Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 06, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Evolent Health, Inc. | |
Entity Central Index Key | 1,628,908 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Class A | ||
Entity Common Stock, Shares Outstanding (in shares) | 74,683,776 | |
Class B | ||
Entity Common Stock, Shares Outstanding (in shares) | 2,653,544 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 287,143 | $ 134,563 |
Restricted cash and restricted investments | 5,070 | 34,416 |
Accounts receivable, net (amounts related to affiliates: 2017 - $5,740; 2016 - $8,258) | 43,972 | 40,635 |
Prepaid expenses and other current assets (amounts related to affiliates: 2017 - $37; 2016 - $4,507) | 16,144 | 11,011 |
Investments, at amortized cost | 0 | 44,341 |
Total current assets | 352,329 | 264,966 |
Restricted cash and restricted investments | 11,862 | 6,000 |
Investments in and advances to affiliates | 712 | 2,159 |
Property and equipment, net | 46,930 | 31,179 |
Prepaid expenses and other non-current assets | 9,364 | 10,043 |
Intangible assets, net | 249,492 | 258,923 |
Goodwill | 628,341 | 626,569 |
Total assets | 1,299,030 | 1,199,839 |
Current liabilities: | ||
Accounts payable (amounts related to affiliates: 2017 - $12,120; 2016 - $13,480) | 27,292 | 43,892 |
Accrued liabilities (amounts related to affiliates: 2017 - $796; 2016 - $3,211) | 21,094 | 29,160 |
Accrued compensation and employee benefits | 30,987 | 38,408 |
Deferred revenue | 26,094 | 20,481 |
Total current liabilities | 105,467 | 131,941 |
Long-term debt, net of discount | 121,164 | 120,283 |
Other long-term liabilities | 9,982 | 14,655 |
Deferred tax liabilities, net | 6,638 | 20,846 |
Total liabilities | 243,251 | 287,725 |
Commitments and Contingencies (See Note 9) | ||
Shareholders' Equity (Deficit) | ||
Additional paid-in-capital | 919,962 | 555,250 |
Retained earnings (accumulated deficit) | 99,111 | 146,617 |
Total shareholders' equity (deficit) attributable to Evolent Health, Inc. | 1,019,847 | 702,526 |
Non-controlling interests | 35,932 | 209,588 |
Total shareholders' equity (deficit) | 1,055,779 | 912,114 |
Total liabilities and shareholders' equity (deficit) | 1,299,030 | 1,199,839 |
Class A | ||
Shareholders' Equity (Deficit) | ||
Common stock | 747 | 506 |
Class B | ||
Shareholders' Equity (Deficit) | ||
Common stock | $ 27 | $ 153 |
CONSOLIDATED BALANCE SHEETS (U3
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Accounts receivable, related parties | $ 5,740 | $ 8,258 |
Prepaid expenses and other current assets, related parties | 37 | 4,507 |
Accounts payable, related parties | 12,120 | 13,480 |
Accrued liabilities, related parties | $ 796 | $ 3,211 |
Class A | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 750,000,000 | 750,000,000 |
Common stock, issued (in shares) | 74,657,870 | 52,586,899 |
Common stock, outstanding (in shares) | 74,657,870 | 52,586,899 |
Class B | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, issued (in shares) | 2,653,544 | 15,346,981 |
Common stock, outstanding (in shares) | 2,653,544 | 15,346,981 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | ||
Revenue | |||||
Transformation | [1] | $ 8,204 | $ 7,757 | $ 23,799 | $ 26,259 |
Platform and operations | [1] | 99,708 | 52,453 | 297,422 | 139,918 |
Total revenue | 107,912 | 60,210 | 321,221 | 166,177 | |
Expenses | |||||
Cost of revenues (exclusive of depreciation and amortization expenses presented separately below) | [1] | 68,281 | 33,905 | 203,804 | 95,294 |
Selling, general and administrative expenses | [1] | 45,834 | 38,398 | 150,474 | 103,101 |
Depreciation and amortization expenses | 7,717 | 3,746 | 21,236 | 10,728 | |
Goodwill impairment | 0 | 0 | 0 | 160,600 | |
Loss on change in fair value of contingent consideration | 100 | 0 | 300 | 0 | |
Total operating expenses | 121,932 | 76,049 | 375,814 | 369,723 | |
Operating income (loss) | (14,020) | (15,839) | (54,593) | (203,546) | |
Interest income | 411 | 255 | 813 | 805 | |
Interest expense | (880) | 0 | (2,781) | 0 | |
Income (loss) from affiliates | (369) | (448) | (1,446) | (462) | |
Other income (expense), net | 15 | 1 | 21 | 4 | |
Income (loss) before income taxes and non-controlling interests | (14,843) | (16,031) | (57,986) | (203,199) | |
Provision (benefit) for income taxes | (1,714) | (256) | (2,009) | (1,614) | |
Net income (loss) | (13,129) | (15,775) | (55,977) | (201,585) | |
Net income (loss) attributable to non-controlling interests | (541) | (4,567) | (8,471) | (59,250) | |
Net income (loss) attributable to Evolent Health, Inc. | (12,588) | (11,208) | (47,506) | (142,335) | |
Earnings (Loss) Available for Common Shareholders | |||||
Basic | (12,588) | (11,208) | (47,506) | (142,335) | |
Diluted | $ (12,588) | $ (11,208) | $ (47,506) | $ (142,335) | |
Earnings (Loss) per Common Share | |||||
Basic (in dollars per share) | $ (0.18) | $ (0.26) | $ (0.78) | $ (3.34) | |
Diluted (in dollars per share) | $ (0.18) | $ (0.26) | $ (0.78) | $ (3.34) | |
Weighted-Average Common Shares Outstanding | |||||
Basic (in shares) | 70,328 | 43,110 | 60,867 | 42,632 | |
Diluted (in shares) | 70,328 | 43,110 | 60,867 | 42,632 | |
Affiliates | |||||
Revenue | |||||
Transformation | $ 352 | $ 67 | $ 597 | $ 169 | |
Platform and operations | 9,411 | 8,636 | 24,764 | 24,342 | |
Expenses | |||||
Cost of revenues (exclusive of depreciation and amortization expenses presented separately below) | 5,299 | 3,723 | 17,382 | 14,209 | |
Selling, general and administrative expenses | $ 514 | $ 531 | $ 1,038 | $ 1,298 | |
[1] | Amounts related to affiliates included above are as follows (see Note 16): (1) Amounts related to affiliates included above are as follows (see Note 16): Revenue Transformation$352 $67 $597 $169 Platform and operations9,411 8,636 24,764 24,342 Expenses Cost of revenue (exclusive of depreciation and amortization expenses)5,299 3,723 $17,382 $14,209 Selling, general and administrative expenses514 531 1,038 1,298 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash Flows from Operating Activities | ||
Net income (loss) | $ (55,977) | $ (201,585) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Undistributed losses from affiliates | 1,446 | 462 |
Depreciation and amortization expenses | 21,236 | 10,728 |
Goodwill impairment | 0 | 160,600 |
Stock-based compensation expense | 16,172 | 13,844 |
Deferred tax provision (benefit) | (2,668) | (1,614) |
Amortization of deferred financing costs | 685 | 0 |
Other | 388 | 443 |
Changes in assets and liabilities, net of acquisitions: | ||
Accounts receivables, net | (5,075) | (1,605) |
Prepaid expenses and other current assets | (5,125) | (112) |
Accounts payable, net of change in restricted cash and restricted investments | 10,591 | (3,692) |
Accrued liabilities | (11,075) | 6,165 |
Accrued compensation and employee benefits | (7,707) | (638) |
Deferred revenue | 4,835 | 2,882 |
Other long-term liabilities | (1,719) | 117 |
Net cash provided by (used in) operating activities | (33,993) | (14,005) |
Cash Flows from Investing Activities | ||
Cash paid for asset acquisition or business combination | (3,694) | (14,000) |
Maturities and sales of investments | 44,210 | 4,099 |
Investments in and advances to affiliates | 0 | (3,000) |
Purchases of property and equipment | (21,349) | (11,116) |
Change in restricted cash and restricted investments | (2,164) | 1,194 |
Net cash provided by (used in) investing activities | 17,003 | (22,823) |
Cash Flows from Financing Activities | ||
Proceeds from issuance of common stock, net of stock issuance costs | 166,947 | 0 |
Proceeds from stock option exercises | 3,802 | 1,244 |
Taxes withheld and paid for vesting of restricted stock units | (1,179) | (365) |
Net cash provided by (used in) financing activities | 169,570 | 879 |
Net increase (decrease) in cash and cash equivalents | 152,580 | (35,949) |
Cash and cash equivalents as of beginning-of-period | 134,563 | 145,726 |
Cash and cash equivalents as of end-of-period | 287,143 | 109,777 |
Supplemental Disclosure of Non-cash Investing and Financing Activities | ||
Accrued property and equipment purchases | 83 | 374 |
Class A common stock issued in connection with business combinations | 0 | 10,534 |
Increase to goodwill from measurement period adjustments related to business combinations | 1,766 | 0 |
Decrease in accrued financing costs related to 2021 Notes | 196 | 0 |
Tax benefit related to Accordion intangible technology | 2,042 | 0 |
Effects of the 2017 and 2016 Securities Offerings | ||
Decrease in non-controlling interests as a result of Class B Exchanges | 168,883 | 28,220 |
Decrease in deferred tax liability as a result of securities offerings | 12,992 | 1,606 |
Supplemental Disclosures | ||
Cash paid during the period for interest | 1,222 | 0 |
Cash paid during the period for taxes | $ 0 | $ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (Unaudited) - USD ($) shares in Thousands, $ in Thousands | Total | Common StockClass A | Common StockClass B | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Non-controlling Interests |
Beginning balance (in shares) at Dec. 31, 2015 | 41,491 | 17,525 | ||||
Beginning balance, amount at Dec. 31, 2015 | $ 934,579 | $ 415 | $ 175 | $ 342,063 | $ 306,688 | $ 285,238 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Cumulative-effect adjustment from adoption of new accounting principle | 0 | 468 | (329) | (139) | ||
Stock-based compensation expense | 16,147 | 16,147 | ||||
Acceleration of unvested equity awards for Valence Health employees (in shares) | 162 | |||||
Acceleration of unvested equity awards for Valence Health employees | 3,899 | $ 2 | 3,897 | |||
Exercise of stock options (in shares) | 221 | |||||
Exercise of stock options | 1,259 | $ 0 | 1,259 | |||
Restricted stock units vested, net of shares withheld for taxes (in shares) | 84 | |||||
Restricted stock units vested, net of shares withheld for taxes | 2,193 | $ 0 | 2,193 | |||
Exchange of Class B common stock (in shares) | 2,178 | (2,178) | ||||
Exchange of Class B common stock | 0 | $ 22 | $ (22) | 28,220 | (28,220) | |
Tax impact of Class B common stock exchange | 1,606 | 1,606 | ||||
Issuance of Class A common stock for business combinations (in shares) | 8,451 | |||||
Issuance of Class A common stock for business combinations | 177,782 | $ 67 | 177,715 | |||
Tax impact of Class A common stock issued for business combination | 1,427 | 1,427 | ||||
Reclassification of non-controlling interests | 0 | (19,745) | 19,745 | |||
Net income (loss) | (226,778) | (159,742) | (67,036) | |||
Ending balance (in shares) at Dec. 31, 2016 | 52,587 | 15,347 | ||||
Ending balance, amount at Dec. 31, 2016 | 912,114 | $ 506 | $ 153 | 555,250 | 146,617 | 209,588 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Cumulative-effect adjustment from adoption of new accounting principle | 0 | |||||
Stock-based compensation expense | 16,172 | 16,172 | ||||
Exercise of stock options (in shares) | 734 | |||||
Exercise of stock options | 3,802 | $ 28 | 3,774 | |||
Restricted stock units vested, net of shares withheld for taxes (in shares) | 138 | |||||
Restricted stock units vested, net of shares withheld for taxes | (1,179) | $ 2 | (1,181) | |||
Shares retired upon release from Valence Health escrow (in shares) | (310) | |||||
Shares released from Valence Health escrow | 908 | $ (3) | 911 | |||
Exchange of Class B common stock (in shares) | 12,693 | (12,693) | ||||
Exchange of Class B common stock | 0 | $ 126 | $ (126) | 168,883 | (168,883) | |
Tax impact of 2017 Securities Offerings | 12,992 | 12,992 | ||||
Issuance of Class A common stock during August 2017 Primary (in shares) | 20,100 | |||||
Reclassification of non-controlling interests | 0 | (3,698) | 3,698 | |||
Net income (loss) | (55,977) | (47,506) | (8,471) | |||
Ending balance (in shares) at Sep. 30, 2017 | 74,658 | 2,654 | ||||
Ending balance, amount at Sep. 30, 2017 | $ 1,055,779 | $ 747 | $ 27 | $ 919,962 | $ 99,111 | $ 35,932 |
Organization
Organization | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Evolent Health, Inc. was incorporated in December 2014 in the state of Delaware, and is a managed services firm that supports leading health systems and physician organizations in their migration toward value-based care and population health management. The Company’s services include providing our customers, who we refer to as partners, with a population management platform, integrated data and analytics capabilities, pharmacy benefit management (“PBM”) services and comprehensive health plan administration services. Together these services enable health systems to manage patient health in a more cost-effective manner. The Company’s contracts are structured as a combination of advisory fees, monthly member service fees, percentage of plan premiums and shared medical savings arrangements. The Company’s headquarters is located in Arlington, Virginia. Our predecessor, Evolent Health Holdings, Inc. (“Evolent Health Holdings”), merged with and into Evolent Health, Inc. in connection with the Offering Reorganization, as defined and discussed in our 2016 Form 10-K. Prior to our initial public offering (“IPO”) in June 2015 and the offering reorganization we undertook in connection therewith, Evolent Health Holdings did not control Evolent Health LLC, our operating subsidiary company due to certain participating rights granted to our investor, TPG Global, LLC and certain of its affiliates (“TPG”). However, Evolent Health Holdings was able to exert significant influence on Evolent Health LLC and, accordingly, accounted for its investment in Evolent Health LLC using the equity method of accounting through June 3, 2015. Subsequent to the offering reorganization which occurred on June 4, 2015, (the “Offering Reorganization”), the financial results of Evolent Health LLC have been consolidated in the financial statements of Evolent Health, Inc. As of September 30, 2017 , the Company owned 96.6% of the economic interests and 100% of the voting rights in Evolent Health LLC, and is the sole managing member of Evolent Health LLC. Since its inception, the Company has incurred losses from operations. As of September 30, 2017 , the Company had cash and cash equivalents of $287.1 million . The Company believes it has sufficient liquidity for the next twelve months as of the date the financial statements were available to be issued. |
Basis of Presentation, Summary
Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principle | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principle | Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principle Basis of Presentation In our opinion, the accompanying unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state our financial position, results of operations, and cash flows. The Consolidated Balance Sheet at December 31, 2016 , has been derived from audited financial statements as of that date. The interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain footnote 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 2016 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 2016 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 consolidated financial statements, estimates are used for, but not limited to, the valuation of assets, liabilities, consideration related to business combinations and asset acquisitions, revenue recognition including discounts and credits, estimated selling prices for deliverables in multiple element arrangements, contingent payments, allowance for doubtful accounts, depreciable lives of assets, impairment of long lived assets (including equity method investments), stock-based compensation, deferred income taxes and valuation allowance, contingent liabilities, valuation of intangible assets (including goodwill), purchase price allocation in taxable stock transactions and the useful lives of intangible assets. Principles of Consolidation The consolidated financial statements include the accounts of Evolent Health, Inc. and its subsidiaries. All inter-company accounts and transactions are eliminated in consolidation. Operating Segments Operating segments are defined as components of a business that earn revenue and incur expenses for which discrete financial information is available that is evaluated, on a regular basis, by the chief operating decision maker (“CODM”) to decide how to allocate resources and assess performance. The Company’s CODM, the Chief Executive Officer, allocates resources at a consolidated level and therefore the Company views its operations and manages its business as one operating segment. All of the Company’s revenue is generated in the United States and all assets are located in the United States. Restricted Cash and Restricted Investments Restricted cash and restricted investments include cash and investments used to collateralize various contractual obligations (in thousands) as follows: As of As of September 30, December 31, 2017 2016 Collateral for letters of credit for facility leases (1) $ 3,813 $ 4,852 Collateral with financial institutions (2) 8,150 4,950 Pharmacy benefit management and claims processing services (3) 4,840 30,555 Other 129 59 Total restricted cash and restricted investments 16,932 40,416 Non-current restricted investments (2) 8,150 4,950 Non-current restricted cash (1) 3,712 1,050 Total non-current restricted cash and restricted investments 11,862 6,000 Current restricted cash and restricted investments $ 5,070 $ 34,416 (1) Represents restricted cash related to collateral for letters of credit required in conjunction with lease agreements. See Note 9 for further discussion of our lease commitments. (2) Represents collateral for letters of credit held with financial institutions for risk-sharing arrangements. The collateral amount is invested in restricted certificates of deposit with original maturities in excess of 12 months. The restricted investments are classified as held-to-maturity and stated at amortized cost. Fair value of the certificates of deposit is determined using Level 2 inputs and approximates amortized cost as of September 30, 2017 . See Note 9 for further discussion of our risk-sharing arrangements. (3) Represents cash held on behalf of partners to process PBM and other claims. Property and Equipment, Net Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment are computed using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term. Based on the current competitive environment and constantly changing landscape for similar technology, effective September 1, 2017, the Company changed its estimate of the useful life of internal-use software from 7 years to 5 years. This change in useful life has been accounted for as a change in accounting estimate and will be applied to all new internal-use software. This change in estimate will also be applied prospectively to the remaining carrying amounts of existing internal-use software. For these existing assets the useful lives were adjusted at the individual asset level and will be amortized over a period of time such that the carrying value is fully amortized 5 years from the date the individual assets were initially placed in service. Refer to Note 6 for additional discussion regarding the change in estimate related to our property and equipment. The following summarizes the updated estimated useful lives by asset classification: Computer hardware 3 years Furniture and equipment 3 years Internal-use software development costs 5 years Leasehold improvements Shorter of useful life or remaining lease term When an item is sold or retired, the cost and related accumulated depreciation or amortization is eliminated and the resulting gain or loss, if any, is recorded in our Consolidated Statements of Operations. We periodically review the carrying value of our long-lived assets, including property and equipment, for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be fully recoverable. For long-lived assets to be held and used, impairments are recognized when the carrying amount of a long-lived asset group is not recoverable and exceeds fair value. The carrying amount of a long-lived asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. An impairment loss is measured as the amount by which the carrying amount of a long-lived asset group exceeds its fair value. 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. Based on the current competitive environment and constantly changing landscape for similar technology, effective September 1, 2017, the Company changed its estimate of the useful life of intangible technology from a range of 5 - 7 years to 5 years. This change in useful life has been accounted for as a change in accounting estimate and will be applied to all new intangible technology, provided the facts and circumstances of the intangible technology do not suggest otherwise. This change in estimate will also be applied prospectively to the remaining carrying amounts of existing technology assets. For these existing assets the useful lives were adjusted at the individual asset level and will be amortized over a period of time such that the carrying value is fully amortized 5 years from the date the individual assets were initially capitalized. Refer to Note 7 for additional discussion regarding the change in estimate related to our intangible assets. The following summarizes the updated estimated useful lives by asset classification: Corporate trade name 20 years Customer relationships 15-25 years Technology 5 years 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 7 for additional discussion regarding our intangible assets. 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 our single reporting unit level, which is consistent with the way management evaluates our business. Acquisitions to date have been complementary to the Company’s core business, and therefore goodwill is assigned to our single reporting unit to reflect the synergies arising from each business combination. As discussed in Note 3 , we adopted Accounting Standards Update (“ASU”) 2017-04, Intangibles-Goodwill and Other - Simplifying the Test for Goodwill Impairment, effective January 1, 2017. The adoption resulted in an update to our accounting policy for goodwill impairment. Under the updated policy, we perform a one-step test in our evaluation of the carrying value of goodwill, if qualitative factors determine it is necessary to complete a goodwill impairment test. In the 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 impairment of goodwill on our Consolidated Statements of Operations. See Note 7 for additional discussion regarding goodwill impairment tests. Change in Accounting Principle In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. We adopted ASU 2016-09 with an effective date of January 1, 2016, and elected to recognize share-based award forfeitures as they occur. The adoption of ASU 2016-09 resulted in a cumulative effect reduction to beginning retaining earnings of $0.5 million as of January 1, 2016, and an increase in net income (loss) of approximately $0.1 million for the three months ended March 31, 2016. See “Part II - Item 8. Financial Statements and Supplementary Data - Note 18” in our 2016 Form 10-K for further information about the impact of the adoption. Immaterial Correction of an Error in Previously Issued Financial Statements Subsequent to the filing of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2017, the Company identified an error related to the classification of restricted cash and restricted investments on our Consolidated Statement of Cash Flows. Accordingly, the Company corrected this error by revising the classification of certain changes in restricted cash and restricted investments within the Consolidated Statement of Cash Flows. The following table summarizes the impact of the correction of the error to the Company’s Consolidated Statement of Cash Flows for the six months ended June 30, 2017 (in thousands): As Reported Correction As Revised Cash Flows from Operating Activities Changes in assets and liabilities, net of acquisitions: Accounts receivables, net $ (5,247 ) $ (2,655 ) $ (7,902 ) Accounts payable, net of change in restricted cash and restricted investments (2,514 ) 9,555 7,041 Net cash provided by (used in) operating activities (44,712 ) 6,900 (37,812 ) Cash Flows from Investing Activities Change in restricted cash and restricted investments 3,200 (6,900 ) (3,700 ) Net cash provided by (used in) investing activities 7,739 (6,900 ) 839 The Company assessed the materiality of the misstatement both quantitatively and qualitatively and determined the correction of this error to be immaterial to all prior consolidated financial statements taken as a whole. The Company will revise our Consolidated Statements of Cash Flows for the six months ended June 30, 2017, in future filings to reflect the correction of the error. |
Recently Issued Accounting Stan
