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What changed in Evolent Health, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Evolent Health, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+473 added−445 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-23)

Top changes in Evolent Health, Inc.'s 2024 10-K

473 paragraphs added · 445 removed · 327 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

79 edited+40 added−17 removed109 unchanged
Biggest changeThe table below presents certain demographic data based on our latest engagement surveys for each of the respective years below (results are based on self-identification): December 31, 2023 2022 2021 Gender (global representation) Women 68% 62 % 62 % Men 32% 38 % 38 % Racial and ethnic minorities (U.S. representation) Black or African American 21.4% 22.2 % 21.8 % Asian 10.8% 12.6 % 13.8 % Hispanic or Latino 11.7% 14.1 % 12.1 % Two or more races 3.0% 2.8 % 2.7 % American Indian or Alaska Native 0.4% 0.3 % 0.2 % Native Hawaiian or Other Pacific Islander 0.4% 0.4 % 0.4 % Leadership Representation (Managing Director level or above) Women 50 % 48 % 50 % Racial and ethnic minorities 30 % 28 % 29 % Employee self-identification (U.S. representation) LGBTQ+ 11.3 % 8.7 % 7.2 % Veteran 10.1 % 2.0 % 2.4 % Disabled Individual 13.9 % 7.8 % 4.8 % 12 Information about our Executive Officers Our executive officers as of February 22, 2024, were as follows: Name Age Position Seth Blackley 45 Chief Executive Officer Dan McCarthy 39 President John Johnson 40 Chief Financial Officer Emily Rafferty 41 Chief Operating Officer Jonathan Weinberg 56 General Counsel Aammaad Shams 40 Chief Accounting Officer Seth Blackley is our co-founder and has served as our Chief Executive Officer since October 2020 and served as our President from August 2011 until his promotion.
Biggest changeThe table below presents self-identification and self-disclosed employee demographic data: December 31, 2024 Gender (global representation) Women 68.0% Men 32.0% Racial and ethnic minorities (U.S. representation) (1) Racial and ethnic minorities 50.4% Non-racial and ethnic minorities 49.6% Leadership Representation (U.S. representation, Managing Director level or above) Women 57.1% Men 42.9% Racial and ethnic minorities 23.4% Non-racial and ethnic minorities 76.6% Employee self-identification (U.S. representation) LGBTQ+ 12.1% Veteran 2.3% Individual with disability 2.0% ———————— (1) Metrics around the minority representation include Black or African American, Asian, Hispanic or Latino, American Indian, Alaska Native, Native Hawaiian, Other Pacific Islander, Two or More Races, and decline to state.
Termination fees and the related notice period in certain of our contracts are determined based on the scope of the market-facing solutions that the partner has adopted and the duration of the contract.
Termination fees and the related notice period in certain of our contracts are determined based on the scope of the market-facing solutions that our partner has adopted and the duration of the contract.
Highlights of the capabilities of Identifi® include the following: • Data and integration services: Data from disparate sources, such as EMRs, and lab and pharmacy data, is collected, assembled, integrated and maintained to provide health care professionals with a holistic view of the patient. • Clinical and business content: Clinical and business content is applied to the integrated data to create actionable information to optimize clinical and financial performance. • EMR integration: Data and clinical insights from Identifi® are fed back into partner EMRs to improve both provider and patient satisfaction, create workflow efficiencies, promote clinical documentation and coding and provide clinical support at the point-of-care. • Applications: A suite of cloud-based applications manages the clinical, financial and operational aspects of the value-based model.
Highlights of the capabilities of Identifi® include the following: • Data and integration services: Data from disparate sources, such as EMRs, and lab and pharmacy data, is collected, assembled, integrated and maintained to provide health care professionals with a holistic view of the patient. • Clinical and business content: Clinical and business content is applied to the integrated data to create actionable information to optimize clinical and financial performance. • EMR integration: Data and clinical insights from Identifi® are fed back into partner EMRs to improve both provider and patient satisfaction, create workflow efficiencies, promote clinical documentation and coding and provide clinical support at the point-of-care. 3 • Applications: A suite of cloud-based applications manages the clinical, financial and operational aspects of the value-based model.
We make available, free of charge, on or through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 14
We make available, free of charge, on or through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 15
The economic model of our total cost of care management solution is primarily performance-based, which we believe enhances our ability to influence provider behavior by aligning our incentives with our partners. We use, and may continue to use, different go-to-market brand names for various solution packages, depending on the markets we seek to address.
The economic model of our total cost of care management solution is primarily performance-based, which we believe enhances our 2 ability to influence provider behavior by aligning our incentives with our partners. We use, and may continue to use, different go-to-market brand names for various solution packages, depending on the markets we seek to address.
While we believe we comply in all material respects with applicable health care and insurance laws and regulations, these regulations can vary significantly from jurisdiction to jurisdiction, and interpretation of existing laws and regulations may change periodically. Federal and state legislatures also may enact various legislative proposals that could materially impact certain aspects of our business.
While we believe we comply in all material respects with applicable health care and insurance laws and regulations, these regulations can vary significantly from jurisdiction to jurisdiction, and interpretation and enforcement of existing laws and regulations may change periodically. Federal and state legislatures also may enact various legislative proposals that could materially impact certain aspects of our business.
We cannot assure you as to the ultimate content, timing, or effect of any changes, nor is it possible at this time to estimate the impact of any such potential legislation or changes. Health care reform has resulted in profound changes to the individual health insurance market and our business, and we expect these changes to continue.
We cannot assure you as to the ultimate content, timing, or effect of any changes, nor is it possible at this time to estimate the impact 9 of any such potential legislation or changes. Health care reform has resulted in profound changes to the individual health insurance market and our business, and we expect these changes to continue.
In October 2018, we acquired New Century Health, a national population health leader in managing specialty care for Medicare, commercial and Medicaid members under performance-based arrangements, focused primarily on oncology and cardiovascular care, initiating Evolent’s current primary strategy to pursue solutions for managing high prevalence, complex specialty care.
In October 2018, we acquired New Century Health, a national leader in managing specialty care for Medicare, commercial and Medicaid members under performance-based arrangements, focused primarily on oncology and cardiovascular care, initiating Evolent’s current primary strategy to pursue solutions for managing high prevalence, complex specialty care.
These go-to-market brand names include: (i) Value Based Services, wherein we support primarily health systems in their value-based operations and (ii) Evolent Care 2 Partners, wherein we offer physicians the opportunity to join Evolent’s proprietary payer contracting vehicles, scaled risk pools, and operating model.
These go-to-market brand names include: (i) Value Based Services, wherein we support primarily health systems in their value-based operations and (ii) Evolent Care Partners, wherein we offer physicians the opportunity to join Evolent’s proprietary payer contracting vehicles, scaled risk pools and operating model.
For example, some of our contracts may be terminated by the partner if we fail to achieve target performance metrics over a specified period. Certain of our contracts may be terminated by the partner immediately following repeated failures by us to provide specified levels of service over periods ranging from six months to more than a year.
For example, some contracts may be terminated by the partner if we fail to achieve target performance metrics over a specified period. Certain contracts may be terminated by the partner immediately following repeated failures by us to provide specified levels of service over periods ranging from six months to more than a year.
In addition, Congress, state legislatures and third-party payers may continue to review and assess alternative health care delivery and payment systems and may in the future propose and adopt legislation or policy changes or implementations effecting additional fundamental changes in the health care delivery system, including with respect to Medicare, and Medicaid, and exchange programs.
In addition, CMS Congress, state legislatures and third-party payers may continue to review and assess alternative health care delivery and payment systems and may in the future propose and adopt legislation or policy changes or implementations effecting additional fundamental changes in the health care delivery system, including with respect to Medicare, and Medicaid, and exchange programs.
We evaluate when these investment and compensation arrangements create financial relationships under the Stark Law and design structures that are intended to satisfy exceptions under the Stark Law or Medicare Shared Savings Program waiver. 9 Antitrust Laws The antitrust laws are designed to prevent competitors from jointly fixing prices.
We evaluate when these investment and compensation arrangements create financial relationships under the Stark Law and design structures that are intended to satisfy exceptions under the Stark Law or Medicare Shared Savings Program waiver. Antitrust Laws The antitrust laws are designed to prevent competitors from jointly fixing prices.
Shams was a Director in KPMG, LLP’s Accounting Advisory Services practice from June 2015 until March 2018. Mr. Shams is a Certified Public Accountant in the Commonwealth of Virginia. 13 Our executive officers are elected annually by our Board of Directors.
Shams was a Director in KPMG, LLP’s Accounting Advisory Services practice from June 2015 until March 2018. Mr. Shams is a Certified Public Accountant in the Commonwealth of Virginia. Our executive officers are elected annually by our Board of Directors.
Our platform integrates clinical analytics and protocols, pharmacy management, physician engagement, network management and claims payment to drive improved outcomes for partners. We believe we are creating scaled benefits for our partners in areas such as data analytics, administrative services and care management.
Our platform integrates clinical analytics and protocols, pharmacy management, physician engagement, network management and claims payment to drive improved outcomes for partners. 5 We believe we are creating scaled benefits for our partners in areas such as data analytics, administrative services and care management.
These exclusivity or other restrictive provisions may apply to specific competitors of our partners or specific geographic areas, subject to certain exceptions. Accordingly, these exclusivity clauses may prevent us from entering into relationships with certain potential partners. 7 The contracts with our partners impose other obligations on us.
These exclusivity or other restrictive provisions may apply to specific competitors of our partners or specific geographic areas, subject to certain exceptions. Accordingly, these exclusivity clauses may prevent us from entering into relationships with certain potential partners. The contracts with our partners impose other obligations on us.
Prior to his New Century Health role, Mr. Johnson was Senior Vice President, Corporate Performance at Evolent Health from January 2018 to March 2019 and Vice President, Corporate Performance at Evolent Health from April 2016 to December 2017. Prior to joining the Company, Mr.
Prior to his New Century Health role, Mr. 14 Johnson was Senior Vice President, Corporate Performance at Evolent Health from January 2018 to March 2019 and Vice President, Corporate Performance at Evolent Health from April 2016 to December 2017. Prior to joining the Company, Mr.
Growth Opportunities Multiple Avenues for Growth with Our Existing, Embedded Partner Base We have established a multi-year partnership model with multiple drivers of embedded growth through the following avenues: • growth in lives in existing covered populations; • partners expanding into new lines of value-based care to capture growth in new profit pools; • cross-selling additional solutions to existing partners; and • capturing value created through a variety of value-based arrangements by participating alongside our partners in upside risk sharing arrangements.
Growth Opportunities Multiple Avenues for Growth with Our Existing, Embedded Partner Base We have established a partnership model with multiple drivers of embedded growth through the following avenues: • growth in lives in existing covered populations; • partners expanding into new lines of value-based care to capture growth in new profit pools; • cross-selling additional solutions to existing partners; and • capturing value created through a variety of value-based arrangements by participating alongside our partners in upside risk sharing arrangements.
In addition to the information about us and our subsidiaries contained in this Annual Report on Form 10-K, information about us can be found on our website including information on our corporate governance principles and practices. Our Investor Relations website at ir.evolenthealth.com contains a significant amount of information about us, including financial and other information for investors.
In addition to the information about us and our subsidiaries contained in this Annual Report on Form 10-K, information about us can be found on our website including information on our corporate governance principles and practices. Our Investor Relations website at ir.evolent.com contains a significant amount of information about us, including financial and other information for investors.
We make key investments in tools and resources to help engage and attract talent through modern recruitment practices. This includes in-bound (job postings/ referrals) and outbound (outreach to passive talent) strategies aimed at casting a wide net to engage the best talent available to us.
We make key investments in tools and resources to help engage and attract talent through modern, and data-driven recruitment practices. This includes in-bound (job postings/ referrals) and outbound (outreach to passive talent) strategies aimed at casting a wide net to engage the best talent available to us.
The following are summaries of key federal and state laws and regulations that impact our operations: Governmental Health Care Programs & Health Care Reform We are subject to regulation by both CMS and state agencies with respect to certain services we provide relating to Medicaid and Medicare programs.
The following are summaries of key federal and state laws and regulations that impact our operations: Governmental Health Care Programs and Health Care Reform We are subject to regulation by both CMS and state agencies with respect to certain services we provide relating to Medicaid, Medicare, and ACA programs and payers.
Government Regulation Our business is subject to extensive, complex and rapidly changing federal and state laws and regulations. Various federal and state agencies have discretion to issue regulations and interpret and enforce health care laws.
Government Regulation Our business is subject to extensive, complex and rapidly evolving federal and state laws and regulations. Various federal and state agencies have discretion to issue regulations and interpret and enforce health care laws.
Acquisition of NIA On November 17, 2022, Evolent Health LLC and the Company entered into a definitive agreement for the Company to acquire NIA.
Significant Activities Acquisition of NIA On November 17, 2022, Evolent Health LLC and the Company entered into a definitive agreement for the Company to acquire NIA.
We believe adherence to evidence-based clinical pathways supports better outcomes for patients, a better experience for physicians, and lower costs for the healthcare system overall. Specialty care represents a significant and fast-growing portion of healthcare costs in the U.S., driven in part by the pace of development of new therapies and treatments.
We believe adherence to evidence-based clinical pathways supports better outcomes for patients, a better experience for physicians, and lower costs for the healthcare system overall. Specialty care represents a significant and fast-growing portion of healthcare costs in the United States, driven in part by the pace of development of new therapies and treatments.
Similarly, we cannot predict whether pending or future federal or state legislation or court proceedings will change various aspects of the Medicaid and Medicare programs, nor can we predict the impact those changes will have on our business operations or financial results, but the effects could be materially adverse.
Similarly, we cannot predict whether pending or future federal or state legislation or court proceedings will change various aspects of these programs, nor can we predict the impact those changes will have on our business operations or financial results, but the effects could be materially adverse.
Most of our contracts include cure periods for certain breaches, during which time we may attempt to resolve any issues that would trigger a partner’s ability to terminate the contract. However, certain of our contracts are also terminable immediately on the occurrence of certain events.
Most of our contracts include cure periods for certain breaches, during which time we may attempt to resolve any issues that would trigger a partner’s ability to terminate the contract. Certain contracts are terminable immediately upon the occurrence of certain events.
Revenue from our Specialty Technology and Services Suite is derived from non-capitation arrangements under our specialty care management solution. Revenue from our Performance Suite includes services provided through capitation arrangements where we assume responsibility for the cost of medical claims under our scope.
Revenue from our Performance Suite includes services provided through capitation arrangements where we assume responsibility for the cost of medical claims under our scope. This revenue is derived from arrangements under our specialty care management solution and our total cost of care management solution.
We also compete based on price and aligned performance relationships and are subject to pricing pressures as a result of, among other things, competition within the industry, consolidation of health care industry participants, practices of managed care organizations, government action and financial stress experienced by our partners.
We also compete on the basis of price. We are subject to pricing pressures as a result of, among other things, competition within the industry, consolidation of health care industry participants, practices of managed care organizations, government action and financial stress experienced by our partners.
We are constantly looking for ways to improve our fraud, waste and abuse detection methods. The fraud, waste and abuse laws include federal and state anti-kickback laws that generally prohibit the payment or receipt of kickbacks, bribes or other remuneration in exchange for the referral of patients or other health-related business.
Compliance with these laws may require substantial resources. We are constantly looking for ways to improve our fraud, waste and abuse detection methods. The fraud, waste and abuse laws include federal and state anti-kickback laws that generally prohibit the payment or receipt of kickbacks, bribes or other remuneration in exchange for the referral of patients or other health-related business.
Our competitors are constantly developing products and services that may become more efficient or appealing to our existing partners and potential partners. Additionally, some health care information technology providers have begun to incorporate enhanced analytical tools and functionality into their core product and service offerings used by health care providers.
Our competitors are constantly developing products and services that may become more efficient or appealing to our existing partners and potential partners. Additionally, some health care information technology providers have begun to incorporate enhanced analytical tools and functionality into their core product and service offerings used by health care providers, including with the use of AI or machine learning.
Certain of our contracts may be terminated immediately by the partner if we lose applicable licenses, go bankrupt, lose our liability insurance, become insolvent, file for bankruptcy or receive an exclusion, suspension or debarment from state or federal government authorities.
Certain contracts may be terminated immediately by the partner if we lose applicable licenses, go bankrupt, lose our liability insurance or receive an exclusion, suspension or debarment from state or federal government authorities.
Since our inception, we have invested a significant amount in expanding our offerings. 4 Differentiated Offering by Performing More Services Utilizing An Integrated Strategy Building off of our strength in oncology and cardiology, we believe the acquisition of NIA will accelerate our market leadership to serve the needs of large scale, national payer organizations to manage the cost and quality of care across large and complex medical specialties.
Differentiated Offering by Performing More Services Utilizing An Integrated Strategy Building off of our strength in oncology and cardiology, we believe the acquisition of NIA will accelerate our market leadership to serve the needs of large scale, national payer organizations to manage the cost and quality of care across large and complex medical specialties.
Additionally, if a partner were to lose applicable licenses, go bankrupt, lose liability insurance, become insolvent, file for bankruptcy or receive an exclusion, suspension or debarment from state or federal government authorities, our contract with such partner could in effect be terminated. The loss, termination or renegotiation of any contract could negatively impact our results.
Additionally, if a partner were to lose applicable licenses, go bankrupt, lose liability insurance, become insolvent, file for bankruptcy or receive an exclusion, suspension or debarment from state or federal government authorities, the contract with such partner could in effect be terminated.
