

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Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles - Restricted Cash and Restricted Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash and restricted investments	$ 34,451	$ 26,958	$ 52,628
Current restricted cash	21,932	14,492
Total current restricted cash and restricted investments	21,932	14,492
Non-current restricted cash	12,519	12,466
Total non-current restricted cash and restricted investments	12,519	12,466
Collateral for letters of credit for facility leases
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash and restricted investments	2,132	2,269
Collateral with financial institutions
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash and restricted investments	10,966	10,912
Claims processing services
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash and restricted investments	$ 21,353	$ 13,777

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Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles - Cash Reconciliation (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Accounting Policies [Abstract]
Cash and cash equivalents	$ 157,519	$ 188,200	$ 210,158
Restricted cash and restricted investments	34,451	26,958	52,628
Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows	$ 191,970	$ 215,158	$ 262,786	$ 354,942

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Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles - Additional Information (Details) - option_to_renew_lease	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Accounting Policies [Abstract]
Accounts receivable netted against claims payable	47.00%	47.00%
Accounts receivable, net eligible for net basis settlement	20.00%
Number of leases option	1

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Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles - Intangible Assets, Net (Details)	Mar. 31, 2023
Corporate trade name | Minimum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	2 years
Corporate trade name | Maximum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	20 years
Customer relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	11 years
Customer relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	25 years
Technology
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	5 years
Provider network contracts | Minimum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	3 years
Provider network contracts | Maximum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	5 years

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Recently Issued Accounting Standards (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Jan. 01, 2022	Dec. 31, 2021	Aug. 31, 2020	Oct. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity	$ 1,121,743	$ 859,417	$ 611,209		$ 693,633
2024 Notes | Senior Notes
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Long-term debt, net						$ 78,900
2025 Notes | Senior Notes
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Long-term debt, net							$ 100,700
Cumulative-effect adjustment from adoption of ASC 2020-06
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity					(66,383)
Retained Earnings (Accumulated Deficit)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity	(626,136)	(606,154)	(592,340)		(626,779)
Retained Earnings (Accumulated Deficit) | Cumulative-effect adjustment from adoption of ASC 2020-06
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity					39,789
Additional Paid-In Capital
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity	$ 1,768,999	$ 1,486,857	$ 1,224,250		1,340,989
Additional Paid-In Capital | Cumulative-effect adjustment from adoption of ASC 2020-06
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity					$ (106,172)
Accounting Standards Update 2020-06 | Cumulative-effect adjustment from adoption of ASC 2020-06 | 2024 Notes | Senior Notes
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Long-term debt, net				$ 25,100
Accounting Standards Update 2020-06 | Cumulative-effect adjustment from adoption of ASC 2020-06 | 2025 Notes | Senior Notes
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Long-term debt, net				41,300
Accounting Standards Update 2020-06 | Retained Earnings (Accumulated Deficit) | Cumulative-effect adjustment from adoption of ASC 2020-06
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity				39,800
Accounting Standards Update 2020-06 | Retained Earnings (Accumulated Deficit) | Cumulative-effect adjustment from adoption of ASC 2020-06 | 2024 Notes | Senior Notes
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity				(11,700)
Accounting Standards Update 2020-06 | Retained Earnings (Accumulated Deficit) | Cumulative-effect adjustment from adoption of ASC 2020-06 | 2025 Notes | Senior Notes
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity				(28,100)
Accounting Standards Update 2020-06 | Additional Paid-In Capital | Cumulative-effect adjustment from adoption of ASC 2020-06
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity				$ 106,200

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Transactions - Narrative (Details) - USD ($)				3 Months Ended		12 Months Ended
		Jan. 20, 2023	Aug. 01, 2022	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Business Acquisition [Line Items]
Cash				$ 386,724,000	$ 70,000
Discrete tax benefit				68,189,000	(1,202,000)
Revenue	[1]			427,690,000	297,057,000
Net loss				(26,258,000)	$ (5,350,000)
NIA
Business Acquisition [Line Items]
Total consideration		$ 715,694,000
Cash		387,823,000
Fair value of Class A common stock issued		261,271,000
Contingent consideration arrangements (up to)		$ 150,000,000
Percentage of contingent consideration allowed to be paid in equity interest (up to)		50.00%
Contingent consideration		$ 66,600,000
Goodwill, expected tax deductible amount		$ 0
Discrete tax benefit				56,100,000
Revenue				48,500,000
Net loss				$ (5,500,000)
NIA | Common Class A
Business Acquisition [Line Items]
Equity interest issued or issuable, number of shares (in shares)		8,474,576
NIA | Customer relationships
Business Acquisition [Line Items]
Estimated useful life		15 years
NIA | Technology
Business Acquisition [Line Items]
Estimated useful life		5 years
NIA | Corporate trade name
Business Acquisition [Line Items]
Estimated useful life		2 years
IPG
Business Acquisition [Line Items]
Total consideration			$ 461,663,000
Cash			$ 256,488,000
Equity interest issued or issuable, number of shares (in shares)			3,700,000
Fair value of Class A common stock issued			$ 130,175,000
Contingent consideration arrangements (up to)			87,000,000
Contingent consideration			75,000,000
Goodwill, expected tax deductible amount			$ 0
Discrete tax benefit						$ 46,800,000
Voting interests acquired			100.00%
IPG | Customer relationships
Business Acquisition [Line Items]
Estimated useful life			20 years
IPG | Technology
Business Acquisition [Line Items]
Estimated useful life			5 years
IPG | Corporate trade name
Business Acquisition [Line Items]
Estimated useful life			15 years

[1] See Note 18 for amounts attributable to unconsolidated related parties included in these line items.