Recently Issued Accounting Standards | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Recently Issued Accounting Standards | Recently Issued Accounting Standards Adoption of New Accounting Standards In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation - Scope of Modification Accounting . The purpose of the ASU is to limit the circumstances in which an entity applies modification accounting to share-based awards by setting criteria whereby an entity would be precluded from applying modification accounting guidance in Topic 718. The ASU also removes guidance in Topic 718 stating that modification accounting is not required when an entity adds an anti-dilution provision if that modification is not made in contemplation of an equity restructuring. The amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim periods. The amendments should be applied prospectively to an award modified on or after the adoption date. We adopted this standard, effective June 1, 2017. The adoption of this ASU may have an impact if we have a modification to our share-based awards at a future date. There was no impact of the adoption for the three and nine months ended September 30, 2017 . In January 2017, the FASB issued ASU 2017-01, Business Combinations - Clarifying the Definition of a Business . The purpose of the ASU is to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU provides a screen to determine when an integrated set of assets and activities is not a business. The ASU also provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments should be applied prospectively on or after the effective date. Early adoption is permitted for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. We adopted this standard during June 2017, in conjunction with the acquisition of Accordion Health, Inc. (see Note 4 ). The adoption had an impact on our financial statements with respect to the accounting for the Accordion Health, Inc. acquisition, and we anticipate it will have an impact if we engage in future business combinations or asset acquisitions. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other - Simplifying the Test for Goodwill Impairment . The purpose of the ASU is to simplify the subsequent measurement of goodwill. The ASU eliminates Step 2 from the goodwill impairment test. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. This update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We believe this newly adopted principle is preferable as it reduces the complexity of performing a goodwill impairment test. As a result, we adopted this standard effective January 1, 2017. Our updated accounting policy for goodwill impairment is described in Note 2 . While the adoption of this ASU may have a material impact in determining the results of future goodwill impairment tests and thus impact our consolidated financial statements in the future, there was no impact of the adoption during the three and nine months ended September 30, 2017 . In March 2016, the FASB issued ASU 2016-07, Investments-Equity Method and Joint Ventures - Simplifying the Transition to the Equity Method of Accounting . The purpose of this ASU is to eliminate the requirement to retroactively adopt the equity method of accounting when an investment qualifies for the equity method as a result of an increase in the level of ownership interest or degree of influence. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We adopted this standard effective January 1, 2017. The adoption did not have a material impact on our financial statements for the three and nine months ended September 30, 2017 . In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging - Contingent Put and Call Options in Debt Instruments . The purpose of this ASU is to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely rated to their debt hosts. An entity performing the assessment under the amendments in the ASU is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. For public business entities, the amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. We adopted this standard effective January 1, 2017. The adoption did not have a material impact on our financial statements for the three and nine months ended September 30, 2017 . Future Adoption of New Accounting Standards In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash . The purpose of the ASU is to reduce diversity in practice regarding the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in the ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments in this ASU should be applied using a retrospective transition method to each period presented. We intend to adopt the requirements of this standard during the fourth quarter of 2017, and are currently evaluating the impact of the adoption on our Consolidated Statements of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments . This ASU provides updated guidance on eight specific cash flow issues to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We intend to adopt the requirements of this standard during the fourth quarter of 2017, and are currently evaluating the impact of the adoption on our Consolidated Statements of Cash Flows. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments . With respect to assets measured at amortized cost, such as held-to-maturity assets, the update requires presentation of the amortized cost net of a credit loss allowance. The update eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments. The credit loss estimate can now reflect an entity’s current estimate of all future expected credit losses as opposed to the previous standard, when an entity only considered past events and current conditions. With respect to available for sale debt securities, the update requires that credit losses be presented as an allowance rather than as a write-down. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We intend to adopt the requirements of this standard effective January 1, 2020, and are currently evaluating the impact of the adoption on our financial condition and results of operations. In February 2016, the FASB issued ASU 2016-02, Leases , in order to establish the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This update introduces a new standard on accounting for leases, including a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related to evaluating when profit can be recognized). The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. We intend to adopt the requirements of this standard effective January 1, 2019, and are currently evaluating the impact of the adoption on our financial condition and results of operations. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , in order to clarify the principles of recognizing revenue. This standard establishes the core principle of recognizing revenue to depict the transfer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB defines a five-step process that systematically identifies the various components of the revenue recognition process, culminating with the recognition of revenue upon satisfaction of an entity’s performance obligations. By completing all five steps of the process, the core principles of revenue recognition will be achieved. In March 2016, the FASB issued an update to the new revenue standard (ASU 2014-09) in the form of ASU 2016-08, which amended the principal-versus-agent implementation guidance and illustrations in the new revenue guidance. The update clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued another update to the new revenue standard in the form of ASU 2016-10, which amended the guidance on identifying performance obligations and the implementation guidance on licensing. These ASUs were followed by two further updates issued during May 2016: ASU 2016-11, which rescinds certain SEC guidance, such as the adoption of ASUs 2014-09 and 2014-16, including accounting for consideration given by a vendor to a customer, and ASU 2016-12, which is intended to clarify the objective of the collectability criterion while identifying the contract(s) with a customer. The new revenue standard (including updates) will be effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted only as of annual reporting periods beginning after December 15, 2016. The guidance permits two methods of adoption: i) the full retrospective method applying the standard to each prior reporting period presented, or ii) the modified retrospective method with a cumulative effect of initially applying the guidance recognized at the date of initial application. The standard also allows entities to apply certain practical expedients at their discretion. We intend to adopt this standard effective January 1, 2018, using the modified retrospective method with a cumulative catch up adjustment and providing additional disclosures comparing results to previous rules. In our efforts to adopt this ASU, we have formulated an implementation team that is currently engaged in the assessment and implementation process. We are continuing to review our contracts with customers to identify potential differences that could result from applying the new guidance. As we complete our overall assessment, we anticipate modifying certain accounting policies and practices, principally as it relates to the capitalization of certain customer setup costs which have historically been expensed as incurred. We also expect to implement specific controls over the evaluation of the impact, including our calculation of the cumulative effect of adopting ASU 2014-09. We will continue to identify any needed changes to our accounting policies and practices, business processes, systems and controls to support the new revenue recognition and disclosure requirements. We are still in the process of quantifying the overall impact of the adoption of the new standard to our consolidated financial statements and will continue our evaluation through the date of adoption. We have evaluated all other issued and unadopted ASUs and believe the adoption of these standards will not have a material impact on our results of operations, financial position, or cash flows. |
Transactions
Transactions | 9 Months Ended |
Sep. 30, 2017 | |
Organizational Transactions [Abstract] | |
Transactions | Transactions New Mexico Health Connections On September 25, 2017 , the Company entered into an agreement with New Mexico Health Connections (“NMHC”) to acquire assets related to NMHC’s commercial business for approximately $10.3 million . The assets include a health plan management services organization with a tenured leadership team and employee base with extensive experience working locally with providers to run NMHC’s suite of preventive, disease and care management programs. The assets will be contributed to a new entity, True Health New Mexico, Inc., a wholly-owned subsidiary of Evolent Health. The legacy NMHC will continue to operate as an independent non-profit health care organization operating throughout the state of New Mexico, offering individual health insurance products. Once completed, this transaction will allow the Company to create a new subsidiary that will leverage our platform to support a value-based, provider-centric model of care throughout the state of New Mexico. Consideration for the transaction will include an initial cash payment of $10.0 million , with a further $0.3 million to be held in escrow. Consummation of the transaction is subject to customary closing conditions, including approval by the New Mexico Office of Superintendent of Insurance. The Company expects to complete the transaction on December 31, 2017, and to commence operations of the health plans beginning January 1, 2018, but we cannot assure that the transaction will be completed on this timetable, or at all. Business Combinations Aldera On November 1, 2016 , the Company completed the acquisition of Aldera, including 100% of the voting equity interests. The acquisition provides control over Aldera, a key vendor and the primary software provider for the Valence Health third-party administration (“TPA”) platform. The merger consideration, net of certain closing and post-closing adjustments was $34.3 million based on the closing price of the Company’s Class A common stock on the New York Stock Exchange (the “NYSE”) on November 1, 2016 , and consisted of approximately 0.5 million shares of the Company’s Class A common stock, $17.5 million in cash and $7.0 million related to the settlement of a prepaid software license. As a result of the Class A common stock issued for the Aldera transaction, the Company’s ownership of Evolent Health LLC increased from 77.2% to 77.4% , immediately after the acquisition, as the Company was issued Class A membership units in Evolent Health LLC in exchange for the contribution of Aldera to Evolent Health LLC post-acquisition. Prior to the acquisition of Aldera, Evolent entered into a perpetual license agreement for development rights and use of Aldera proprietary software for $7.0 million . Upon closing the acquisition of Aldera, the Company concluded that the $7.0 million prepaid asset recorded by Evolent and the deferred revenue balance recorded by Aldera for the perpetual software license should be assessed as a prepayment for a software license that was effectively settled upon acquisition and was eliminated in the post-combination consolidated financial statements. No gain or loss was recognized on settlement as management determined the $7.0 million license fee to be priced at fair value and the license agreement did not include a settlement provision. The Company increased the consideration transferred for the acquisition of Aldera by $7.0 million for the effective settlement of the prepaid software license at the recorded amount, which brought the total consideration paid for the acquisition to $34.3 million . The Company incurred approximately $0.2 million in transaction costs related to the Aldera acquisition, which were recorded within “Selling, general and administrative expenses” on our Consolidated Statements of Operations for the year ended December 31, 2016 . The Company incurred approximately $1.8 million in transaction, severance and transition costs related to the Aldera acquisition during the nine months ended September 30, 2017 , which were recorded within “Selling, general and administrative expenses” on our Consolidated Statements of Operations. The Company accounted for the transaction as a business combination using purchase accounting. During the nine months ended September 30, 2017 , the Company recorded net measurement period adjustments of approximately $0.4 million . The purchase price allocation, as previously determined, the measurement period adjustments and the purchase price allocation, as revised, are as follows (in thousands): Measurement As Previously Period Determined Adjustments As Revised Purchase consideration: Fair value of Class A common stock issued $ 9,864 $ — $ 9,864 Cash for settlement of software license 7,000 — 7,000 Cash 17,481 — 17,481 Total consideration $ 34,345 $ 34,345 Tangible assets acquired: Receivables $ 624 $ (194 ) $ 430 Prepaid expenses and other current assets 272 — 272 Property and equipment 1,065 — 1,065 Other non-current assets 9 — 9 Identifiable intangible assets acquired: Customer relationships 7,000 — 7,000 Technology 2,500 — 2,500 Liabilities assumed: Accounts payable 429 — 429 Accrued liabilities 1,204 205 1,409 Accrued compensation and employee benefits 605 — 605 Deferred revenue 44 — 44 Goodwill 25,157 399 25,556 Net assets acquired $ 34,345 $ 34,345 The fair value of the receivables acquired, as revised, shown in the table above, approximates the gross contractual amounts deemed receivable by management. Identifiable intangible assets associated with technology and customer relationships will be amortized on a straight-line basis over their estimated useful lives of 5 and 15 years, respectively. The technology is related to source code for licensed software used to support the third party administration platform offered to Aldera’s clients. The fair value of the intangible assets was primarily determined using the income 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. 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 goodwill is attributable primarily to the acquired assembled workforce and expected cost and revenue synergies. Goodwill is considered an indefinite lived asset. The transaction was a taxable business combination for the Company and the amount of goodwill determined for tax purposes is deductible upon the beginning of the amortization period for tax purposes. The amounts above reflect management’s estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed based on a valuation performed using currently available information, inclusive of the measurement period adjustments. During the nine months ended September 30, 2017 , the Company recorded certain measurement period adjustments that primarily impacted receivables, accrued liabilities and goodwill. These adjustments resulted in a net $0.4 million increase to goodwill, as reflected in the purchase price allocation table above. The purchase price allocation for Aldera was finalized as of September 30, 2017, and we do not expect any additional measurement period adjustments. Valence Health On October 3, 2016 , the Company completed its acquisition of Valence Health, including 100% of the voting equity interests. Valence Health, based in Chicago, Illinois, was founded in 1996 and provides value-based administration, population health and advisory services. In its 20 year history, Valence Health developed particular expertise in the Medicaid and pediatric markets. The addition of Valence Health strengthens the Company’s operational capabilities and provides increased scale and client diversification. The merger consideration, net of certain closing and post-closing adjustments was $217.9 million based on the closing price of the Company’s Class A common stock on the NYSE on October 3, 2016 , and consisted of 6.8 million shares of the Company’s Class A common stock and $54.8 million in cash. The shares issued to Valence Health stockholders represented approximately 10.5% of the Company’s issued and outstanding Class A common stock and Class B common stock immediately following the transaction. As a result of the Class A common stock issued for the Valence Health transaction, the Company’s ownership in Evolent Health LLC increased from 74.6% to 77.2% , immediately after the acquisition, as the Company was issued Class A membership units in Evolent Health LLC in exchange for the contribution of Valence Health to Evolent Health LLC post acquisition. The transaction also included an earn-out of up to $12.4 million , fair valued at $2.6 million as of October 3, 2016 , payable by January 30, 2017, in the Company’s Class A common stock, tied to new business activity contracted on or before December 31, 2016. The fair value was determined by assigning probabilities to potential business activity in the pipeline as of the acquisition date. As of December 31, 2016, Valence Health had not contracted sufficient business to be eligible for payment of the earn-out consideration. As a result, the Company recorded a gain of $2.6 million in accordance with the release of the contingent liability for the year ended December 31, 2016, which is recorded within “(Gain) loss on change in value of contingent consideration” on our Consolidated Statements of Operations. The Company incurred approximately $2.7 million of transaction costs related to the Valence Health acquisition for the year ended December 31, 2016. Approximately $2.6 million of the transaction costs are recorded within “Selling, general and administrative expenses” and less than $0.1 million are recorded within “Cost of revenue” on our Consolidated Statements of Operations. The Company incurred approximately $5.9 million of transaction, severance and transition costs related to the Valence Health acquisition for the nine months ended September 30, 2017 . Approximately $1.5 million of these costs are recorded within “Selling, general and administrative expenses” and approximately $4.4 million are recorded within “Cost of revenue” on our Consolidated Statements of Operations. The Company accounted for the transaction as a business combination using purchase accounting. The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of October 3, 2016 . During the nine months ended September 30, 2017 , the Company recorded net measurement period adjustments of approximately $1.4 million . The purchase price allocation, as previously determined, the measurement period adjustments and the purchase price allocation, as revised, are as follows (in thousands): Measurement As Previously Period Determined Adjustments As Revised Purchase consideration: Fair value of Class A common stock issued $ 159,614 $ 911 $ 160,525 Fair value of contingent consideration 2,620 — 2,620 Cash 54,799 — 54,799 Total consideration $ 217,033 $ 217,944 Tangible assets acquired: Restricted cash $ 1,829 $ — $ 1,829 Accounts Receivable 8,587 (251 ) 8,336 Prepaid expenses and other current assets 3,465 — 3,465 Property and equipment 6,241 — 6,241 Other non-current assets 313 — 313 Favorable leases assumed (net of unfavorable leases) 4,323 (126 ) 4,197 Identifiable intangible assets acquired: Customer relationships 69,000 — 69,000 Technology 18,000 — 18,000 Liabilities assumed: Accounts payable 5,703 — 5,703 Accrued liabilities 3,865 — 3,865 Accrued compensation and employee benefits 9,200 — 9,200 Deferred revenue 2,022 640 2,662 Other long-term liabilities 2,328 — 2,328 Net deferred tax liabilities 13,316 (550 ) 12,766 Goodwill 141,709 1,378 143,087 Net assets acquired $ 217,033 $ 217,944 The fair value of the receivables acquired, as revised, shown in the table above, approximates the gross contractual amounts due under contracts of $9.1 million , of which $0.8 million is expected to be uncollectible. Identifiable intangible assets associated with customer relationships and technology will be amortized on a straight-line basis over their preliminary estimated useful lives of 20 and 5 years, respectively. The customer relationships are primarily attributable to long-term existing contracts with current customers. The technology is an existing platform Valence Health uses to provide services to customers. The fair value of the intangible assets was primarily determined using the income 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. 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 goodwill is attributable primarily to the acquired assembled workforce and expected cost and revenue synergies. Goodwill is considered an indefinite lived asset. The merger was structured as a tax-free reorganization and, therefore, the Company received carryover 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, as well as the Valence Health net operating loss tax carryforward received in the merger, in the amount of $13.3 million , resulting in additional goodwill. The purchased and additional goodwill created due to the increase in the deferred tax liability were not deductible for tax purposes. The Company contributed the acquired assets and liabilities of Valence Health to Evolent Health LLC, resulting in a taxable gain of $52.7 million for the Company, not recognized for financial reporting purposes. The amounts above reflect management’s preliminary estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed based on a valuation performed using currently available information, inclusive of measurement period adjustments. The Company recorded various measurement period adjustments that resulted in a $1.4 million net increase to goodwill during the nine months ended September 30, 2017 , including an adjustment to increase deferred revenue and goodwill by appr oximately $0.6 million during the nine months ended September 30, 2017 . Approximately $0.2 million of this adjustment was recorded as revenue during the three months ended March 31, 2017, with the remainder recorded as revenue during the second quarter of 2017. In addition, during the second quarter of 2017, the Company reached an agreement to finalize the net working capital (“NWC”) settlement related to the Valence Health transaction. Per the executed settlement agreement, the Company received 0.2 million shares of its Class A Common Stock previously held in escrow. The fair value of the NWC settlement was approximately $0.9 million less than the Company’s previously recorded estimate and, accordingly, the Company recorded a measurement period adjustment to increase purchase price and goodwill by approximately $0.9 million . The Company also recorded adjustments to accounts receivable and intangible assets, which resulted in a $0.4 million increase to goodwill. During the third quarter of 2017, the Company filed the 2016 pre-acquisition tax return for Valence Health, resulting in an adjustment to decrease deferred tax liabilities and goodwill by approximately $0.6 million due to updates in certain estimates that were made as of the transaction date. Any remaining necessary adjustments are expected to be finalized within one year from the date of acquisition. Our results for the year ended December 31, 2016 , included approximately $3.9 million in stock compensation expense related to the acceleration of unvested Valence Health equity awards that vested upon the close of the Valence Health acquisition. The expense was related to Valence Health employees that remained with the Company following the close of the acquisition. As previously discussed in “Part II - Item 8. Financial Statements and Supplementary Data - Note 4” of our 2016 Form 10-K, immediately following the Valence Health acquisition, the Company decided to abandon and sublet its rented space at 540 W. Madison Street, Suite 1400, Chicago, Illinois (the “14 th Floor Space”). Therefore, our results from operations for the year ended December 31, 2016 , included a lease abandonment expense of approximately $6.5 million in conjunction with a rental space acquired as part of the Valence Health acquisition, based on remaining lease payments and expected future sublease income. During the second quarter of 2017, the Company reached an agreement to terminate the lease for the 14th Floor Space, effective September 2017. The Company continued making rent payments until September 1, 2017, at which point it paid a one-time lease cancellation and related brokerage fee. Remaining cash outflows related to the 14th Floor Space were estimated to be approximately $4.8 million as of June 30, 2017, while the remaining balance of the initial $6.5 million lease abandonment liability recorded after the Valence Health acquisition was approximately $5.3 million as of June 30, 2017, prior to adjustments pertaining to the lease cancellation fees. As such, the Company recorded a one-time adjustment of $0.5 million to reduce the lease abandonment liability, from $5.3 million to $4.8 million , as of June 30, 2017. The adjustment was recorded as a reduction to our rent expense within “Selling, general and administrative expenses” on our Consolidated Statements of Operations for the nine months ended September 30, 2017 . The Company made regular rent payments until