We focus on the following areas to this strategy: • Talent Attraction, Selection, and Hiring • Employee Compensation and Incentives • Employee Training and Career Development • Employee Well Being • Diversity, Equity and Inclusion (“DEI”) Talent Attraction, Selection, and Hiring We seek to source the right talent by looking at both internal and external talent pools.
We focus on the following areas: • Talent Attraction, Selection, and Hiring • Employee Compensation and Incentives • Employee Training and Career Development • Employee Well Being • Culture of Inclusion 12 Talent Attraction, Selection, and Hiring We seek to source the right talent by looking at both internal and external talent pools.
In some cases, we are responsible for paying for all, or substantially all, of the cost of care for a defined scope of health care services out of the revenue we receive. Some of our contracts allow for advance billing of our partners.
In some cases, we are responsible for paying for all, or substantially all, of the cost of care for a defined scope of health care services out of the revenue we receive.
The contracts may contain exclusivity or other restrictive provisions which are negotiated on an individual basis and vary depending on many factors, including the term and scope of the contract. The term of these exclusivity and other restrictive provisions typically corresponds to the term of the contract.
The loss, termination or renegotiation of any contract could negatively impact our results. The contracts may contain exclusivity or other restrictive provisions which are negotiated on an individual basis and vary depending on many factors, including the term and scope of the contract. The term of these exclusivity and other restrictive provisions typically corresponds to the term of the contract.
We provide our employees with benefits including medical insurance, dental, vision, paid time off, and 401k plan with company match for eligible employees. In addition, we offer fertility support, bariatric surgery, diabetes, and hypertension program offerings, as well as 100% paid pregnancy leave and parental leave.
We believe that we have a responsibility to support our people’s health and well-being. We provide our employees with benefits including medical insurance, dental, vision, paid time off, and 401(k) plan with company match for eligible employees. In addition, we offer fertility support, bariatric surgery, diabetes, and hypertension program offerings, as well as 100% paid pregnancy leave and parental leave.
Fraud, Waste and Abuse Laws Investigating and prosecuting healthcare fraud, waste and abuse continues to be a top priority for state and federal law enforcement entities. The focus of these efforts has been directed at Medicare, Medicaid, the ACA’s Health Insurance Marketplace (“Health Insurance Marketplace”) and commercial products. Compliance with these laws may require substantial resources.
It may also begin to introduce some regulatory frameworks and guardrails. Fraud, Waste and Abuse Laws Investigating and prosecuting healthcare fraud, waste and abuse continues to be a top priority for state and federal law enforcement entities. The focus of these efforts has been directed at Medicare, Medicaid, the ACA’s Health Insurance Marketplace (“Health Insurance Marketplace”) and commercial products.
Expand Offerings to Meet Evolving Market Needs There are multiple business offerings that our partners may require to operate in a value-based care environment that we do not currently provide, including but not limited to: • physician employment; • PBM expansion to include additional specialty pharmacy management capabilities; • additional Specialty Technology and Services Suite lines of business beyond oncology, cardiology and musculoskeletal, including kidney and fetal-maternal medicine care; • on-site or specialty clinic services; and • consumer engagement and digital outreach.
We anticipate the manner with which we partner and share in risk with health care providers will likely continue to evolve over time given the still nascent and fragmented nature of value-based care. 6 Expand Offerings to Meet Evolving Market Needs There are multiple business offerings that our partners may require to operate in a value-based care environment that we do not currently provide, including but not limited to: • physician employment; • PBM expansion to include additional specialty pharmacy management capabilities; • additional Specialty Technology and Services Suite lines of business beyond oncology, cardiology and musculoskeletal, including kidney and fetal-maternal medicine care; • on-site or specialty clinic services; and • consumer engagement and digital outreach.
McCarthy was a leader at McKinsey & Company’s healthcare practice. Our Chief Financial Officer, John Johnson, served as the acting Chief Financial Officer for New Century Health along with various roles within the Company since 2016.
Our Chief Financial Officer, John Johnson, served as the acting Chief Financial Officer for New Century Health along with various roles within the Company since 2016.
We were founded in 2011, ahead of the implementation of the ACA and before the rapid expansion of programs, such as Medicare ACOs or Medicare bundled payment initiatives.
We were founded in 2011, ahead of the implementation of the ACA and before the rapid expansion of programs, such as Medicare ACOs or Medicare bundled payment initiatives. Since our inception, we have invested a significant amount in expanding our offerings.
Our Solutions We have three primary solutions: (i) specialty care management services, (ii) total cost of care management and (iii) administrative services. From time to time, we package our solutions under various go-to-market brand names to create product differentiation. Our partners may engage us to provide one, or multiple types of solutions, depending on their specific needs.
From time to time, we package our solutions under various go-to-market brand names to create product differentiation. Our partners may engage us to provide one, or multiple types of solutions, depending on their specific needs.
From time to time, we may also pursue acquisition and investment opportunities of businesses related to services we currently provide or that are complementary to our technical capabilities.
From time to time, we may also pursue acquisition and investment opportunities of businesses related to services we currently provide or that are complementary to our technical capabilities. For example, we completed recent acquisitions described in Part I - Item 1.
In January 2023, we acquired NIA, a specialty benefit management organization that focuses on managing cost and quality in the areas of radiology, musculoskeletal, physical medicine and genetics. As of January 1, 2023, we began managing our operations and allocating resources across one segment, instead of two.
In January 2023, we acquired NIA, a specialty benefit management organization that focuses on managing cost and quality in the areas of radiology, musculoskeletal, physical medicine and genetics.
As we increase our exposure to Medicare and Medicaid businesses through new and existing partners, we increase our exposure to changes in government policy with respect to and regulation of the Medicaid and Medicare programs in which we and our partners participate.
Roughly three quarters of Medicaid beneficiaries are served by private Medicare Managed Care Organizations (“MCOs”). As we increase our exposure to Medicare and Medicaid businesses through new and existing partners, we increase our exposure to changes in government policy with respect to and regulation of the Medicaid and Medicare programs in which we and our partners participate.
Additionally, expansion of enforcement activity could adversely affect our business and financial condition. Going forward, we expect CMS, Congress, and state agencies to continue to closely scrutinize each component of the Medicare and Medicaid programs, as well as modify the terms and requirements of the programs.
Going forward, we expect CMS, Congress, and state agencies to continue to closely scrutinize each component of the Medicare, Medicaid, and exchange programs, as well as modify the terms and requirements of the programs.
Partner Relationships We have sought to partner with leading payers and providers in sizable markets, which we believe creates a growth cycle that benefits from the secular transition to value-based care.
Our dedicated business development team works closely with our partners to identify additional service opportunities on a continuous basis. Partner Relationships We have sought to partner with leading payers and providers in sizable markets, which we believe creates a growth cycle that benefits from the secular transition to value-based care.
Although the revenue from our contracts is not guaranteed because certain of our contracts are terminable for convenience by our partners after a notice period has passed, certain partners would be required to pay us a termination fee in certain circumstances.
For example, after a specified period, certain of our contracts are terminable for convenience by our partners after a notice period has passed and, in certain cases, partners would be required to pay us a termination fee.
In addition, certain of our contracts provide that if we fail to meet specified implementation targets, the contracts will terminate and we will be subject to financial penalties. The initial terms of New Century Health contracts, including contracts of IPG and Vital Decisions, typically are multi-year.
In addition, certain of our contracts provide that if we fail to meet specified implementation targets, the contracts will terminate and/or we will be subject to financial penalties. These provisions could impact our cash flows and profitability. The initial terms of our specialty contracts are typically multi-year.
In some of our contracts, a defined portion of the revenue is at risk and can be refunded to the partner if certain service levels are not attained. We monitor our compliance with the service levels to determine whether a refund will be provided and record an estimate of these refunds.
In some of our contracts, a defined portion of the revenue is at risk and can be refunded to the partner if certain service levels are not attained.
The entrance or expansion of these larger companies in the managed healthcare industry (including our customers who have in-sourced or who may choose to in-source healthcare services) could increase the competitive pressures we face and could limit our ability to maintain or increase our rates. Other competitors have proprietary technology that differentiates their product and service offerings from ours.
The entrance or expansion of these larger companies in the managed healthcare industry (including our customers who have in-sourced or who may choose to in-source healthcare services) could increase the competitive pressures we face and could limit our ability to maintain or increase our rates. If this happens, our profitability could be adversely affected.
Our contracts governing the relationships with our partners include key terms which may include the period of performance, revenue rates, advanced billing terms, service level agreements, termination clauses, exclusivity clauses and right of first refusal clauses.
From time to time, we restructure or renegotiate our contracts with partners to adapt to changing market conditions and dynamics. Our contracts governing the relationships with our partners include key terms which may include the period of performance, revenue rates, advanced billing terms, service level agreements, termination clauses, and exclusivity clauses.
NIA is a specialty benefit management company with a complementary service offering to the Company’s historic specialties. Based on feedback from our clients, we believe the market for value-based specialty care is large, fragmented and lacking a market leader to provide clinically sophisticated, technology-enabled solutions across the highest cost, highly prevalent and most complex medical specialties.
Based on feedback from our clients, we believe the market for value-based specialty care is large, fragmented and lacking a market leader to provide clinically sophisticated, technology-enabled solutions across the highest cost, highly prevalent and most complex medical specialties. The acquisitions of NIA and IPG by Evolent are part of our competitive response to this apparent unmet need.
Generally, for our Performance Suite, Specialty Technology and Services Suite and Administrative Services revenue, we are paid a fixed fee per member per month. Also included in our specialty care management services solution are certain services billed on a per-case basis and presented as Cases.
Also included in our specialty care management services solution are certain services billed on a per-case basis and presented as Cases.
Blackley was the Executive Director of Corporate Development and Strategic Planning at The Advisory Board from June 2007 to August 2011. Our President, Dan McCarthy, served as the New Century Health’s Chief Executive Officer since 2019 and held multiple leadership roles within Evolent since joining the Company in 2014. Prior to joining the Company, Mr.
Our President, Dan McCarthy, served as the New Century Health’s Chief Executive Officer since 2019 and held multiple leadership roles within Evolent since joining the Company in 2014. Prior to joining the Company, Mr. McCarthy was a leader at McKinsey & Company’s healthcare practice.
Our partners’ health plans generally will be covered entities, and, as their business associate, they require us to contractually comply with certain aspects of these standards by entering into requisite business associate agreements.
Our partners’ health plans generally will be covered entities, and, as their business associate, they require us to contractually comply with certain aspects of these standards by entering into requisite business associate agreements. HHS has recently proposed updating the HIPAA Security Rule in an effort to strengthen the cybersecurity requirements that protect electronic 11 Protected Health Information.
We are rigorous in our selection process to facilitate alignment with our company values and core needs of teams. And finally, we conduct background checks and have a comprehensive onboarding program. Employee Compensation and Incentives We aim to attract and retain the highest caliber of health care talent.
We are rigorous in our selection process to facilitate alignment with our company values and core needs of teams. And finally, we conduct background checks and have a comprehensive onboarding program. Employee Compensation and Incentives Our Total Rewards philosophy is dedicated to attracting, growing, and retaining top talent to drive company success and nurture our culture.
Employees and their families can access mental health resources as part of their benefits, covering a spectrum of mental wellness needs. In addition, we have an active employee listening strategy, including employee surveys, personal impact days to promote social improvement engagement, an employee relief fund, holistic wellness initiatives during the year that include yoga, cooking sessions, meditation, and wellness challenges.
In addition, we have an active employee listening strategy, including employee surveys, personal impact days to promote social improvement engagement, an employee relief fund, holistic wellness initiatives during the year that include yoga, cooking sessions, meditation, and wellness challenges. 13 Culture of Inclusion Evolent supports inclusion efforts and is committed to non-discrimination practices.
In addition, we provide comprehensive quality management for oncology and cardiology patients from diagnosis through advance care planning services as well as identifying high quality, lowest cost of care for outpatient orthopedic surgeries.
In addition, we provide comprehensive quality management for oncology and cardiology patients from diagnosis through advance care planning services as well as identifying high quality, lowest cost of care for outpatient orthopedic surgeries. 1 We provide a differentiated approach by (i) assembling networks of high-performance providers, (ii) designing evidence-based clinical pathways and (iii) deploying proprietary specialty care management technology.
The Company has also established a captive insurance company under the laws of the State of Vermont and is subject to the captive insurance laws of that state. 10 Intellectual Property Our continued growth and success depend, in part, on our ability to protect our intellectual property and proprietary technology, including our Identifi® software and CarePro TM platform.
Intellectual Property Our continued growth and success depend, in part, on our ability to protect our intellectual property and proprietary technology, including our Identifi® software and CarePro TM platform.
The partnership model enables cultural alignment, integration into the provider care delivery and payment work-flow, contractual relationships and a cycle of clinical and cost improvement with shared financial benefit.
The partnership model enables cultural alignment, integration into the provider care delivery and payment work-flow, contractual relationships and a cycle of clinical and cost improvement with shared financial benefit. In certain cases, we also agree to participate alongside our partners in risk-sharing or other support arrangements to increase our alignment of interests via performance-based relationships.
We develop and manage comprehensive specialty networks, provide physician engagement and support and identify provider financial incentive alignment.
(i) Assembling high-performance provider networks We develop high-performance provider networks with tools, capabilities and incentives to align and support physicians and other healthcare providers. We develop and manage comprehensive specialty networks, provide physician engagement and support and identify provider financial incentive alignment.
We also capitalize software development costs related to Identifi® and CarePro TM . Our research and development expenditures and capitalized software development costs also include the suite of products developed primarily by New Century Health. Human Capital Management We believe our people differentiate our business and power our mission. As of December 31, 2023, we had approximately 4,700 global employees.
We also capitalize software development costs related to Identifi® and CarePro TM . Human Capital Management We believe our people differentiate our business and power our mission. As of December 31, 2024, we had approximately 4,500 global employees. None of our employees are represented by a labor union, and we are not a party to any collective bargaining agreements.
We have established a global talent management approach to invest in our employees’ ongoing learning and to identify and develop talent that accelerates our business. We support a culture of growth and development through engaging and relevant resources including Evolent-exclusive live learnings and curated, on-demand content through LinkedIn Learning.
We support a culture of growth and development through engaging and relevant resources including Evolent-exclusive live learnings and curated, on-demand content through LinkedIn Learning. These resources are available to all employees through our online learning center.
None of our employees are represented by a labor union, and we are not a party to any collective bargaining agreements. Our primary human capital objective is to attract, retain and develop great talent that is committed to our mission and business objectives.
Our primary human capital objective is to attract, retain and develop great talent that is committed to our mission and business objectives.
Medicare is a federal program that provides hospital and medical insurance benefits to persons age 65 and over, as well as certain other individuals. Medicaid programs are jointly funded by federal and state governments and are administered by states under an approved plan that provides hospital and other health care benefits to qualifying individuals.
Medicare is a federal program that provides hospital and medical insurance benefits to persons aged 65 and over, as well as certain other individuals.
Our sales team works closely with our leadership team and subject matter experts to foster long-term relationships with our partners’ leadership and board of directors given the nature of our partnerships. Our dedicated business development team works closely with our partners to identify additional service opportunities on a continuous basis.
Sales and Marketing We market and sell our services to payers and providers throughout the United States. Our sales team works closely with our leadership team and subject matter experts to foster long-term relationships with our partners’ leadership and board of directors given the nature of our partnerships.
Substantially all these contracts may be immediately terminated with cause and many of NIA’s contracts are terminable without cause by the customer or NIA either upon the giving of requisite notice and the passage of a specified period of time (typically between 30 and 180 days) or upon the occurrence of other specified events.
While they regularly contain year-to-year renewal provisions, we cannot assure you any or all of these contracts will be renewed in any particular year as these contracts may be immediately terminated with cause and many of our specialty contracts, following an initial term, are terminable without cause by the customer or Evolent either upon the giving of requisite notice and the passage of a specified period of time (typically between 30 and 180 days) or upon the occurrence of other specified events. 7 The revenue from our contracts is not guaranteed.
If not, we consider the factors that regulatory authorities are likely to consider in attempting to identify the intent behind such arrangements. We also design business models that reduce the risk that any such arrangements might be viewed as abusive and trigger Anti-Kickback Statute claims.
If not, we consider the factors that regulatory authorities are likely to consider in attempting to identify the intent behind such arrangements.
Our applications scale with the clinical, financial and administrative needs of our provider partners. As additional capabilities are required by our partners, they are often deployed as applications through Identifi®. 3 Sources of Revenue The majority of our revenue is derived from recurring multi-year contracts which we believe enables us to have strong visibility into future revenue.
Our applications scale with the clinical, financial and administrative needs of our provider partners. As additional capabilities are required by our partners, they are often deployed as applications through Identifi®. Sources of Revenue Revenue from our Specialty Technology and Services Suite is derived from non-capitation arrangements under our specialty care management solution.
CMS-0057-F further imposes stricter medical necessity decision timeframes on federal managed care programs, effective CY 2026, as well as complex technical interface requirements for Medicare and Medicaid which are to facilitate increased data sharing between managed care plans, enrollees and providers and streamline the prior authorization process. 8 The U.S.
CMS-0057-F further imposes stricter medical necessity decision timeframes on federal managed care programs, effective CY 2026, as well as complex technical interface requirements, effective CY 2027, for Medicare, Medicaid, the Children’s Health Insurance Program (“CHIP”), and Qualified Health Plans (“QHPs”) offered on the ACA Federally Facilitated Exchange.