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Transactions - Allocation of Acquisition Cost (Details) - USD ($) $ in Thousands			3 Months Ended
	Jan. 20, 2023	Aug. 01, 2022	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Dec. 31, 2021
Purchase consideration:
Cash			$ 386,724	$ 70
Liabilities assumed:
Goodwill			$ 1,117,945	$ 426,274	$ 722,774	$ 426,297
NIA
Purchase consideration:
Cash	$ 387,823
Fair value of Class A common stock issued	261,271
Fair value of contingent consideration	66,600
Total consideration	715,694
Tangible assets acquired:
Accounts receivable	28,065
Prepaid expenses and other current assets	675
Total tangible assets acquired	28,740
Identifiable intangible assets acquired:
Total identifiable intangible assets acquired	404,000
Liabilities assumed:
Accrued liabilities	5,409
Accrued compensation and employee benefits	6,173
Deferred tax liabilities, net	100,486
Deferred revenue	142
Total liabilities assumed	112,210
Goodwill	395,164
Net assets acquired	715,694
NIA | Customer relationships
Identifiable intangible assets acquired:
Total identifiable intangible assets acquired	345,100
NIA | Technology
Identifiable intangible assets acquired:
Total identifiable intangible assets acquired	50,700
NIA | Corporate trade name
Identifiable intangible assets acquired:
Total identifiable intangible assets acquired	$ 8,200
IPG
Purchase consideration:
Cash		$ 256,488
Fair value of Class A common stock issued		130,175
Fair value of contingent consideration		75,000
Total consideration		461,663
Tangible assets acquired:
Accounts receivable		34,155
Prepaid expenses and other current assets		636
Other non-current assets		1,393
Total tangible assets acquired		36,184
Identifiable intangible assets acquired:
Total identifiable intangible assets acquired		195,700
Liabilities assumed:
Accounts payable		7,997
Accrued liabilities		8,083
Accrued compensation and employee benefits		423
Deferred tax liabilities, net		48,671
Deferred revenue		321
Operating lease liabilities		1,323
Total liabilities assumed		66,818
Goodwill		296,597
Net assets acquired		461,663
IPG | Customer relationships
Identifiable intangible assets acquired:
Total identifiable intangible assets acquired		154,000
IPG | Technology
Identifiable intangible assets acquired:
Total identifiable intangible assets acquired		23,900
IPG | Corporate trade name
Identifiable intangible assets acquired:
Total identifiable intangible assets acquired		$ 17,800

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Transactions - Pro Forma Information (Details) - NIA - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Business Acquisition [Line Items]
Revenue	$ 446,740	$ 362,827
Net loss attributable to common shareholders of Evolent Health, Inc.	$ (15,730)	$ (10,240)

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Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Revenue	[1]	$ 427,690	$ 297,057
Evolent Health Services Segment
Disaggregation of Revenue [Line Items]
Revenue		427,690	297,057
Evolent Health Services Segment | Performance Suite
Disaggregation of Revenue [Line Items]
Revenue		239,873	171,164
Evolent Health Services Segment | Specialty Technology and Services Suite
Disaggregation of Revenue [Line Items]
Revenue		65,316	13,580
Evolent Health Services Segment | Administrative Services
Disaggregation of Revenue [Line Items]
Revenue		83,067	106,859
Evolent Health Services Segment | Cases
Disaggregation of Revenue [Line Items]
Revenue		39,434	5,454
Evolent Health Services Segment | Medicaid
Disaggregation of Revenue [Line Items]
Revenue		183,034	130,501
Evolent Health Services Segment | Medicare
Disaggregation of Revenue [Line Items]
Revenue		127,669	104,399
Evolent Health Services Segment | Commercial and other
Disaggregation of Revenue [Line Items]
Revenue		$ 116,987	$ 62,157

[1] See Note 18 for amounts attributable to unconsolidated related parties included in these line items.