September 1, 2017, at which point it paid a one-time lease cancellation and related brokerage fee of $4.4 million . There is no remaining lease abandonment liability related to the 14th Floor Space as of September 30, 2017. In conjunction with our acquisition of Valence Health on October 3, 2016 , we also signed a Master Service Agreement (the “MSA”), as well as a Transition Service Agreement (the “TSA”) with Cicerone Health Solutions, Inc., the surviving Valence Health, Inc. state insurance cooperative business not acquired by Evolent (“CHS”). The MSA and the TSA are at market rates and, therefore, there is no allocation of purchase price to these arrangements. The terms of the MSA stipulate that the Company will provide service information technology, system configuration and medical management services to CHS’s state insurance cooperative clients until December 31, 2018 . Based on management’s analysis, the terms of the MSA are at fair market value. Under the terms of the TSA, the Company will provide back office information technology support to CHS and CHS will provide back office finance and human resources support to Evolent until December 31, 2017 . Additionally, employees of both entities will have mutual employee health care claims administration through a self-funded plan. Based on management’s analysis, the terms of the TSA are at fair market value. Passport On February 1, 2016 , the Company entered into a strategic alliance with University Health Care, Inc. d/b/a Passport Health Plan (“Passport”), a nonprofit community-based and provider-sponsored health plan administering Kentucky Medicaid and federal Medicare Advantage benefits to approximately 0.3 million Kentucky Medicaid and Medicare Advantage beneficiaries. As part of the transaction, we issued 1.1 million Class A common shares to acquire capabilities and assets from Passport to enable us to build out a Medicaid Center of Excellence based in Louisville, Kentucky. Additional equity consideration of up to $10.0 million may be earned by Passport should we obtain new third party Medicaid businesses in future periods. This transaction also includes a 10 -year arrangement under which we will provide various health plan management and managed care services to Passport. The Company incurred approximately $0.3 million in transaction costs related to the Passport acquisition for the year ended December 31, 2016 . The transaction costs were recorded within “Selling, general and administrative expenses” on our Consolidated Statements of Operations. The Company has accounted for the transactions with Passport as a business combination using purchase accounting. The fair value of the total consideration transferred in connection with the close of the transaction was $18.2 million , of which the Class A common shares were valued at $10.5 million and the contingent equity consideration was initially valued at $7.8 million . The fair value of the shares issued was determined based on the closing price of the Company’s Class A common stock on the NYSE as of February 1, 2016 , and the quantity of shares issued was determined under a pricing collar set forth in the purchase agreement. The contingent consideration of $8.6 million and $8.3 million is a mark-to-market liability recorded within “Other long-term liabilities” on our Consolidated Balance Sheets as of September 30, 2017 , and December 31, 2016 . We recorded a re-measurement loss of approximately $0.3 million during the nine months ended September 30, 2017 , and $0.5 million during the fourth quarter of 2016, based on changes in the underlying assumptions of the fair value calculation. T he fair value of the contingent equity consideration was estimated based on the real options approach, a form of the income approach, which estimated the probability of the Company achieving future revenues under the agreement. Key assumptions include the discount rate and the probability-adjusted recurring revenue forecast. A further discussion of the fair value measurement of the contingent consideration is provided in Note 15 . The purchase price was allocated to the assets acquired based on their fair values as of February 1, 2016 , as follows (in thousands): Purchase Consideration Fair value of Class A common stock issued $ 10,450 Fair value of contingent consideration 7,750 Total consideration $ 18,200 Tangible assets acquired Prepaid asset $ 6,900 Goodwill 11,300 Net assets acquired $ 18,200 The prepaid asset is related to an acquired facility license agreement as the Company was provided with leased facilities which house the acquired Passport employees at no future cost to the Company. The fair value of the acquired facility license agreement was determined by comparing the current market value of similar lease spaces to the facilities occupied by the acquired Passport personnel to obtain a market value of the occupied space, with the present value of the determined market value of the occupied space classified as the acquired facility license agreement prepaid asset. The goodwill is attributable partially to the acquired assembled workforce. The transaction was a taxable business combination for the Company and the amount of goodwill determined for tax purposes is deductible upon the beginning of the amortization period for tax purposes. Pro Forma Financial Information (Unaudited) The unaudited pro forma Consolidated Statements of Operations presented below gives effect to (1) the Aldera transaction as if it had occurred on January 1, 2015, (2) the Valence Health transaction as if it had occurred on January 1, 2015, and (3) the Passport transaction as if it had occurred on January 1, 2015. The following pro forma information includes adjustments to: • remove transaction costs related to the Passport transaction of $0.3 million recorded during the nine months ended September 30, 2016 , and reclassify said amounts to the nine months ended September 30, 2015 ; • record amortization expenses related to intangible assets beginning January 1, 2015, for intangible assets related to Valence Health and Aldera; • record revenue and expenses related to the Valence Health MSA and TSA agreements for the nine months ended September 30, 2016 ; and • record rent expense related to Passport prepaid lease beginning January 1, 2015. 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, except per share data). For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2016 Revenue $ 91,936 $ 262,233 Net income (loss) (16,247 ) (205,483 ) Net income (loss) attributable to non-controlling interests (4,067 ) (52,604 ) Net income (loss) attributable to Evolent Health, Inc. (12,180 ) (152,879 ) Net income (loss) available to common shareholders: Basic (0.24 ) (3.04 ) Diluted (0.24 ) (3.04 ) Securities Offerings August 2017 Primary Offering In August 2017, the Company completed a primary offering of 8.8 million shares of its Class A common stock at a price to the public of $19.85 per share and a corresponding price to the underwriters of $19.01 per share (the “August 2017 Primary”). This offering resulted in net cash proceeds to the Company of approximately $166.9 million (gross proceeds of $175 million , net of $8.1 million in underwriting discounts and stock issuance costs). For each share of Class A common stock issued by Evolent Health, Inc., the Company received a corresponding Class A common unit from Evolent Health LLC in exchange for contributing the issuance proceeds to Evolent Health LLC. As a result of the Class A common stock and Class A common units issued during the August 2017 Primary, the Company’s economic interest in Evolent Health LLC increased from 96.1% to 96.6% immediately following the August 2017 Primary, and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. Secondary Offerings Certain affiliates of TPG (“TPG”), The Advisory Board Company (“The Advisory Board”), UPMC and Ptolemy Capital, LLC (“Ptolemy Capital”) (together, the “Investor Stockholders”) have an existing exchange right that allows receipt of newly-issued shares of the Company’s Class A common stock in exchange (a “Class B Exchange”) for an equal number of shares of the Company’s Class B common stock (which are subsequently canceled) and an equal number of Evolent Health LLC’s Class B common units (“Class B units”). Class B units received by the Company from relevant Investor Stockholders are simultaneously exchanged for an equivalent number of Class A units of Evolent Health LLC, and Evolent Health LLC cancels the Class B units it receives in the Class B Exchange. The cancellation of the Class B units results in an increase in the Company’s economic interest in Evolent Health LLC. The Company did not receive any proceeds from Class B exchanges or the sale of Class A common stock in the secondary offerings described below. The Investor Stockholders initiated several Class B Exchanges as part of various secondary offerings during 2017 and 2016, thus increasing the Company’s economic interest in Evolent Health LLC, as discussed below. June 2017 Secondary Offering In June 2017, the Company completed a secondary offering of 4.5 million shares of its Class A common stock at a price to the underwriters of $25.87 per share (the “June 2017 Secondary”). The shares sold in the June 2017 Secondary consisted of 0.7 million existing shares of the Company’s Class A common stock owned and held by certain Investor Stockholders and 3.8 million newly-issued shares of the Company’s Class A common stock received by certain Investor Stockholders pursuant to Class B Exchanges. As a result of these Class B Exchanges and Evolent Health LLC’s cancellation of the Class B units during the June 2017 Secondary, the Company’s economic interest in Evolent Health LLC increased from 90.5% to 96.1% immediately following the June 2017 Secondary, and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. May 2017 Secondary Offering In May 2017, the Company completed a secondary offering of 7.0 million shares of its Class A common stock at a price to the underwriters of $24.30 per share (the “May 2017 Secondary”). The shares were sold by the Investor Stockholders and certain management selling stockholders (together with the Investor Stockholders, the “Selling Stockholders”). The shares sold in the May 2017 Secondary consisted of 3.1 million existing shares of the Company’s Class A common stock owned and held by the Selling Stockholders, 3.8 million newly-issued shares of the Company’s Class A common stock received by certain Investor Stockholders pursuant to Class B Exchanges and 0.1 million shares issued upon the exercise of options by certain management selling stockholders. As a result of these Class B Exchanges and Evolent Health LLC’s cancellation of the Class B units during the May 2017 Secondary, the Company’s economic interest in Evolent Health LLC increased from 84.9% to 90.5% immediately following the May 2017 Secondary, and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. March 2017 Secondary Offering In March 2017, the Company completed a secondary offering of 7.5 million shares of its Class A common stock at a price to the underwriters of $19.53 per share (the “March 2017 Secondary”). The shares sold in the March 2017 Secondary consisted of 3.1 million existing shares of the Company’s Class A common stock owned and held by the Investor Stockholders and 4.4 million newly-issued shares of the Company’s Class A common stock received by certain Investor Stockholders pursuant to Class B Exchanges. As a result of these Class B Exchanges and Evolent Health LLC’s cancellation of the Class B units during the March 2017 Secondary, the Company’s economic interest in Evolent Health LLC increased from 77.4% to 83.9% immediately following the March 2017 Secondary, and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. In connection with the March 2017 Secondary, the underwriters exercised, in full, their option to purchase an additional 1.1 million shares of Class A common stock (the “March 2017 Option to Purchase Additional Shares”) from the Investor Stockholders at a price of $19.53 per share. The March 2017 Option to Purchase Additional Shares closed in May 2017. The shares sold in the March 2017 Option to Purchase Additional Shares consisted of 0.5 million existing shares of the Company’s Class A common stock owned and held by certain Investor Stockholders. It also included 0.6 million newly-issued shares of the Company’s Class A common stock received by certain Investor Stockholders pursuant to Class B Exchanges. As a result of the Class B Exchanges and Evolent Health LLC’s cancellation of the Class B units during the March 2017 Option to Purchase Additional Shares, the Company’s economic interest in Evolent Health LLC increased from 83.9% to 84.9% immediately following the March 2017 Option to Purchase Additional Shares, and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. The June 2017 Secondary, May 2017 Secondary, March 2017 Secondary and March 2017 Option to Purchase Additional Shares are collectively referred to as the “2017 Secondary Offerings.” September 2016 Secondary In September 2016, the Company completed a secondary offering of 8.6 million shares of its Class A common stock at a price to the public of $22.50 per share, including the exercise in full by the underwriters of their option to purchase additional shares (the “September 2016 Secondary”). The shares sold in the September 2016 Secondary consisted |
Investments
Investments | 9 Months Ended |
Sep. 30, 2017 | |
Investments [Abstract] | |
Investments | Investments Our investments are classified as held-to-maturity as we have both the intent and ability to hold the investments until their individual maturities. All of our held-to-maturity investments had matured as of September 30, 2017 . The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of our investments as measured using Level 2 inputs as of December 31, 2016 (in thousands): Gross Gross Amortized Unrealized Unrealized Fair Costs Gains Losses Value U.S. Treasury bills $ 28,119 $ 116 $ 27 $ 28,208 Corporate bonds 16,222 81 8 16,295 Total investments $ 44,341 $ 197 $ 35 $ 44,503 The following table summarizes the amortized cost and fair value of our investments by contractual maturities as of December 31, 2016 (in thousands): As of December 31, 2016 Amortized Fair Costs Value Due in one year or less $ 44,341 $ 44,503 The following table summarizes our held-to-maturity securities that had been in a continuous unrealized loss position for less than twelve months as of December 31, 2016 (in thousands, except number of securities): Number of Fair Unrealized Securities Value Losses U.S. Treasury bills 1 $ 4,002 $ 1 We did not hold any securities in a continuous unrealized loss position for twelve months or longer as of December 31, 2016 . When a held-to-maturity investment is in an unrealized loss position, we assess whether or not we expect to recover the entire cost basis of security, based on our best estimate of the present value of cash flows expected to be collected from the debt security. Factors considered in our analysis include the reasons for the unrealized loss position, the severity and duration of the unrealized loss position, credit worthiness and forecasted performance of the investee. In cases where the estimated present value of future cash flows is less than our cost basis, we recognize an other than temporary impairment and write the investment down to its fair value. The new cost basis would not be changed for subsequent recoveries in fair value. No investments were written down during the three and nine months ended September 30, 2017 . |
Property and Equipment, Net
Property and Equipment, Net | 9 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | Property and Equipment, Net The following summarizes our property and equipment (in thousands): As of As of September 30, December 31, 2017 2016 Computer hardware $ 5,436 $ 4,474 Furniture and equipment 2,448 2,448 Internal-use software development costs 41,879 21,385 Leasehold improvements 8,446 8,108 Total property and equipment 58,209 36,415 Accumulated depreciation and amortization (11,279 ) (5,236 ) Total property and equipment, net $ 46,930 $ 31,179 The Company capitalized $8.4 million and $20.4 million of internal-use software development costs for the three and nine months ended September 30, 2017 , respectively, and $3.6 million and $10.7 million for the three and nine months ended September 30, 2016 , respectively. The net book value of capitalized internal-use software development costs was $37.6 million and $19.9 million as of September 30, 2017 , and December 31, 2016 , respectively. Depreciation expense related to property and equipment was $2.3 million and $6.0 million for the three and nine months ended September 30, 2017 , respectively, of which amortization expense related to capitalized internal-use software development costs was $1.2 million and $2.8 million , respectively. Depreciation expense related to property and equipment was $0.9 million and $2.4 million for the three and nine months ended September 30, 2016 , respectively, of which amortization expense related to capitalized internal-use software development costs was $0.4 million and $0.9 million , respectively. As discussed in Note 2 , the Company changed its estimate of the useful life of internal-use software from 7 years to 5 years, effective September 1, 2017. This change in useful life has been accounted for as a change in accounting estimate and will be applied to all new internal-use software. Remaining carrying amounts of existing internal-use software will be amortized prospectively over a maximum of 5 years, or the remaining useful lives if less than 5 years. The change in estimated useful life increased net loss by approximately $0.2 million for the three and nine months ended September 30, 2017 . |
Goodwill and Intangible Assets,
Goodwill and Intangible Assets, Net | 9 Months Ended |
Sep. 30, 2017 | |
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 annual goodwill impairment review occurs during the fourth quarter of each fiscal year. We performed our 2016 evaluation on October 31, 2016, as further described in our 2016 Form 10-K. Our qualitative assessment did not identify sufficient indicators of impairment to require a Step 1 evaluation. In interim periods between annual goodwill reviews, we also evaluate qualitative factors that could cause us to believe our estimated fair value of our single reporting unit may be lower than the carrying value and trigger a Step 1 test including, but not limited to (i) macroeconomic conditions, (ii) industry and market considerations, (iii) our overall financial performance including an analysis of our current and projected cash flows, revenue and earnings, (iv) a sustained decrease in share price and (v) other relevant entity-specific events including changes in strategy, partners, or litigation. We did not identify any qualitative factors that would trigger a Step 1 test during the nine months ended September 30, 2017 . During the fourth quarter of 2017, we will perform our annual impairment test. If we determine that qualitative factors indicate it is necessary to perform a Step 1 goodwill impairment test, we will perform a test to evaluate the carrying value of our goodwill. One of the qualitative factors we will evaluate is whether there is a sustained decrease in our share price. Subsequent to September 30, 2017, our Class A common stock has traded at levels that, if sustained, could represent a sustained decrease in share price and, as a result, could trigger a Step 1 test. If we perform a Step 1 test, we may be required to write down a material portion of our $628.3 million of goodwill as of September 30, 2017, on our Consolidated Balance Sheet and record a charge in impairment of goodwill on our Consolidated Statements of Operations for the relevant periods. Any impairment charges that we may record in the future could be material to our results of operations and financial condition. As discussed in Notes 2 and 3 , we adopted ASU 2017-04 effective January 1, 2017, thus changing our policy with regard to goodwill impairment testing. Following the adoption, we will perform a one-step test for goodwill impairment. The discussion below of our goodwill impairment testing during the first quarter of 2016 was performed using a two-step method under our previous policy. During the three months ended March 31, 2016, our common stock traded between $8.48 and $12.32 , or an average common stock price of $10.33 , compared to an average common stock price of $19.51 and $14.73 during the three month periods ended September 30, 2015, and December 31, 2015, respectively. A sustained decline in our common stock price and the resulting impact on our market capitalization is one of several qualitative factors we consider each quarter when evaluating whether events or changes in circumstances indicate it is more likely than not that a potential goodwill impairment exists. We concluded that the decline in common stock price observed during the first quarter of 2016 did represent a sustained decline and, as such, we performed a Step 1 impairment test of our goodwill as of March 31, 2016. Step 1 Results To determine the implied fair value for our single reporting unit, we used both a market multiple valuation approach (“market approach”) and a discounted cash flow valuation approach (“income approach”). In determining the estimated fair value, we considered the level of our Class A common stock price and assumptions that we believed market participants would make in valuing our reporting unit, including a control premium, as well as discounted cash flow calculations of management’s estimates of future financial performance and management’s long-term plans. This analysis also required us to make judgments about revenues, expenses, fixed asset and working capital requirements, the timing of exchanges of our Class B common shares, capital market assumptions and discount rates. In our March 31, 2016, Step 1 test, our most sensitive assumption for purposes of the market approach was our estimate of the control premium, and the most sensitive assumption related to the income approach, other than our cash flows, was the discount rate. As of March 31, 2016, our single reporting unit failed the Step 1 analysis as we determined that its implied fair value was less than its carrying value based on the weighting of the fair values determined under both the market and income approaches. As fair value was less than carrying value, we performed a Step 2 test to determine the implied fair value of our goodwill. Step 2 Results In our March 31, 2016, Step 2 test, the fair value of all assets and liabilities were estimated, including our tangible assets (corporate trade name, customer relationships and technology) for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of goodwill was then compared to the carrying amount of goodwill resulting in an impairment charge of $160.6 million on our Consolidated Statements of Operations. The impairment was driven primarily by the sustained decline in our share price as our estimates of our future cash flows and the control premium have remained consistent, combined with an increase in the discount rate period over period. As noted above, our determination of fair value used a weighting of the fair values determined under both the market and income approaches, with the market approach driving the significant reduction in overall firm value and related impairment of goodwill. The following table summarizes the changes in the carrying amount of goodwill (in thousands): For the Nine Months For the Year Ended Ended September 30, December 31, 2017 2016 Balance as of beginning-of-period $ 626,569 $ 608,903 Goodwill Acquired (1) — 178,266 Measurement period adjustments (2) 1,772 — Goodwill Impairment — (160,600 ) Balance as of end-of-period $ 628,341 $ 626,569 (1) Represents goodwill acquired as a result of the Passport, Valence Health and Aldera transactions, as discussed in Note 4 . (2) Represents measurement period adjustments related to Valence Health and Aldera, as discussed in Note 4 . Intangible Assets, Net As part of the Offering Reorganization, intangible assets of $169.0 million were recorded on our Consolidated Balance Sheets. We recorded additional intangible assets of $108.3 million related to our acquisitions in 2016, as discussed in Note 4 . Details of our intangible assets (in thousands) are presented below: As of September 30, 2017 Weighted- Average Gross Net Remaining Carrying Accumulated Carrying Useful Life Amount Amortization Value Corporate trade name 17.7 $ 19,000 $ 2,217 $ 16,783 Customer relationships 20.7 203,500 15,988 187,512 Technology 3.3 56,157 14,664 41,493 Below market lease, net 8.5 4,197 493 3,704 Total $ 282,854 $ 33,362 $ 249,492 As of December 31, 2016 Weighted- Average Gross Net Remaining Carrying Accumulated Carrying Useful Life Amount Amortization Value Corporate trade name 18.4 $ 19,000 $ 1,505 $ 17,495 Customer relationships 21.5 203,500 9,018 194,482 Technology 5.2 50,500 7,753 42,747 Below market lease, net 9.4 4,323 124 4,199 Total $ 277,323 $ 18,400 $ 258,923 Amortization expense related to intangible assets was $5.3 million and $15.0 million for the three and nine months ended September 30, 2017 , respectively, and $2.7 million and $7.9 million for the three and nine months ended September 30, 2016 , respectively. As discussed in Note 2 , the Company changed its estimate of the useful life of intangible technology from a range of 5 - 7 years to 5 years, effective September 1, 2017. This change in useful life has been accounted for as a change in accounting estimate and will be applied to all new similar intangible technology, as applicable. Remaining carrying amounts of existing intangible technology will be amortized prospectively over a maximum of 5 years, or the remaining useful lives if less than 5 years. The change in estimated useful life increased net loss by approximately $0.3 million for the three and nine months ended September 30, 2017 . Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the asset’s carrying value. As discussed above, during the first quarter of 2016, our single reporting unit failed the Step 1 test for goodwill impairment, thus triggering an impairment analysis of the carrying value of our intangible asset group. In conjunction with the impairment testing of the carrying value of our goodwill in 2016, we performed an analysis to determine whether the carrying amount of our intangible asset group was recoverable. We performed a Step 1 test, which required management to compare the total undiscounted future cash flows of the intangible asset group to the current carrying amount. The total undiscounted cash flows included only the future cash flows that are directly associated with and that were expected to arise as a result of the use and eventual disposal of the asset group. Based on our Step 1 test, we concluded the carrying amount of our intangible asset group was recoverable given the pre-tax, undiscounted cash flows exceeded the carrying value of the intangible asset group. |