Many states have proposed, and some have passed, bills which prescribe how providers and services which meet certain approval rates become exempt from prior authorization for a period of time.
Many states have proposed, and some have passed, bills which prescribe how providers and services which meet certain approval rates become exempt from prior authorization for a period of time, widely known as “gold carding.” Most recently, the state of Illinois passed a law requiring guidance on gold carding to be adopted; the new law would exempt qualifying providers from prior authorization on all services subject to review for the year in which they qualify.
Our senior leadership team has extensive experience in the health care industry and a track record of delivering measurable clinical, financial and operational improvement for health care providers and payers. Our Chief Executive Officer, Seth Blackley, had served as our President since August 2011. Prior to co-founding the Company, Mr.
Proven Leadership Team We have made a significant investment in building an industry-leading management team. Our senior leadership team has extensive experience in the health care industry and a track record of delivering measurable clinical, financial and operational improvement for health care providers and payers.
We rely on shared values and a leadership framework to create an environment with clear expectations and where everyone has the opportunity to develop and grow. Additionally, we continue to deepen our internal mobility program, initially launched in 2020, aimed at retaining talent.
We rely on shared values and a leadership framework to create an environment with clear expectations and where everyone has the opportunity to learn, develop and grow. Employee Well-Being Our approach to employee well-being reflects the spirit of our mission to change the health of the nation.
It is not possible to predict the outcome of this congressional or regulatory activity, either of which could adversely affect us.
Further since taking office in January 2025, the Trump administration has taken dramatic steps to freeze some federal funding and reduce the size of the federal workforce. It is not possible to predict the outcome of this congressional, executive, or regulatory activity, either of which could adversely affect us.
NIA is part of Evolent’s specialty care management offering. Refer to “Part II - Item 8. Financial Statements and Supplementary Data - Note 4” for additional discussion regarding the NIA acquisition. Competitive Strengths We believe we are well-positioned to benefit from the transformations occurring in health care payment and delivery described above.
NIA is part of Evolent’s specialty care management offering. Refer to “Part II - Item 8. Financial Statements and Supplementary Data - Note 4” for additional discussion regarding the NIA acquisition. Acquisition of Machinify On August 1, 2024, the Company completed its acquisition of certain assets of Machinify, Inc. and the exclusive, perpetual and royalty-free license of Machinify Auth.
This revenue is derived from arrangements under our specialty care management solution and our total cost of care management solution. Administrative Services revenue is derived from recurring multi-year platform and operations contracts under our administrative services solution.
Administrative Services revenue is derived from recurring multi-year platform and operations contracts under our administrative services solution. Generally, for our Performance Suite, Specialty Technology and Services Suite and Administrative Services revenue, we are paid a fixed fee per member per month.
Congress (“Congress”) and state and local legislatures and regulators may propose and adopt legislation or policy changes or implementations effecting additional fundamental changes with respect to Medicare and Medicaid programs. Such changes in the law, or new interpretations of existing laws, may have a significant impact on our methods and costs of doing business.
Such changes in the law, or new interpretations of existing laws, may have a significant impact on our methods and costs of doing business. Additionally, expansion of enforcement activity could adversely affect our business and financial condition.
We believe in pay for performance and structure our compensation to annually incentivize and reward high performance. We periodically review and evaluate our compensation and pay practices for market competitiveness. Employee Growth and Development We believe the continued growth and development of our talent is critical to maintaining our success and growth as a company.
Employee Growth and Development We believe the continued growth and development of our talent is critical to maintaining our success and growth as a company. We have established a global talent management approach to invest in our employees’ ongoing learning and to identify and develop talent that accelerates our business.
On August 1, 2022, we consummated the acquisition of IPG for $256.5 million in cash and the issuance of 3.7 million shares of Class A common stock. IPG is part of Evolent’s specialty care management services solution. Refer to “Part II - Item 8. Financial Statements and Supplementary Data - Note 4” for additional discussion regarding the IPG transaction.
Refer to “Part II - Item 8. Financial Statements and Supplementary Data - Note 4” for additional discussion regarding the Machinify acquisition.
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As a result of this approach, we have seen as much as a 30% increase in adherence to best evidence for populations that we manage.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks include, but are not limited to, the following: • We may be unable to efficiently integrate NIA into our operations. • The historical financial information of NIA related to the NIA acquisition may not be a reliable indicator of future results. • We derive a significant portion of our revenues from our largest partners. • The market for value-based health care in the United States is rapidly evolving. • The health care regulatory and political framework is uncertain and evolving. • If we are unable to offer new and innovative products and services or our products and services fail to keep pace our results of operations may suffer. • We have made and entered, and may in the future make and enter acquisitions, investments and alliances and joint ventures, which may be difficult to integrate, result in unanticipated costs or dilute our stockholders. • Our revenues and growth rely, in part, on our partners and revenues from our engagements, which are subject to factors outside of our control. • Failure to accurately predict our exposure under performance-based contracts could result in a reduction in profitability. • If we fail to effectively manage our growth and costs, our business could be harmed. • Public health emergencies have adversely affected, and could in the future, adversely affect our business and the business of our customers and suppliers. • Our offshore support and professional services may prove difficult to manage or may not allow us to realize our cost reduction goals. • If we lose key members of our management team or employees or are unable to attract and retain employees, our compensation costs will increase and our business and operating results will be adversely affected. • We have recorded a significant amount of goodwill, and we may never realize the full value of our intangible assets, causing us to record impairments that may negatively affect our results of operations. • We may need to obtain additional financing. • We have experienced net losses in the past and we may not achieve profitability in the future. • We are and may become subject to litigation, proceedings, government inquiries, reviews, audits or investigations. • We typically incur significant upfront costs in our partner relationships, and if we are unable to develop or grow these partner relationships over time, we are unlikely to recover these costs and our operating results may suffer. • If we do not continue to attract new partners and successfully capture new opportunities with new or existing partners, we may not achieve our financial projections, and our results of operations would be harmed. • The costs of compliance with sustainability or other environmental, social responsibility or governance laws, regulations, or policies, including investor and client-driven policies and standards, could adversely affect our business. • As we enter into an increasing number and variety of risk sharing arrangements with partners, our revenues and profitability could be limited and negatively impacted. • If the estimates and assumptions we use to determine the size of the target markets for our services are inaccurate, our future growth rate may be impacted and our business would be harmed. • Consolidation in the health care industry could have a material adverse effect on us. • We face intense competition, which could limit our ability to maintain or expand market share within our industry, and if we do not maintain or expand our market share our business and operating results will be harmed. • Increasing inflationary pressures and consumer costs may have a negative effect on our margins, profitability and results of operations. • We are subject to data privacy and protection laws. • Data loss or corruption due to failures or errors in our systems or service disruptions at our data centers may adversely affect our reputation and relationships with existing partners, which could have a negative impact on us. • Our business is subject to online security risks, and if we are unable to safeguard the security and privacy of confidential data, we may face significant liabilities and our reputation and business will be harmed. • If we are unable to obtain, maintain and enforce intellectual property protection, others may be able to develop and commercialize technology and products similar to ours, and our ability to commercialize our technology and products may be adversely affected. • If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business may be adversely affected. 15 • Third parties may initiate legal proceedings alleging that we are infringing or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on us. • Our use of “open source” software could adversely affect our ability to offer our services and subject us to possible litigation. • If we are unable to protect the confidentiality of our trade secrets, know-how and other proprietary information, the value of our technology and products could be adversely affected. • We do not control the intellectual property rights covering certain technologies and any loss of rights to these technologies or the rights licensed to us could prevent us from developing and/or commercializing our products. • Any restrictions on our use of, or ability to license, data, or our failure to license data and integrate third-party technologies, could have a material adverse effect on us. • We rely on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our partners, and any failure or interruption in the services provided by these third parties or our own systems could expose us to litigation and negatively impact our relationships with partners, adversely affecting our brand and our business. • We rely on third-party vendors to host and maintain our technology platform. • If we identify material weaknesses in the future, we and our auditor may conclude that our internal control over financial reporting is not effective and we may be unable to produce timely and accurate financial statements. • We are required to pay certain of our pre-IPO investors for certain tax benefits we may claim in the future, and these amounts are expected to be material. • We will not be reimbursed for any payments made under the TRA in the event that any tax benefits are disallowed. • The agreements between us and certain of our pre-IPO investors were made in the context of an affiliated relationship and may contain different terms than comparable agreements with unaffiliated third parties. • The conditional conversion feature of the 2025 Notes and the 2029 Notes (each as defined below), if triggered, may adversely affect our financial condition and operating results. • We are exposed to interest rate risk, which could cause the Company’s debt service obligations to increase significantly. • Our debt following the NIA acquisition is significant and could adversely affect our business and our ability to meet our obligations. • Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt. • Our Series A Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to, the rights of holders of our Class A common stock. • The market price of our Class A common stock could decline due to the large number of shares of Class A common stock issuable upon conversion of our convertible notes or the Series A Preferred Stock, or by sales or issuances of substantial amounts of our Class A common stock. • We do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Biggest changeThese risks include, but are not limited to, the following: • the significant portion of revenue we derive from our largest partners, and the potential loss, termination or renegotiation of our relationship or contract with any significant partner, or multiple partners in the aggregate; • the increasing number of risk-sharing arrangements we enter into with our partners; • the growth and success of our partners and certain revenues from our engagements, which are difficult to predict and are subject to factors outside of our control, including governmental funding reductions and other policy changes; • our ability to accurately predict our exposure under performance-based contracts; • failure by our customers to provide us with accurate and timely information; • our ability to recover the upfront costs in our partner relationships and develop our partner relationships over time; • our ability to attract new partners and successfully capture new opportunities; • our ability to offer new and innovative products and services and our ability to keep pace with industry standards, technology and our partners’ needs; • our ability to maintain and enhance our reputation and brand recognition; • our dependency on our key personnel, and our ability to attract, hire, integrate and retain key personnel; • risks related to completed and future acquisitions, investments, alliances and joint ventures, which could divert management resources, result in unanticipated costs or dilute our stockholders; • our ability to effectively manage our growth and maintain an efficient cost structure; • our ability to partner with providers due to exclusivity provisions in our and some of our partner and founder contracts; • risks related to managing our offshore operations and cost reduction goals; • our ability to estimate the size of our target markets for our services; • consolidation in the health care industry; • competition which could limit our ability to maintain or expand market share within our industry; • risks related to audits by CMS and other governmental payers and actions, including whistleblower claims under the False Claims Act; • evolution of the health care regulatory and political framework; • restrictions on the manner in which we access personal data and penalties as a result of privacy and data protection laws; • data loss or corruption due to failures or errors in our systems and service disruptions at our data centers; • liabilities and reputational risks related to our ability to safeguard the security and privacy of confidential data; • our ability to obtain, maintain and enforce intellectual property rights and protect our trademarks and trade names, including from third parties alleging that we are infringing or violating their intellectual property rights; • our ability to protect the confidentiality of our trade secrets; • risks associated with our use of AI and machine learning models; • our use of “open-source” software; • our reliance on third parties and licensed technologies; • restrictions on our ability to use, disclose, de-identify or license data and to integrate third-party technologies; • our reliance on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our partners and operating our business; • material weaknesses in the future may impact our ability to conclude that our internal control over financial reporting is not effective and we may be unable to produce timely and accurate financial statements; • our ability to achieve profitability in the future; • the impact of additional goodwill and intangible asset impairments on our results of operations; • our obligations to make material payments to certain of our pre-IPO investors for certain tax benefits we may claim in the future; • our obligations to make payments under the tax receivables agreement that may be accelerated or may exceed the tax benefits we realize; • our ability to utilize benefits under the tax receivables agreement described herein; • the terms of agreements between us and certain of our pre-IPO investors may contain different terms than comparable agreement we may enter into with unaffiliated third parties; • Our inability to obtain financing may result in a reduction in the ownership of our stockholders; • the conditional conversion features, and changes in accounting treatment, of the 2025 Notes and the 2029 Notes (as defined below), which, if triggered, may adversely affect our financial condition and operating results; 16 • our ability to raise funds necessary to settle conversions of our notes in cash, to repurchase our notes for cash upon a fundamental change or to pay the redemption price for any notes we redeem; • interest rate risk and other restrictive covenants under the Credit Agreement (as defined below) and the terms of our Series A Preferred Stock; • our indebtedness, our ability to service our indebtedness, and our ability to obtain additional financing on favorable terms or at all; • our ability to service our debt and pay dividends on our Series A Preferred Stock; • interference with our ability to access the revolving credit facility under our Credit Agreement; • the potential volatility of our Class A common stock price; • our Series A Preferred Stock has rights, preferences and privileges that are not held by and are preferential to the rights of holders of our Class A common stock, and could in the future substantially dilute the ownership interest of holders of our Class A common stock; • the potential decline of our Class A common stock price if a substantial number of shares are sold or become available for sale, including those issuable upon conversion of our Series A Preferred Stock; • provisions in our certificate of incorporation and by-laws and provisions of Delaware law that discourage or prevent strategic transactions, including a takeover of us; • provisions in our certificate of incorporation which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees; • our intention not to pay cash dividends on our Class A common stock; • the impact of litigation proceedings, government inquiries, reviews, audits or investigations; • risks related to the failure of any bank in which we deposit our funds, which could reduce the amount of cash we have available to meet our cash commitments and make additional investments; • public health emergencies, epidemics, pandemics or contagious diseases; • the cost of compliance with sustainability or other ESG (as defined below) law and regulations; and • the impact of increasing inflationary pressures and rising consumer costs on our business.
Exclusivity and right of first refusal clauses in some of our partner and founder contracts may prohibit us from partnering with certain other providers in the future, and as a result may limit our growth. Some of our partner and founder contracts include exclusivity and right of first refusal clauses.
Exclusivity and right of first refusal clauses in some of our partner and founder contracts may prohibit us from partnering with certain other providers in the future, and as a result may limit our growth. Some of our partner and founder contracts include exclusivity clauses.
Acquisitions, investments and alliances, including our acquisitions of NIA, Vital Decisions, and IPG, could result in numerous risks to our business which could negatively impact our financial condition and results of operations, including: • difficulty converting platforms or integrating the purchased operations, products or technologies; • substantial unanticipated integration costs, delays and challenges that may arise in integration; • the loss of key customers who are in turn subject to risks and financial dislocation in their businesses; • the loss of key employees, particularly those of the acquired operations; • difficulty retaining or developing the acquired business’ customers; • adverse effects on our existing business relationships with customers, suppliers, other partners, standing with regulators; • challenges related to the integration and operation of businesses that operate in new geographic areas and new markets or lines of business; • unanticipated financial losses in the acquired business, including the risk of higher-than-expected health care costs; • failure to realize the potential cost savings or other financial benefits or the strategic benefits of the acquisitions, including failure to consummate any proposed or contemplated transaction; and • liabilities, including acquired litigation, and expenses from the acquired businesses for contractual disputes with customers and other third parties, infringement of intellectual property rights, data privacy violations or other claims and failure to obtain indemnification for such liabilities or claims, and distraction of our personnel in connection with any related proceedings.
Acquisitions, investments and alliances, including our acquisitions of Machinify, NIA, Vital Decisions, and IPG, could result in numerous risks to our business which could negatively impact our financial condition and results of operations, including: • difficulty converting platforms or integrating the purchased operations, products or technologies; • substantial unanticipated integration costs, delays and challenges that may arise in integration; • the loss of key customers who are in turn subject to risks and financial dislocation in their businesses; • the loss of key employees, particularly those of the acquired operations; • difficulty retaining or developing the acquired business’ customers; • adverse effects on our existing business relationships with customers, suppliers, other partners, standing with regulators; • challenges related to the integration and operation of businesses that operate in new geographic areas and new markets or lines of business; • unanticipated financial losses in the acquired business, including the risk of higher-than-expected health care costs; • failure to realize the potential cost savings or other financial benefits or the strategic benefits of the acquisitions, including failure to consummate any proposed or contemplated transaction; and • liabilities, including acquired litigation, and expenses from the acquired businesses for contractual disputes with customers and other third parties, infringement of intellectual property rights, data privacy violations or other claims and failure to obtain indemnification for such liabilities or claims, and distraction of our personnel in connection with any related proceedings.
This significant amount of debt, preferred stock and other cash needs could have important consequences to us, including: • requiring a substantial portion of our cash flow from operations to make payments on this debt, thereby limiting the cash we have available to fund future growth opportunities, such as capital expenditures and acquisitions; • restrictive covenants in our debt arrangements and the arrangements governing our Series A Preferred Stock, which could limit our operations and borrowing; 38 • increasing our vulnerability to general adverse economic and industry conditions and limiting our flexibility in planning for, or reacting to, changes in our business and industry, due to the need to use our cash to service our outstanding debt and Series A Preferred Stock; • placing us at a competitive disadvantage relative to our competitors that are not as highly leveraged and that may therefore be more able to invest in their business or use their available cash to pursue other opportunities, including acquisitions; and • limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise.
This significant amount of debt, preferred stock and other cash needs could have important consequences to us, including: • requiring a substantial portion of our cash flow from operations to make payments on this debt, thereby limiting the cash we have available to fund future growth opportunities, such as capital expenditures and acquisitions; • restrictive covenants in our debt arrangements and the arrangements governing our Series A Preferred Stock, which could limit our operations and borrowing; • increasing our vulnerability to general adverse economic and industry conditions and limiting our flexibility in planning for, or reacting to, changes in our business and industry, due to the need to use our cash to service our outstanding debt and Series A Preferred Stock; • placing us at a competitive disadvantage relative to our competitors that are not as highly leveraged and that may therefore be more able to invest in their business or use their available cash to pursue other opportunities, including acquisitions; and • limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise.