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Revenue Recognition - Transaction Price Allocated to the Remaining Performance Obligations (Details) $ in Millions	Mar. 31, 2023 USD ($)
Revenue from Contract with Customer [Abstract]
Performance obligation	$ 43.8
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01 | December 31, 2023
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, percentage	69.00%
Remaining performance obligation, expected timing of satisfaction, period	9 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01 | December 31, 2024
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, percentage	92.00%
Remaining performance obligation, expected timing of satisfaction, period	21 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01 | December 31, 2025
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, percentage	100.00%
Remaining performance obligation, expected timing of satisfaction, period	33 months

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Revenue Recognition - Contract Balances (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Revenue from Contract with Customer [Abstract]
Short-term receivables	$ 261,875	$ 246,209
Short-term deferred revenue	7,069	5,758
Long-term deferred revenue	2,193	$ 2,533
Deferred revenue
Balance as of beginning-of-period	8,291
Reclassification to revenue, as a result of performance obligations satisfied	(3,987)
Cash received in advance of satisfaction of performance obligations	4,958
Balance as of end of period	9,262
Revenue	1,500
Revenue recognized from performed obligations	$ 4,800

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Revenue Recognition - Contract Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Capitalized Contract Cost [Line Items]
Contract cost amortization	$ 2,290	$ 11,689
Amortization period	5 years
Bonuses and Commissions
Capitalized Contract Cost [Line Items]
Contract cost assets	$ 3,400	3,900
Contract cost amortization	300	1,400
Contract Fulfillment Costs
Capitalized Contract Cost [Line Items]
Contract cost assets	13,100	18,100
Contract cost amortization	$ 2,000	$ 10,300

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Credit Losses - Accounts Receivable (Narrative) (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Accounts Receivable, Noncurrent, Past Due [Line Items]
Percentage of receivables, current	70.00%	67.00%
Accounts receivable, net	$ 284,700	$ 269,100
Allowance for doubtful accounts, current	$ 15,073	$ 10,180	$ 2,171	$ 3,374
Past due less than 60 days
Accounts Receivable, Noncurrent, Past Due [Line Items]
Percentage of receivables, past due	23.00%	21.00%
Past due less than 120 days
Accounts Receivable, Noncurrent, Past Due [Line Items]
Percentage of receivables, past due	26.00%	29.00%

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Credit Losses - Schedule of Changes in Allowance for Accounts Receivable (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance as of beginning of period	$ (10,180)	$ (3,374)
NIA acquisition	(240)	0
Provision for credit losses	(5,482)	1,203
Charge-offs	829	0
Balance as of end of period	$ (15,073)	$ (2,171)

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Property and Equipment, Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Property and Equipment [Line Items]
Total property and equipment	$ 247,251		$ 238,351
Accumulated depreciation and amortization expenses	(158,645)		(150,477)
Total property and equipment, net	88,606		87,874
Net capitalized internal-use software development costs	75,100		73,700
Depreciation expense	8,100	$ 7,600
Capitalized computer software, amortization	6,700	6,700
Computer hardware
Property and Equipment [Line Items]
Total property and equipment	30,441		30,092
Furniture and equipment
Property and Equipment [Line Items]
Total property and equipment	4,246		4,214
Internal-use software development costs
Property and Equipment [Line Items]
Total property and equipment	197,174		189,119
Capitalized computer software additions	8,100	$ 6,400
Leasehold improvements
Property and Equipment [Line Items]
Total property and equipment	$ 15,390		$ 14,926

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Goodwill and Intangible Assets, Net - Impairment Testing (Details)	Oct. 31, 2022 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill impairment	$ 0

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Goodwill and Intangible Assets, Net - Schedule of Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Dec. 31, 2021
Goodwill [Roll Forward]
Balance as of beginning of period	$ 722,774	$ 426,297
Goodwill acquired	395,164
Foreign currency translation	7	(23)
Balance as of end of period	$ 1,117,945	$ 426,274
Cumulative inception to date impairment			$ 575,500	$ 575,500

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Goodwill and Intangible Assets, Net - Intangible Assets, Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,044,685		$ 640,510
Accumulated Amortization	218,828		197,726
Total future amortization of intangible assets	825,857		442,784
Amortization of intangible assets	$ 21,100	$ 7,500
Corporate trade name
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life	1 year 9 months 18 days	12 years 8 months 12 days
Gross Carrying Amount	$ 51,965		43,600
Accumulated Amortization	16,967		11,726
Total future amortization of intangible assets	$ 34,998		31,874
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life	15 years 2 months 12 days	15 years 9 months 18 days
Gross Carrying Amount	$ 810,119		465,019
Accumulated Amortization	103,694		92,760
Total future amortization of intangible assets	$ 706,425		372,259
Technology
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life	2 years 3 months 18 days	2 years 8 months 12 days
Gross Carrying Amount	$ 162,522		111,822
Accumulated Amortization	83,970		80,255
Total future amortization of intangible assets	$ 78,552		31,567
Below market lease, net
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life	1 month 6 days	3 months 18 days
Gross Carrying Amount	$ 1,218		1,218
Accumulated Amortization	1,200		1,151
Total future amortization of intangible assets	$ 18		67
Provider network contracts
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life	1 year 1 month 6 days	1 year 3 months 18 days
Gross Carrying Amount	$ 18,861		18,851
Accumulated Amortization	12,997		11,834
Total future amortization of intangible assets	$ 5,864		$ 7,017