Long-term Debt
Long-term Debt | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Long-term Debt | Long-term Debt In December 2016, the Company issued $125.0 million aggregate principal amount of its 2.00% Convertible Senior Notes due 2021 (the “2021 Notes”) in a private placement to qualified institutional buyers within the meaning of Rule 144A under the Securities Act of 1933, as amended. The 2021 Notes were issued at par for net proceeds of $120.4 million . We incurred $4.6 million of debt issuance costs in connection with the 2021 Notes during the fourth quarter of 2016, which we are amortizing to non-cash interest expense using the straight line method over the contractual term of the 2021 Notes, since this method was not materially different from the effective interest method. The closing of the private placement of the 2021 Notes occurred on December 5, 2016 . Holders of the 2021 Notes are entitled to cash interest payments, which are payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2017 , at a rate equal to 2.00% per annum. The 2021 Notes will mature on December 1, 2021 , unless earlier repurchased or converted in accordance with their terms prior to such date. In addition, holders of the 2021 Notes may require the Company to repurchase their 2021 Notes upon the occurrence of a fundamental change at a price equal to 100.00% of the principal amount of the 2021 Notes being repurchased, plus any accrued and unpaid interest. Upon maturity, and at the option of the holders of the 2021 Notes, the principal amount of the notes may be settled via shares of the Company’s Class A common stock. For the three and nine months ended September 30, 2017 , the Company recorded approximately $0.6 million and $1.9 million , respectively, in interest expense and $0.2 million and $0.7 million , respectively, in non-cash interest expense related to the amortization of deferred financing costs. The 2021 Notes are convertible into shares of the Company’s Class A common stock, based on an initial conversion rate of 41.6082 shares of Class A common stock per $1,000 principal amount of the 2021 Notes, which is equivalent to an initial conversion price of approximately $24.03 per share of the Company’s Class A common stock. In the aggregate, the 2021 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 provision upon a fundamental change under the indenture between Evolent Health, Inc. and U.S. Bank National Association, as trustee, related to the 2.00% convertible senior notes due 2021, dated as of December 5, 2016). The 2021 Notes are convertible, in multiples of $1,000 principal amount, at the option of the holders at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, we will deliver for each $1,000 principal amount of notes converted a number of shares of our Class A common stock equal to the applicable conversion rate (together with a cash payment in lieu of delivering any fractional share) on the third business day following the relevant conversion date. Convertible Senior Notes Carrying Value While the 2021 Notes are recorded on our accompanying unaudited interim consolidated balance sheets at their net carrying value of $121.2 million as of September 30, 2017 , the 2021 Notes are privately traded by qualified institutional buyers (within the meaning of Rule 144A under the Securities Act of 1933, as amended) and their fair value was $142.4 million , based on a traded price on September 29, 2017, a Leve l 2 input. As of December 31, 2016 , the estimated fair value of the 2021 Notes was $125.0 million , which approximated cost as there were no significant movements in interest rates between the issuance date and December 31, 2016 . The 2021 Notes also have embedded conversion options and contingent interest provisions. The following table summarizes the carrying value of the long-term debt (in thousands): As of As of September 30, December 31, 2017 2016 Carrying value $ 121,164 $ 120,283 Unamortized discount 3,836 4,717 Principal amount $ 125,000 $ 125,000 Remaining amortization period (years) 4.2 4.9 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies 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 the Company’s customers and top prospects. The Advisory Board Reseller Agreement The Company and The Advisory Board are parties to a services, reseller, and non-competition agreement, dated August 31, 2011, which was amended and restated by the parties on June 27, 2013, and May 1, 2015 (as so amended, “The Advisory Board Reseller Agreement”). Under the terms of The Advisory Board Reseller Agreement, The Advisory Board provides certain services to the Company on an as-requested basis. In addition, The Advisory Board has a right of first offer to provide certain specified services during the term of the Agreement and has the right to collect certain fees for specified referrals. Pursuant to the Advisory Board Reseller Agreement, Evolent entered into a services agreement with The Advisory Board in October 2016 whereby The Advisory Board will provide certain services to the Company in conjunction with risk adjustment services provided to one of our customers. Contingencies Tax Receivables Agreement In connection with the Offering Reorganization, the Company entered into the TRA with certain of its investors, which provides for the payment by the Company to these investors of 85% of the amount of the tax benefits, if any, that the Company is deemed to realize as a result of increases in our tax basis related to exchanges of Class B common units as well as tax benefits attributable to the future utilization of pre-IPO NOLs. These payment obligations are obligations of the Company. For purposes of the TRA, the benefit deemed realized by the Company will be computed by comparing its actual income tax liability to the amount of such taxes that the Company would have been required to pay had there been no increase to the tax basis of the assets of the Company as a result of the exchanges or had the Company had no NOL carryforward balance. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including: • the timing of the exchanges and the price of the Class A shares at the time of the transaction, triggering a tax basis increase in the Company’s asset and a corresponding benefit to be realized under the TRA; and • the amount and timing of our taxable income - the Company will be required to pay 85% of the tax savings as and when realized, if any. If the Company does not have taxable income, it will not be required to make payments under the TRA for that taxable year because no tax savings were actually realized. Due to the items noted above, and the fact that the Company is in a full valuation allowance position such that the deferred tax assets related to the Company’s historical pre-IPO losses and tax basis increase benefit from exchanges have not been realized, the Company has not recorded a liability pursuant to the TRA. Litigation Matters We are engaged from time to time in certain legal disputes arising in the ordinary course of business, including employment claims. When the likelihood of a loss contingency becomes probable and the amount of the loss can be reasonably estimated, we accrue a liability for the loss contingency. In connection with the Valence Health acquisition, the Company acquired certain in-process litigation; however, the Company is indemnified by the Valence Health sellers for certain matters and therefore has no potential material exposure. 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. The Company is not aware of any legal proceedings or claims as of September 30, 2017 , or December 31, 2016 , that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company’s financial position or result of operations. Commitments Lease Commitments The Company has entered into lease agreements for its office locations in Arlington, Virginia, Chicago, Illinois, Lisle, Illinois and San Francisco, California. In addition, certain leases acquired as part of the Valence Health transaction included existing sublease agreements for office locations in Chicago, Illinois. Total rental expense, net of sublease income, on operating leases was $3.0 million and $8.0 million for the three and nine months ended September 30, 2017 , respectively, and $1.1 million and $3.4 million for the three and nine months ended September 30, 2016 , respectively. In connection with various lease agreements, the Company is required to maintain $3.8 million in letters of credit and, as such, held $3.8 million in restricted cash and restricted investments as collateral for the letters of credit as of September 30, 2017 . As previously discussed in “Part II - Item 8. Financial Statements and Supplementary Data - Note 4” of our 2016 Form 10-K, immediately following the Valence Health acquisition, the Company decided to abandon and sublet its rented space at 540 W. Madison Street, Suite 1400, Chicago, Illinois. Therefore, our results from operations for the year ended December 31, 2016 , included a lease abandonment expense of approximately $6.5 million in conjunction with a rental space acquired as part of the Valence Health acquisition, based on remaining lease payments and expected future sublease income. During the second quarter of 2017, the Company reached an agreement to terminate the lease for the 14th Floor Space, effective September 2017. Remaining cash outflows related to the 14th Floor Space were estimated to be approximately $4.8 million as of June 30, 2017, while the remaining balance of the initial $6.5 million lease abandonment liability recorded after the Valence Health acquisition was approximately $5.3 million as of June 30, 2017, excluding adjustments pertaining to the lease cancellation fees. As such, the Company recorded a one-time adjustment of $0.5 million to reduce the lease abandonment liability, from $5.3 million to $4.8 million , as of June 30, 2017. The adjustment was recorded as a reduction to our rent expense within “Selling, general and administrative expenses” on our Consolidated Statements of Operations for the nine months ended September 30, 2017. The Company made regular rent payments until September 1, 2017, at which point it paid a one-time lease cancellation and related brokerage fee of $4.4 million . There is no remaining lease abandonment liability related to the 14th Floor Space as of September 30, 2017. The following table presents a roll forward of the lease abandonment liability (in thousands): For the Nine Months For the Year Ended Ended September 30, December 31, 2017 2016 Accrual as of beginning-of-period $ 6,100 $ — Abandonment expense — 6,460 Impact of lease termination (496 ) — Abandonment amortization (1,239 ) (360 ) Lease cancellation fee (4,365 ) — Accrual as of end-of-period $ — $ 6,100 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 consolidated financial statements. Registration rights agreement We entered into a registration rights agreement with The Advisory Board, UPMC, TPG and another investor to register for sale under the Securities Act, 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 o f shares that are a party thereto no longer hold any such shares that are entitled to registration rights. Pursuant to our contractual obligations under this agreement, we filed a registration statement on Form S-3 with the SEC on July 28, 2016, which was declared effective on August 12, 2016. Pursuant to certain terms of the registration rights agreement, the Investor Stockholders sold 19.7 million shares of the Company’s Class A common stock during the 2017 Secondary Offerings and 8.6 million shares of the Company’s Class A common stock during the September 2016 Secondary Offering, as discussed in Note 4 . Pursuant to the terms of the registration rights agreement, we incurred $0.3 million and $1.5 million in expenses related to the 2017 Secondary Offerings for the three and nine months ended September 30, 2017 , and $2.1 million in expenses related to the September 2016 Secondary Offering for the three and nine months ended September 30, 2016 . The expenses were recorded within “Selling, general and administrative expenses” on our Consolidated Statements of Operations. We will continue to pay all expenses relating to any demand, piggyback or shelf registration, other than underwriting discounts and commissions and any transfer taxes, subject to specified conditions and limitations. The registration rights agreement includes customary indemnification provisions, including indemnification of the participating holders of shares of Class A common stock and their directors, officers and employees by us for any losses, claims, damages or liabilities in respect thereof and expenses to which such holders may become subject under the Securities Act, state law or otherwise. Guarantees As part of our strategy to support certain of our partners in the Next Generation Accountable Care Program, we entered into upside and downside risk sharing arrangements. Our downside risk-sharing arrangements are limited to our fees and are executed through our wholly-owned captive insurance company. To satisfy the capital requirements of our insurance entity as well as state insurance regulators, Evolent entered into letters of credit of $8.2 million to secure potential losses related to insurance services. This amount is in excess of our actuarial assessment of loss. 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 September 30, 2017 , approximately 74.2% of our $295.9 million of cash and cash equivalents (including restricted cash) were held in bank deposits with FDIC participating banks and approximately 25.8% were held in money market funds. 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 has not experienced any realized losses on cash and cash equivalents to date. The following table summarizes those partners who represented at least 10.0% of our trade accounts receivable for the periods presented: As of As of September 30, December 31, 2017 2016 Customer B 14.2 % * Customer E 13.9 % 14.3 % * 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 revenue for the periods presented: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Customer A 19.0 % 24.9 % 18.5 % 18.7 % Customer B * * 10.0 % * Customer C * 15.3 % * 16.5 % Customer D * 14.3 % * 14.7 % * Represents less than 10.0% of the respective balance |
Earnings (Loss) Per Common Shar
Earnings (Loss) Per Common Share | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Common Share | Earnings (Loss) Per Common Share The following table sets forth the computation of basic and diluted earnings per share available for common stockholders (in thousands, except per share data): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Net income (loss) $ (13,129 ) $ (15,775 ) $ (55,977 ) $ (201,585 ) Less: Net income (loss) attributable to non-controlling interests (541 ) (4,567 ) (8,471 ) (59,250 ) Net income (loss) available for common shareholders (1) (2) $ (12,588 ) $ (11,208 ) $ (47,506 ) $ (142,335 ) Weighted-average common shares outstanding (2) (3) 70,328 43,110 60,867 42,632 Earnings (Loss) per Common Share Basic $ (0.18 ) $ (0.26 ) $ (0.78 ) $ (3.34 ) Diluted (0.18 ) (0.26 ) (0.78 ) (3.34 ) (1) For periods of net loss, net income (loss) available for common shareholders is the same for both basic and diluted purposes. (2) Each Class B common unit of Evolent Health LLC can be exchanged (together with a corresponding number of shares of our Class B common stock) for one share of our Class A common stock. As holders exchange their Class B common shares for Class A common shares, our interest in Evolent Health LLC will increase. Therefore, shares of our Class B common stock are not considered dilutive shares for the purposes of calculating our diluted earnings (loss) per common share as related adjustment to net income (loss) available for common shareholders would equally offset the additional shares, resulting in the same earnings (loss) per common share. (3) For periods of net loss, shares used in the earnings (loss) per common share calculation represent basic shares as using diluted shares would be anti-dilutive. Anti-dilutive shares (in thousands) excluded from the calculation of weighted-average common shares presented above are presented below: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Exchangeable Class B common stock 2,654 17,145 8,846 17,397 Restricted stock units ("RSUs") 577 416 557 196 Stock options and performance-based stock options 2,976 3,193 3,031 1,672 Convertible senior notes 5,201 — 5,201 — Total 11,408 20,754 17,635 19,265 |
Stock-based Compensation
Stock-based Compensation | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based Compensation | Stock-based Compensation Total compensation expense by award type and line item in our consolidated financial statements were as follows (in thousands): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Award Type Stock options $ 4,291 $ 3,961 $ 12,452 $ 11,700 Performance-based stock options 113 113 335 261 RSUs 1,304 725 3,385 1,883 Total $ 5,708 $ 4,799 $ 16,172 $ 13,844 Line Item Cost of revenue $ 401 $ 369 $ 1,143 $ 1,219 Selling, general and administrative expenses 5,307 4,430 15,029 12,625 Total $ 5,708 $ 4,799 $ 16,172 $ 13,844 No stock-based compensation in the totals above was capitalized as software development costs for the three and nine months ended September 30, 2017 and 2016 , respectively. Stock-based awards granted were as follows: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Stock options 84,249 — 961,313 900,000 Performance-based stock options — — — 267,770 RSUs 37,361 32,238 461,494 445,569 As discussed in Note 2 , the Company adopted ASU 2016-09 with an effective date of January 1, 2016, and elected to recognize share-based award forfeitures as they occur. The adoption of ASU 2016-09 had an immaterial impact to our financial condition and results of operations as of and for the three and nine months ended September 30, 2016 . In addition, the adoption of ASU 2016-09 changed how the Company recognizes excess tax benefits (“windfalls”) or deficiencies (“shortfalls”) related to share-based compensation. Prior to the adoption of ASU 2016-09, these windfalls and shortfalls were credited or charged, respectively, to additional paid-in capital in the Company’s Consolidated Balance Sheets when the amount of cash taxes paid was impacted by the windfalls and shortfalls. Under the revised standard, these windfalls and shortfalls are recognized prospectively as discrete tax benefit or discrete tax expense, respectively, in the Company’s Consolidated Statements of Operations without regard to the impact on cash taxes paid. For the three and nine months ended September 30, 2017 and 2016 , the Company recognized an immaterial discrete tax benefit related to net windfall tax benefits from share-based compensation, which increased the net operating loss (“NOL”) deferred tax asset and our valuation allowance. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For interim periods, we recognize an income tax provision (benefit) based on our estimated annual effective tax rate expected for the full year. The Company recorded $1.7 million and $2.0 million in income tax benefit for the three and nine months ended September 30, 2017 , which resulted in effective tax rates of 11.6% and 3.5% , respectively. The Company recorded $0.3 million and $1.6 million in income tax benefit for the three and nine months ended September 30, 2016 , which resulted in effective tax rates of 1.6% and 0.8% , respectively. Approximately $2.1 million of the income tax benefit recorded during the three months ended September 30, 2017 , relates primarily to the change in estimate of indefinite lived components as part of the outside basis difference in our partnership interest in Evolent Health LLC related to the equity transactions as further disclosed in Note 4 . These components, as well as components reversing outside of the net operating loss carryover period, are not considered a source of future taxable income for realizing the deferred tax assets, and with the exception of those, the Company continues to record a valuation allowance against the net deferred tax assets. The company recorded a change in estimate of $0.7 million in federal alternative minimum and state income tax liability and corresponding income tax expense in connection to its 2016 tax return filings during the third quarter of 2017. As a result of the increase in our ownership of Evolent Health LLC following the August 2017 Primary and 2017 Secondary Offerings discussed in Note 4 above, the Company reduced the indefinite portion of the deferred tax liability related to the book basis compared to the tax basis in our partnership interest in Evolent Health LLC by $13.1 million for the nine months ended September 30, 2017 . The effect of this change in the deferred tax liability was recorded as $12.8 million of additional paid-in capital and $0.3 million of income tax benefit. As a result of the increase in our ownership of Evolent Health LLC following the September 2016 Secondary discussed in Note 4 above, the Company reduced the indefinite portion of the deferred tax liability related to the book basis compared to the tax basis in our partnership interest in Evolent Health LLC by $1.6 million for the three and nine months ended September 30, 2016 . The effect of this change in the deferred tax liability was recorded as additional paid-in capital. As of each applicable period-end, the Company has not recognized any uncertain tax positions, penalties or interest as we have concluded that no such positions exist. The Company is not currently subject to income tax audits in any U.S. or state jurisdictions for any tax year. Tax Receivables Agreement In connection with the Offering Reorganization, the Company entered into the TRA with certain of its investors, which provides for the payment by the Company to these investors of 85% of the amount of the tax benefits, if any, that the Company is deemed to realize as a result of increases in our tax basis related to exchanges of Class B common units as well as tax benefits attributable to the future utilization of pre-IPO NOLs. See Note 9 above and “Part II - Item 8. Financial Statements and Supplementary Data - Note 12” in our 2016 Form 10-K for discussion of our TRA. |
Investments In and Advances to
Investments In and Advances to Affiliates | 9 Months Ended |
Sep. 30, 2017 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investments In and Advances to Affiliates | Investments In and Advances to Affiliates Georgia Physicians for Accountable Care LLC During the second quarter of 2016, the Company acquired 21,429 Class B Units of Georgia Physicians for Accountable Care, LLC (“GPAC”) for $3.0 million in cash. The investment represented a 27% economic interest and a 28% voting interest in GPAC at the date of the transaction. As of September 30, 2017 , the Company owned a 26% economic interest and a 28% voting interest in GPAC. The Company has determined it has significant influence but that it does not have control over GPAC. Accordingly, the investment is accounted for under the equity method of accounting and the Company will be allocated its proportional share of GPAC’s profits and losses for each reporting period. Evolent Health, Inc.’s proportional share of the losses of GPAC was approximately $0.4 million and $1.4 million for the three and nine months ended September 30, 2017 , and $0.4 million and $0.5 million for the three and nine months ended September 30, 2016 , respectively. Concurrently, the Company also signed a long-term services agreement with GPAC to provide certain management, operational and support services to help GPAC manage elements of its service offerings. Revenue related to the long-term services agreement was less than $0.1 million and $0.4 million for the three and nine months ended September 30, 2017 , respectively, and approximately $0.1 million for the three and nine months ended September 30, 2016 . |
Non-controlling Interests
Non-controlling Interests | 9 Months Ended |
Sep. 30, 2017 | |
Noncontrolling Interest [Abstract] | |