In addition, upon the occurrence of a refinancing or replacement of the entirety of the indebtedness under the Credit Agreement prior to its maturity that is provided solely by lenders who are not affiliates or approved funds of Ares Capital Management LLC, we will be required to redeem all shares of Series A Preferred Stock then outstanding for cash at a redemption price per share equal to 165.00% of the then-current liquidation preference of the Series A Preferred Stock, plus 40 all accrued and unpaid dividends on the Series A Preferred Stock being redeemed, plus, solely in the event such refinancing or replacement is consummated prior to January 20, 2025, the aggregate amount of regular dividends per share which would have otherwise been payable on the Series A Preferred Stock from the date of redemption until January 20, 2025.
In addition, upon the occurrence of a refinancing or replacement of the entirety of the indebtedness under the Credit Agreement prior to its maturity that is provided solely by lenders who are not affiliates or approved funds of Ares Capital Management LLC, we will be required to redeem all shares of Series A Preferred Stock then outstanding for cash at a redemption price per share equal to 165.00% of the then-current liquidation preference of the Series A Preferred Stock, plus all accrued and unpaid dividends on the Series A Preferred Stock being redeemed, plus, solely in the event such refinancing or replacement is consummated prior to January 20, 2025, the aggregate amount of regular dividends per share which would have otherwise been payable on the Series A Preferred Stock from the date of redemption until January 20, 2025.
Among other things, our second amended and restated certificate of incorporation, as amended, and our third amended and restated by-laws: • prohibit stockholder action by written consent; • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares of capital stock, making a takeover more difficult and expensive; • prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; • provide that special meetings of the stockholders may be called only by or at the direction of the board of directors, the chairman of our board or the chief executive officer; and • require advance notice to be given by stockholders for any stockholder proposals or director nominees.
Among other things, our second amended and restated certificate of incorporation, as amended, and our third amended and restated by-laws: 41 • prohibit stockholder action by written consent; • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares of capital stock, making a takeover more difficult and expensive; • prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; • provide that special meetings of the stockholders may be called only by or at the direction of the board of directors, the chairman of our board or the chief executive officer; and • require advance notice to be given by stockholders for any stockholder proposals or director nominees.
Any of our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed or misappropriated, our trade secrets and other confidential information could be disclosed in an unauthorized manner to third parties, or our intellectual property rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide us with competitive advantages, which could result in costly redesign efforts, discontinuance of certain offerings or other competitive harm.
Any of our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed or misappropriated, our trade secrets and other confidential information could be disclosed in an 29 unauthorized manner to third parties, or our intellectual property rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide us with competitive advantages, which could result in costly redesign efforts, discontinuance of certain offerings or other competitive harm.
The impact of these actions have included, and in the future could include making organizational changes across our business as well as other profitability initiatives that may result in reductions in force, re-aligning of resources as well as other potential operational efficiency and cost-reduction initiatives and could result in reductions to the fees and changes to the scope of services contemplated by our original partner contracts and consequently have and could negatively impact our revenues, financial results (including potential impairments), business and prospects.
The impact of these actions have included, and in the future could include making organizational changes across our business as well as other profitability initiatives that may result in reductions in force, re-aligning of resources as well as other potential operational efficiency and cost-reduction initiatives and could result in reductions to the fees and changes to the scope of services contemplated by our 17 original partner contracts and consequently have and could negatively impact our revenues, financial results (including potential impairments), business and prospects.
In addition, if we identify future material weaknesses in our internal controls over financial 35 reporting or if we are unable to comply with the demands that are placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC.
In addition, if we identify future material weaknesses in our internal controls over financial reporting or if we are unable to comply with the demands that are placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC.
As partners’ businesses respond to market dynamics and financial pressures, and as partners make strategic business decisions in respect of the lines of business they pursue and programs in which they participate, certain of our and NIA’s partners have renegotiated or terminated, or not renewed, and we expect that in the future additional partners will, from time to time, seek to renegotiate or terminate or not renew their agreements with us.
As partners’ businesses respond to market dynamics and financial pressures, and as partners make strategic business decisions in respect of the lines of business they pursue and programs in which they participate, certain of our partners have renegotiated or terminated, or not renewed, and we expect that in the future additional partners will, from time to time, seek to renegotiate or terminate or not renew their agreements with us.
Even if we have an agreement to indemnify us against such costs, the indemnifying party may be unable to uphold its contractual obligations. If we cannot or do not obtain a third-party license to the infringed technology on reasonable terms or at all, or obtain similar technology from another source, our revenue and earnings could be adversely impacted.
Even if we have an agreement to indemnify us 30 against such costs, the indemnifying party may be unable to uphold its contractual obligations. If we cannot or do not obtain a third-party license to the infringed technology on reasonable terms or at all, or obtain similar technology from another source, our revenue and earnings could be adversely impacted.
However, there is no guarantee we will be able to enter into such agreements on acceptable terms or at all. The functionality of our 20 services platforms depends, in part, on our ability to integrate with third-party applications and data management systems that our partners use and from which they obtain data.
However, there is no guarantee we will be able to enter into such agreements on acceptable terms or at all. The functionality of our services platforms depends, in part, on our ability to integrate with third-party applications and data management systems that our partners use and from which they obtain data.
Our business, operations and financial position are subject to various risks. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the audited annual financial statements and notes thereto included elsewhere in this Form 10-K, when evaluating your investment in our securities.
Our business, operations and financial position are subject to various risks. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the audited annual consolidated financial statements and notes thereto included elsewhere in this Form 10-K, when evaluating your investment in our securities.
While we maintain insurance covering certain security and privacy damages and claim expenses, we may not carry insurance or 30 maintain coverage sufficient to compensate for all liability and such insurance may not be available for renewal on acceptable terms or at all, and in any event, insurance coverage would not address the reputational damage that could result from a security incident.
While we maintain insurance covering certain security and privacy damages and claim expenses, we may not carry insurance or maintain coverage sufficient to compensate for all liability and such insurance may not be available for renewal on acceptable terms or at all, and in any event, insurance coverage would not address the reputational damage that could result from a security incident.
Under the “if-converted” method, diluted earnings per share will generally be calculated assuming that the 2025 Notes and the 2029 Notes were converted solely into shares of Class A common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which could adversely affect our diluted earnings per share.
Under the “if- 38 converted” method, diluted earnings per share will generally be calculated assuming that the 2025 Notes and the 2029 Notes were converted solely into shares of Class A common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which could adversely affect our diluted earnings per share.
In addition, Section 203 of the DGCL may affect the ability of an “interested stockholder” to engage in certain business combinations, for a period of three years following the time that the stockholder becomes an “interested stockholder.” We have elected in our second 41 amended and restated certificate of incorporation, as amended, not to be subject to Section 203 of the DGCL.
In addition, Section 203 of the DGCL may affect the ability of an “interested stockholder” to engage in certain business combinations, for a period of three years following the time that the stockholder becomes an “interested stockholder.” We have elected in our second amended and restated certificate of incorporation, as amended, not to be subject to Section 203 of the DGCL.
Certain of our partners are subject to Medicaid health plans with state contracts that come 17 up for renewal from time to time and can be subject to an RFP process. If a partner loses its contract or an RFP process it would cause the Company to lose that portion of the customer’s business.
Certain of our partners are subject to Medicaid health plans with state contracts that come up for renewal from time to time and can be subject to an RFP process. If a partner loses its contract or an RFP process it would cause the Company to lose that portion of the customer’s business.
Congress and state and local legislatures and regulators may propose and adopt legislation or policy changes or implementations effecting additional fundamental changes with respect to Medicare and Medicaid programs. Such changes in the law, or new interpretations of existing laws, may have a significant impact on our methods and costs of doing business.
Congress and state and local legislatures and regulators may propose and adopt legislation or policy changes or implementations effecting additional fundamental changes with respect to Medicare, Medicaid, and exchange programs. Such changes in the law, or new interpretations of existing laws, may have a significant impact on our methods and costs of doing business.
These and other factors may cause the market price and demand for our Class A common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Class A common stock, including any shares of Class A common stock they receive upon conversion of our convertible notes, and may otherwise negatively affect the liquidity of our Class A common stock.
These and other factors have and may cause the market price and demand for our Class A common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Class A common stock, including any shares of Class A common stock they receive upon conversion of our convertible notes, and may otherwise negatively affect the liquidity of our Class A common stock.
If we lose key members of our management team or employees or are unable to attract and retain the employees we need, our compensation costs will increase and our business and operating results will be adversely affected. 23 Our success depends largely upon the continued services of our key executive officers and recruitment of additional highly-skilled employees.
If we lose key members of our management team or employees or are unable to attract and retain the employees we need, our compensation costs will increase and our business and operating results will be adversely affected. Our success depends largely upon the continued services of our key executive officers and recruitment of additional highly-skilled employees.
These restrictions limit our ability and/or the ability of certain of our subsidiaries to, among other things: • incur or guarantee additional debt; • incur certain liens; • merge or consolidate; • transfer or sell assets; • make certain investments; • pay dividends and make other distributions on, or redeem or repurchase, capital stock; and • enter into transactions with affiliates.
These restrictions limit our ability and/or the ability of certain of our subsidiaries to, among other things: • incur or guarantee additional debt; • incur certain liens; 39 • merge or consolidate; • transfer or sell assets; • make certain investments; • pay dividends and make other distributions on, or redeem or repurchase, capital stock; and • enter into transactions with affiliates.
In addition, if we do not adequately respond to these competitive pressures, it could cause us to be unable to maintain our current contracts or obtain new contracts. Other competitors have proprietary technology that differentiates their product and service offerings from ours.
In addition, if we do not adequately respond to these competitive pressures, it could cause us to be unable to maintain our current contracts or obtain 24 new contracts. Other competitors have proprietary technology that differentiates their product and service offerings from ours.
As a result, our information systems require an ongoing commitment of significant resources to maintain and enhance existing systems and develop new systems in order to keep pace with continuing changes in information technology, emerging cybersecurity risks and threats, evolving industry and regulatory standards and changing preferences of our partners.
As a result, our information systems require an ongoing commitment of significant resources to maintain and enhance existing systems and develop new systems in order to keep pace with continuing changes in information technology, cybersecurity risks and threats, evolving industry and regulatory standards and changing preferences of our partners.
Additionally, expansion of enforcement activity could adversely affect our business and financial condition. Going forward, we expect CMS, Congress, and state agencies to continue to closely scrutinize each component of the Medicare and Medicaid programs, as well as modify the terms and requirements of the programs.
Additionally, expansion of enforcement activity could adversely affect our business and financial condition. Going forward, we expect CMS, Congress, and state agencies to continue to closely scrutinize each component of the Medicare, Medicaid, and exchange programs, as well as modify the terms and requirements of the programs.
To operate without interruption, both we and our service providers must guard against: • damage from fire, power loss and other natural disasters; 34 • telecommunications failures; • software and hardware errors, failures and crashes; • security breaches, computer viruses and similar disruptive problems; and • other potential interruptions.
To operate without interruption, both we and our service providers must guard against: • damage from fire, power loss and other natural disasters; • telecommunications failures; • software and hardware errors, failures and crashes; • security breaches, computer viruses and similar disruptive problems; and • other potential interruptions.
If they succeed in registering or developing 31 common law rights in such trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to commercialize our technologies or products in certain relevant countries.
If they succeed in registering or developing common law rights in such trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to commercialize our technologies or products in certain relevant countries.
Any such disruptions could limit our ability to achieve the anticipated benefits of the transaction. Any integration may be unpredictable, or subject to delays or changed circumstances, and we and any targets may not perform in accordance with our expectations.
Any such disruptions could limit our ability to achieve the anticipated benefits of the transaction. 22 Any integration may be unpredictable, or subject to delays or changed circumstances, and we and any targets may not perform in accordance with our expectations.
If we raise additional funds by issuing equity or convertible debt securities, the ownership of our then-existing stockholders may be reduced, and holders of these securities may have rights, preferences or privileges senior to those of our then-existing stockholders.
If we raise additional funds by 37 issuing equity or convertible debt securities, the ownership of our then-existing stockholders may be reduced, and holders of these securities may have rights, preferences or privileges senior to those of our then-existing stockholders.
As we grow, our customer acquisition costs could outpace our build-up of recurring revenue, and we may be unable to reduce our total 25 operating costs through economies of scale such that we are unable to achieve profitability.
As we grow, our customer acquisition costs could outpace our build-up of recurring revenue, and we may be unable to reduce our total operating costs through economies of scale such that we are unable to achieve profitability.
We depend upon licenses from third parties for some of the technology and data used in our applications, and for some of the technology platforms upon which these applications are built and operate, including under the UPMC IP Agreement and the UPMC 33 Technology Agreement.
We depend upon licenses from third parties for some of the technology and data used in our applications, and for some of the technology platforms upon which these applications are built and operate, including under the UPMC IP Agreement and the UPMC Technology Agreement.
The HITECH Act requires individual notification for all breaches, media notification of breaches for over 500 individuals and at least annual reporting of all breaches to the Department of Health and Human Services.
The HITECH Act requires individual notification for all breaches, media notification of breaches for over 500 individuals and at least annual reporting of all breaches to the 27 Department of Health and Human Services.
We may be required to expend significant capital and other resources to protect against security breaches and/or privacy incidents or to alleviate problems caused by security breaches and/or privacy incidents.
We may be required to expend significant capital and other resources to 28 protect against security breaches and/or privacy incidents or to alleviate problems caused by security breaches and/or privacy incidents.
In addition, our continuing growth and expansion in dispersed markets, such as our acquisitions of IPG during the third quarter of 2022, NIA in the first quarter of 2023, and other businesses we may acquire in the future, may place significant additional pressure on our system of internal control over financial reporting and require us to update our internal control over financial reporting to integrate such acquisitions.
In addition, our continuing growth and expansion in dispersed markets, such as our acquisitions of IPG during the third quarter of 2022, NIA in the first quarter of 2023, Machinify in the third quarter of 2024 and other businesses we may acquire in the future, may place significant additional pressure on our system of internal control over financial reporting and require us to update our internal control over financial reporting to integrate such acquisitions.
There is ongoing concern from privacy advocates, regulators and others regarding data protection and privacy issues, and the number of jurisdictions with data protection and privacy laws have been increasing. Also, there are ongoing public policy discussions regarding whether the standards for de-identified, anonymous or pseudonymized health information are sufficient to adequately protect patient privacy.
There is ongoing concern from privacy advocates, regulators and others regarding data protection and privacy issues, and the number of jurisdictions with data protection and privacy laws has been increasing. Also, there are ongoing public policy discussions regarding whether the standards for de-identified, anonymous or pseudonymized health information are sufficient to adequately protect patient privacy.
Some of our partners undertake a significant and prolonged evaluation process, often to determine whether our solutions meet their unique health system needs, which has in the past resulted in extended periods of time to establish a partner relationship. Our efforts involve educating our partners about the use, technical capabilities and benefits of our solutions.
Some of our partners undertake a significant and prolonged evaluation process, often to determine whether our solutions meet their unique needs, which has in the past resulted in extended periods of time to establish a partner relationship. Our efforts involve educating our partners about the use, technical capabilities and benefits of our solutions.
Partner contracts with exclusivity or other restrictive provisions may limit our ability to partner with or provide services to other providers or purchase services from other vendors within certain time periods. These exclusivity or other restrictive provisions often apply to specific competitors of our health system partners or specific geographic areas within a particular state or an entire state.
Partner contracts with exclusivity or other restrictive provisions may limit our ability to partner with or provide services to other providers or purchase services from other vendors within certain time periods. These exclusivity or other restrictive provisions often apply to specific competitors of our partners or specific geographic areas within a particular state or an entire state.
For example, in connection with its formation, Evolent Health LLC entered into an IP Agreement with UMPC (the “UPMC IP Agreement”), pursuant to which if we were to conduct business with certain precluded providers, it would result in the loss of the license thereunder.
For example, in connection with its formation, Evolent Health LLC entered into an IP Agreement with UPMC (the “UPMC IP Agreement”), pursuant to which if we were to conduct business with certain precluded providers, it would result in the loss of the license thereunder.
Because some of our partners are participants in governmental programs, our solutions have in the past and may again in the future be subject to periodic surveys and audits by governmental entities or contractors for compliance with Medicare and other standards and requirements.
Because some of our partners are participants in governmental programs, our services have in the past and may again in the future be subject to periodic surveys and audits by governmental entities or contractors for compliance with Medicare and other standards and requirements.
As a result of these competitive advantages, our competitors and potential competitors may be able to respond more quickly to market forces, take advantage of acquisitions and other opportunities more readily, undertake more extensive marketing campaigns for their brands, products and services, more successfully utilize developing technology, including data analytics, artificial intelligence, and machine learning, and make more attractive offers to our existing partners and potential partners.
As a result of these competitive advantages, our competitors and potential competitors may be able to respond more quickly to market forces, take advantage of acquisitions and other opportunities more readily, undertake more extensive marketing campaigns for their brands, products and services, more successfully utilize developing technology, including data analytics, AI and machine learning, and make more attractive offers to our existing partners and potential partners.
The broader U.S. economy experienced higher than expected inflationary pressures throughout 2022 related to continued supply chain disruptions, labor shortages and geopolitical instability. Inflation levels remained at elevated level through 2023.