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Goodwill and Intangible Assets, Net - Amortization of Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
2023	$ 69,945
2024	87,529
2025	63,641
2026	63,293
2027	60,552
Thereafter	480,897
Total future amortization of intangible assets	$ 825,857	$ 442,784

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Long-term Debt - 2022 Credit Agreement (Details) $ in Thousands			3 Months Ended
	Jan. 20, 2023 USD ($) day	Aug. 01, 2022 USD ($)	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)
Debt Instrument [Line Items]
Proceeds from issuance of long-term debt, net of offering costs			$ 256,330	$ 0
Secured Debt | 2022 Credit Facilities
Debt Instrument [Line Items]
Interest expense			11,100
Unamortized debt discount and issuance costs		$ 14,400
Amortization of the debt discount and the issuance costs			500
Secured Debt | Line of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 240,000	$ 175,000
Closing fee percentage	3.00%	2.00%
Number of days prior to any junior debt maturity | day	91
Commitment fee percentage		2.00%
Secured Debt | Line of Credit | Secured Overnight Financing Rate (SOFR)
Debt Instrument [Line Items]
Basis spread on variable rate		6.00%
Secured Debt | Line of Credit | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate		5.00%
Revolving Credit Facility | Line of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 25,000	$ 50,000
Closing fee percentage	3.00%	2.00%
Commitment fee percentage		2.00%
Revolving Credit Facility | Line of Credit | 2022 Credit Facilities
Debt Instrument [Line Items]
Repaid under the revolving credit facility			$ 37,500
Revolving Credit Facility | Line of Credit | Secured Overnight Financing Rate (SOFR)
Debt Instrument [Line Items]
Basis spread on variable rate		4.00%
Revolving Credit Facility | Line of Credit | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate		3.00%
2022 Credit Facilities | Line of Credit
Debt Instrument [Line Items]
Prepayment penalty prior to first anniversary of closing date (in percent)		3.00%
Prepayment penalty after first anniversary of closing date but prior to second anniversary of closing date (in percent)		2.00%
Prepayment penalty after second anniversary of closing date but prior to third anniversary of closing date (in percent)		1.00%
Prepayment penalty on or after third anniversary of closing date (in percent)		0.00%

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Long-term Debt - 2024 Notes (Details) $ / shares in Units, $ in Thousands			1 Months Ended		3 Months Ended
	Aug. 18, 2022 shares	Aug. 11, 2022 USD ($)	Aug. 31, 2022 USD ($)	Aug. 31, 2020 USD ($) shares $ / shares	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Jan. 01, 2022 USD ($)	Dec. 31, 2021 USD ($)
Debt Instrument [Line Items]
Stockholders' equity					$ 1,121,743	$ 611,209	$ 859,417		$ 693,633
Amortization of deferred financing costs					911	539
Cumulative-effect adjustment from adoption of ASC 2020-06
Debt Instrument [Line Items]
Stockholders' equity									(66,383)
Class A Common Stock
Debt Instrument [Line Items]
Stockholders' equity					1,125	916	1,015		908
Additional Paid-In Capital
Debt Instrument [Line Items]
Stockholders' equity					1,768,999	1,224,250	1,486,857		1,340,989
Additional Paid-In Capital | Cumulative-effect adjustment from adoption of ASC 2020-06
Debt Instrument [Line Items]
Stockholders' equity									(106,172)
Additional Paid-In Capital | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06
Debt Instrument [Line Items]
Stockholders' equity								$ 106,200
Retained Earnings (Accumulated Deficit)
Debt Instrument [Line Items]
Stockholders' equity					(626,136)	(592,340)	(606,154)		(626,779)
Retained Earnings (Accumulated Deficit) | Cumulative-effect adjustment from adoption of ASC 2020-06
Debt Instrument [Line Items]
Stockholders' equity									$ 39,789
Retained Earnings (Accumulated Deficit) | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06
Debt Instrument [Line Items]
Stockholders' equity								39,800
Senior Notes
Debt Instrument [Line Items]
Payments of debt issuance costs				$ 2,500
2024 Notes | Senior Notes
Debt Instrument [Line Items]
Face amount				$ 117,100	24,281		$ 24,281
Interest rate				3.50%
Debt conversion, converted instrument, amount				$ 84,200
Debt issuance costs				$ 3,000
Interest expense					200	1,000
Conversion price (in dollars per share) | $ / shares				$ 18.23
Initial conversion amount (in shares) | shares				6,400,000
Long-term debt, net				$ 78,900
Debt issuance costs, net, debt component				$ 1,700
Amortization of deferred financing costs					$ 200	$ 200
Repurchase covenant, repurchase price due to fundamental change as percentage of principal amount				100.00%
Repurchase covenant, sale price as a percentage of conversion price				130.00%
Repurchase covenant, trading days, minimum				20 days
Consecutive trading days, minimum				30 days
Repurchase covenant, repurchase price due to change in sale price as percentage of conversion price				100.00%
Loss on extinguishment/repayment of debt, net			$ 10,200
2024 Notes | Senior Notes | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06
Debt Instrument [Line Items]
Long-term debt, net								25,100
2024 Notes | Senior Notes | Class A Common Stock
Debt Instrument [Line Items]
Debt issuance costs				$ 1,300
Proceeds from issuance of debt				$ 38,100
2024 Notes | Senior Notes | Class A Common Stock | Common Class A
Debt Instrument [Line Items]
Initial conversion rate per $ 1000 principal amount				0.0548667
2024 Notes | Senior Notes | Additional Paid-In Capital | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06 | Equity Component of Long Term Debt
Debt Instrument [Line Items]
Stockholders' equity								(38,100)
2024 Notes | Senior Notes | Additional Paid-In Capital | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06 | Deferred Financing Fees
Debt Instrument [Line Items]
Stockholders' equity								1,300
2024 Notes | Senior Notes | Retained Earnings (Accumulated Deficit) | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06
Debt Instrument [Line Items]
Stockholders' equity								$ (11,700)
2021 Notes | Senior Notes
Debt Instrument [Line Items]
Debt conversion, original debt, amount		$ 92,800		$ 84,200
Debt conversion issued (in share) | shares	5,394,165
New Notes | Senior Notes
Debt Instrument [Line Items]
Debt conversion, converted instrument, amount				$ 32,800