Non-controlling Interests | Non-controlling Interests In connection with the closing of the IPO, we used the net proceeds of the IPO to purchase 13.2 million newly-issued Class A common units in Evolent Health LLC. Additionally, we acquired 2.1 million Class A common units in Evolent Health LLC, at $17.00 per unit, as a result of the merger of the TPG affiliate with and into Evolent Health, Inc. as described in our 2016 Form 10-K. Immediately following the Offering Reorganization and IPO, the Company owned 70.3% of Evolent Health LLC. During the year ended December 31, 2016, the Company issued shares of its Class A common stock to acquire Passport, Valence Health and Aldera. For each share of Class A common stock issued by the Company, we received a reciprocal number of Class A common units from Evolent Health LLC in exchange for contributing the acquired entities to Evolent Health LLC. As a result, our economic interest in Evolent Health LLC increased during the year from 70.3% to 70.8% due to Class A common shares issued for the acquisition of Passport and from 74.6% to 77.4% as a result of Class A common shares issued for the acquisitions of Valence Health and Aldera. In order to account for the change in our ownership interest in Evolent Health LLC, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. In addition, the Company completed a secondary offering of 8.6 million shares of its Class A common stock at a price to the public of $22.50 per share in September 2016. The shares sold in the September 2016 Secondary consisted of 6.4 million existing shares of the Company’s Class A common stock owned and held by the Selling Stockholders and 2.2 million newly-issued shares of the Company’s Class A common stock received by certain Investor Stockholders pursuant to Class B Exchanges. As a result of these Class B Exchanges and Evolent Health LLC’s cancellation of the Class B units during the September 2016 Secondary, the Company’s economic interest in Evolent Health LLC increased from 71.0% to 74.6% as of September 22, 2016, and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. Further, the Company completed the 2017 Secondary Offerings during the nine months ended September 30, 2017 . The shares sold in the 2017 Secondary Offerings consisted of 20.1 million shares of the Company’s Class A common stock, consisting of 7.4 million existing shares of the Company’s Class A common stock owned and held by certain Selling Stockholders, 12.6 million newly-issued shares of the Company’s Class A common stock received by certain Investor Stockholders pursuant to Class B Exchanges and 0.1 million shares issued upon the exercise of options by certain management selling stockholders. As a result of these Class B Exchanges and Evolent Health LLC’s cancellation of the Class B units during the 2017 Secondary Offerings, the Company’s economic interest in Evolent Health LLC increased from 77.4% to 96.1% immediately following the June 2017 Secondary, and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. In addition, the Company issued 8.8 million shares of its Class A Common Stock during the August 2017 Primary for net proceeds of $166.9 million . For each share of Class A common stock issued by Evolent Health, Inc., the Company received a corresponding Class A common unit from Evolent Health LLC in exchange for contributing the issuance proceeds to Evolent Health LLC. As a result of the Class A common stock and Class A common units issued in conjunction with the August 2017 Primary, the Company’s economic interest in Evolent Health LLC increased from 96.1% to 96.6% immediately following the August 2017 Primary, and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. As of September 30, 2017 , and December 31, 2016 , we owned 96.6% and 77.4% of the economic interests in Evolent Health LLC, respectively. See Note 4 for further discussion of our August 2017 Primary and 2017 Secondary Offerings. Changes in non-controlling interests (in thousands) for the periods presented were as follows: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Non-controlling interests as of beginning-of-period $ 34,680 $ 230,416 $ 209,588 $ 285,238 Cumulative-effect adjustment from adoption of new accounting principle — — — (139 ) Decrease in non-controlling interests as a result of Class B Exchanges — (28,220 ) (168,883 ) (28,220 ) Reclassification of non-controlling interests 1,793 — 3,698 — Net income (loss) attributable to non-controlling interests (541 ) (4,567 ) (8,471 ) (59,250 ) Non-controlling interests as of end-of-period $ 35,932 $ 197,629 $ 35,932 $ 197,629 |
Fair Value Measurement
Fair Value Measurement | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | Fair Value Measurement GAAP defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) assuming an orderly transaction in the most advantageous market at the measurement date. GAAP also establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include: • Level 1 - inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date; • Level 2 - inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date and the fair value can be determined through the use of models or other valuation methodologies; and • Level 3 - inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the particular asset or liability being measured. Recurring Fair Value Measurements In accordance with GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands): As of September 30, 2017 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 76,408 $ — $ — $ 76,408 Liabilities Contingent consideration (2) — — 8,600 8,600 As of December 31, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 1,128 $ — $ — $ 1,128 Liabilities Contingent consideration (2) — — 8,300 8,300 (1) Represents the cash and cash equivalents that were held in a money market fund as of September 30, 2017 , and December 31, 2016 , as presented in the tables above. (2) Represents the contingent earn-out consideration related to the Passport acquisition as described further in Note 4 . The Company recognizes any transfers between levels within the hierarchy as of the beginning of the reporting period. There were no transfers between fair value levels for the three and nine month periods ended September 30, 2017 and 2016 , respectively. 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. As discussed in Note 4 , the strategic alliance with Passport includes a provision for additional equity consideration contingent upon the Company obtaining new third party Medicaid business in future periods. The significant unobservable inputs used in the fair value measurement of the Passport contingent consideration are the five -year risk-adjusted recurring revenue compound annual growth rate (“CAGR”) and the applicable discount rate. A significant increase in the assumed five -year risk-adjusted recurring revenue CAGR projection or decrease in discount rate in isolation would result in a significantly higher fair value of the contingent consideration. The changes in our contingent consideration, measured at fair value, for which the Company uses Level 3 inputs to determine fair value are as follows (in thousands): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Balance as of beginning-of-period $ 8,500 $ 7,750 $ 8,300 $ — Additions — — — 7,750 Realized and unrealized (gains) losses, net 100 — 300 — Balance as of end-of-period $ 8,600 $ 7,750 $ 8,600 $ 7,750 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: As of September 30, 2017 Fair Valuation Significant Assumption or Value Technique Unobservable Inputs Input Ranges Contingent consideration (1) $ 8,600 Real options approach Risk-adjusted recurring revenue CAGR 92.5 % (2) Discount rate/time value 2.7% - 4.0% (1) Related to additional Passport earn-out consideration as described further in Note 4 . (2) The risk-adjusted recurring revenue CAGR is calculated over the five -year period 2017-2021. Given that there was no recurring revenue in 2016 and 2017, the calculation of the 2017 and 2018 growth rate is based on a theoretical 2016 and 2017 recurring revenue of $1.0 million , resulting in a higher growth rate. The risk-adjusted recurring revenue CAGR over the period 2019-2021 is 19.2% . As of December 31, 2016 Fair Valuation Significant Assumption or Value Technique Unobservable Inputs Input Ranges Contingent consideration (1) $ 8,300 Real options approach Risk-adjusted recurring revenue CAGR 97.0 % (2) Discount rate/time value 2.5% - 4.5% (1) Related to additional Passport earn-out consideration as described further in Note 4 . (2) The risk-adjusted recurring revenue CAGR is calculated over the five -year period 2017-2021. Given that there was no recurring revenue in 2016, the calculation of the 2017 growth rate was based on a theoretical 2016 recurring revenue of $1.0 million , resulting in a higher growth rate. The risk-adjusted recurring revenue CAGR over the period 2018-2021 was 50.8% . Nonrecurring Fair Value Measurements In addition to the assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. This includes goodwill, intangible assets, property, plant and equipment, held-to-maturity investments and equity method investments. While not carried at fair value on a recurring basis, these items are continually monitored for indicators of impairment that would indicate current carrying value is greater than fair value. In those situations, the assets are considered impaired and written down to current fair value. Refer to Notes 4 , 5 , 6 , 7 and 13 for further discussion of assets measured at fair value on a nonrecurring basis. Other Fair Value Disclosures The carrying amounts of cash and cash equivalents (those not held in a money market fund), restricted cash, receivables, prepaid expenses, accounts payable, accrued liabilities and accrued compensation approximate their fair values because of the relatively short-term maturities of these items and financial instruments. Refer to Note 8 for information regarding the fair value of the 2021 Notes. |
Related Parties
Related Parties | 9 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Parties | Related Parties As discussed in Note 13 , Evolent owned a 26% economic interest in GPAC as of September 30, 2017 , and is considered to have significant influence. As a result, the Company accounts for the investment under the equity method of accounting and is allocated its proportional share of GPAC’s profits and losses for each reporting period. In addition, the Company signed a long-term services agreement with GPAC to provide certain management, operational and support services to help GPAC manage elements of its service offerings. The Company also works closely with both of its founding investors, The Advisory Board and UPMC. The relationship with The Advisory Board is centered on providing certain specified services and making valuable connections with CEOs of health systems that could become partners. The Company’s relationship with UPMC is a subcontractor relationship where UPMC has agreed to execute certain tasks (primarily TPA services) relating to certain customer commitments. We also conduct business with a company in which UPMC holds a significant equity interest. Our founding investors and their related businesses are considered related parties and the balances and/or transactions with them were reported on our consolidated financial statements. Additionally, we issued shares of our stock to certain of our partners while concurrently entering into revenue contracts with those partners. Those partners are considered related parties and the balances and/or transactions with them were reported on our consolidated financial statements for the periods in which they held a significant equity interest in Evolent Health, Inc. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Acquisition of Premier Health Plan, Inc. On October 31, 2017 , the Company entered into an agreement with Premier Health Insuring Corporation (“PHIC”), a subsidiary of Premier Health Partners, an existing Evolent customer, to acquire Premier Health Plan, Inc. (“Premier Health”). Premier Health currently offers and operates large group commercial and individual and family medical insurance plans in Ohio. As part of the agreement, PHIC will contribute its Medicare Advantage business to Premier Health immediately prior to the closing of the transaction. Consideration for the transaction is estimated at approximately $31.0 million , payable in a combination of cash and Evolent Health Class A common stock. Consummation of the transaction is subject to certain closing conditions, including federal and state regulatory approvals. The Company expects to consummate the transaction at the end of 2017 or early 2018, and to commence operations of the health plans thereafter, but we cannot assure you that the transaction will be completed on this timetable or at all. Implementation Funding Agreement On October 25, 2017, the Company entered into an agreement with a current customer and contributed $20.0 million in the form of an implementation funding loan (the “Implementation Fund”) shortly thereafter. The Implementation Fund is expected to support implementation services to assist the customer in expanding its Medicaid membership. The Implementation Fund carries a fixed interest rate of 2.5% per annum and the terms of the agreement governing the Implementation Fund require it to be repaid in ten equal installments of $2.0 million , plus accrued interest, during 2018. |
Basis of Presentation, Summar24
Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principle (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation In our opinion, the accompanying unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state our financial position, results of operations, and cash flows. The Consolidated Balance Sheet at December 31, 2016 , has been derived from audited financial statements as of that date. The interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain footnote 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 2016 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 consolidated financial statements, estimates are used for, but not limited to, the valuation of assets, liabilities, consideration related to business combinations and asset acquisitions, revenue recognition including discounts and credits, estimated selling prices for deliverables in multiple element arrangements, contingent payments, allowance for doubtful accounts, depreciable lives of assets, impairment of long lived assets (including equity method investments), stock-based compensation, deferred income taxes and valuation allowance, contingent liabilities, valuation of intangible assets (including goodwill), purchase price allocation in taxable stock transactions and the useful lives of intangible assets. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Evolent Health, Inc. and its subsidiaries. All inter-company accounts and transactions are eliminated in consolidation. |
Operating Segments | Operating Segments Operating segments are defined as components of a business that earn revenue and incur expenses for which discrete financial information is available that is evaluated, on a regular basis, by the chief operating decision maker (“CODM”) to decide how to allocate resources and assess performance. The Company’s CODM, the Chief Executive Officer, allocates resources at a consolidated level and therefore the Company views its operations and manages its business as one operating segment. All of the Company’s revenue is generated in the United States and all assets are located in the United States. |
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 |
Property and Equipment, Net | Property and Equipment, Net Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment are computed using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term. Based on the current competitive environment and constantly changing landscape for similar technology, effective September 1, 2017, the Company changed its estimate of the useful life of internal-use software from 7 years to 5 years. This change in useful life has been accounted for as a change in accounting estimate and will be applied to all new internal-use software. This change in estimate will also be applied prospectively to the remaining carrying amounts of existing internal-use software. For these existing assets the useful lives were adjusted at the individual asset level and will be amortized over a period of time such that the carrying value is fully amortized 5 years from the date the individual assets were initially placed in service. Refer to Note 6 for additional discussion regarding the change in estimate related to our property and equipment. The following summarizes the updated estimated useful lives by asset classification: Computer hardware 3 years Furniture and equipment 3 years Internal-use software development costs 5 years Leasehold improvements Shorter of useful life or remaining lease term When an item is sold or retired, the cost and related accumulated depreciation or amortization is eliminated and the resulting gain or loss, if any, is recorded in our Consolidated Statements of Operations. We periodically review the carrying value of our long-lived assets, including property and equipment, for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be fully recoverable. For long-lived assets to be held and used, impairments are recognized when the carrying amount of a long-lived asset group is not recoverable and exceeds fair value. The carrying amount of a long-lived asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. An impairment loss is measured as the amount by which the carrying amount of a long-lived asset group exceeds its fair value. |
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. Based on the current competitive environment and constantly changing landscape for similar technology, effective September 1, 2017, the Company changed its estimate of the useful life of intangible technology from a range of 5 - 7 years to 5 years. This change in useful life has been accounted for as a change in accounting estimate and will be applied to all new intangible technology, provided the facts and circumstances of the intangible technology do not suggest otherwise. This change in estimate will also be applied prospectively to the remaining carrying amounts of existing technology assets. For these existing assets the useful lives were adjusted at the individual asset level and will be amortized over a period of time such that the carrying value is fully amortized 5 years from the date the individual assets were initially capitalized. Refer to Note 7 for additional discussion regarding the change in estimate related to our intangible assets. The following summarizes the updated estimated useful lives by asset classification: Corporate trade name 20 years Customer relationships 15-25 years Technology 5 years 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 7 for additional discussion regarding our intangible assets. |
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 our single reporting unit level, which is consistent with the way management evaluates our business. Acquisitions to date have been complementary to the Company’s core business, and therefore goodwill is assigned to our single reporting unit to reflect the synergies arising from each business combination. As discussed in Note 3 , we adopted Accounting Standards Update (“ASU”) 2017-04, Intangibles-Goodwill and Other - Simplifying the Test for Goodwill Impairment, effective January 1, 2017. The adoption resulted in an update to our accounting policy for goodwill impairment. Under the updated policy, we perform a one-step test in our evaluation of the carrying value of goodwill, if qualitative factors determine it is necessary to complete a goodwill impairment test. In the 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 impairment of goodwill on our Consolidated Statements of Operations. See Note 7 for additional discussion regarding goodwill impairment tests. |
Adoption of New Accounting Standards and Future Adoption of New Accounting Standards | Adoption of New Accounting Standards In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation - Scope of Modification Accounting . The purpose of the ASU is to limit the circumstances in which an entity applies modification accounting to share-based awards by setting criteria whereby an entity would be precluded from applying modification accounting guidance in Topic 718. The ASU also removes guidance in Topic 718 stating that modification accounting is not required when an entity adds an anti-dilution provision if that modification is not made in contemplation of an equity restructuring. The amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim periods. The amendments should be applied prospectively to an award modified on or after the adoption date. We adopted this standard, effective June 1, 2017. The adoption of this ASU may have an impact if we have a modification to our share-based awards at a future date. There was no impact of the adoption for the three and nine months ended September 30, 2017 . In January 2017, the FASB issued ASU 2017-01, Business Combinations - Clarifying the Definition of a Business . The purpose of the ASU is to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU provides a screen to determine when an integrated set of assets and activities is not a business. The ASU also provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments should be applied prospectively on or after the effective date. Early adoption is permitted for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. We adopted this standard during June 2017, in conjunction with the acquisition of Accordion Health, Inc. (see Note 4 ). The adoption had an impact on our financial statements with respect to the accounting for the Accordion Health, Inc. acquisition, and we anticipate it will have an impact if we engage in future business combinations or asset acquisitions. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other - Simplifying the Test for Goodwill Impairment . The purpose of the ASU is to simplify the subsequent measurement of goodwill. The ASU eliminates Step 2 from the goodwill impairment test. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. This update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We believe this newly adopted principle is preferable as it reduces the complexity of performing a goodwill impairment test. As a result, we adopted this standard effective January 1, 2017. Our updated accounting policy for goodwill impairment is described in Note 2 . While the adoption of this ASU may have a material impact in determining the results of future goodwill impairment tests and thus impact our consolidated financial statements in the future, there was no impact of the adoption during the three and nine months ended September 30, 2017 . In March 2016, the FASB issued ASU 2016-07, Investments-Equity Method and Joint Ventures - Simplifying the Transition to the Equity Method of Accounting . The purpose of this ASU is to eliminate the requirement to retroactively adopt the equity method of accounting when an investment qualifies for the equity method as a result of an increase in the level of ownership interest or degree of influence. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We adopted this standard effective January 1, 2017. The adoption did not have a material impact on our financial statements for the three and nine months ended September 30, 2017 . In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging - Contingent Put and Call Options in Debt Instruments . The purpose of this ASU is to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely rated to their debt hosts. An entity performing the assessment under the amendments in the ASU is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. For public business entities, the amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. We adopted this standard effective January 1, 2017. The adoption did not have a material impact on our financial statements for the three and nine months ended September 30, 2017 . Future Adoption of New Accounting Standards In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash . The purpose of the ASU is to reduce diversity in practice regarding the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in the ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments in this ASU should be applied using a retrospective transition method to each period presented. We intend to adopt the requirements of this standard during the fourth quarter of 2017, and are currently evaluating the impact of the adoption on our Consolidated Statements of Cash Flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments . This ASU provides updated guidance on eight specific cash flow issues to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We intend to adopt the requirements of this standard during the fourth quarter of 2017, and are currently evaluating the impact of the adoption on our Consolidated Statements of Cash Flows. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments . With respect to assets measured at amortized cost, such as held-to-maturity assets, the update requires presentation of the amortized cost net of a credit loss allowance. The update eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments. The credit loss estimate can now reflect an entity’s current estimate of all future expected credit losses as opposed to the previous standard, when an entity only considered past events and current conditions. With respect to available for sale debt securities, the update requires that credit losses be presented as an allowance rather than as a write-down. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We intend to adopt the requirements of this standard effective January 1, 2020, and are currently evaluating the impact of the adoption on our financial condition and results of operations. In February 2016, the FASB issued ASU 2016-02, Leases , in order to establish the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This update introduces a new standard on accounting for leases, including a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related to evaluating when profit can be recognized). The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. We intend to adopt the requirements of this standard effective January 1, 2019, and are currently evaluating the impact of the adoption on our financial condition and results of operations. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , in order to clarify the principles of recognizing revenue. This standard establishes the core principle of recognizing revenue to depict the transfer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB defines a five-step process that systematically identifies the various components of the revenue recognition process, culminating with the recognition of revenue upon satisfaction of an entity’s performance obligations. By completing all five steps of the process, the core principles of revenue recognition will be achieved. In March 2016, the FASB issued an update to the new revenue standard (ASU 2014-09) in the form of ASU 2016-08, which amended the principal-versus-agent implementation guidance and illustrations in the new revenue guidance. The update clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued another update to the new revenue standard in the form of ASU 2016-10, which amended the guidance on identifying performance obligations and the implementation guidance on licensing. These ASUs were followed by two further updates issued during May 2016: ASU 2016-11, which rescinds certain SEC guidance, such as the adoption of ASUs 2014-09 and 2014-16, including accounting for consideration given by a vendor to a customer, and ASU 2016-12, which is intended to clarify the objective of the collectability criterion while identifying the contract(s) with a customer. The new revenue standard (including updates) will be effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted only as of annual reporting periods beginning after December 15, 2016. The guidance permits two methods of adoption: i) the full retrospective method applying the standard to each prior reporting period presented, or ii) the modified retrospective method with a cumulative effect of initially applying the guidance recognized at the date of initial application. The standard also allows entities to apply certain practical expedients at their discretion. We intend to adopt this standard effective January 1, 2018, using the modified retrospective method with a cumulative catch up adjustment and providing additional disclosures comparing results to previous rules. In our efforts to adopt this ASU, we have formulated an implementation team that is currently engaged in the assessment and implementation process. We are continuing to review our contracts with customers to identify potential differences that could result from applying the new guidance. As we complete our overall assessment, we anticipate modifying certain accounting policies and practices, principally as it relates to the capitalization of certain customer setup costs which have historically been expensed as incurred. We also expect to implement specific controls over the evaluation of the impact, including our calculation of the cumulative effect of adopting ASU 2014-09. We will continue to identify any needed changes to our accounting policies and practices, business processes, systems and controls to support the new revenue recognition and disclosure requirements. We are still in the process of quantifying the overall impact of the adoption of the new standard to our consolidated financial statements and will continue our evaluation through the date of adoption. We have evaluated all other issued and unadopted ASUs and believe the adoption of these standards will not have a material impact on our results of operations, financial position, or cash flows. |