The broader U.S. economy experienced higher than expected inflationary pressures throughout 2022 related to continued supply chain disruptions, labor shortages and geopolitical instability. Inflation levels remained at elevated level through 2024.
Up to a maximum of 6.8 million shares of our Class A common stock is reserved for issuance upon the conversion of our convertible notes and 4.4 million shares are reserved for issuance upon the conversion of our Series A Preferred Stock.
Up to a maximum of 15.8 million shares of our Class A common stock is reserved for issuance upon the conversion of our convertible notes and 4.4 million shares are reserved for issuance upon the conversion of our Series A Preferred Stock.
Moreover, costs of providing oncology, cardiology, radiology (including advanced imaging), musculoskeletal, physical medicine, genetics and other specialties are very hard to predict, in part as a result of rapidly changing utilization of new and existing drugs and changing diagnostic and therapeutic protocols.
Moreover, costs of providing oncology, cardiology, radiology (including advanced imaging), musculoskeletal, physical medicine, genetics and other specialties are and have been very hard to predict, in part as a result 19 of rapidly changing utilization of new and existing drugs and changing diagnostic and therapeutic protocols.
We must continue to invest significant resources in our personnel and technology, including artificial intelligence, in a timely and cost-effective manner in order to enhance our existing products and services and introduce new high-quality products and services that existing partners and potential new partners will want.
We must continue to invest significant resources in our personnel and technology, including AI, in a timely and cost-effective manner in order to enhance our existing products and services and introduce new high-quality products and services that existing partners and potential new partners will want.
Financial Statements and Supplementary Data - Note 16 - “Income Taxes.” These increases in tax basis and NOLs may reduce the amount of tax that we may otherwise be required to pay in the future, although the Internal Revenue Service (“IRS”) may challenge all or a part of the tax basis increases and NOLs, and a court could sustain such a challenge.
Financial Statements and Supplementary Data—Note 15.” These increases in tax basis and NOLs may reduce the amount of tax that we may otherwise be required to pay in the future, although the Internal Revenue Service (“IRS”) may challenge all or a part of the tax basis increases and NOLs, and a court could sustain such a challenge.
Similarly, we cannot predict whether pending or future federal or state legislation or court proceedings will change various aspects of the Medicaid and Medicare programs, nor can we predict the impact those changes will have on our business operations or financial results, but the effects could be materially adverse.
Similarly, we cannot predict whether pending or future federal or state legislation or court proceedings will change various aspects of these programs, nor can we predict the impact those changes will have on our business operations or financial results, but the effects could be materially adverse.
Medicare Advantage Organization (“MAOs”) utilization management practices have been the focus of a 2022 report by the Department of Health and Human Services Office of Inspector General as well as new final rules by (CMS-4201-F and CMS-0057-F). CMS-4201-F, effective calendar year 2024, imposes several requirements on MAOs with respect to their use of prior authorization.
MAOs utilization management practices have been the focus of a 2022 report by the Department of Health and Human Services Office of Inspector General as well as new final rules by (CMS-4201-F and CMS-0057-F). CMS-4201-F, effective calendar year 2024, imposes 25 several requirements on MAOs with respect to their use of prior authorization.
Even though we provide for protections through our agreements with our subcontractors, we still have limited control over their actions and practices. A breach of privacy or security of protected health information by a subcontractor may 29 result in an enforcement action, including criminal and civil liability, against us.
Even though we provide for protections through our agreements with our subcontractors, we still have limited control over their actions and practices. A breach of privacy or security of protected health information by a subcontractor may result in an enforcement action, including criminal and civil liability, against us, and/or may qualify as a breach of our client contracts.
The trading price of our Class A common stock has been and may continue to be volatile and subject to wide price fluctuations in response to various factors, including: • economic and political conditions or events; • market conditions in the broader stock market in general, or in our industry in particular, including as a result of public health emergencies, inflationary pressures, and an uncertain macroeconomic environment due in part to the conflict between Russia and Ukraine and the war between Israel and Hamas; • actual or anticipated fluctuations in our quarterly financial reports and results of operations; • our ability to satisfy our ongoing capital needs and unanticipated cash requirements; • indebtedness incurred in the future; • introduction of new products and services by us or our competitors; • business developments of our partners; • issuance of new or changed securities analysts’ reports or recommendations; • sales of large blocks of our stock; • additions or departures of key personnel; • regulatory developments; and • litigation and governmental investigations.
The trading price of our Class A common stock has been and may continue to be volatile and subject to wide price fluctuations in response to various factors, including: • actual or anticipated fluctuations in our quarterly financial reports and results of operations, including as a result of our failure to meet our financial outlook or analyst consensus, which was the case for our third quarter results in 2024; • economic and political conditions or events; • market conditions in the broader stock market in general, or in our industry in particular, including as a result of public health emergencies, inflationary pressures, and an uncertain macroeconomic environment due in part to the conflict between Russia and Ukraine and the war between Israel and Hamas; • our ability to satisfy our ongoing capital needs and unanticipated cash requirements; • indebtedness incurred in the future; • introduction of new products and services by us or our competitors; • business developments of our partners; • issuance of new or changed securities analysts’ reports or recommendations; • sales of large blocks of our stock; • additions or departures of key personnel; • regulatory developments; and • litigation and governmental investigations.
We have incurred significant net losses in the past and our operating expenses may increase in the future as we continue to invest to grow our business and build relationships with partners, develop our platforms and develop new solutions.
We have experienced net losses in the past and we may not achieve profitability in the future. We have incurred significant net losses in the past and our operating expenses may increase in the future as we continue to invest to grow our business and build relationships with partners, develop our platforms and develop new solutions.
Under the Accounting Standards Codification (“ASC”) Topic 606 revenue standard, certain set up costs we incur during the implementation phase may be deferred into the platform and operations phase, potentially along with associated revenues.
Under the Accounting Standards Codification (“ASC”) Topic 606 revenue standard, certain set up costs we incur during the implementation phase may be deferred into the ongoing phase, potentially along with associated revenues.
See the risk factor captioned “If we lose key members of our management team or employees or are unable to attract and retain the employees we need, our compensation costs will increase and our business and operating results will be adversely affected.” While we are unable to predict the direction of the 28 economy or if inflation will increase or revert to normal levels, if inflation levels remain elevated for a sustained period of time, our margins, profitability and results of operations could be adversely affected.
See the risk factor captioned “Risk Factors— 43 Risks Relating to Our Business and Strategy—If we lose key members of our management team or employees or are unable to attract and retain the employees we need, our compensation costs will increase and our business and operating results will be adversely affected.” While we are unable to predict the direction of the economy or if inflation will increase or revert to normal levels, if inflation levels remain elevated for a sustained period of time, our margins, profitability and results of operations could be adversely affected.
Additionally, if a partner were to lose applicable licenses, go bankrupt, lose liability insurance, become insolvent, file for bankruptcy or receive an exclusion, suspension or debarment from state or federal government authorities, the contract with such partner could in effect be terminated. In addition, certain contracts may be terminated immediately if we become insolvent or file for bankruptcy.
Additionally, if a partner were to lose applicable licenses, go bankrupt, lose liability insurance, become insolvent, file for bankruptcy or receive an exclusion, suspension or debarment from state or federal government authorities, the contract with such partner could in effect be terminated.
As of December 31, 2023, we recorded a TRA liability of $107.9 million including $17.6 million of potential future payments under the TRA related to the future utilization of the pre-IPO NOLs described above and $90.3 million of potential future payments related to the tax basis step-up of the assets of Evolent Health LLC in connection with the exchanges that occurred with our completed secondary offerings and private sales.
As of December 31, 2024, we recorded a TRA liability of $108.1 million including $17.6 million of potential future payments under the TRA related to the future utilization of the pre-IPO NOLs described above and $90.5 million of potential future payments related to the tax basis step-up of the assets of Evolent Health LLC in connection with the exchanges that occurred with our completed secondary offerings and private sales.
We rely on internal systems as well as third-party vendors, including bandwidth and telecommunications equipment providers, to provide our services. We do not maintain redundant systems or facilities for some of these services.
We rely on internal systems as well as third parties, including bandwidth and telecommunications equipment providers, to provide our services and operate our business. We do not maintain redundant systems or facilities for some of these services.
Many states have proposed, and some have passed, bills which prescribe how providers and services which meet certain approval rates become exempt from prior authorization for a period of time.
Many states have proposed, and some have passed, bills which prescribe how providers and services which meet certain approval rates become exempt from prior authorization for a period of time, widely known as “gold carding”.
Changes in the accounting treatment for convertible debt securities that may be settled in cash, such as the notes offered hereby, could have a material effect on our reported financial results.
Changes in the accounting treatment for convertible debt securities that may be settled in cash, such as the 2025 Notes and the 2029 Notes, could have a material effect on our reported financial results.
Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures.
Our business may not generate cash flow from operations in the future sufficient to service our debt and our Series A Preferred Stock and make necessary capital expenditures.
If our actual taxable income is insufficient or there are adverse changes in applicable law or regulations, we may be unable to realize all or a portion of these expected benefits and our cash flows and stockholders’ equity could be negatively affected. Please refer to the discussion in “Part II - Item 8.
If our actual taxable income is insufficient or there are adverse changes in applicable law or regulations, we may be unable to realize all or a portion of these expected benefits and our cash flows and stockholders’ equity could be negatively affected. Please refer to the discussion in “Part II—Item 8. Financial Statements and Supplementary Data—Note 15” for additional information.
We compete on the basis of several factors, including breadth, depth and quality of product and service offerings, ability to deliver clinical, financial and operational performance improvement through the use of products and services, quality and reliability of services, ease of use and convenience, brand recognition and the ability to integrate services with existing technology.
Our services solutions compete based on several factors, including breadth, depth and quality of product and service offerings, ability to deliver clinical, financial and operational performance improvement using products and services, quality and reliability of services, ease of use and convenience, brand recognition and the ability to integrate services with existing technology.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
The Company’s internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
Our competitors are constantly developing products and services that may become more efficient or appealing to 27 our existing partners and potential partners. Additionally, some health care information technology providers have begun to incorporate enhanced analytical tools and functionality into their core product and service offerings used by health care providers.
Our competitors are constantly developing products and services that may become more efficient or appealing to our existing partners and potential partners. Additionally, some health care information technology providers have begun to incorporate enhanced analytical tools and functionality into their core product and service offerings used by health care providers, including with the use of AI or machine learning.
Risks Relating to Internal Control Over Financial Reporting If we identify material weaknesses in the future, we and our auditor may conclude that our internal control over financial reporting is not effective and we may be unable to produce timely and accurate financial statements, any of which could adversely impact our investors’ confidence and our stock price.
Risks Relating to Internal Control Over Financial Reporting and Other Financial Matters If we identify material weaknesses in the future, we and our auditor may conclude that our internal control over financial reporting is not effective and we may be unable to produce timely and accurate financial statements, any of which could adversely impact our investors’ confidence and our stock price. 34 Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
We are unable to predict how these changes and other health care reform initiatives from new legislation, regulation, judicial action and/or executive action, including the CAA and No Surprises Act and state laws, will ultimately impact the health care industry and what the potential impact may be on our business, financial condition, operating results and prospects.
We are unable to predict how these changes and other health care reform initiatives from new legislation, regulation, judicial action and/or executive action, including those described above, will ultimately impact the health care industry and what the potential impact may be on our business, financial condition, operating results and prospects.
The costs of attempting to protect against cybersecurity risks and the costs of responding to cyber-attacks are significant. This could require us to expend significant resources to continue to modify or enhance our protective measures and to remediate any damage.
We expect to continue to experience such vulnerabilities in the future. The costs of attempting to protect against cybersecurity risks and the costs of responding to cyber-attacks are significant. This could require us to expend significant resources to continue to modify or enhance our protective measures and to remediate any damage.
These sales, or the possibility that these sales may occur, may also make it more difficult for us to raise additional capital by selling equity or equity-linked securities in the future, at a time and price that we deem appropriate. As of February 15, 2024 , 115.4 million shares of our Class A common stock were outstanding.
These sales, or the possibility that these sales may occur, may also make it more difficult for us to raise additional capital by selling equity or equity-linked securities in the future, at a time and price that we deem appropriate. As of February 14, 2025, 116,591,148 shares of our Class A common stock were outstanding.
Our offerings could be subject to audits by CMS and other governmental payers and whistleblower claims under the False Claims Act. We support provider-sponsored health plans with Medicare Advantage, Medicaid and exchange products, as well as health systems and provider groups participating in payer-delegated risk arrangements or in the CMS Next Generation ACO Model.
Our offerings could be subject to audits by CMS and other governmental payers and whistleblower claims under the False Claims Act. We support health plans with Medicare Advantage, Medicaid and exchange products, as well as health systems and provider groups participating in payer-delegated risk arrangements or in various programs sponsored by CMS, including the Medicare Shared Savings Program.
For example, some contracts may be terminated by the partner if we fail to achieve target performance metrics over a specified period. Certain contracts may be terminated by the partner immediately following repeated failures by us to provide specified levels of service.
For example, some contracts may be terminated by the partner if we fail to achieve target performance metrics over a specified period. Certain contracts may be terminated by the partner immediately following repeated failures by us to provide specified levels of service over periods ranging from six months to more than a year.
CMS-0057-F further imposes stricter medical necessity decision timeframes on federal managed care programs, effective CY 2026, as well as complex technical interface requirements for Medicare and Medicaid which are to facilitate increased data sharing between managed care plans, enrollees and providers and streamline the prior authorization process.
CMS-0057-F further imposes stricter medical necessity decision timeframes on federal managed care programs, effective CY 2026, as well as complex technical interface requirements, effective CY 2027, for Medicare, Medicaid, CHIP and QHPs offered on the ACA Federally Facilitated Exchange. These are intended to facilitate increased data sharing between managed care plans, enrollees and providers and streamline the prior authorization process.
We may need to raise additional funds in order to: • finance unanticipated working capital requirements; • develop or enhance our technological infrastructure and our existing solutions; • fund strategic relationships, including joint ventures and co-investments; • fund additional implementation engagements; • acquire complementary businesses, technologies, products or services; or 24 • refinance existing debt.
We may need to raise additional funds in order to: • finance unanticipated working capital requirements; • develop or enhance our technological infrastructure and our existing solutions; • fund strategic relationships, including joint ventures and co-investments, including the exercise by our joint venture partners of any put features; • fund additional implementation engagements; • acquire complementary businesses, technologies, products or services; or • refinance and/or payoff existing debt.
We are unable to predict the impact on the Company’s operations of future regulations or legislation affecting Medicaid programs, or the healthcare industry in general. For example, our partners may receive less Medicaid-based revenue following the Biden administration’s termination of the PHE as a result of and state Medicaid redeterminations.
We are unable to predict the impact on the Company’s operations of future regulations or legislation affecting Medicaid programs, or the healthcare industry in general. For example, our partners generally received less Medicaid-based revenue following the Biden administration’s termination of the COVID-19 PHE and the subsequent state Medicaid redeterminations.
Historically, we have relied on a limited number of partners for a substantial portion of our total revenue. Our three largest partners in terms of revenue, Cook County Health and Hospitals System, Molina Healthcare, Inc. (“Molina”) and Humana Insurance Company comprised 15.7%, 13.5% and 12.0%, respectively, of our revenue for the year ended December 31, 2023.
Historically, we have relied on a limited number of partners for a substantial portion of our total revenue. Our four largest partners in terms of revenue, Humana Insurance Company, Molina Healthcare, Inc. (“Molina”), Florida Blue and Cook County Health and Hospitals System comprised 19.3%, 13.7%, 12.9% and 11.5%, respectively, of our revenue for the year ended December 31, 2024.
Under GAAP, we review our goodwill for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
The occurrence of any one of these events could cause a significant decrease in our liquidity and impair our ability to pay amounts due on any indebtedness, and could have a material adverse effect on our business, financial condition and results of operations. We have experienced net losses in the past and we may not achieve profitability in the future.
The occurrence of any one of these events could cause a significant decrease in our liquidity and impair our ability to pay amounts due on any indebtedness and could have a material adverse effect on our business, financial condition and results of operations.
Although we have long-term contracts with many partners, these contracts may be terminated before their term expires for various reasons, such as changes in the regulatory landscape and poor performance by us, subject to certain conditions.
The revenue from our contracts is not guaranteed. Although we have long-term contracts with many partners, these contracts may be terminated before their terms expire for various reasons, such as changes in the regulatory landscape and poor performance by us, subject to certain conditions, amongst others.
OCR has the discretion to impose penalties without being required to attempt to resolve violations through informal means; further, OCR may require companies to enter into resolution agreements and corrective action plans which impose ongoing compliance requirements.
OCR has become an increasingly active regulator and has signaled its intention to continue this trend. OCR has the discretion to impose penalties without being required to attempt to resolve violations through informal means; further, OCR may require companies to enter into resolution agreements and corrective action plans which impose ongoing compliance requirements.
Because certain partners’ revenues are highly reliant on third-party payer reimbursement funding rates and mechanisms, overall reductions of rates from such payers could adversely impact the liquidity of our partners, resulting in their inability to make payments to us on agreed payment terms. See “Risk factors-The health care regulatory and political framework is uncertain and evolving” for additional information.
Because certain partners’ revenues are highly reliant on third-party payer reimbursement funding rates and mechanisms, overall reductions of rates from such payers could adversely impact the liquidity of our partners, resulting in their inability to make payments to us on agreed payment terms.