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Long-term Debt - 2025 Notes (Details) $ / shares in Units, shares in Millions	1 Months Ended	3 Months Ended
	Oct. 31, 2018 USD ($) shares $ / shares	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Jan. 01, 2022 USD ($)	Dec. 31, 2021 USD ($)	Oct. 24, 2018 USD ($)	Oct. 22, 2018 USD ($)
Debt Instrument [Line Items]
Stockholders' equity		$ 1,121,743,000	$ 611,209,000	$ 859,417,000		$ 693,633,000
Amortization of deferred financing costs		911,000	539,000
Cumulative-effect adjustment from adoption of ASC 2020-06
Debt Instrument [Line Items]
Stockholders' equity						(66,383,000)
Class A Common Stock
Debt Instrument [Line Items]
Stockholders' equity		1,125,000	916,000	1,015,000		908,000
Additional Paid-In Capital
Debt Instrument [Line Items]
Stockholders' equity		1,768,999,000	1,224,250,000	1,486,857,000		1,340,989,000
Additional Paid-In Capital | Cumulative-effect adjustment from adoption of ASC 2020-06
Debt Instrument [Line Items]
Stockholders' equity						(106,172,000)
Additional Paid-In Capital | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06
Debt Instrument [Line Items]
Stockholders' equity					$ 106,200,000
Retained Earnings (Accumulated Deficit)
Debt Instrument [Line Items]
Stockholders' equity		(626,136,000)	(592,340,000)	(606,154,000)		(626,779,000)
Retained Earnings (Accumulated Deficit) | Cumulative-effect adjustment from adoption of ASC 2020-06
Debt Instrument [Line Items]
Stockholders' equity						$ 39,789,000
Retained Earnings (Accumulated Deficit) | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06
Debt Instrument [Line Items]
Stockholders' equity					39,800,000
2025 Notes
Debt Instrument [Line Items]
Debt issuance costs	$ 5,900,000
Senior Notes | 2025 Notes
Debt Instrument [Line Items]
Face amount	$ 172,500,000	172,500,000		$ 172,500,000			$ 22,500,000	$ 150,000,000
Interest rate	1.50%
Interest expense		600,000	600,000
Conversion price (in dollars per share) | $ / shares	$ 33.43
Initial conversion amount (in shares) | shares	5.2
Carrying amount	$ 100,700,000
Proceeds from issuance of debt	166,600,000
Debt issuance costs	$ 3,400,000
Amortization of deferred financing costs		$ 300,000	$ 300,000
Repurchase covenant, repurchase price due to fundamental change as percentage of principal amount	100.00%
Repurchase covenant, sale price as a percentage of conversion price (at least)	130.00%
Repurchase covenant, trading days, minimum	20 days
Consecutive trading days, minimum	30 days
Repurchase covenant, repurchase price due to change in sale price as percentage of conversion price	100.00%
Senior Notes | 2025 Notes | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06
Debt Instrument [Line Items]
Carrying amount					41,300,000
Senior Notes | 2025 Notes | Class A Common Stock
Debt Instrument [Line Items]
Proceeds from issuance of debt	$ 71,800,000
Debt issuance costs	$ 2,500,000
Senior Notes | 2025 Notes | Class A Common Stock | Common Class A
Debt Instrument [Line Items]
Initial conversion rate per $ 1000 principal amount	0.0299135
Senior Notes | 2025 Notes | Additional Paid-In Capital | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06 | Equity Component of Long Term Debt
Debt Instrument [Line Items]
Stockholders' equity					(71,800,000)
Senior Notes | 2025 Notes | Additional Paid-In Capital | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06 | Deferred Financing Fees
Debt Instrument [Line Items]
Stockholders' equity					2,500,000
Senior Notes | 2025 Notes | Retained Earnings (Accumulated Deficit) | Cumulative-effect adjustment from adoption of ASC 2020-06 | Accounting Standards Update 2020-06
Debt Instrument [Line Items]
Stockholders' equity					$ (28,100,000)