Fair Value Measurements and Other Fair Value Disclosures | Nonrecurring Fair Value Measurements In addition to the assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. This includes goodwill, intangible assets, property, plant and equipment, held-to-maturity investments and equity method investments. While not carried at fair value on a recurring basis, these items are continually monitored for indicators of impairment that would indicate current carrying value is greater than fair value. In those situations, the assets are considered impaired and written down to current fair value. Refer to Notes 4 , 5 , 6 , 7 and 13 for further discussion of assets measured at fair value on a nonrecurring basis. Other Fair Value Disclosures The carrying amounts of cash and cash equivalents (those not held in a money market fund), restricted cash, receivables, prepaid expenses, accounts payable, accrued liabilities and accrued compensation approximate their fair values because of the relatively short-term maturities of these items and financial instruments. Refer to Note 8 for information regarding the fair value of the 2021 Notes. |
Basis of Presentation, Summar25
Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principle (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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: As of As of September 30, December 31, 2017 2016 Collateral for letters of credit for facility leases (1) $ 3,813 $ 4,852 Collateral with financial institutions (2) 8,150 4,950 Pharmacy benefit management and claims processing services (3) 4,840 30,555 Other 129 59 Total restricted cash and restricted investments 16,932 40,416 Non-current restricted investments (2) 8,150 4,950 Non-current restricted cash (1) 3,712 1,050 Total non-current restricted cash and restricted investments 11,862 6,000 Current restricted cash and restricted investments $ 5,070 $ 34,416 (1) Represents restricted cash related to collateral for letters of credit required in conjunction with lease agreements. See Note 9 for further discussion of our lease commitments. (2) Represents collateral for letters of credit held with financial institutions for risk-sharing arrangements. The collateral amount is invested in restricted certificates of deposit with original maturities in excess of 12 months. The restricted investments are classified as held-to-maturity and stated at amortized cost. Fair value of the certificates of deposit is determined using Level 2 inputs and approximates amortized cost as of September 30, 2017 . See Note 9 for further discussion of our risk-sharing arrangements. (3) Represents cash held on behalf of partners to process PBM and other claims. |
Summary of property and equipment | The following summarizes the updated estimated useful lives by asset classification: Computer hardware 3 years Furniture and equipment 3 years Internal-use software development costs 5 years Leasehold improvements Shorter of useful life or remaining lease term The following summarizes our property and equipment (in thousands): As of As of September 30, December 31, 2017 2016 Computer hardware $ 5,436 $ 4,474 Furniture and equipment 2,448 2,448 Internal-use software development costs 41,879 21,385 Leasehold improvements 8,446 8,108 Total property and equipment 58,209 36,415 Accumulated depreciation and amortization (11,279 ) (5,236 ) Total property and equipment, net $ 46,930 $ 31,179 |
Schedule of intangible assets | The following summarizes the updated estimated useful lives by asset classification: Corporate trade name 20 years Customer relationships 15-25 years Technology 5 years Details of our intangible assets (in thousands) are presented below: As of September 30, 2017 Weighted- Average Gross Net Remaining Carrying Accumulated Carrying Useful Life Amount Amortization Value Corporate trade name 17.7 $ 19,000 $ 2,217 $ 16,783 Customer relationships 20.7 203,500 15,988 187,512 Technology 3.3 56,157 14,664 41,493 Below market lease, net 8.5 4,197 493 3,704 Total $ 282,854 $ 33,362 $ 249,492 As of December 31, 2016 Weighted- Average Gross Net Remaining Carrying Accumulated Carrying Useful Life Amount Amortization Value Corporate trade name 18.4 $ 19,000 $ 1,505 $ 17,495 Customer relationships 21.5 203,500 9,018 194,482 Technology 5.2 50,500 7,753 42,747 Below market lease, net 9.4 4,323 124 4,199 Total $ 277,323 $ 18,400 $ 258,923 |
Schedule of immaterial correction of an error in previously issued financial statements | The following table summarizes the impact of the correction of the error to the Company’s Consolidated Statement of Cash Flows for the six months ended June 30, 2017 (in thousands): As Reported Correction As Revised Cash Flows from Operating Activities Changes in assets and liabilities, net of acquisitions: Accounts receivables, net $ (5,247 ) $ (2,655 ) $ (7,902 ) Accounts payable, net of change in restricted cash and restricted investments (2,514 ) 9,555 7,041 Net cash provided by (used in) operating activities (44,712 ) 6,900 (37,812 ) Cash Flows from Investing Activities Change in restricted cash and restricted investments 3,200 (6,900 ) (3,700 ) Net cash provided by (used in) investing activities 7,739 (6,900 ) 839 |
Transactions (Tables)
Transactions (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Organizational Transactions [Abstract] | |
Schedule of allocation of purchase price | The purchase price was allocated to the assets acquired based on their fair values as of February 1, 2016 , as follows (in thousands): Purchase Consideration Fair value of Class A common stock issued $ 10,450 Fair value of contingent consideration 7,750 Total consideration $ 18,200 Tangible assets acquired Prepaid asset $ 6,900 Goodwill 11,300 Net assets acquired $ 18,200 The purchase price allocation, as previously determined, the measurement period adjustments and the purchase price allocation, as revised, are as follows (in thousands): Measurement As Previously Period Determined Adjustments As Revised Purchase consideration: Fair value of Class A common stock issued $ 9,864 $ — $ 9,864 Cash for settlement of software license 7,000 — 7,000 Cash 17,481 — 17,481 Total consideration $ 34,345 $ 34,345 Tangible assets acquired: Receivables $ 624 $ (194 ) $ 430 Prepaid expenses and other current assets 272 — 272 Property and equipment 1,065 — 1,065 Other non-current assets 9 — 9 Identifiable intangible assets acquired: Customer relationships 7,000 — 7,000 Technology 2,500 — 2,500 Liabilities assumed: Accounts payable 429 — 429 Accrued liabilities 1,204 205 1,409 Accrued compensation and employee benefits 605 — 605 Deferred revenue 44 — 44 Goodwill 25,157 399 25,556 Net assets acquired $ 34,345 $ 34,345 |
Schedule of net assets acquired | The purchase price allocation, as previously determined, the measurement period adjustments and the purchase price allocation, as revised, are as follows (in thousands): Measurement As Previously Period Determined Adjustments As Revised Purchase consideration: Fair value of Class A common stock issued $ 159,614 $ 911 $ 160,525 Fair value of contingent consideration 2,620 — 2,620 Cash 54,799 — 54,799 Total consideration $ 217,033 $ 217,944 Tangible assets acquired: Restricted cash $ 1,829 $ — $ 1,829 Accounts Receivable 8,587 (251 ) 8,336 Prepaid expenses and other current assets 3,465 — 3,465 Property and equipment 6,241 — 6,241 Other non-current assets 313 — 313 Favorable leases assumed (net of unfavorable leases) 4,323 (126 ) 4,197 Identifiable intangible assets acquired: Customer relationships 69,000 — 69,000 Technology 18,000 — 18,000 Liabilities assumed: Accounts payable 5,703 — 5,703 Accrued liabilities 3,865 — 3,865 Accrued compensation and employee benefits 9,200 — 9,200 Deferred revenue 2,022 640 2,662 Other long-term liabilities 2,328 — 2,328 Net deferred tax liabilities 13,316 (550 ) 12,766 Goodwill 141,709 1,378 143,087 Net assets acquired $ 217,033 $ 217,944 |
Business acquisition, pro forma information | 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, except per share data). For the Three For the Nine Months Ended Months Ended September 30, September 30, 2016 2016 Revenue $ 91,936 $ 262,233 Net income (loss) (16,247 ) (205,483 ) Net income (loss) attributable to non-controlling interests (4,067 ) (52,604 ) Net income (loss) attributable to Evolent Health, Inc. (12,180 ) (152,879 ) Net income (loss) available to common shareholders: Basic (0.24 ) (3.04 ) Diluted (0.24 ) (3.04 ) |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Investments [Abstract] | |
Summary investment holdings | The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of our investments as measured using Level 2 inputs as of December 31, 2016 (in thousands): Gross Gross Amortized Unrealized Unrealized Fair Costs Gains Losses Value U.S. Treasury bills $ 28,119 $ 116 $ 27 $ 28,208 Corporate bonds 16,222 81 8 16,295 Total investments $ 44,341 $ 197 $ 35 $ 44,503 |
Investments classified by contractual maturity date | The following table summarizes the amortized cost and fair value of our investments by contractual maturities as of December 31, 2016 (in thousands): As of December 31, 2016 Amortized Fair Costs Value Due in one year or less $ 44,341 $ 44,503 |
Schedule of unrealized loss on held-to-maturity securities | The following table summarizes our held-to-maturity securities that had been in a continuous unrealized loss position for less than twelve months as of December 31, 2016 (in thousands, except number of securities): Number of Fair Unrealized Securities Value Losses U.S. Treasury bills 1 $ 4,002 $ 1 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Summary of property and equipment | The following summarizes the updated estimated useful lives by asset classification: Computer hardware 3 years Furniture and equipment 3 years Internal-use software development costs 5 years Leasehold improvements Shorter of useful life or remaining lease term The following summarizes our property and equipment (in thousands): As of As of September 30, December 31, 2017 2016 Computer hardware $ 5,436 $ 4,474 Furniture and equipment 2,448 2,448 Internal-use software development costs 41,879 21,385 Leasehold improvements 8,446 8,108 Total property and equipment 58,209 36,415 Accumulated depreciation and amortization (11,279 ) (5,236 ) Total property and equipment, net $ 46,930 $ 31,179 |
Goodwill and Intangible Asset29
Goodwill and Intangible Assets, Net (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill | The following table summarizes the changes in the carrying amount of goodwill (in thousands): For the Nine Months For the Year Ended Ended September 30, December 31, 2017 2016 Balance as of beginning-of-period $ 626,569 $ 608,903 Goodwill Acquired (1) — 178,266 Measurement period adjustments (2) 1,772 — Goodwill Impairment — (160,600 ) Balance as of end-of-period $ 628,341 $ 626,569 (1) Represents goodwill acquired as a result of the Passport, Valence Health and Aldera transactions, as discussed in Note 4 . (2) Represents measurement period adjustments related to Valence Health and Aldera, as discussed in Note 4 . |
Schedule of intangible assets | The following summarizes the updated estimated useful lives by asset classification: Corporate trade name 20 years Customer relationships 15-25 years Technology 5 years Details of our intangible assets (in thousands) are presented below: As of September 30, 2017 Weighted- Average Gross Net Remaining Carrying Accumulated Carrying Useful Life Amount Amortization Value Corporate trade name 17.7 $ 19,000 $ 2,217 $ 16,783 Customer relationships 20.7 203,500 15,988 187,512 Technology 3.3 56,157 14,664 41,493 Below market lease, net 8.5 4,197 493 3,704 Total $ 282,854 $ 33,362 $ 249,492 As of December 31, 2016 Weighted- Average Gross Net Remaining Carrying Accumulated Carrying Useful Life Amount Amortization Value Corporate trade name 18.4 $ 19,000 $ 1,505 $ 17,495 Customer relationships 21.5 203,500 9,018 194,482 Technology 5.2 50,500 7,753 42,747 Below market lease, net 9.4 4,323 124 4,199 Total $ 277,323 $ 18,400 $ 258,923 |
Long-term Debt (Tables)
Long-term Debt (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of convertible debt | The following table summarizes the carrying value of the long-term debt (in thousands): As of As of September 30, December 31, 2017 2016 Carrying value $ 121,164 $ 120,283 Unamortized discount 3,836 4,717 Principal amount $ 125,000 $ 125,000 Remaining amortization period (years) 4.2 4.9 |
Commitments and Contingencies
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of lease abandonment liability | The following table presents a roll forward of the lease abandonment liability (in thousands): For the Nine Months For the Year Ended Ended September 30, December 31, 2017 2016 Accrual as of beginning-of-period $ 6,100 $ — Abandonment expense — 6,460 Impact of lease termination (496 ) — Abandonment amortization (1,239 ) (360 ) Lease cancellation fee (4,365 ) — Accrual as of end-of-period $ — $ 6,100 |
Summary of major customers | The following table summarizes those partners who represented at least 10.0% of our revenue for the periods presented: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Customer A 19.0 % 24.9 % 18.5 % 18.7 % Customer B * * 10.0 % * Customer C * 15.3 % * 16.5 % Customer D * 14.3 % * 14.7 % * Represents less than 10.0% of the respective balance The following table summarizes those partners who represented at least 10.0% of our trade accounts receivable for the periods presented: As of As of September 30, December 31, 2017 2016 Customer B 14.2 % * Customer E 13.9 % 14.3 % * Represents less than 10.0% of the respective balance |
Earnings (Loss) Per Common Sh32
Earnings (Loss) Per Common Share (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Computation of basic and diluted earnings per share | The following table sets forth the computation of basic and diluted earnings per share available for common stockholders (in thousands, except per share data): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Net income (loss) $ (13,129 ) $ (15,775 ) $ (55,977 ) $ (201,585 ) Less: Net income (loss) attributable to non-controlling interests (541 ) (4,567 ) (8,471 ) (59,250 ) Net income (loss) available for common shareholders (1) (2) $ (12,588 ) $ (11,208 ) $ (47,506 ) $ (142,335 ) Weighted-average common shares outstanding (2) (3) 70,328 43,110 60,867 42,632 Earnings (Loss) per Common Share Basic $ (0.18 ) $ (0.26 ) $ (0.78 ) $ (3.34 ) Diluted (0.18 ) (0.26 ) (0.78 ) (3.34 ) (1) For periods of net loss, net income (loss) available for common shareholders is the same for both basic and diluted purposes. (2) Each Class B common unit of Evolent Health LLC can be exchanged (together with a corresponding number of shares of our Class B common stock) for one share of our Class A common stock. As holders exchange their Class B common shares for Class A common shares, our interest in Evolent Health LLC will increase. Therefore, shares of our Class B common stock are not considered dilutive shares for the purposes of calculating our diluted earnings (loss) per common share as related adjustment to net income (loss) available for common shareholders would equally offset the additional shares, resulting in the same earnings (loss) per common share. (3) For periods of net loss, shares used in the earnings (loss) per common share calculation represent basic shares as using diluted shares would be anti-dilutive. |
Schedule of antidilutive securities excluded from computation of earnings per share | Anti-dilutive shares (in thousands) excluded from the calculation of weighted-average common shares presented above are presented below: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Exchangeable Class B common stock 2,654 17,145 8,846 17,397 Restricted stock units ("RSUs") 577 416 557 196 Stock options and performance-based stock options 2,976 3,193 3,031 1,672 Convertible senior notes 5,201 — 5,201 — Total 11,408 20,754 17,635 19,265 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based compensation expense | Total compensation expense by award type and line item in our consolidated financial statements were as follows (in thousands): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Award Type Stock options $ 4,291 $ 3,961 $ 12,452 $ 11,700 Performance-based stock options 113 113 335 261 RSUs 1,304 725 3,385 1,883 Total $ 5,708 $ 4,799 $ 16,172 $ 13,844 Line Item Cost of revenue $ 401 $ 369 $ 1,143 $ 1,219 Selling, general and administrative expenses 5,307 4,430 15,029 12,625 Total $ 5,708 $ 4,799 $ 16,172 $ 13,844 |
Stock-based awards granted | Stock-based awards granted were as follows: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Stock options 84,249 — 961,313 900,000 Performance-based stock options — — — 267,770 RSUs 37,361 32,238 461,494 445,569 |
Non-controlling Interests (Tabl
Non-controlling Interests (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Noncontrolling Interest [Abstract] | |
Schedule of changes in non-controlling interests | Changes in non-controlling interests (in thousands) for the periods presented were as follows: For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Non-controlling interests as of beginning-of-period $ 34,680 $ 230,416 $ 209,588 $ 285,238 Cumulative-effect adjustment from adoption of new accounting principle — — — (139 ) Decrease in non-controlling interests as a result of Class B Exchanges — (28,220 ) (168,883 ) (28,220 ) Reclassification of non-controlling interests 1,793 — 3,698 — Net income (loss) attributable to non-controlling interests (541 ) (4,567 ) (8,471 ) (59,250 ) Non-controlling interests as of end-of-period $ 35,932 $ 197,629 $ 35,932 $ 197,629 |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Summary of assets at fair value on recurring basis | The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands): As of September 30, 2017 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 76,408 $ — $ — $ 76,408 Liabilities Contingent consideration (2) — — 8,600 8,600 As of December 31, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 1,128 $ — $ — $ 1,128 Liabilities Contingent consideration (2) — — 8,300 8,300 (1) Represents the cash and cash equivalents that were held in a money market fund as of September 30, 2017 , and December 31, 2016 , as presented in the tables above. (2) Represents the contingent earn-out consideration related to the Passport acquisition as described further in Note 4 . |
Summary of liabilities at fair value on recurring basis | The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands): As of September 30, 2017 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 76,408 $ — $ — $ 76,408 Liabilities Contingent consideration (2) — — 8,600 8,600 As of December 31, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ 1,128 $ — $ — $ 1,128 Liabilities Contingent consideration (2) — — 8,300 8,300 (1) Represents the cash and cash equivalents that were held in a money market fund as of September 30, 2017 , and December 31, 2016 , as presented in the tables above. (2) Represents the contingent earn-out consideration related to the Passport acquisition as described further in Note 4 . |
Changes in contingent consideration measured at fair value | The changes in our contingent consideration, measured at fair value, for which the Company uses Level 3 inputs to determine fair value are as follows (in thousands): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2017 2016 2017 2016 Balance as of beginning-of-period $ 8,500 $ 7,750 $ 8,300 $ — Additions — — — 7,750 Realized and unrealized (gains) losses, net 100 — 300 — Balance as of end-of-period $ 8,600 $ 7,750 $ 8,600 $ 7,750 |
Valuation techniques and significant unobservable inputs of Level 3 fair value measurements | The following table summarizes the fair value (in thousands), valuation techniques and significant unobservable inputs of our Level 3 fair value measurements as of the periods presented: As of September 30, 2017 Fair Valuation Significant Assumption or Value Technique Unobservable Inputs Input Ranges Contingent consideration (1) $ 8,600 Real options approach Risk-adjusted recurring revenue CAGR 92.5 % (2) Discount rate/time value 2.7% - 4.0% (1) Related to additional Passport earn-out consideration as described further in Note 4 . (2) The risk-adjusted recurring revenue CAGR is calculated over the five -year period 2017-2021. Given that there was no recurring revenue in 2016 and 2017, the calculation of the 2017 and 2018 growth rate is based on a theoretical 2016 and 2017 recurring revenue of $1.0 million , resulting in a higher growth rate. The risk-adjusted recurring revenue CAGR over the period 2019-2021 is 19.2% . As of December 31, 2016 Fair Valuation Significant Assumption or Value Technique Unobservable Inputs Input Ranges Contingent consideration (1) $ 8,300 Real options approach Risk-adjusted recurring revenue CAGR 97.0 % (2) Discount rate/time value 2.5% - 4.5% (1) Related to additional Passport earn-out consideration as described further in Note 4 . (2) The risk-adjusted recurring revenue CAGR is calculated over the five -year period 2017-2021. Given that there was no recurring revenue in 2016, the calculation of the 2017 growth rate was based on a theoretical 2016 recurring revenue of $1.0 million , resulting in a higher growth rate. The risk-adjusted recurring revenue CAGR over the period 2018-2021 was 50.8% . |
Organization (Details)
Organization (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Aug. 31, 2017 | Jul. 31, 2017 | Jun. 30, 2017 | Jun. 29, 2017 | May 31, 2017 | May 30, 2017 | Mar. 31, 2017 | Feb. 28, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Sep. 22, 2016 | Sep. 21, 2016 | Dec. 31, 2015 | Jun. 05, 2015 |
Organization [Line Items] | |||||||||||||||
Cash and cash equivalents | $ 287,143 | $ 134,563 | $ 109,777 | $ 145,726 | |||||||||||
Evolent Health LLC | Pre-Organization Members | |||||||||||||||
Organization [Line Items] | |||||||||||||||
Evolent Health LLC ownership interest | 100.00% | ||||||||||||||
Evolent Health LLC | |||||||||||||||
Organization [Line Items] | |||||||||||||||
Parent's ownership percentage | 96.60% | 96.60% | 96.10% | 96.10% | 90.50% | 90.50% | 84.90% | 83.90% | 77.40% | 77.40% | 74.60% | 71.00% | 70.30% |
Basis of Presentation, Summar37
Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principle (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Sep. 30, 2017USD ($)segment | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | Jan. 01, 2016USD ($) | |
Accounting Policies [Abstract] | |||||||
Number of operating segments | segment | 1 | ||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||
Total restricted cash and restricted investments | $ 16,932 | $ 16,932 | $ 40,416 | ||||
Non-current restricted investments | 8,150 | 8,150 | 4,950 | ||||