We may be required to, or may determine to, incur expenses related to our joint venture investments that we do not anticipate or that may not deliver the level of returns that we expect, in lieu of a put requirement or otherwise. 21 In connection with these acquisitions, investments, alliances or joint ventures, we could incur significant costs, debt, amortization expenses related to intangible assets or large and immediate write-offs or other impairments or charges, assume liabilities or issue stock (as we have done in prior transactions, including the acquisition of NIA) that would dilute our current stockholders’ ownership.
In connection with these acquisitions, investments, alliances or joint ventures, we could incur significant costs, debt, amortization expenses related to intangible assets or large and immediate write-offs or other impairments or charges, assume liabilities or issue stock (as we have done in prior transactions, including the acquisition of NIA) that would dilute our current stockholders’ ownership.
For example, if our managed care partners seek to provide services directly to their subscribers instead of contracting with us for such services, we could be adversely affected. The health care regulatory and political framework is uncertain and evolving.
For example, if our managed care partners seek to provide services directly to their subscribers instead of contracting with us for such services, we could be adversely affected.
Disputes may arise between us and our licensors regarding intellectual property rights subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement; • our obligations with respect to the use of the licensed technology in relation to our services and technologies, and which activities satisfy those obligations; • whether our activities are in compliance with the restrictions placed upon our rights to use the licensed technology by our licensors; and • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.
Disputes may arise between us and our licensors regarding intellectual property rights subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement; • our obligations with respect to the use of the licensed technology in relation to our services and technologies, and which activities satisfy those obligations; • whether our activities are in compliance with the restrictions placed upon our rights to use the licensed technology by our licensors; and • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners. 31 If disputes over intellectual property rights that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to obtain equivalent replacement licensing arrangements or to successfully develop and commercialize the affected products and technologies.
We rely on third-party vendors to host and maintain our technology platform, including our primary platform to facilitate value-based care business models for health plans, Identifi®. Our ability to offer our services and operate our business is therefore dependent on maintaining our relationships with third-party vendors and entering into new relationships to meet the changing needs of our business.
We rely on third-party vendors to host and maintain our technology platforms, including Identifi® and CarePro™. Our ability to offer our services and operate our business is therefore dependent on maintaining our relationships with third-party vendors and entering into new relationships to meet the changing needs of our business.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur CISO has served in this role for the past four years, and has more than 25 years of experience in the aggregate in various roles involving managing information security, technology infrastructure, IT operations and developing cybersecurity strategy, and is a Certified Information Systems Security Professional (CISSP).
Biggest changeOur CISO has served in this role for the past five years, has more than 25 years of experience in the aggregate in various roles involving managing information security, technology infrastructure, IT operations and developing cybersecurity strategy, and is a Certified Information Systems Security Professional (“CISSP”).
As part of this program, we employ a range of tools and services to inform our assessment, identification and management of material risks from cybersecurity threats, which include, from time to time, monitoring emerging data protection laws and implementing responsive changes to our processes; undertaking periodic reviews of our partner facing policies and statements related to cybersecurity; conducting cybersecurity management and incident training for employees involved in our systems and processes that 42 handle sensitive data; conducting phishing email simulations for employees and contractors with access to corporate email systems; requiring employees, as well as third-parties who provide services on our behalf, to treat information and data with care; and employing a cyber risk management and quantification system customized to our environment.
As part of this program, we employ a range of tools and services to inform our assessment, identification and management of material risks from cybersecurity threats, which include, from time to time, monitoring emerging data protection laws and implementing responsive changes to our processes; undertaking periodic reviews of our partner facing policies and statements related to cybersecurity; conducting cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data; conducting phishing email simulations for employees and contractors with access to corporate email systems; requiring employees, as well as third-parties who provide services on our behalf, to treat information and data with care; and employing a cyber risk management and quantification system customized to our environment.
For a discussion of whether and how any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect the Company, including our business strategy and results of operations, see “Risk Factors – “Risks Related to Data Protection Privacy, Cybersecurity, Intellectual Property and Technology” which is incorporated by reference into this Item 1C.
For a discussion of whether and how any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect the Company, including our business strategy and results of operations, see “Risk Factors – Risks Related to Data Protection Privacy, Cybersecurity, Intellectual Property and Technology” which is incorporated by reference into this Item 1C.
Management periodically assesses such risks and assists in the implementation of policies and procedures related to cybersecurity risk oversight in conjunction with the Compliance and Regulatory Affairs Committee. Our CISO is responsible for assessing and managing the Company’s material risks from cybersecurity threats.
Management periodically assesses such risks and assists in the implementation of policies and procedures related to cybersecurity risk oversight in conjunction with the Compliance and Regulatory Affairs Committee. 44 Our CISO is responsible for assessing and managing the Company’s material risks from cybersecurity threats.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease all of our facilities and we do not own any real property. As provided in “Part II – Item 8. Financial Statements and Supplementary Data - Note 12 - Leases,” the total rental expense on operating leases, net of sublease income, was $14.0 million for the year ended December 31, 2023.
Biggest changeAs provided in “Part II – Item 8. Financial Statements and Supplementary Data - Note 11” the total rental expense on operating leases, net of sublease income, was $8.3 million for the year ended December 31, 2024.
Item 2. Properties Our corporate headquarters and executive officers are located in Arlington, Virginia, where we occupy approximately 8,500 square feet of office space effective January 1, 2024 with a new 7-year lease. We also lease offices throughout the United States, and in Pune, India and Manila, Philippines.
Item 2. Properties Our corporate headquarters and executive officers are located in Arlington, Virginia, where we occupy approximately 8,500 square feet of office space effective January 1, 2024 with a seven-year lease. We also lease offices throughout the United States, in Pune, India and Manila, Philippines. We lease all of our facilities and we do not own any real property.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends Series A Preferred Stock For the year ended December 31, 2023 the Series A Preferred stockholders were paid dividends in the amount of $18.8 million.
Biggest changeDividends Series A Preferred Stock For the year ended December 31, 2024, the Series A Preferred stockholders were paid dividends in the amount of $20.1 million. We expect to continue to pay dividends to the Series A Preferred stockholders pursuant to the terms of the Certificate of Designation of Cumulative Series A Convertible Preferred Shares.
This graph assumes an investment of $100 at the closing price of the markets on December 31, 2018, in our Class A common stock, the NASDAQ Health Care Index and the NYSE Composite Index, and assumes the reinvestment of dividends, if any. The comparisons shown in the following graph are based upon historical data.
This graph assumes an investment of $100 at the closing price of the markets on December 31, 2019, in our Class A common stock, the NASDAQ Health Care Index and the NYSE Composite Index, and assumes the reinvestment of dividends, if any. The comparisons shown in the following graph are based upon historical data.
Performance Graph The following graph compares the cumulative total stockholder return on our Class A common stock for the 5-years ended December 31, 2023, to the cumulative total returns of the NASDAQ Health Care Index and the NYSE Composite Index over the same 44 period.
Performance Graph The following graph compares the cumulative total stockholder return on our Class A common stock for the 5-years ended December 31, 2024, to the cumulative total returns of the NASDAQ Health Care Index and the NYSE Composite Index over the same 46 period.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market and Dividend Information Market Information Our Class A common stock is traded on the NYSE under the symbol “EVH.” Holders As of February 15, 2024, there were 84 holders of record of our Class A common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market and Dividend Information Market Information Our Class A common stock is traded on the NYSE under the symbol “EVH.” Holders As of February 14, 2025, there were 77 holders of record of our Class A common stock.
We do not anticipate paying any cash dividends on our Class A common stock for the foreseeable future.
Common Stock We have not declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends on our Class A common stock for the foreseeable future.
Removed
We expect to continue to pay dividends to the Series A Preferred stockholders pursuant to the terms of the Securities Purchase Agreement we entered into on January 20, 2023 with the purchasers listed on Schedule I thereto (the “Securities Purchase Agreement”). Common Stock We have not declared or paid any cash dividends on our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOn January 20, 2023, (“the NIA Closing Date”), the Company entered into Amendment No. 1 to the Credit Agreement (the “Amendment”), pursuant to which the lenders agreed to extend credit to the Borrower in the form of (i) additional revolving commitments in an aggregate principal amount equal to $25.0 million (the “Incremental Revolving Facility” and together with the Initial Revolving Facility, the “Revolving Facility”), and (ii) additional term loans in an aggregate principal amount equal to $240.0 million (the “Incremental Term Loan Facility” and together with the Initial Term Loan Facility, the “Term Loan Facility”; the Revolving Facility and the Term Loan Facility are collectively referred to herein as the “Credit Facilities”).
Biggest changeCredit Agreement Activity On December 6, 2024 (the “Amendment No. 3 Effective Date”), the Company entered into Amendment No. 3 (“Amendment No. 3”) to the Credit Agreement (as defined below) that provides new secured debt financing in the form of (i) additional commitments under the Company’s existing asset-based revolving credit facility in an aggregate principal amount equal to $50.0 million (the “2024 Revolver Increase”, and together with the Initial Revolving Facility (as defined below) and the 2023 Revolver Increase (as defined below, the “Revolving Facility”), (ii) a new delayed draw term loan facility in an aggregate principal amount equal to $125.0 million (the “2024-A Delayed Draw Term Loan Facility”), and (iii) a new delayed draw term loan facility in an aggregate principal amount equal to $75.0 million (the “2024-B Delayed Draw Term Loan Facility” and together with the 2024 Revolver Increase and the 2024-A Delayed Draw Term Loan Facility, the “2024 Incremental Facilities”; the Initial Term Loan Facility (as defined below), the 2023 Additional Term Loans (as defined below), the 2024-A Delayed Draw Term Loan Facility and the 2024-B Delayed Draw Term Loan Facility are collectively referred to herein as the “Term Loan Facility”; the Revolving Facility and the Term Loan Facility are collectively referred to herein as the “Credit Facilities”).
In order to determine whether we are the principal or agent in the arrangement, we review each third-party relationship on a contract-by- contract basis. As we integrate goods and services provided by third parties into our overall service, we control the services provided to the customer prior to its delivery.
In order to determine whether we are the principal or agent in the arrangement, we review each third-party relationship on a contract-by- contract basis. As we integrate goods and services provided by third parties into our overall service, we control the services provided to the customer prior to its delivery.
Financing Activities Cash flows provided by financing activities of $281.3 million in the year ended December 31, 2023, were primarily related to $647.5 million received from our Credit Facilities and 2029 Notes and $168.0 million from the issuance of preferred equity, offset in part, by $464.2 million of cash outflows related to the payment on our Credit Facilities, $46.9 million from the payment of contingent consideration, $18.8 million of preferred dividends paid on our Series A Preferred Stock and $15.3 million from withholding taxes paid in respect of vested restricted stock units that were net settled.
Cash flows provided by financing activities of $281.3 million in the year ended December 31, 2023, were primarily related to $647.5 million received from our Credit Facilities and 2029 Notes and $168.0 million from the issuance of preferred equity, offset in part, by $464.2 million of cash outflows related to the payment on our Credit Facilities, $46.9 million from the payment of contingent consideration, $18.8 million of preferred dividends paid on our Series A Preferred Stock and $15.3 million from withholding taxes paid in respect of vested restricted stock units that were net settled.
Effective during the three months ended March 31, 2023, the Company changed its reportable segments to reflect changes in the way its chief operating decision maker evaluates the performance of its operations, develops strategy and allocates capital resources. Specifically, the Company collapsed its previous two segments, Evolent Health Services and Clinical Solutions into one segment.
Effective during the three months ended March 31, 2023, the Company changed its reportable segments to reflect changes in the way its chief operating decision maker (“CODM”) evaluates the performance of its operations, develops strategy and allocates capital resources. Specifically, the Company collapsed its previous two segments, Evolent Health Services and Clinical Solutions into one segment.
During the year ended December 31, 2023, the Company repaid $415.0 million of the Term Loan Facility that was utilized to acquire IPG and NIA and recorded a loss on repayment/extinguishment of long-term debt of $21.0 million comprised of $10.7 million in prepayment premium and $10.3 million of acceleration of amortization of deferred financing costs.
Loss on Extinguishment/Repayment of Long-Term Debt, Net During the year ended December 31, 2023, the Company repaid $415.0 million of the Term Loan Facility that was utilized to acquire IPG and NIA and recorded a loss on repayment/extinguishment of long-term debt of $21.0 million comprised of $10.7 million in prepayment premium and $10.3 million of acceleration of amortization of deferred financing costs.
In applying these critical accounting policies in preparing our financial statements, management must use critical assumptions, estimates and judgments concerning future results or other developments, including the likelihood, timing or amount of one or more future events. Actual results may differ from these estimates under different assumptions or conditions.
In applying these critical accounting policies in preparing our consolidated financial statements, management must use critical assumptions, estimates and judgments concerning future results or other developments, including the likelihood, timing or amount of one or more future events. Actual results may differ from these estimates under different assumptions or conditions.
As such, we are the principal and we will recognize revenue on a gross basis. In certain cases, we act as an agent and do not control the services from third parties before it is delivered to the customer, thereby recognizing revenue on a net basis.
As such, we are the principal and we will recognize revenue on a gross basis. In certain cases, we 53 act as an agent and do not control the services from third parties before it is delivered to the customer, thereby recognizing revenue on a net basis.
Goodwill is not amortized, but is reviewed at least annually for indications of impairment, with consideration given to financial performance and other relevant factors. We perform impairment tests of goodwill at a reporting 48 unit level.
Goodwill is not amortized, but is reviewed at least annually for indications of impairment, with consideration given to financial performance and other relevant factors. We perform impairment tests of goodwill at a reporting unit level.
Prior to the Redemption Date, holders of the 2024 Notes were entitled to convert to shares of the Company’s Class A Common Stock at a rate of 55.6153 shares per $1,000 principal amount of 2024 Notes.
Prior to the 48 Redemption Date, holders of the 2024 Notes were entitled to convert to shares of the Company’s Class A common stock at a rate of 55.6153 shares per $1,000 principal amount of 2024 Notes.
Risk Factors.” INTRODUCTION Business Overview We are a market leader in connecting care for people with complex conditions like cancer, cardiovascular disease, and musculoskeletal diagnoses. We work on behalf of health plans and other risk-bearing entities and payers (our customers) to support physicians and other healthcare providers (our users) in providing high quality evidence-based care to their patients.
INTRODUCTION Business Overview We are a market leader in connecting care for people with complex conditions like cancer, cardiovascular disease, and musculoskeletal diagnoses. We work on behalf of health plans and other risk-bearing entities and payers (our customers) to support physicians and other healthcare providers (our users) in providing high quality evidence-based care to their patients.
In cases where partners cross between multiple solutions, we only capture members from the solution with the maximum number of members. 52 Management uses Lives on Platform, PMPM fees, Cases, Revenue per Case and Average Unique Members because we believe that they provide insight into the unit economics of our services.
In cases where partners cross between multiple solutions, we only capture members from the solution with the maximum number of members. 54 Management uses Lives on Platform, PMPM fees, Cases, Revenue per Case and Average Unique Members because we believe that they provide insight into the unit economics of our services.
We use both a discounted cash flow analysis and market multiple analysis in order to estimate our reporting units fair value. The discounted cash flow analysis relies on significant judgement and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates and operating margins.
We use both a discounted cash flow analysis and market multiple analysis in order to estimate the fair value of our reporting unit. The discounted cash flow analysis relies on significant judgement and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates and operating margins.
Lives on Platform and PMPM Fees Performance Suite Lives on Platform are calculated by summing monthly members covered for specialty care services for contracts not under ASO arrangements, plus members managed by Complex Care in risk arrangements and divided by the number of months in the period.
Lives on Platform and PMPM Fees Performance Suite Lives on Platform are calculated by summing monthly members covered for specialty care services for contracts not under ASO arrangements, plus members managed by Complex Care in capitation arrangements and divided by the number of months in the period.
The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to consolidated financial statements presented in “Part II – Item 8. Financial Statements and Supplementary Data” as well as “Part I - Item 1A.
The MD&A is provided as a supplement to, and should be read in conjunction with our consolidated financial statements and the accompanying notes to our consolidated financial statements presented in “Part II – Item 8. Financial Statements and Supplementary Data” as well as “Part I - Item 1A. Risk Factors.
The tax benefit to be recognized is the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with the applicable tax authority that has full knowledge of all relevant information. Our gross unrecognized benefits are $2.6 million as of December 31, 2023.
The tax benefit to be 51 recognized is the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with the applicable tax authority that has full knowledge of all relevant information. Our gross unrecognized benefits are $2.6 million as of December 31, 2024.
Recent Events Impact of Inflation We experience pricing pressures in the form of competitive prices in addition to rising costs for certain inflation-sensitive operating expenses such as labor, employee benefits and facility leases. We do not believe these impacts were material to our revenues or net income during the year ended December 31, 2023.
Impact of Inflation We experience pricing pressures in the form of competitive prices in addition to rising costs for certain inflation-sensitive operating expenses such as labor, employee benefits and facility leases. We do not believe these impacts were material to our revenues or net income during the year ended December 31, 2024.
These initiatives include making organizational changes across the business that resulted in severance, terminated benefits and related payroll taxes and dedicated employee costs associated with recent acquisitions as well as third-party professional fees.
These initiatives include making organizational changes across the business that resulted in severance, termination benefits and related payroll taxes and 49 dedicated employee costs associated with recent acquisitions as well as third-party professional fees.