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Long-term Debt - 2021 Notes (Details) - Senior Notes - USD ($) $ in Thousands		1 Months Ended
	Aug. 11, 2022	Aug. 31, 2020	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Payments of debt issuance costs		$ 2,500
2021 Notes
Debt Instrument [Line Items]
Debt conversion, original debt, amount	$ 92,800	84,200
2024 Notes
Debt Instrument [Line Items]
Face amount		$ 117,100	$ 24,281	$ 24,281
Interest rate		3.50%
Debt issuance costs		$ 3,000
Debt conversion, converted instrument, amount		$ 84,200

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Long-term Debt - Convertible Senior Notes Carrying Value (Details) - Senior Notes - USD ($)	Mar. 31, 2023	Dec. 31, 2022	Aug. 31, 2020	Oct. 31, 2018	Oct. 24, 2018	Oct. 22, 2018
2024 Notes
Debt Instrument [Line Items]
Carrying value	$ 23,971,000	$ 23,925,000
Unamortized debt discount and issuance costs	310,000	356,000
Principal amount	$ 24,281,000	$ 24,281,000	$ 117,100,000
Remaining amortization period (years)	1 year 8 months 12 days	1 year 10 months 24 days
2024 Notes | Level 2
Debt Instrument [Line Items]
Fair value	$ 38,000,000	$ 38,000,000
2025 Notes
Debt Instrument [Line Items]
Carrying value	169,205,000	168,885,000
Unamortized debt discount and issuance costs	3,295,000	3,615,000
Principal amount	$ 172,500,000	$ 172,500,000		$ 172,500,000	$ 22,500,000	$ 150,000,000
Remaining amortization period (years)	2 years 6 months	2 years 9 months 18 days
2025 Notes | Level 2
Debt Instrument [Line Items]
Fair value	$ 192,605,000	$ 185,546,000

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Commitments and Contingencies - Additional Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) customer	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Restricted Cash and Cash Equivalents Items [Line Items]
Automatic extension period	1 year
Automatic extension after each period	1 year
Percent of tax savings to be paid	85.00%
Recognition of remaining TRA liability	$ 66,184	$ 0
Tax receivable agreement liability	$ 112,134		$ 45,950
UPMC Reseller Agreement
Restricted Cash and Cash Equivalents Items [Line Items]
Number of customers | customer	20
Revenue	$ 0	600
Letter of Credit | Line of Credit
Restricted Cash and Cash Equivalents Items [Line Items]
Maximum borrowing capacity	13,100		$ 13,100
Letter of Credit | Line of Credit | Collateral with financial institutions
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash and restricted investments	$ 13,100	$ 13,100

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Commitments and Contingencies - Credit and Concentration Risk (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Dec. 31, 2021
Concentration Risk [Line Items]
Percentage of cash and cash equivalents held with FDIC participating bank	99.10%
Cash and cash equivalents (including restricted cash)	$ 191,970	$ 262,786	$ 215,158	$ 354,942
Percentage of cash held in international banks	0.90%
Cook County Health and Hospitals System | Customer Concentration Risk | Accounts Receivable | Trade Accounts Receivable
Concentration Risk [Line Items]
Concentration risk (in percent)	34.60%		42.50%
Cook County Health and Hospitals System | Customer Concentration Risk | Revenues
Concentration Risk [Line Items]
Concentration risk (in percent)	17.20%	23.90%
Florida Blue Medicare, Inc. | Customer Concentration Risk | Revenues
Concentration Risk [Line Items]
Concentration risk (in percent)	11.90%	11.90%
Molina Healthcare | Customer Concentration Risk | Accounts Receivable | Trade Accounts Receivable
Concentration Risk [Line Items]
Concentration risk (in percent)	17.80%		12.00%
Molina Healthcare | Customer Concentration Risk | Revenues
Concentration Risk [Line Items]
Concentration risk (in percent)	13.20%
Bright Health Management, Inc. | Customer Concentration Risk | Accounts Receivable | Trade Accounts Receivable
Concentration Risk [Line Items]
Concentration risk (in percent)			11.30%

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Leases - Narrative (Details) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($) option_to_renew_lease	Dec. 31, 2022 USD ($)
Lessee, Lease, Description [Line Items]
Number of leases option | option_to_renew_lease	1
Lease Agreements
Lessee, Lease, Description [Line Items]
Letters of credit outstanding, amount	$ 2.1	$ 2.1
Restricted cash and restricted investments	$ 2.1	$ 2.3