Non-current restricted cash | 3,712 | 3,712 | 1,050 | ||||
Total non-current restricted cash and restricted investments | 11,862 | 11,862 | 6,000 | ||||
Current restricted cash and restricted investments | 5,070 | 5,070 | 34,416 | ||||
Reduction in retained earnings | 99,111 | 99,111 | 146,617 | ||||
Increase in net Income | (13,129) | $ (15,775) | (55,977) | $ (201,585) | (226,778) | ||
Cumulative effect impact of adoption as an expense | 5,708 | $ 4,799 | 16,172 | $ 13,844 | |||
Accounting Standards Update 2016-09 | Election To Recognize Share-Based Award Forfeitures As They Occur | |||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||
Reduction in retained earnings | $ (500) | ||||||
Increase in net Income | $ 100 | ||||||
Letters of credit for facility leases | |||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||
Total restricted cash and restricted investments | 3,813 | 3,813 | 4,852 | ||||
Collateral with financial institutions | |||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||
Total restricted cash and restricted investments | 8,150 | 8,150 | 4,950 | ||||
Pharmacy benefit management and claims processing services | |||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||
Total restricted cash and restricted investments | 4,840 | 4,840 | 30,555 | ||||
Other | |||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||
Total restricted cash and restricted investments | $ 129 | $ 129 | $ 59 |
Basis of Presentation, Summar38
Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principle - Property and Equipment (Details) | 1 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2017 | |
Computer hardware | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 3 years | ||
Furniture and equipment | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 3 years | ||
Internal-use software development costs | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 5 years | 7 years |
Basis of Presentation, Summar39
Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principle - Intangible Assets, Net (Details) | 1 Months Ended | 8 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Technology | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 5 years | |||
Remaining amortization period | 5 years | 3 years 4 months | 5 years 2 months 15 days | |
Technology | Minimum | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 5 years | |||
Technology | Maximum | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 7 years | |||
Corporate trade name | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 20 years | |||
Remaining amortization period | 17 years 8 months 19 days | 18 years 4 months 26 days | ||
Customer relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Remaining amortization period | 20 years 8 months 19 days | 21 years 6 months | ||
Customer relationships | Minimum | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 15 years | |||
Customer relationships | Maximum | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 25 years |
Basis of Presentation, Summar40
Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principle - Error Correction (Details) - USD ($) $ in Thousands | 6 Months Ended | 9 Months Ended | |
Jun. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | |
Changes in assets and liabilities, net of acquisitions: | |||
Accounts receivables, net | $ (5,075) | $ (1,605) | |
Accounts payable, net of change in restricted cash and restricted investments | 10,591 | (3,692) | |
Net cash provided by (used in) operating activities | (33,993) | (14,005) | |
Cash Flows from Investing Activities | |||
Change in restricted cash and restricted investments | (2,164) | 1,194 | |
Net cash provided by (used in) investing activities | $ 17,003 | $ (22,823) | |
Classification Of Restricted Cash And Restricted Investments | |||
Changes in assets and liabilities, net of acquisitions: | |||
Accounts receivables, net | $ (7,902) | ||
Accounts payable, net of change in restricted cash and restricted investments | 7,041 | ||
Net cash provided by (used in) operating activities | (37,812) | ||
Cash Flows from Investing Activities | |||
Change in restricted cash and restricted investments | (3,700) | ||
Net cash provided by (used in) investing activities | 839 | ||
As Reported | Classification Of Restricted Cash And Restricted Investments | |||
Changes in assets and liabilities, net of acquisitions: | |||
Accounts receivables, net | (5,247) | ||
Accounts payable, net of change in restricted cash and restricted investments | (2,514) | ||
Net cash provided by (used in) operating activities | (44,712) | ||
Cash Flows from Investing Activities | |||
Change in restricted cash and restricted investments | 3,200 | ||
Net cash provided by (used in) investing activities | 7,739 | ||
Correction | Classification Of Restricted Cash And Restricted Investments | |||
Changes in assets and liabilities, net of acquisitions: | |||
Accounts receivables, net | (2,655) | ||
Accounts payable, net of change in restricted cash and restricted investments | 9,555 | ||
Net cash provided by (used in) operating activities | 6,900 | ||
Cash Flows from Investing Activities | |||
Change in restricted cash and restricted investments | (6,900) | ||
Net cash provided by (used in) investing activities | $ (6,900) |
Transactions - New Mexico Healt
Transactions - New Mexico Health Connections (Details) - USD ($) $ in Thousands | Sep. 25, 2017 | Sep. 30, 2017 | Sep. 30, 2016 |
Business Acquisition [Line Items] | |||
Cash paid for asset acquisition or business combination | $ 3,694 | $ 14,000 | |
New Mexico Health Connections | |||
Business Acquisition [Line Items] | |||
Total consideration | $ 10,300 | ||
Cash paid for asset acquisition or business combination | 10,000 | ||
Contingent consideration, liability | $ 300 |
Transactions - Aldera (Details)
Transactions - Aldera (Details) - USD ($) $ in Thousands, shares in Millions | Nov. 01, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Aug. 31, 2017 | Jul. 31, 2017 | Jun. 30, 2017 | Jun. 29, 2017 | May 31, 2017 | May 30, 2017 | Mar. 31, 2017 | Feb. 28, 2017 | Oct. 31, 2016 | Sep. 22, 2016 | Sep. 21, 2016 | Dec. 31, 2015 | Jun. 05, 2015 |
Purchase consideration: | |||||||||||||||||
Cash | $ 3,694 | $ 14,000 | |||||||||||||||
Liabilities assumed: | |||||||||||||||||
Goodwill | 628,341 | $ 626,569 | $ 608,903 | ||||||||||||||
Measurement period adjustment, decrease in goodwill | $ (1,772) | $ 0 | |||||||||||||||
Evolent Health LLC | |||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||
Parent's ownership percentage | 96.60% | 77.40% | 96.60% | 96.10% | 96.10% | 90.50% | 90.50% | 84.90% | 83.90% | 77.40% | 74.60% | 71.00% | 70.30% | ||||
Aldera | |||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||
Parent's ownership percentage | 100.00% | ||||||||||||||||
Transaction costs | $ 1,800 | $ 200 | |||||||||||||||
Purchase consideration: | |||||||||||||||||
Fair value of Class A common stock issued | $ 9,864 | ||||||||||||||||
Cash for settlement of software license | 7,000 | ||||||||||||||||
Cash | 17,481 | ||||||||||||||||
Total consideration | 34,345 | ||||||||||||||||
Tangible assets acquired: | |||||||||||||||||
Receivables | 430 | ||||||||||||||||
Prepaid expenses and other current assets | 272 | ||||||||||||||||
Property and equipment | 1,065 | ||||||||||||||||
Other non-current assets | 9 | ||||||||||||||||
Liabilities assumed: | |||||||||||||||||
Accounts payable | 429 | ||||||||||||||||
Accrued liabilities | 1,409 | ||||||||||||||||
Accrued compensation and employee benefits | 605 | ||||||||||||||||
Deferred revenue | 44 | ||||||||||||||||
Goodwill | 25,556 | ||||||||||||||||
Net assets acquired | 34,345 | ||||||||||||||||
Measurement period adjustment, decrease in goodwill | $ 400 | ||||||||||||||||
Aldera | Customer relationships | |||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||
Identifiable intangible assets | $ 7,000 | ||||||||||||||||
Liabilities assumed: | |||||||||||||||||
Useful life | 15 years | ||||||||||||||||
Aldera | Technology | |||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||
Identifiable intangible assets | $ 2,500 | ||||||||||||||||
Liabilities assumed: | |||||||||||||||||
Useful life | 5 years | ||||||||||||||||
Aldera | As Previously Determined | |||||||||||||||||
Purchase consideration: | |||||||||||||||||
Fair value of Class A common stock issued | $ 9,864 | ||||||||||||||||
Cash for settlement of software license | 7,000 | ||||||||||||||||
Cash | 17,481 | ||||||||||||||||
Total consideration | 34,345 | ||||||||||||||||
Tangible assets acquired: | |||||||||||||||||
Receivables | 624 | ||||||||||||||||
Prepaid expenses and other current assets | 272 | ||||||||||||||||
Property and equipment | 1,065 | ||||||||||||||||
Other non-current assets | 9 | ||||||||||||||||
Liabilities assumed: | |||||||||||||||||
Accounts payable | 429 | ||||||||||||||||
Accrued liabilities | 1,204 | ||||||||||||||||
Accrued compensation and employee benefits | 605 | ||||||||||||||||
Deferred revenue | 44 | ||||||||||||||||
Goodwill | 25,157 | ||||||||||||||||
Net assets acquired | 34,345 | ||||||||||||||||
Aldera | As Previously Determined | Customer relationships | |||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||
Identifiable intangible assets | 7,000 | ||||||||||||||||
Aldera | As Previously Determined | Technology | |||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||
Identifiable intangible assets | 2,500 | ||||||||||||||||
Aldera | Measurement Period Adjustments | |||||||||||||||||
Purchase consideration: | |||||||||||||||||
Fair value of Class A common stock issued | 0 | ||||||||||||||||
Cash for settlement of software license | 0 | ||||||||||||||||
Cash | 0 | ||||||||||||||||
Tangible assets acquired: | |||||||||||||||||
Receivables | (194) | ||||||||||||||||
Prepaid expenses and other current assets | 0 | ||||||||||||||||
Property and equipment | 0 | ||||||||||||||||
Other non-current assets | 0 | ||||||||||||||||
Liabilities assumed: | |||||||||||||||||
Accounts payable | 0 | ||||||||||||||||
Accrued liabilities | 205 | ||||||||||||||||
Accrued compensation and employee benefits | 0 | ||||||||||||||||
Deferred revenue | 0 | ||||||||||||||||
Goodwill | 399 | ||||||||||||||||
Aldera | Measurement Period Adjustments | Customer relationships | |||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||
Identifiable intangible assets | 0 | ||||||||||||||||
Aldera | Measurement Period Adjustments | Technology | |||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||
Identifiable intangible assets | $ 0 | ||||||||||||||||
Aldera | Evolent Health LLC | |||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||
Parent's ownership percentage | 77.40% | 77.20% | |||||||||||||||
Aldera | Class A | |||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||
Consideration transferred (in shares) | 0.5 |
Transactions - Valence Health (
Transactions - Valence Health (Details) - USD ($) shares in Thousands | Jun. 30, 2017 | Oct. 03, 2016 | Jun. 05, 2015 | Aug. 31, 2017 | Jun. 30, 2017 | May 31, 2017 | Mar. 31, 2017 | Sep. 30, 2016 | Mar. 31, 2017 | Aug. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Jul. 31, 2017 | Jun. 29, 2017 | May 30, 2017 | Feb. 28, 2017 | Oct. 02, 2016 | Sep. 22, 2016 | Sep. 21, 2016 | Dec. 31, 2015 |
Business Acquisition [Line Items] | |||||||||||||||||||||
Measurement period adjustment, goodwill | $ 1,772,000 | $ 0 | |||||||||||||||||||
Purchase consideration: | |||||||||||||||||||||
Cash | 3,694,000 | $ 14,000,000 | |||||||||||||||||||
Liabilities assumed: | |||||||||||||||||||||
Goodwill | $ 628,341,000 | 626,569,000 | $ 608,903,000 | ||||||||||||||||||
Impact of lease termination, reduction in lease abandonment liability | 0 | ||||||||||||||||||||
Lease cancellation and related brokerage fee | $ 0 | ||||||||||||||||||||
Common Stock | Class A | |||||||||||||||||||||
Liabilities assumed: | |||||||||||||||||||||
Issuance of common stock (in shares) | 13,200 | 8,816 | 4,500 | 7,000 | 7,500 | 8,600 | 19,700 | 20,100 | |||||||||||||
Evolent Health LLC | |||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||
Parent's ownership percentage | 96.10% | 70.30% | 96.60% | 96.10% | 90.50% | 83.90% | 83.90% | 96.60% | 96.60% | 77.40% | 96.10% | 90.50% | 84.90% | 77.40% | 74.60% | 71.00% | |||||
Valence Health | |||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||
Percentage of voting interests acquired | 100.00% | ||||||||||||||||||||
Percentage of issued and outstanding common stock | 10.50% | ||||||||||||||||||||
Contingent consideration arrangements (up to) | $ 12,400,000 | ||||||||||||||||||||
Contingent consideration arrangements fair value | 2,600,000 | ||||||||||||||||||||
Transaction costs | $ 5,900,000 | $ 2,700,000 | |||||||||||||||||||
Measurement period adjustment, goodwill | 400,000 | 1,400,000 | |||||||||||||||||||
Purchase consideration: | |||||||||||||||||||||
Fair value of Class A common stock issued | 160,525,000 | ||||||||||||||||||||
Cash for settlement of software license | 2,620,000 | ||||||||||||||||||||
Cash | 54,799,000 | ||||||||||||||||||||
Total consideration | 217,944,000 | ||||||||||||||||||||
Tangible assets acquired: | |||||||||||||||||||||
Restricted cash | 1,829,000 | ||||||||||||||||||||
Receivables | 8,336,000 | ||||||||||||||||||||
Prepaid expenses and other current assets | 3,465,000 | ||||||||||||||||||||
Property and equipment | 6,241,000 | ||||||||||||||||||||
Other non-current assets | 313,000 | ||||||||||||||||||||
Favorable leases assumed (net of unfavorable leases) | 4,197,000 | ||||||||||||||||||||
Liabilities assumed: | |||||||||||||||||||||
Accounts payable | 5,703,000 | ||||||||||||||||||||
Accrued liabilities | 3,865,000 | ||||||||||||||||||||
Accrued compensation and employee benefits | 9,200,000 | ||||||||||||||||||||
Deferred revenue | 2,662,000 | ||||||||||||||||||||
Other long-term liabilities | 2,328,000 | ||||||||||||||||||||
Net deferred tax liabilities | 12,766,000 | ||||||||||||||||||||
Goodwill | 143,087,000 | ||||||||||||||||||||
Net assets acquired | 217,944,000 | ||||||||||||||||||||
Acquired receivables | 9,100,000 | ||||||||||||||||||||
Acquired receivables, estimated uncollectible | 800,000 | ||||||||||||||||||||
Deferred tax liabilities | 13,300,000 | ||||||||||||||||||||
Gain (loss) on disposition of assets | 52,700,000 | ||||||||||||||||||||
Measurement period adjustment, accrued liabilities | $ 600,000 | ||||||||||||||||||||
Accelerated compensation cost | 3,900,000 | ||||||||||||||||||||
Valence Health | 540 W. Madison Street, Suite 1400 | |||||||||||||||||||||
Liabilities assumed: | |||||||||||||||||||||
Loss from lease abandonment | 6,500,000 | ||||||||||||||||||||
Remaining lease payments | $ 4,800,000 | $ 4,800,000 | 0 | $ 5,300,000 | |||||||||||||||||
Impact of lease termination, reduction in lease abandonment liability | $ 500,000 | (496,000) | |||||||||||||||||||
Lease cancellation and related brokerage fee | 4,365,000 | ||||||||||||||||||||
Valence Health | Class A | |||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||
Equity interest issued or issuable (in shares) | 6,800 | ||||||||||||||||||||
Valence Health | Common Stock | Class A | |||||||||||||||||||||
Liabilities assumed: | |||||||||||||||||||||
Issuance of common stock (in shares) | 200 | ||||||||||||||||||||
Valence Health | Customer relationships | |||||||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||||||
Identifiable intangible assets | $ 69,000,000 | ||||||||||||||||||||
Liabilities assumed: | |||||||||||||||||||||
Useful life | 20 years | ||||||||||||||||||||
Valence Health | Technology | |||||||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||||||
Identifiable intangible assets | $ 18,000,000 | ||||||||||||||||||||
Liabilities assumed: | |||||||||||||||||||||
Useful life | 5 years | ||||||||||||||||||||
Valence Health | As Previously Determined | |||||||||||||||||||||
Purchase consideration: | |||||||||||||||||||||
Fair value of Class A common stock issued | $ 159,614,000 | ||||||||||||||||||||
Cash for settlement of software license | 2,620,000 | ||||||||||||||||||||
Cash | 54,799,000 | ||||||||||||||||||||
Total consideration | 217,033,000 | ||||||||||||||||||||
Tangible assets acquired: | |||||||||||||||||||||
Restricted cash | 1,829,000 | ||||||||||||||||||||
Receivables | 8,587,000 | ||||||||||||||||||||
Prepaid expenses and other current assets | 3,465,000 | ||||||||||||||||||||
Property and equipment | 6,241,000 | ||||||||||||||||||||
Other non-current assets | 313,000 | ||||||||||||||||||||
Favorable leases assumed (net of unfavorable leases) | 4,323,000 | ||||||||||||||||||||
Liabilities assumed: | |||||||||||||||||||||
Accounts payable | 5,703,000 | ||||||||||||||||||||
Accrued liabilities | 3,865,000 | ||||||||||||||||||||
Accrued compensation and employee benefits | 9,200,000 | ||||||||||||||||||||
Deferred revenue | 2,022,000 | ||||||||||||||||||||
Other long-term liabilities | 2,328,000 | ||||||||||||||||||||
Net deferred tax liabilities | 13,316,000 | ||||||||||||||||||||
Goodwill | 141,709,000 | ||||||||||||||||||||
Net assets acquired | 217,033,000 | ||||||||||||||||||||
Valence Health | As Previously Determined | Customer relationships | |||||||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||||||
Identifiable intangible assets | 69,000,000 | ||||||||||||||||||||
Valence Health | As Previously Determined | Technology | |||||||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||||||
Identifiable intangible assets | 18,000,000 | ||||||||||||||||||||
Valence Health | Measurement Period Adjustments | |||||||||||||||||||||
Purchase consideration: | |||||||||||||||||||||
Fair value of Class A common stock issued | 911,000 | ||||||||||||||||||||
Cash for settlement of software license | 0 | ||||||||||||||||||||
Cash | 0 | ||||||||||||||||||||
Tangible assets acquired: | |||||||||||||||||||||
Restricted cash | 0 | ||||||||||||||||||||
Receivables | (251,000) | ||||||||||||||||||||
Prepaid expenses and other current assets | 0 | ||||||||||||||||||||
Property and equipment | 0 | ||||||||||||||||||||
Other non-current assets | 0 | ||||||||||||||||||||
Favorable leases assumed (net of unfavorable leases) | (126,000) | ||||||||||||||||||||
Liabilities assumed: | |||||||||||||||||||||
Accounts payable | 0 | ||||||||||||||||||||
Accrued liabilities | 0 | ||||||||||||||||||||
Accrued compensation and employee benefits | 0 | ||||||||||||||||||||
Deferred revenue | 640,000 | ||||||||||||||||||||
Other long-term liabilities | 0 | ||||||||||||||||||||
Net deferred tax liabilities | (550,000) | ||||||||||||||||||||
Goodwill | 1,378,000 | ||||||||||||||||||||
Valence Health | Measurement Period Adjustments | Customer relationships | |||||||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||||||
Identifiable intangible assets | 0 | ||||||||||||||||||||
Valence Health | Measurement Period Adjustments | Technology | |||||||||||||||||||||
Identifiable intangible assets acquired: | |||||||||||||||||||||
Identifiable intangible assets | $ 0 | ||||||||||||||||||||
Valence Health | Selling, general and administrative expenses | |||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||
Transaction costs | 1,500,000 | 2,600,000 | |||||||||||||||||||
Valence Health | Cost of revenue | |||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||
Transaction costs | $ 4,400,000 | $ 100,000 | |||||||||||||||||||
Valence Health | Revenue | |||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||
Measurement period adjustment, goodwill | $ 200,000 | ||||||||||||||||||||
Valence Health | Evolent Health LLC | |||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||
Parent's ownership percentage | 77.20% | 74.60% |
Transactions - Passport (Detail
Transactions - Passport (Details) shares in Millions, beneficiary in Millions | Feb. 01, 2016USD ($)beneficiaryshares | Sep. 30, 2017USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2015USD ($) |
Business Acquisition [Line Items] | |||||||
Loss on change in fair value of contingent consideration | $ 100,000 | $ 0 | $ 300,000 | $ 0 | |||
Tangible assets acquired: | |||||||
Goodwill | 628,341,000 | $ 626,569,000 | 628,341,000 | $ 608,903,000 | |||
Passport | |||||||
Business Acquisition [Line Items] | |||||||
Number of medicaid and medicare advantage beneficiaries | beneficiary | 0.3 | ||||||
Additional equity consideration (up to) | $ 10,000,000 | ||||||
Term of health plan management and managed care services arrangement | 10 years | ||||||
Transaction costs | $ 300,000 | ||||||
Contingent consideration, liability | 7,800,000 | $ 8,600,000 | 8,300,000 | 8,600,000 | |||
Loss on change in fair value of contingent consideration | $ 500,000 | $ 300,000 | |||||
Purchase consideration: | |||||||
Fair value of Class A common stock issued | 10,450,000 | ||||||
Fair value of contingent consideration | 7,750,000 | ||||||
Total consideration | 18,200,000 | ||||||
Tangible assets acquired: | |||||||
Prepaid expenses and other current assets | 6,900,000 | ||||||
Goodwill | 11,300,000 | ||||||
Net assets acquired | $ 18,200,000 | ||||||
Passport | Common Stock | Class A | |||||||
Business Acquisition [Line Items] | |||||||
Issuance of common stock (in shares) | shares | 1.1 |
Transactions - Pro Forma Inform
Transactions - Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | |
Business Acquisition [Line Items] | |||
Revenue | $ 91,936 | $ 262,233 | |
Net income (loss) | (16,247) | (205,483) | |
Net income (loss) attributable to noncontrolling interest | (4,067) | (52,604) | |
Net income (loss) attributable to Evolent Health, Inc. | $ (12,180) | $ (152,879) | |
Net income (loss) available to common shareholders, basic (in dollars per share) | $ (0.24) | $ (3.04) | |
Net income (loss) available to common shareholders, diluted (in dollars per share) | $ (0.24) | $ (3.04) | |
Passport | |||
Business Acquisition [Line Items] | |||
Adjustment for removal of transaction costs | $ (300) | ||
Passport | Recorded In 2016 | |||
Business Acquisition [Line Items] | |||
Adjustment for removal of transaction costs | $ 300 |
Transactions - Secondary Offeri
Transactions - Secondary Offerings (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | Jun. 05, 2015 | Aug. 31, 2017 | Jun. 30, 2017 | May 31, 2017 | Mar. 31, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Aug. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Jul. 31, 2017 | Jun. 29, 2017 | May 30, 2017 | Mar. 30, 2017 | Feb. 28, 2017 | Dec. 31, 2016 | Sep. 22, 2016 | Sep. 21, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 |
Business Acquisition [Line Items] | ||||||||||||||||||||||
Share price (in usd per share) | $ 10.33 | $ 14.73 | $ 19.51 | |||||||||||||||||||
Proceeds from issuance of common stock, net of payments of stock issuance costs | $ 166,947 | $ 0 | ||||||||||||||||||||
Payments of stock issuance costs | $ 300 | $ 2,100 | $ 1,500 | $ 2,100 | ||||||||||||||||||
Evolent Health LLC | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Parent's ownership percentage | 70.30% | 96.60% | 96.10% | 90.50% | 83.90% | 96.60% | 96.60% | 96.60% | 96.10% | 90.50% | 84.90% | 77.40% | 77.40% | 74.60% | 71.00% | |||||||
Evolent Health LLC | Over-Allotment Option | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Parent's ownership percentage | 84.90% | 83.90% | ||||||||||||||||||||
Class A | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Proceeds from issuance of common stock, net of payments of stock issuance costs | $ 166,900 | |||||||||||||||||||||
Proceeds from issuance of common stock | $ 175,000 | |||||||||||||||||||||
Class A | Common Stock | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 13,200 | 8,816 | 4,500 | 7,000 | 7,500 | 8,600 | 19,700 | 20,100 | ||||||||||||||
Share price (in usd per share) | $ 17 | $ 19.85 | $ 25.87 | $ 24.30 | $ 19.53 | $ 22.50 | $ 22.50 | $ 19.85 | $ 22.50 | |||||||||||||
Payments of stock issuance costs | $ 8,100 | |||||||||||||||||||||
Class A | Common Stock | Over-Allotment Option | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 1,100 | |||||||||||||||||||||
Share price (in usd per share) | $ 19.53 | |||||||||||||||||||||
Class A | Common Stock | Underwriters | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Share price (in usd per share) | $ 19.006375 | $ 19.006375 | ||||||||||||||||||||
Class A | Common Stock | Investor Stockholders | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 3,800 | 3,800 | 4,400 | 2,200 | 12,600 | |||||||||||||||||
Class A | Common Stock | Investor Stockholders | Over-Allotment Option | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 600 | |||||||||||||||||||||
Class A | Common Stock | Management Selling Stockholders | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 100 | |||||||||||||||||||||
Class A | Common Stock | Evolent Health, Selling Stockholders | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 700 | 3,100 | 3,100 | 6,400 | 7,400 | |||||||||||||||||
Class A | Common Stock | Evolent Health, Selling Stockholders | Over-Allotment Option | ||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 500 |
Transactions - Accordion Health
Transactions - Accordion Health, Inc. (Details) - Accordion $ in Millions | Jun. 08, 2017USD ($) |
Business Acquisition [Line Items] | |
Accordion purchase agreement, amount | $ 3.2 |
Accordion purchase agreement, contingent earn-out | 0.8 |
Accordion purchase agreement, deferred tax liabilities | 2 |
Technology Assets | |
Business Acquisition [Line Items] | |
Accordion purchase agreement, intangible assets acquired | 3.3 |
Accordion purchase agreement, capitalized transaction costs | $ 0.1 |
Intangible asset, useful life | 5 years |
Accordion purchase agreement, increase in intangible asset | $ 2 |
Transactions - Vestica (Details
Transactions - Vestica (Details) - USD ($) $ in Thousands | Mar. 01, 2016 | Sep. 30, 2017 | Sep. 30, 2016 |
Business Acquisition [Line Items] | |||
Cash | $ 3,694 | $ 14,000 | |
Vestica | |||
Business Acquisition [Line Items] | |||
Cash | $ 7,500 | ||
Contingent consideration, liability | 4,000 | ||
Vestica | Customer relationships | |||
Business Acquisition [Line Items] | |||
Total consideration | $ 7,500 | ||