We believe adherence to evidence-based clinical pathways supports better outcomes for patients, a better experience for physicians, and lower costs for the healthcare system overall. Specialty care represents a significant and fast-growing portion of healthcare costs in the U.S., driven in part by the pace of development of new therapies and treatments.
We believe adherence to evidence-based clinical pathways supports better outcomes for patients, a better experience for physicians, and lower costs for the healthcare system overall. Specialty care represents a significant and fast-growing portion of healthcare costs in the United States, driven in part by the pace of development of new therapies and treatments.
Primary activities include net income from operations adjusted for non-cash transactions, working capital changes and changes in other assets and liabilities.
Primary activities include net loss from operations adjusted for non-cash transactions, working capital changes and changes in other assets and liabilities.
Financial Statements and Supplementary Data - Note 13” for additional discussion regarding the sale of Series A Preferred Stock.
Financial Statements and Supplementary Data - Note 12” for additional discussion regarding the sale of Series A Preferred Stock.
Depreciation and Amortization Expense Depreciation and amortization expenses consist of the amortization of intangible assets associated with the step up in fair value of Evolent Health LLC’s assets and liabilities for the Offering Reorganization, amortization of intangible assets recorded as part of our various business combinations and asset acquisitions and depreciation of property and equipment, including the amortization of capitalized software.
Depreciation and Amortization Expense Depreciation and amortization expenses consist of the amortization of intangible assets associated with the step up in fair value of Evolent Health LLC’s assets and liabilities for the Offering Reorganization, amortization of intangible assets recorded as part of our various business combinations and asset acquisitions and depreciation of property and equipment, including internal-use software development costs.
Financial Statements and Supplementary Data - Note 10.” Series A Preferred Stock In connection with the consummation of the acquisition of NIA, on January 20, 2023, we entered into a Securities Purchase Agreement pursuant to which the Company offered and sold an aggregate 175,000 shares of Series A Preferred Stock, at a purchase price of $960.00 per share, resulting in total gross proceeds to us of $168.0 million.
Series A Preferred Stock In connection with the consummation of the acquisition of NIA, on January 20, 2023, we entered into a Securities Purchase Agreement pursuant to which the Company offered and sold an aggregate 175,000 shares of Series A Preferred Stock, at a purchase price of $960.00 per share, resulting in total gross proceeds to us of $168.0 million.
Uses of Capital Our principal uses of cash are in the operation and expansion of our business, payment of interest on our convertible debt and secured borrowings and payment of preferred dividends. The Company does not anticipate paying a cash dividend on our Class A common stock in the foreseeable future. 60
Uses of Capital Our principal uses of cash are in the operation and expansion of our business, payment of interest and other amounts payable on our convertible debt and secured borrowings and payment of preferred dividends. The Company does not anticipate paying a cash dividend on our Class A common stock in the foreseeable future. 62
Right-of-Use Asset Impairment During the year ended December 31, 2023, the Company decommissioned its Chicago, IL lease and wrote off the associated right-of-use asset, recognizing an impairment charge of $24.1 million in right-of-use assets impairment on the consolidated statements of operations and comprehensive income (loss). There were no such impairments in 2022.
During the year ended December 31, 2023, the Company decommissioned its Chicago, IL lease and wrote off the associated right-of-use asset, recognizing an impairment charge of $24.1 million in right-of-use assets impairment on the consolidated statements of operations and comprehensive income (loss).
Loss on Repayment of Long-Term Debt, Net On August 11, 2022, the Company entered into exchange agreements with certain holders of the 2024 Notes. Pursuant to the agreements, these holders exchanged $92.8 million in aggregate principal amount of such notes for shares of the Company’s Class A common stock.
On August 11, 2022, the Company entered into exchange agreements with certain holders of the 2024 Notes. Pursuant to the agreements, these holders exchanged $92.8 million in aggregate principal amount of such notes for shares of the Company’s Class A common stock.
Financial Statements and Supplementary Data - Note 10” in this Form 10-K for more information related to interest expense by debt issuance. Gain from Equity Method Investees The Company allocated its proportional share of the investees’ earnings and losses each reporting period.
Financial Statements and Supplementary Data - Note 9” and “Part II - Item 8. Financial Statements and Supplementary Data - Note 25” in this Form 10-K for more information related to interest expense by debt issuance. Gain from Equity Method Investees The Company allocated its proportional share of the investees’ earnings and losses each reporting period.
The Company’s proportional share of the gain from these investments was approximately $1.3 million, $4.6 million and $13.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The Company’s proportional share of the gain (loss) from these investments was approximately $(3.4) million, $1.3 million and $4.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Restricted Cash and Restricted Investments Restricted cash and restricted investments of $30.6 million is carried at cost and includes cash held on behalf of other entities for pharmacy and claims management services of $12.3 million, collateral for letters of credit required as security deposits for facility leases of $2.1 million, amounts held with financial institutions for risk-sharing arrangements of $16.2 million as of December 31, 2023.
Restricted Cash and Restricted Investments Restricted cash and restricted investments of $74.3 million is carried at cost and includes cash held on behalf of other entities for pharmacy and claims management services of $55.8 million, collateral for letters of credit required as security deposits for facility leases of $1.9 million, amounts held with financial institutions for risk-sharing arrangements of $16.6 million as of December 31, 2024.
We recorded interest expense (including amortization of deferred financing costs) of approximately $54.2 million, $15.6 million and $25.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
We recorded interest expense (including amortization of deferred financing costs) of approximately $24.7 million, $54.2 million and $15.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.
As a result, a quantitative goodwill impairment analysis was not required. Revenue Recognition Contracts with Multiple Performance Obligations Our contracts with customers may contain multiple performance obligations, primarily when the partner has requested both administrative services and other services such as our specialty care management or total cost of care management services as these services are distinct from one another.
Revenue Recognition Contracts with Multiple Performance Obligations Our contracts with customers may contain multiple performance obligations, primarily when the partner has requested both administrative services and other services such as our specialty care management or total cost of care management services as these services are distinct from one another.
Approximately $1.7 million and $4.4 million of total personnel costs in costs of revenue was attributable to stock-based compensation expense for the year ended December 31, 2023, and 2022, respectively. Cost of revenue represented 76.6% of total revenue for both the year ended December 31, 2023, and 2022, respectively.
Approximately $4.6 million and $1.7 million of total cost of revenue was attributable to stock-based compensation expense for the year ended December 31, 2024, and 2023, respectively. Cost of revenue represented 85.6% and 76.6% of total revenue for the year ended December 31, 2024, and 2023 respectively.
Benefit from Income Taxes An income tax provision for (benefit from) of $(89.4) million, $(43.4) million and $0.5 million was recognized for the years ended December 31, 2023, 2022 and 2021, respectively, which resulted in effective tax rates of 44.2%, 69.9% and (1.6)%, respectively.
Benefit from Income Taxes A benefit from income taxes of $1.4 million, $89.4 million and $43.4 million was recognized for the years ended December 31, 2024, 2023 and 2022, respectively, which resulted in effective tax rates of 2.2%, 44.2% and 69.9%, respectively.
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.
In the quantitative evaluation, the fair value 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.
Approximately $38.8 million and $29.6 million of total personnel costs were attributable to stock-based compensation expense for the year ended December 31, 2023 and 2022, respectively. Acquisition and severance costs accounted for approximately $16.6 million and $24.9 million of total selling, general and administrative expenses for the year ended December 31, 2023, and 2022, respectively.
Approximately $35.2 million and $38.8 million of total selling, general and administrative expenses were attributable to stock-based compensation expense for the year ended December 31, 2024 and 2023, respectively. Acquisition and severance costs accounted for approximately $5.8 million and $16.6 million of total selling, general and administrative expenses for the year ended December 31, 2024 and 2023, respectively.
Financial Statements and Supplementary Data - Consolidated Statements of Cash Flows:” For the Year Ended December 31, 2023 2022 2021 Net cash and restricted cash provided by (used in) operating activities $ 142,582 $ (11,553) $ 38,747 Net cash and restricted cash used in investing activities (415,544) (259,115) (15,786) Net cash and restricted cash provided by (used in) financing activities 281,340 131,541 (29,548) Operating Activities Cash flows from operating activities primarily represent inflows and outflows associated with our operations.
Financial Statements and Supplementary Data - Consolidated Statements of Cash Flows”: For the Year Ended December 31, 2024 2023 2022 Net cash and restricted cash provided by (used in) operating activities $ 18,765 $ 142,582 $ (11,553) Net cash and restricted cash used in investing activities (62,932) (415,544) (259,115) Net cash and restricted cash (used in) provided by financing activities (565) 281,340 131,541 Operating Activities Cash flows from operating activities primarily represent inflows and outflows associated with our operations.
Customers The following table summarizes those partners who represented at least 10.0% of our consolidated revenue: For the Year Ended December 31, 2023 2022 Cook County Health and Hospitals Systems 15.7% 22.4% Humana Insurance Company 12.0% * Molina Healthcare, Inc. 13.5% * Florida Blue Medicare, Inc. 10.4% 11.5% ———————— * Represents less than 10.0% of the respective balance Transactions The Company has undertaken several transactions, some of which may impact year-to-year comparisons.
Customers The following table summarizes those partners who represented at least 10.0% of our consolidated revenue: For the Year Ended December 31, 2024 2023 2022 Cook County Health and Hospitals System 11.5% 15.7% 22.4% Florida Blue Medicare, Inc. 12.9% 10.4% 11.5% Humana Insurance Company 19.3% 12.0% * Molina Healthcare, Inc. 13.7% 13.5% * ———————— * Represents less than 10.0% of the respective balance.
Selling, general and administrative expenses also include costs associated with our centralized infrastructure and research and development activities to support our network development capabilities, claims processing services, including PBM administration, technology infrastructure, clinical program development and data analytics.
Selling, general and administrative expenses also include transition services agreements (“TSA”) fees associated with our acquisitions, costs associated with our centralized infrastructure and research and development activities to support our network development capabilities, technology infrastructure, clinical program development and data analytics.
Contractual and Other Obligations We believe that the amount of cash and cash equivalents on hand and cash flows from operations will be adequate for us to execute our business strategy and meet anticipated requirements for lease obligations, capital expenditures working capital and debt service for the next twelve months.
Contractual and Other Obligations We believe that the amount of cash and cash equivalents on hand and cash flows from operations, plus borrowings under our credit facilities and if necessary, additional funding through other forms of financing, will be adequate for us to execute our business strategy and meet anticipated requirements for lease obligations, capital expenditures working capital and debt service for the next twelve 60 months and in the long-term.
We estimate our actual current tax expense, including permanent charges and benefits, and temporary differences resulting from differing treatment of items, such as deferred revenue for tax and book accounting purposes.
We estimate our actual current tax expense, including permanent charges and benefits, and temporary differences resulting from differing treatment of items, such as deferred revenue for tax and book accounting purposes. These temporary differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets.
Changes in the fair value of contingent consideration, other than measurement period adjustments, are recognized as a change in fair value of contingent consideration on the Company's consolidated statements of operations and comprehensive income (loss).
Changes in the fair value of contingent consideration, other than measurement period adjustments, are recognized as a change in fair value of contingent consideration on the Company's consolidated statements of operations and comprehensive income (loss). Acquisition-related expenses and post-acquisition restructuring costs are recognized separately from the business combination and are expensed as incurred.
Those cash outflows were offset, in part by higher accounts payable and accrued compensation and employee benefits of approximately $10.8 million. 58 Investing Activities Cash flows used in investing activities of $415.5 million in the year ended December 31, 2023 were primarily attributable to $388.2 million paid for the acquisition of NIA and $28.7 million of investments in internal-use software and purchases of property and equipment.
Cash flows used in investing activities of $415.5 million in the year ended December 31, 2023 were primarily attributable to $388.2 million paid for the acquisition of NIA and $28.7 million of investments in internal-use software and purchases of property and equipment.
As of December 31, 2023, the Company had $192.8 million of cash and cash equivalents and $30.6 million in restricted cash and restricted investments. We believe our current cash and cash equivalents will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months.
As of December 31, 2024, the Company had $104.2 million of cash and cash equivalents and $74.3 million in restricted cash and restricted investments. We believe our current cash and cash equivalents will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months as of the date the financial statements were issued.
The Company used the net proceeds to prepay interest and prepayment premiums on outstanding borrowings and pay interest and prepayment premiums under its Term Loan Facility. Refer to “Part II – Item 8.
The Company used the net proceeds to prepay interest and prepayment premiums on outstanding borrowings and pay interest and prepayment premiums under its Term Loan Facility. Refer to “Part II – Item 8. Financial Statements and Supplementary Data – Note 9” for additional discussion regarding the 2029 Notes.
Regular dividends on the Series A Preferred Stock are paid quarterly in cash in arrears at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designation) plus 6.00%.
Regular dividends on the Series A Preferred Stock are paid quarterly in cash in arrears at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designation) plus 6.00%. The regular dividend rate will also increase by 2.0% per annum upon the occurrence and during the continuance of certain triggering events.
We believe Evolent can bring an integrated approach to a patient’s condition across multiple specialties, using technology to recommend our evidence-based clinical pathways in a way that provides rapid feedback to the provider, seeks to remove barriers to care, and aligns 45 financial incentives with the best evidence.
We believe Evolent can bring an integrated approach to a patient’s condition across multiple specialties, using technology to recommend our evidence-based clinical pathways in a way that provides rapid feedback to the provider, seeks to remove barriers to care, and aligns financial incentives with the best evidence. 47 We were an early innovator in value-based care, founded in 2011 by members of our management team, UPMC, an integrated delivery system based in Pittsburgh, Pennsylvania, and The Advisory Board Company.
NIA is part of Evolent’s Specialty Technology and Services Suite. Refer to “Part II - Item 8.
NIA is part of Evolent’s Specialty Technology and Services Suite.
Our operating cash outflows were affected by the timing of our customer and vendor payments primarily driven by increases in accounts receivables from Cook County Health and Hospitals System of approximately $99.2 million, reduction of our accrued liabilities due to a decrease in expected IPG and Vital Decisions contingent consideration payments of $25.7 million and an increase in reserves for liabilities related to payments to providers and pharmacies under performance-based arrangements related to its total cost of care and specialty care management services of $28.4 million.
Our operating cash outflows were affected by the timing of our customer and vendor payments primarily driven by increases in accounts receivables from Cook County Health and Hospitals System of approximately $99.2 million, reduction of our accrued liabilities due to a decrease in expected IPG and Vital Decisions contingent consideration payments of $25.7 million and an increase in reserves for liabilities related to payments to providers and pharmacies under performance-based arrangements related to its total cost of care and specialty care management services of $28.4 million. 59 Investing Activities Cash flows used in investing activities of $62.9 million in the year ended December 31, 2024 were primarily attributable to cash paid for asset acquisitions and business combinations of $30.7 million which is inclusive of $19.5 million for the purchase of Machinify and $3.0 million for investment in future equity notes, and $24.9 million of investments in internal-use software and purchases of property and equipment.
If we believe that it is more likely than not that these deferred tax assets will not be recovered, we establish a valuation allowance. To the extent that we increase a valuation allowance in a period, we include an expense in the consolidated statement of operations in the period in which such determination is made.
To the extent that we increase a valuation allowance in a period, we include an expense in the consolidated statement of operations in the period in which such determination is made.
Costs consist primarily of claims expense, employee-related expenses (including compensation, benefits and stock-based compensation), expenses for TPA support and other services, as well as other professional fees. In certain cases, our cost of revenue also includes claims and capitation payments to providers and payments for pharmaceutical treatments and other health care expenditures through performance-based arrangements.
In certain cases, our cost of revenue also includes claims and capitation payments to providers and payments for pharmaceutical treatments and other health care expenditures through performance-based arrangements.
Selling, general and administrative expenses represented 18.2% and 19.9% of total revenue for the year ended December 31, 2023, as compared to 2022, respectively.
Selling, general and administrative expenses represented 10.3% and 18.2% of total revenue for the year ended December 31, 2024, as compared to 2023, respectively, driven in part by the Company’s 2023 Repositioning Plan which concluded in the second quarter of 2024.
Comparison of the Results for Year Ended December 31, 2022 to 2021 Revenue Total revenue increased by $444.1 million, or 48.9%, to $1,352.0 million for the year ended December 31, 2022, as compared to 2021.
Comparison of the Results for Year Ended December 31, 2024 to 2023 Revenue Total revenue increased by $590.8 million, or 30.1%, to $2,554.7 million for the year ended December 31, 2024, as compared to 2023.
Consolidated Results (in thousands, except percentages) For the Year Ended December 31, Change Over Prior Period For the Year Ended December 31, Change Over Prior Period 2023 2022 $ % 2022 2021 $ % Revenue $ 1,963,896 $ 1,352,013 $ 611,883 45.3% $ 1,352,013 $ 907,957 $ 444,056 48.9% Expenses Cost of revenue 1,503,426 1,035,429 467,997 45.2% 1,035,429 657,551 377,878 57.5% Selling, general and administrative expenses 358,110 269,269 88,841 33.0% 269,269 219,499 49,770 22.7% Depreciation and amortization expenses 123,415 67,195 56,220 83.7% 67,195 60,037 7,158 11.9% Loss on disposal of non-strategic assets 8,107 — 8,107 100.0% — — — —% Right-of-use assets impairment 24,065 — 24,065 100.0% — — — —% Change in fair value of contingent consideration 17,984 (23,522) 41,506 176.5% (23,522) 13,281 (36,803) (277.1)% Total operating expenses 2,035,107 1,348,371 686,736 50.9% 1,348,371 950,368 398,003 41.9% Operating income (loss) $ (71,211) $ 3,642 $ (74,853) (2,055.3)% $ 3,642 $ (42,411) $ 46,053 108.6% Cost of revenue as a % of revenue 76.6 % 76.6 % 76.6 % 72.4 % Selling, general and administrative expenses as a % of revenue 18.2 % 19.9 % 19.9 % 24.2 % Comparison of the Results for Year Ended December 31, 2023 to 2022 Revenue Total revenue increased by $611.9 million, or 45.3%, to $1,963.9 million for the year ended December 31, 2023, as compared to 2022.