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Leases - Primary Office Leases (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Lessee, Lease, Description [Line Items]
Future Minimum Lease Commitments	$ 75,556
Arlington, VA
Lessee, Lease, Description [Line Items]
Lease Termination Term (in years)	8 years 9 months 18 days
Future Minimum Lease Commitments	$ 28,960
Letter of Credit Amount Required	$ 1,579
Riverside, IL
Lessee, Lease, Description [Line Items]
Lease Termination Term (in years)	8 years
Future Minimum Lease Commitments	$ 37,301
Letter of Credit Amount Required	$ 232
Edison, NJ
Lessee, Lease, Description [Line Items]
Lease Termination Term (in years)	3 years 1 month 6 days
Future Minimum Lease Commitments	$ 1,597
Letter of Credit Amount Required	$ 222
Alpharetta, GA
Lessee, Lease, Description [Line Items]
Lease Termination Term (in years)	2 years 6 months
Future Minimum Lease Commitments	$ 1,180
Letter of Credit Amount Required	$ 0
Pune, India
Lessee, Lease, Description [Line Items]
Lease Termination Term (in years)	2 months 12 days
Future Minimum Lease Commitments	$ 91
Letter of Credit Amount Required	$ 0
Brea, CA
Lessee, Lease, Description [Line Items]
Lease Termination Term (in years)	4 years 2 months 12 days
Future Minimum Lease Commitments	$ 4,004
Letter of Credit Amount Required	$ 0

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Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Leases [Abstract]
Operating lease cost	$ 1,940	$ 2,274
Variable lease cost	1,556	1,326
Total lease cost	$ 3,496	$ 3,600

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Leases - Maturity of Lease Liabilities (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Leases [Abstract]
2023	$ 5,694
2024	10,436
2025	10,052
2026	8,997
2027	8,685
Thereafter	31,692
Total lease payments	75,556
Less:
Interest	16,674
Present value of lease liabilities	$ 58,882

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Leases - Weighted-average Discount Rate and Weighted-remaining Lease Terms (Details)	Mar. 31, 2023
Leases [Abstract]
Weighted average discount rate	6.34%
Weighted average remaining lease term	8 years

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Convertible Preferred Equity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended
	Jan. 20, 2023	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Temporary Equity [Line Items]
Aggregate shares of preferred stock sold (in shares)		175
Preferred class A common stock, par value (in dollars per share)		$ 0.01
Class A common stock, par value (in dollars per share)		$ 0.01		$ 0.01
Payment of preferred dividends		$ 3,651	$ 0
Series A Preferred Stock
Temporary Equity [Line Items]
Aggregate shares of preferred stock sold (in shares)	175
Preferred class A common stock, par value (in dollars per share)	$ 0.01
Purchase price (in dollars per share)	$ 960.00
Gross proceeds from sale of temporary equity	$ 168,000
Liquidation preference (in dollars per share)	$ 1,000
Annual increase in dividend rate	2.00%
Conversion price (in dollar per share)	$ 40.00
Payment of preferred dividends		$ 3,700
Dividends paid (in dollars per share)		$ 20.86
Accretion of Series A preferred stock		$ 2,600
Series A Preferred Stock | Called by company on or after January 20, 2025
Temporary Equity [Line Items]
Redemption price percentage	165.00%
Series A Preferred Stock | Called by holder on or after January 20, 2030
Temporary Equity [Line Items]
Redemption price percentage	150.00%
Series A Preferred Stock | Refinancing or replacement of debt
Temporary Equity [Line Items]
Redemption price percentage	165.00%
Series A Preferred Stock | Change of control prior to January 20, 2025
Temporary Equity [Line Items]
Redemption price percentage	150.00%
Series A Preferred Stock | Change of control after January 20, 2025
Temporary Equity [Line Items]
Redemption price percentage	135.00%
Series A Preferred Stock | Secured Overnight Financing Rate (SOFR)
Temporary Equity [Line Items]
Quarterly dividend rate, basis spread on variable rate	6.00%
Common Class A
Temporary Equity [Line Items]
Class A common stock, par value (in dollars per share)	$ 0.01

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Loss Per Common Share - Computation of Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Earnings Per Share [Abstract]
Net loss attributable to common shareholders of Evolent Health, Inc - Basic	$ (26,258)	$ (5,350)
Net loss attributable to common shareholders of Evolent Health, Inc. - Diluted	$ (26,258)	$ (5,350)
Weighted-average common shares outstanding - basic (in shares)	107,783	89,509
Weighted-average common shares outstanding - diluted (in shares)	107,783	89,509
Loss per common share
Basic (in dollars per share)	$ (0.24)	$ (0.06)
Diluted (in dollars per share)	$ (0.24)	$ (0.06)

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Loss Per Common Share - Antidilutive Securities (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	13,746	15,499
Restricted stock units ("RSUs"), performance-based RSUs (“PSUs”) and leveraged stock units ("LSUs")
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	1,923	2,161
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	1,260	1,756
Series A Preferred Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	4,375	0
Convertible senior notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	6,188	11,582

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Stock-based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total compensation expense by financial statement line item	$ 10,710	$ 5,346
Cost of revenue
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total compensation expense by financial statement line item	1,540	800
Selling, general and administrative expenses
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total compensation expense by financial statement line item	9,170	4,546
Stock options
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total compensation expense by financial statement line item	60	162
RSUs
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total compensation expense by financial statement line item	7,489	3,301
LSUs
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total compensation expense by financial statement line item	284	775
PSUs
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total compensation expense by financial statement line item	$ 2,877	$ 1,108