Useful life | 13 years |
Investments - Investment Summar
Investments - Investment Summary (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Schedule of Held-to-maturity Securities [Line Items] | |
Amortized Costs | $ 44,341 |
Gross Unrealized Gains | 197 |
Gross Unrealized Losses | 35 |
Fair Value | 44,503 |
U.S. Treasury bills | |
Schedule of Held-to-maturity Securities [Line Items] | |
Amortized Costs | 28,119 |
Gross Unrealized Gains | 116 |
Gross Unrealized Losses | 27 |
Fair Value | 28,208 |
Corporate bonds | |
Schedule of Held-to-maturity Securities [Line Items] | |
Amortized Costs | 16,222 |
Gross Unrealized Gains | 81 |
Gross Unrealized Losses | 8 |
Fair Value | $ 16,295 |
Investments - Contractual Matur
Investments - Contractual Maturity (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Investments [Abstract] | |
Due in one year or less, Amortized Cost | $ 44,341 |
Due in one year or less, Fair Value | $ 44,503 |
Investments - Unrealized Losses
Investments - Unrealized Losses (Details) - U.S. Treasury bills - Level 2 $ in Thousands | Dec. 31, 2016USD ($)security |
Schedule of Held-to-maturity Securities [Line Items] | |
Unrealized loss for less than twelve months, Number of Securities | security | 1 |
Unrealized loss for less than twelve months, Fair Value | $ 4,002 |
Unrealized loss for less than twelve months, Unrealized Losses | $ 1 |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Aug. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Property, Plant and Equipment [Line Items] | |||||||
Total property and equipment | $ 58,209 | $ 58,209 | $ 58,209 | $ 36,415 | |||
Accumulated depreciation and amortization | (11,279) | (11,279) | (11,279) | (5,236) | |||
Total property and equipment, net | 46,930 | 46,930 | 46,930 | 31,179 | |||
Depreciation expense | 2,300 | $ 900 | 6,000 | $ 2,400 | |||
Capitalized computer software, amortization | 1,200 | 400 | 2,800 | 900 | |||
Increase in net loss | 13,129 | 15,775 | 55,977 | 201,585 | 226,778 | ||
Change in estimated useful life | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Increase in net loss | 200 | 200 | |||||
Computer hardware | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Total property and equipment | 5,436 | 5,436 | $ 5,436 | 4,474 | |||
Useful life | 3 years | ||||||
Furniture and equipment | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Total property and equipment | 2,448 | 2,448 | $ 2,448 | 2,448 | |||
Useful life | 3 years | ||||||
Internal-use software development costs | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Total property and equipment | 41,879 | 41,879 | $ 41,879 | 21,385 | |||
Total property and equipment, net | $ 37,600 | 37,600 | 37,600 | 19,900 | |||
Capitalized computer software additions | 8,400 | $ 3,600 | 20,400 | $ 10,700 | |||
Useful life | 5 years | 7 years | |||||
Leasehold improvements | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Total property and equipment | $ 8,446 | $ 8,446 | $ 8,446 | $ 8,108 |
Goodwill and Intangible Asset53
Goodwill and Intangible Assets, Net (Details) - USD ($) $ / shares in Units, $ in Thousands | Mar. 31, 2016 | Mar. 01, 2016 | Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Aug. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 05, 2015 |
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Goodwill | $ 628,341 | $ 628,341 | $ 628,341 | $ 626,569 | $ 608,903 | |||||||
Share price (in usd per share) | $ 10.33 | $ 14.73 | $ 19.51 | |||||||||
Goodwill impairment | $ 160,600 | 0 | $ 0 | 0 | $ 160,600 | 160,600 | ||||||
Intangible assets, net | 249,492 | 249,492 | 249,492 | 258,923 | $ 169,000 | |||||||
Gross Carrying Amount | 282,854 | 282,854 | 282,854 | 277,323 | ||||||||
Accumulated Amortization | 33,362 | 33,362 | 33,362 | 18,400 | ||||||||
Net Carrying Value | 249,492 | 249,492 | 249,492 | $ 258,923 | ||||||||
Amortization of intangible assets | 5,300 | $ 2,700 | 15,000 | $ 7,900 | ||||||||
Change In Intangible Technology Estimated Useful Life | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Increase in net loss | 300 | $ 300 | ||||||||||
Customer relationships | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Weighted-Average Remaining Useful Life | 20 years 8 months 19 days | 21 years 6 months | ||||||||||
Gross Carrying Amount | 203,500 | 203,500 | $ 203,500 | $ 203,500 | ||||||||
Accumulated Amortization | 15,988 | 15,988 | 15,988 | 9,018 | ||||||||
Net Carrying Value | 187,512 | 187,512 | $ 187,512 | $ 194,482 | ||||||||
Corporate trade name | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Weighted-Average Remaining Useful Life | 17 years 8 months 19 days | 18 years 4 months 26 days | ||||||||||
Gross Carrying Amount | 19,000 | 19,000 | $ 19,000 | $ 19,000 | ||||||||
Accumulated Amortization | 2,217 | 2,217 | 2,217 | 1,505 | ||||||||
Net Carrying Value | $ 16,783 | 16,783 | $ 16,783 | $ 17,495 | ||||||||
Useful life | 20 years | |||||||||||
Technology | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Weighted-Average Remaining Useful Life | 5 years | 3 years 4 months | 5 years 2 months 15 days | |||||||||
Gross Carrying Amount | $ 56,157 | 56,157 | $ 56,157 | $ 50,500 | ||||||||
Accumulated Amortization | 14,664 | 14,664 | 14,664 | 7,753 | ||||||||
Net Carrying Value | $ 41,493 | 41,493 | $ 41,493 | $ 42,747 | ||||||||
Useful life | 5 years | |||||||||||
Below market lease, net | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Weighted-Average Remaining Useful Life | 8 years 6 months | 9 years 5 months | ||||||||||
Gross Carrying Amount | $ 4,197 | 4,197 | $ 4,197 | $ 4,323 | ||||||||
Accumulated Amortization | 493 | 493 | 493 | 124 | ||||||||
Net Carrying Value | $ 3,704 | $ 3,704 | $ 3,704 | 4,199 | ||||||||
Vestica | Customer relationships | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Acquired intangible assets | $ 108,300 | |||||||||||
Useful life | 13 years | |||||||||||
Minimum | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Share price (in usd per share) | $ 8.48 | |||||||||||
Minimum | Customer relationships | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Useful life | 15 years | |||||||||||
Minimum | Technology | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Useful life | 5 years | |||||||||||
Maximum | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Share price (in usd per share) | $ 12.32 | |||||||||||
Maximum | Customer relationships | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Useful life | 25 years | |||||||||||
Maximum | Technology | ||||||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||||||
Useful life | 7 years |
Goodwill and Intangible Asset54
Goodwill and Intangible Assets, Net - Goodwill (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 |
Goodwill [Roll Forward] | ||||||
Balance as of beginning-of-period | $ 626,569 | $ 608,903 | $ 608,903 | |||
Goodwill Acquired | 0 | 178,266 | ||||
Measurement period adjustment, goodwill | 1,772 | 0 | ||||
Goodwill impairment | $ (160,600) | $ 0 | $ 0 | 0 | $ (160,600) | (160,600) |
Balance as of end-of-period | $ 628,341 | $ 628,341 | $ 626,569 |
Long-term Debt (Details)
Long-term Debt (Details) $ / shares in Units, shares in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Dec. 31, 2016USD ($)shares$ / shares | Sep. 30, 2017USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | |
Debt Instrument [Line Items] | ||||
Amortization of deferred financing costs | $ 685,000 | $ 0 | ||
Senior Notes | Convertible Senior Notes due 2021 | ||||
Debt Instrument [Line Items] | ||||
Face amount | $ 125,000,000 | $ 125,000,000 | 125,000,000 | |
Interest rate | 2.00% | |||
Proceeds from issuance of debt | $ 120,400,000 | |||
Debt issuance costs | $ 4,600,000 | |||
Repurchase price due to fundamental change as percentage of principal amount | 100.00% | |||
Interest expense | 600,000 | 1,900,000 | ||
Amortization of deferred financing costs | 200,000 | 700,000 | ||
Debt conversion denominator shares per principal amount | $ 1,000 | |||
Convertible debt carrying value | 120,283,000 | 121,164,000 | 121,164,000 | |
Senior Notes | Convertible Senior Notes due 2021 | Level 2 | ||||
Debt Instrument [Line Items] | ||||
Face amount | $ 142,400,000 | $ 142,400,000 | ||
Fair value | $ 125,000,000 | |||
Senior Notes | Convertible Senior Notes due 2021 | Class A | Common Stock | ||||
Debt Instrument [Line Items] | ||||
Initial conversion rate per $1000 principal amount | 0.0416082 | |||
Conversion price (in dollars per share) | $ / shares | $ 24.03 | |||
Initial conversion amount (in shares) | shares | 5.2 |
Long-term Debt - Convertible Se
Long-term Debt - Convertible Senior Notes Carrying Value and Interest Expense (Details) - Senior Notes - Convertible Senior Notes due 2021 - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Debt Instrument [Line Items] | ||
Carrying value | $ 121,164,000 | $ 120,283,000 |
Unamortized discount | 3,836,000 | 4,717,000 |
Principal amount | $ 125,000,000 | $ 125,000,000 |
Remaining amortization period | 4 years 2 months 20 days | 4 years 10 months 25 days |
Level 2 | ||
Debt Instrument [Line Items] | ||
Principal amount | $ 142,400,000 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) - USD ($) shares in Thousands | Jun. 30, 2017 | Oct. 03, 2016 | Jun. 05, 2015 | Aug. 31, 2017 | Jun. 30, 2017 | May 31, 2017 | Mar. 31, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Aug. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Jun. 29, 2017 |
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||
Tax receivables agreement, percent of tax savings to be paid | 85.00% | 85.00% | |||||||||||||
Rent expense | $ 3,000,000 | $ 1,100,000 | $ 8,000,000 | $ 3,400,000 | |||||||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||||||||||
Restricted funds | 16,932,000 | 16,932,000 | $ 40,416,000 | ||||||||||||
Impact of lease termination, reduction in lease abandonment liability | 0 | ||||||||||||||
Lease cancellation and related brokerage fee | 0 | ||||||||||||||
Payments of stock issuance costs | 300,000 | $ 2,100,000 | $ 1,500,000 | $ 2,100,000 | |||||||||||
Common Stock | Class A | |||||||||||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||||||||||
Issuance of common stock (in shares) | 13,200 | 8,816 | 4,500 | 7,000 | 7,500 | 8,600 | 19,700 | 20,100 | |||||||
Payments of stock issuance costs | $ 8,100,000 | ||||||||||||||
Valence Health | Common Stock | Class A | |||||||||||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||||||||||
Issuance of common stock (in shares) | 200 | ||||||||||||||
Valence Health | 540 W. Madison Street, Suite 1400 | |||||||||||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||||||||||
Loss from lease abandonment | 6,500,000 | ||||||||||||||
Remaining lease payments | $ 4,800,000 | $ 4,800,000 | 0 | $ 0 | $ 5,300,000 | ||||||||||
Impact of lease termination, reduction in lease abandonment liability | $ 500,000 | (496,000) | |||||||||||||
Lease cancellation and related brokerage fee | 4,365,000 | ||||||||||||||
Letters of credit for facility leases | |||||||||||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||||||||||
Restricted funds | 3,813,000 | 3,813,000 | 4,852,000 | ||||||||||||
Collateral with financial institutions | |||||||||||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||||||||||
Restricted funds | 8,150,000 | 8,150,000 | $ 4,950,000 | ||||||||||||
Minimum | |||||||||||||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||||||||||||
Letters of credit outstanding, minimum | $ 3,800,000 | $ 3,800,000 |
Commitments and Contingencies58
Commitments and Contingencies - Lease Abandonment Liability (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Liabilities Subject to Compromise, Period Increase (Decrease) [Roll Forward] | ||
Accrual as of beginning-of-period | $ 6,100 | $ 0 |
Abandonment expense | 0 | 6,460 |
Impact of lease termination | 0 | |
Abandonment amortization | (1,239) | (360) |
Lease cancellation fee | 0 | |
Accrual as of end-of-period | $ 0 | $ 6,100 |
Commitments and Contingencies59
Commitments and Contingencies - Concentration Risk (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Concentration Risk [Line Items] | |||||
Percentage of cash and cash equivalents held with FDIC participating banks | 74.20% | 74.20% | |||
Cash and cash equivalents (including restricted cash) | $ 295.9 | $ 295.9 | |||
Percentage of cash and cash equivalents held in money market funds | 25.80% | 25.80% | |||
Customer A | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 19.00% | 24.90% | 18.50% | 18.70% | |
Customer B | Customer Concentration Risk | Accounts Receivable | Customer Receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 14.20% | ||||
Customer B | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 10.00% | ||||
Customer C | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 15.30% | 16.50% | |||
Customer D | Customer Concentration Risk | Revenue | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 14.30% | 14.70% | |||
Customer E | Customer Concentration Risk | Accounts Receivable | Customer Receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 13.90% | 14.30% |
Earnings (Loss) Per Common Sh60
Earnings (Loss) Per Common Share - Computation of Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |||||
Net income (loss) | $ (13,129) | $ (15,775) | $ (55,977) | $ (201,585) | $ (226,778) |
Less: | |||||
Net income (loss) attributable to non-controlling interests | (541) | (4,567) | (8,471) | (59,250) | |
Net income (loss) available for common shareholders | $ (12,588) | $ (11,208) | $ (47,506) | $ (142,335) | |
Weighted-average common shares outstanding (in shares) | 70,328,000 | 43,110,000 | 60,867,000 | 42,632,000 | |
Earnings (Loss) per Common Share | |||||
Basic (in dollars per share) | $ (0.18) | $ (0.26) | $ (0.78) | $ (3.34) | |
Diluted (in dollars per share) | $ (0.18) | $ (0.26) | $ (0.78) | $ (3.34) | |
Class B | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Convertible preferred stock, shares issued upon conversion (in shares) | 1 | 1 |
Earnings (Loss) Per Common Sh61
Earnings (Loss) Per Common Share - Antidilutive Securities (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Number of antidilutive securities excluded from the calculation of earning per share (in shares) | 11,408 | 20,754 | 17,635 | 19,265 |
Exchangeable Class B common stock | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Number of antidilutive securities excluded from the calculation of earning per share (in shares) | 2,654 | 17,145 | 8,846 | 17,397 |
Restricted stock units (RSUs) | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Number of antidilutive securities excluded from the calculation of earning per share (in shares) | 577 | 416 | 557 | 196 |
Stock options and performance-based stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Number of antidilutive securities excluded from the calculation of earning per share (in shares) | 2,976 | 3,193 | 3,031 | 1,672 |
Convertible senior notes | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Number of antidilutive securities excluded from the calculation of earning per share (in shares) | 5,201 | 0 | 5,201 | 0 |
Stock-based Compensation - Comp
Stock-based Compensation - Compensation Expense (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Share-based compensation expense | $ 5,708,000 | $ 4,799,000 | $ 16,172,000 | $ 13,844,000 |
Share-based compensation expense capitalized as software development costs | 0 | 0 | 0 | 0 |
Cost of revenue | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Share-based compensation expense | 401,000 | 369,000 | 1,143,000 | 1,219,000 |
Selling, general and administrative expenses | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Share-based compensation expense | 5,307,000 | 4,430,000 | 15,029,000 | 12,625,000 |
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Share-based compensation expense | 4,291,000 | 3,961,000 | 12,452,000 | 11,700,000 |
Performance-based stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Share-based compensation expense | 113,000 | 113,000 | 335,000 | 261,000 |
RSUs | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Share-based compensation expense | $ 1,304,000 | $ 725,000 | $ 3,385,000 | $ 1,883,000 |
Stock-based Compensation - Awar
Stock-based Compensation - Awards Granted (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based awards granted (in shares) | 84,249 | 0 | 961,313 | 900,000 |
Performance-based stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based awards granted (in shares) | 0 | 0 | 0 | 267,770 |
RSUs | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based awards granted (in shares) | 37,361 | 32,238 | 461,494 | 445,569 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Contingency [Line Items] | ||||
Provision (benefit) for income taxes | $ (1,714) | $ (256) | $ (2,009) | $ (1,614) |
Effective tax rate | 11.60% | 1.60% | 3.50% | 0.80% |
Tax receivables agreement, percent of tax savings to be paid | 85.00% | 85.00% | ||
Evolent Health LLC | ||||
Income Tax Contingency [Line Items] | ||||
Decrease in deferred tax liabilities | $ 13,100 | |||
Evolent Health LLC | Income Tax Benefit | ||||
Income Tax Contingency [Line Items] | ||||
Decrease in deferred tax liabilities | 300 | |||
Additional Paid-in Capital | Evolent Health LLC | ||||
Income Tax Contingency [Line Items] | ||||
Decrease in deferred tax liabilities | $ 1,600 | $ 12,800 | $ 1,600 | |
Tax Year 2016 | ||||
Income Tax Contingency [Line Items] | ||||
Federal alternative minimum and state income tax liability expense | $ 700 | |||
Change in indefinite lived components and components as part of the outside basis difference in our partnership interest | ||||
Income Tax Contingency [Line Items] | ||||
Provision (benefit) for income taxes | $ 2,100 |
Investments In and Advances t65
Investments In and Advances to Affiliates (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Schedule of Equity Method Investments [Line Items] | |||||
Loss from affiliates | $ 369 | $ 448 | $ 1,446 | $ 462 | |
Revenue related to long-term services agreement (less than current QTD) | $ 100 | 100 | $ 400 | 100 | |
GPAC | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Equity method investment, cost | $ 3,000 | ||||
Economic interest percentage | 26.00% | 27.00% | 26.00% | ||
Equity method investment, ownership percentage | 28.00% | 28.00% | 28.00% | ||
Loss from affiliates | $ 400 | $ 400 | $ 1,400 | $ 500 | |
Class B | GPAC | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Equity method investment, shares acquired (in shares) | 21,429 |
Non-controlling Interests (Deta
Non-controlling Interests (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | Jun. 05, 2015 | Aug. 31, 2017 | Jun. 30, 2017 | May 31, 2017 | Mar. 31, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Aug. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Jul. 31, 2017 | Jun. 29, 2017 | May 30, 2017 | Feb. 28, 2017 | Dec. 30, 2016 | Sep. 22, 2016 | Sep. 21, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 |
Noncontrolling Interest [Line Items] | ||||||||||||||||||||||
Proceeds from issuance of common stock, net of payments of stock issuance costs | $ 166,947 | $ 0 | ||||||||||||||||||||
Share price (in usd per share) | $ 10.33 | $ 14.73 | $ 19.51 | |||||||||||||||||||
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | ||||||||||||||||||||||
Non-controlling interests as of beginning-of-period | 209,588 | |||||||||||||||||||||
Cumulative-effect adjustment from adoption of new accounting principle | $ 0 | |||||||||||||||||||||
Reclassification of non-controlling interests | 0 | 0 | ||||||||||||||||||||
Net income (loss) attributable to non-controlling interests | $ (541) | $ (4,567) | (8,471) | $ (59,250) | ||||||||||||||||||
Non-controlling interests as of end-of-period | $ 35,932 | $ 35,932 | $ 209,588 | |||||||||||||||||||
Evolent Health LLC | ||||||||||||||||||||||
Noncontrolling Interest [Line Items] | ||||||||||||||||||||||
Parent's ownership percentage | 70.30% | 96.60% | 96.10% | 90.50% | 83.90% | 96.60% | 96.60% | 96.60% | 77.40% | 96.10% | 90.50% | 84.90% | 77.40% | 74.60% | 71.00% | |||||||
Evolent Health LLC | Passport | ||||||||||||||||||||||
Noncontrolling Interest [Line Items] | ||||||||||||||||||||||
Parent's ownership percentage | 70.80% | 70.30% | ||||||||||||||||||||
Evolent Health LLC | Valence Health and Aldera | ||||||||||||||||||||||
Noncontrolling Interest [Line Items] | ||||||||||||||||||||||
Parent's ownership percentage | 77.40% | 74.60% | ||||||||||||||||||||
Class A | ||||||||||||||||||||||
Noncontrolling Interest [Line Items] | ||||||||||||||||||||||
Proceeds from issuance of common stock, net of payments of stock issuance costs | $ 166,900 | |||||||||||||||||||||
Common Stock | Class A | ||||||||||||||||||||||
Noncontrolling Interest [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 13,200 | 8,816 | 4,500 | 7,000 | 7,500 | 8,600 | 19,700 | 20,100 | ||||||||||||||
Issuance of common stock for business combinations (in shares) | 2,100 | 8,451 | ||||||||||||||||||||
Share price (in usd per share) | $ 17 | $ 19.85 | $ 25.87 | $ 24.30 | $ 19.53 | $ 22.50 | $ 22.50 | $ 19.85 | $ 22.50 | |||||||||||||
Common Stock | Class A | Investor Stockholders | ||||||||||||||||||||||
Noncontrolling Interest [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 3,800 | 3,800 | 4,400 | 2,200 | 12,600 | |||||||||||||||||
Common Stock | Class A | Management Selling Stockholders | ||||||||||||||||||||||
Noncontrolling Interest [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 100 | |||||||||||||||||||||
Common Stock | Class A | Evolent Health, Selling Stockholders | ||||||||||||||||||||||
Noncontrolling Interest [Line Items] | ||||||||||||||||||||||
Issuance of common stock (in shares) | 700 | 3,100 | 3,100 | 6,400 | 7,400 | |||||||||||||||||
Non-controlling Interests | ||||||||||||||||||||||
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | ||||||||||||||||||||||
Non-controlling interests as of beginning-of-period | $ 34,680 | $ 230,416 | $ 209,588 | $ 285,238 | $ 285,238 | |||||||||||||||||
Cumulative-effect adjustment from adoption of new accounting principle | 0 | 0 | 0 | (139) | (139) | |||||||||||||||||
Decrease in non-controlling interests as a result of Class B Exchanges | 0 | (28,220) | (168,883) | (28,220) | ||||||||||||||||||
Reclassification of non-controlling interests | 1,793 | 0 | 3,698 | 0 | 19,745 | |||||||||||||||||
Net income (loss) attributable to non-controlling interests | (541) | (4,567) | (8,471) | (59,250) | ||||||||||||||||||
Non-controlling interests as of end-of-period | $ 34,680 | $ 197,629 | $ 35,932 | $ 197,629 | $ 35,932 | $ 197,629 | $ 209,588 |
Fair Value Measurement - Assets
Fair Value Measurement - Assets and Liabilities on Recurring Basis (Details) - Recurring - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Cash and cash equivalents | $ 76,408 | $ 1,128 |
Liabilities | ||
Contingent consideration | 8,600 | 8,300 |
Level 1 | ||
Assets | ||
Cash and cash equivalents | 76,408 | 1,128 |
Liabilities | ||
Contingent consideration | 0 | 0 |
Level 2 | ||
Assets | ||
Cash and cash equivalents | 0 | 0 |
Liabilities | ||
Contingent consideration | 0 | 0 |
Level 3 | ||
Assets | ||
Cash and cash equivalents | 0 | 0 |
Liabilities | ||
Contingent consideration | $ 8,600 | $ 8,300 |
Fair Value Measurement - Change
Fair Value Measurement - Changes in Contingent Consideration (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Balance as of beginning of period | $ 8,500 | $ 7,750 | $ 8,300 | $ 0 |
Additions | 0 | 0 | 0 | 7,750 |
Realized and unrealized (gains) losses, net | 100 | 0 | 300 | 0 |
Balance as of end of period | $ 8,600 | $ 7,750 | $ 8,600 | $ 7,750 |
Fair Value Measurement - Valuat
Fair Value Measurement - Valuation Techniques and Significant Unobservable Inputs (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | |
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||||
Risk-adjusted recurring revenue compound annual growth rate, period | 5 years | 5 years | ||||
Contingent consideration, fair value | $ 8,600 | $ 8,300 | $ 8,500 | $ 7,750 | $ 7,750 | $ 0 |
Theoretical recurring revenue | 1,000 | 1,000 | ||||
Contingent consideration | Real options approach | Level 3 | ||||||
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||||
Contingent consideration, fair value | $ 8,600 | $ 8,300 | ||||
Risk-adjusted recurring revenue CAGR | 92.50% | 97.00% | ||||
Contingent consideration | Real options approach | Level 3 | Minimum | ||||||
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||||
Discount rate/time value | 2.70% | 2.50% | ||||
Contingent consideration | Real options approach | Level 3 | Maximum | ||||||
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||||
Discount rate/time value | 4.00% | 4.50% | ||||
Contingent consideration | Real options approach 2018-2021 | Level 3 | Minimum | ||||||
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | ||||||
Risk-adjusted recurring revenue CAGR | 19.20% | 50.80% |
Related Parties (Details)
Related Parties (Details) | Sep. 30, 2017 | Jun. 30, 2016 |
GPAC | ||
Related Party Transaction [Line Items] | ||
Economic interest percentage | 26.00% | 27.00% |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event | Oct. 31, 2017USD ($) | Oct. 25, 2017USD ($)installment |
Premier Health | ||
Subsequent Event [Line Items] | ||
Expected consideration | $ 31,000,000 | |
Current Customer | Implementation Fund Loan | Loans Payable | ||
Subsequent Event [Line Items] | ||
Face amount | $ 20,000,000 | |
Interest rate | 2.50% | |
Number of equal principal and interest installments | installment | 10 | |
Amount of equal principal and interest installments | $ 2,000,000 |
Uncategorized Items - evh-20170
Label | Element | Value |
Stock Issued During Period, Value, New Issues | us-gaap_StockIssuedDuringPeriodValueNewIssues | $ 166,947,000 |
Additional Paid-in Capital [Member] | ||
Stock Issued During Period, Value, New Issues | us-gaap_StockIssuedDuringPeriodValueNewIssues | 166,859,000 |
Common Class A [Member] | Common Stock [Member] | ||
Stock Issued During Period, Value, New Issues | us-gaap_StockIssuedDuringPeriodValueNewIssues | $ 88,000 |