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Stock-based Compensation - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2021
Share-Based Payment Arrangement [Abstract]
Stock-based compensation capitalized	$ 0	$ 0	$ 0

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Stock-based Compensation - Schedule of Stock-Based Awards Granted (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	996	917
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	424	479

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Tax Disclosure [Abstract]
Provision for (benefit from) income taxes	$ (68,189)	$ 1,202
Effective tax rate	77.30%	(29.00%)
Reduction of valuation allowance	$ 56,100
Tax expense (benefit) from TRA	8,300
Unrecognized tax benefits	$ 1,600
Amount of tax benefit percent	85.00%

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Investments in Equity Method Investees (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Schedule of Equity Method Investments [Line Items]
Gain from equity method investees	$ 423	$ 596
Equity Method Investee | Services Agreements
Schedule of Equity Method Investments [Line Items]
Revenue related to services agreements	$ 4,800	$ 3,600
Minimum
Schedule of Equity Method Investments [Line Items]
Economic interest percentage	4.00%		4.00%
Voting interest percentage	25.00%		25.00%
Maximum
Schedule of Equity Method Investments [Line Items]
Economic interest percentage	38.00%		38.00%
Voting interest percentage	40.00%		40.00%

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Fair Value Measurement - Assets and Liabilities on Recurring Basis (Details) - Fair Value, Recurring - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Liabilities
Contingent consideration	$ 122,100	$ 78,000
Total fair value of liabilities measured on a recurring basis	122,100	78,000
Level 1
Liabilities
Contingent consideration	0	0
Total fair value of liabilities measured on a recurring basis	0	0
Level 2
Liabilities
Contingent consideration	0	0
Total fair value of liabilities measured on a recurring basis	0	0
Level 3
Liabilities
Contingent consideration	122,100	78,000
Total fair value of liabilities measured on a recurring basis	$ 122,100	$ 78,000

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Fair Value Measurement - Changes in Contingent Consideration and Other (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance as of beginning of period	$ 78,000	$ 28,700
Additions	69,761	0
Settlements	$ (29,961)	$ 0
Unrealized (gain) loss, net	Unrealized (gain) loss, net	Unrealized (gain) loss, net
Unrealized (gain) loss, net	$ 4,300	$ 3,900
Balance as of end of period	$ 122,100	$ 32,600

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Fair Value Measurement - Valuation Techniques and Significant Unobservable Inputs (Details) - Fair Value, Recurring $ in Thousands	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value	$ 122,100	$ 78,000
Level 3
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value	$ 122,100	$ 78,000
Level 3 | Risk-neutral expected earnout consideration
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assumption or input ranges	122,100	77,946
Level 3 | Discount rate | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assumption or input ranges	0.0880	0.0985
Level 3 | Discount rate | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assumption or input ranges	0.1664	0.1001

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Related Parties - Assets and Liabilities (Details) - USD ($) $ in Thousands		Mar. 31, 2023	Dec. 31, 2022
Assets
Accounts receivable, net	[1]	$ 262,764	$ 254,684
Liabilities
Accounts payable	[1]	51,012	57,174
Accrued liabilities	[1]	170,236	111,198
Related Party
Assets
Accounts receivable, net		9,360	8,787
Liabilities
Accounts payable		2	27
Accrued liabilities		$ 0	$ 192

[1] See Note 18 for amounts attributable to related parties included in these line items.

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Related Parties - Revenues and Expenses (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022
Expenses
Selling, general and administrative expenses	[1]	$ 89,726	$ 58,932
Related Party
Related Party Transaction [Line Items]
Revenue		54,721	32,064
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses)		47,506	26,461
Selling, general and administrative expenses		$ 242	$ 66

[1] See Note 18 for amounts attributable to unconsolidated related parties included in these line items.

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Reserves for Claims and Performance-Based Arrangements (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Balance, beginning of period	$ 199,730	$ 171,294
Incurred health care costs:
Current year to date period	180,675	102,664
Prior year to date period	(19,914)	6,511
Total claims incurred	160,761	109,175
Claims paid related to:
Current year to date period	(64,870)	(47,724)
Prior year to date period	(98,424)	(59,491)
Total claims paid	(163,294)	(107,215)
Other adjustments	0	(9,016)
Balance, end of period	$ 197,197	$ 164,238

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Supplemental Disclosure of Non-cash Investing and Financing Activities
Accrued property and equipment purchases	$ 30	$ 670
Class A common stock issued in connection with business combinations	261,271	0
Accrued net working capital adjustment with business combinations	1,098	0
Effects of Leases
Operating cash flows from operating leases	3,528	3,830
Leased assets disposed of (obtained in) exchange for operating lease liabilities	$ (3,076)	$ (3)

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Label	Element	Value
Accounting Standards Update [Extensible Enumeration]	us-gaap_AccountingStandardsUpdateExtensibleList	Accounting Standards Update 2020-06 [Member]