Consolidated Results (in thousands, except percentages) For the Year Ended December 31, Change Over Prior Period For the Year Ended December 31, Change Over Prior Period 2024 2023 $ % 2023 2022 $ % Revenue $ 2,554,741 $ 1,963,896 $ 590,845 30.1 % $ 1,963,896 $ 1,352,013 $ 611,883 45.3% Expenses Cost of revenue 2,187,388 1,503,426 683,962 45.5 % 1,503,426 1,035,429 467,997 45.2% Selling, general and administrative expenses 263,050 358,110 (95,060) (26.5) % 358,110 269,269 88,841 33.0% Depreciation and amortization expenses 118,370 123,415 (5,045) (4.1) % 123,415 67,195 56,220 83.7% Loss on disposal of non-strategic assets — 8,107 (8,107) (100.0) % 8,107 — 8,107 100.0% Right-of-use assets impairment 2,588 24,065 (21,477) (89.2) % 24,065 — 24,065 100.0% Loss on lease termination 18,922 — 18,922 — % — — — 100.0% Change in fair value of contingent consideration 4,908 17,984 (13,076) (72.7) % 17,984 (23,522) 41,506 176.5% Total operating expenses 2,595,226 2,035,107 560,119 27.5% 2,035,107 1,348,371 686,736 50.9% Operating income (loss) $ (40,485) $ (71,211) $30,726 43.1% $ (71,211) $ 3,642 $(74,853) (2,055.3)% Cost of revenue as a % of revenue 85.6 % 76.6 % 76.6 % 76.6 % Selling, general and administrative expenses as a % of revenue 10.3 % 18.2 % 18.2 % 19.9 % We have elected to omit discussion on the earliest of the three years covered by the consolidated financial statements presented.
If the Company determines that it is more likely than not that the fair value of our reporting unit is below the carrying amount, a quantitative goodwill assessment is required. In the quantitative evaluation, the fair value is determined and compared to the carrying value.
Additionally, as part of this assessment, we may perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in measuring our reporting unit’s fair value. 50 If the Company determines that it is more likely than not that the fair value of our reporting unit is below the carrying amount, a quantitative goodwill assessment is required.
The Company paid $18.8 million of dividends and accreted $10.4 million of deferred issuance costs and redemption value during the year ended December 31, 2023. 57 REVIEW OF CONSOLIDATED FINANCIAL CONDITION Liquidity and Capital Resources The Company reported net loss attributable to common shareholders of Evolent Health, Inc. of $(142.3) million, $(19.2) million and $(37.6) million for the years ended December 31, 2023, 2022 and 2021, respectively.
The Company paid dividends and recorded accretion of deferred issuance costs and redemption value related to the Series A Preferred Stock as presented below (in thousands): For the Year Ended December 31, 2024 2023 2022 Cash dividends on Series A Preferred Stock 20,085 18,793 — Accretion of deferred financing costs and redemption value in excess of par $ 11,746 $ 10,427 $ — Total dividends and accretion of Series A Preferred Stock $ 31,831 $ 29,220 $ — 58 REVIEW OF CONSOLIDATED FINANCIAL CONDITION Liquidity and Capital Resources The Company reported net loss attributable to common shareholders of Evolent Health, Inc. of $93.5 million, $142.3 million and $19.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.
These temporary differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. 49 We assess the likelihood that our deferred tax assets will be recovered from future taxable income by considering both positive and negative evidence relating to their recoverability.
We assess the likelihood that our deferred tax assets will be recovered from future taxable income by considering both positive and negative evidence relating to their recoverability. If we believe that it is more likely than not that these deferred tax assets will not be recovered, we establish a valuation allowance.
The following table represents Evolent’s revenue disaggregated by end-market (in thousands): For the Year Ended December 31, 2023 2022 Medicaid $ 785,053 $ 559,362 Medicare 708,853 458,413 Commercial and other 469,990 334,238 Total $ 1,963,896 $ 1,352,013 The following table represents the Company’s Lives on Platform, Cases, Average PMPM fees, Revenue per Case and Average Unique Members for the year ended December 31, 2023 and 2022 (Lives on Platform in thousands): Average Lives on Platform/ Cases Average PMPM Fees / Revenue per Case For the Year Ended December 31, For the Year Ended December 31, 2023 2022 2023 2022 Performance Suite 4,236 2,363 $ 23.90 $ 38.02 Specialty Technology and Services Suite 69,494 14,860 0.36 0.39 Administrative Services 1,831 2,100 13.48 21.56 Cases 61 39 2,575 2,133 Average Unique Members 41,340 16,223 Changes in average PMPM fees for the year ending December 31, 2023 as compared to 2022 were driven primarily by Medicaid redeterminations in the second half of 2023, changes in the mix of services provided, including a higher percentage of services in the Medicaid line of business, and the launch in 2023 of the Performance Suite for advanced imaging with a lower average PMPM fee.
The following table represents Evolent’s revenue disaggregated by line of business (in thousands): For the Year Ended December 31, 2024 2023 Medicaid $ 862,401 $ 785,053 Medicare 1,045,921 708,853 Commercial and other 646,419 469,990 Total $ 2,554,741 $ 1,963,896 The following table represents the Company’s Lives on Platform, Cases, Average PMPM fees, Revenue per Case and Average Unique Members for the year ended December 31, 2024 and 2023 (Average Lives on Platform/Cases in thousands): Average Lives on Platform/ Cases Average PMPM Fees / Revenue per Case For the Year Ended December 31, For the Year Ended December 31, 2024 2023 2024 2023 Performance Suite 7,003 4,236 $ 21.44 $ 23.90 Specialty Technology and Services Suite 73,339 69,494 0.38 0.36 Administrative Services 1,246 1,831 15.92 13.48 Cases 60 61 2,967 2,575 Average Unique Members 40,475 41,430 Cost of Revenue Cost of revenue increased by $684.0 million, or 45.5%, to $2,187.4 million for the year ended December 31, 2024, as compared to 2023, principally as a result of the 30.1% growth in our revenue compared to year ended December 31, 2023.
We believe that these measures are also useful to investors because they allow further insight into the period over period operational performance. Due to our change in segments during the first quarter of 2023, the Company changed its presentation of Lives on Platform to reflect the membership that corresponds to quarterly revenue.
We believe that these measures are also useful to investors because they allow further insight into the period over period operational performance.
Change in Fair Value of Contingent Consideration We recorded a loss (gain) on change in fair value of contingent consideration of $18.0 million for the year ended December 31, 2023, related to the liabilities acquired as a result of the acquisitions of NIA in January 2023 and IPG in August 2022 combined with $7.9 million related to Evolent Care Partners earn out, and $(23.5) million for the year ended December 31, 2022, primarily related to liabilities acquired as a result of the acquisition of Vital Decisions and IPG.
We recorded $18.0 million for the year ended December 31, 2023 related to the liabilities acquired as a result of the acquisitions of NIA and IPG in August 2022. See “Part II - Item 8.
The increase was primarily driven by the NIA transition services administration fee of $30.0 million, higher personnel fees due to increased headcount from the acquisition of NIA and expected benefit accruals to employees of $22.7 million, higher stock compensation of $9.2 million due to the achievement and change in projected achievement of certain performance measurements, 54 higher bad debt expense of $2.3 million due to collection timing from our customers, technology services due to higher headcount of $3.9 million, $1.5 million of severance costs and acquisition costs of $15.1 million.
The decrease was primarily driven by lower TSA fees related to our NIA acquisition of $13.5 million recorded in 2023, $24.6 million of lower professional fees as a result of the 2023 Repositioning Plan, a $25.8 million decrease in personnel costs as a result of lower headcount and bonus accruals and lower bad debt expense of $7.0 million due to collection timing 56 from our customers, lower stock compensation of $3.7 million due to the achievement and change in projected achievement of certain performance measurements and lower lease expense of $5.3 million due to the termination of certain leases.
The increase in interest expense for the year ended December 31, 2023 compared to 2022 and 2021, is driven primarily by interest expense incurred on our Loans to fund the NIA and IPG acquisitions, offset by decreases of $8.7 million and $2.8 million during the years ended December 31, 2022 and 2023 due to the exchange of our 2024 Notes in August 2022 and September 2023 and $8.7 million during the year ended December 31, 2022 due to the exchange of our 2025 Notes in December 2021.
The increase in interest expense for the year ended December 31, 2023 compared to 2022 is driven primarily by interest expense incurred on our Loans to fund the NIA and IPG acquisitions. We expect interest expense to increase in future periods after we borrowed additional amounts under our Committed Facilities. See “Part II - Item 8.
See “Part II - Item 8. Financial Statements and Supplementary Data - Note 19” in this Form 10-K for more information related to changes in the fair value of contingent consideration.
Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. See “Part II - Item 8. Financial Statements and Supplementary Data - Note 8” in this Form 10-K for more information related to the 2024 goodwill impairment test.
Change in Fair Value of Contingent Consideration We recorded a loss on change in fair value of contingent consideration of $(23.5) million for the year ended December 31, 2022, related to the liabilities acquired as a result of the acquisitions of Vital Decisions in October 2021 and IPG in August 2022, and $13.3 million for the twelve months ended December 31, 2021, related to liabilities acquired as a result of the acquisition of Vital Decisions in 2021. 56 Discussion of Non-Operating Results Interest Expense Our interest expense in the year ended December 31, 2023 is primarily attributable to our Credit Agreement with Ares as well as the 2024 Notes and 2025 Notes.
Financial Statements and Supplementary Data - Note 18” in this Form 10-K for more information related to changes in the fair value of contingent consideration. 57 Discussion of Non-Operating Results Interest Expense Our interest expense for the year ended December 31, 2024 is primarily attributable to our Credit Agreement with Ares as well as the 2024 Notes and 2025 Notes.
The following table provides a summary of our total costs associated with our repositioning plans for the years ended December 31, 2023, 2022 and 2021, by major type of cost (in thousands): For the Year Ended December 31, 2023 Total Amount Expected to be Incurred in the 2023 Repositioning Plan Severance and termination benefits $ 8,564 $ 10,562 Dedicated employee costs 6,900 8,929 Professional services 12,910 15,174 Office space consolidation 6,862 $ 10,362 Total $ 35,236 $ 45,027 Critical Accounting Policies and Estimates We have identified the accounting policies below as critical to the understanding of our results of operations and our financial condition.
The following table provides a summary of our total costs associated with our repositioning plans for the years ended December 31, 2024 and 2023, respectively, by major type of cost (in thousands): For the Year Ended December 31, Cumulative Amount Incurred Through December 31, 2024 2024 2023 Severance and termination benefits $ 1,835 $ 8,564 $ 10,399 Dedicated employee costs 1,185 6,900 8,085 Professional services 4,128 12,910 17,038 Office space consolidation 3,452 6,862 10,314 Total $ 10,600 $ 35,236 $ 45,836 Segment Update The Company made organizational changes, including re-evaluating its reportable segments, as a result of growth in our value-based specialty care business, both organically and through acquisitions.
The change in gain from equity method investees for the year ended December 31, 2023, compared to 2022 and 2021 is driven primarily by runout from the sale of our Florida equity investee’s membership during the three months ended March 31, 2021.
The change in gain (loss) from equity method investees for the year ended December 31, 2024, compared to 2023 and 2022 is driven primarily by loss recognition from a joint venture that could potentially be terminated through the exercise of a put option in the first half of 2025.
The interest rate for the secured revolving credit facility will be calculated, at the option of the borrowers at either the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus 4.00%, or the base rate plus 3.00%. Also, as of December 31, 2023, we had 175,000 shares of the Series A Preferred Stock outstanding.
The interest rate for all Loans will be calculated, at the option of the borrowers, (a) in the case of the Revolving Facility, at either the Adjusted Term SOFR plus 4.00%, or the base rate plus 3.00% and (b) in the case of the Term Loan Facility, at either the Adjusted Term SOFR plus 5.50% or the base rate plus 4.50%, subject to step downs based on a total secured leverage ratio.
Selling, General and Administrative Expenses Selling, general, and administrative expenses increased by $88.8 million, or 33.0%, to $358.1 million for the year ended December 31, 2023, as compared to 2022, principally as a result of our IPG and NIA acquisitions and increased employee costs across the organization.
Selling, General and Administrative Expenses Selling, general, and administrative expenses decreased by $95.1 million, or 26.5%, to $263.1 million for the year ended December 31, 2024, as compared to 2023.
We also take into consideration customer demographics, current market conditions, the scope of services and our overall pricing strategy and objectives when determining the standalone selling price. Cost of Revenue (exclusive of depreciation and amortization) Our cost of revenue includes direct expenses and shared resources that perform services in direct support of our partners.
In accordance with the series guidance, we allocate variable consideration to the period to which the fees relate. Cost of Revenue (exclusive of depreciation and amortization) Our cost of revenue includes direct expenses and shared resources that perform services in direct support of our partners.
The regular dividend rate will also increase by 2.0% per annum upon the occurrence and during the continuance of certain triggering events. 59 Accounts Receivable, net Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts.
Accounts Receivable, Net Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. During the year ended December 31, 2024, accounts receivable, net, decreased primarily due to the timing of cash receipts from certain customers.
Qualitative factors include macroeconomic, industry and market considerations, overall financial performance, industry, legal and other relevant events and factors affecting the reporting unit. Additionally, as part of this assessment, we may perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in measuring our reporting unit’s fair value.
Qualitative factors include macroeconomic, industry and market considerations, overall financial performance, industry, legal and other relevant events and factors affecting the reporting unit.
As of December 31, 2023, the Company estimates total repositioning charges of $45.0 million to be incurred during the life of the 2023 Repositioning Plan which will be recorded in selling, general and administrative expenses on the consolidated statements of operations and comprehensive income (loss). The repositioning program is anticipated to be substantially complete by the first half of 2024.
Costs associated with the 2023 Repositioning Plan were recorded in selling, general and administrative expenses on the consolidated statements of operations and comprehensive income (loss). The 2023 Repositioning Plan was completed during the second quarter of 2024.
Depreciation and Amortization Expenses Depreciation and amortization expenses increased $56.2 million, or 83.7%, to $123.4 million for the year ended December 31, 2023, as compared to 2022 due primarily to $51.5 million of amortization of intangible assets acquired through our acquisitions and $6.4 million of accelerated amortization of trade name intangibles due to our consolidation of trade names under Evolent.
Depreciation and Amortization Expenses Depreciation and amortization expenses decreased $5.0 million, or 4.1%, to $118.4 million for the year ended December 31, 2024, as compared to 2023 primarily to fully amortizing our NCH technology intangible and provider network contracts in 2023 resulting in lower amortization of $4.1 million and $1.4 million, respectively, offset, in part by $1.1 million of accelerated amortization on our retired trade names.
The Company's historical disclosures have been recast to be consistent with the current presentation. All of our revenue is recognized in the United States and substantially all of our long-lived assets are located in the United States.
All of our revenue is recognized in the United States and substantially all of our long-lived assets are located in the United States. Recent Events Transactions The Company has undertaken several transactions, some of which may impact year-to-year comparisons. The following is a discussion of certain of those transactions.
Our cost of revenue increased as a percentage of our total revenue due to a change in the mix of our service offerings with the rapid growth of our Performance Suite solutions. We expect our cost of revenue to decrease as a percentage of total revenue over the longer-term subject to the composition of our growth.
Our cost of revenue increased as a percentage of our total revenue due to higher medical costs with the rapid growth of our Performance Suite solution, which has a lower gross margin and longer maturation profile than our other product types and acceleration in specialty oncology pharmacy costs.
Our estimated known contractual obligations (in thousands) as of December 31, 2023, were as follows: 2024 2025-2026 2027-2028 2029+ Total Operating leases for facilities $ 12,572 $ 17,955 $ 15,005 $ 16,033 $ 61,565 Purchase obligations related to vendor contracts 13,143 8,797 935 — 22,875 Convertible notes interest payments 16,401 30,763 28,175 14,088 89,427 Convertible notes principal repayment — 172,500 — 402,500 575,000 Contingent consideration 83,600 — — — 83,600 Total known contractual obligations $ 125,716 $ 230,015 $ 44,115 $ 432,621 $ 832,467 In addition, as of December 31, 2023, we had $37.5 million of aggregate principal amount in a secured revolving credit facility which will mature in 2029.
Our estimated known contractual and other obligations (in thousands) as of December 31, 2024, were as follows (including as discussed in the narrative below): 2025 2026-2027 2028-2029 2030+ Total Operating leases for facilities $ 27,610 $ 21,727 $ 3,155 $ 1,663 $ 54,155 Purchase obligations related to vendor contracts 12,284 13,758 101 — 26,143 Convertible notes interest payments (1) 16,675 28,175 28,176 — 73,026 Convertible notes principal repayment 172,500 — 402,500 — 575,000 Contingent consideration (2) 5,000 — — — 5,000 Total known contractual obligations $ 234,069 $ 63,660 $ 433,932 $ 1,663 $ 733,324 ———————— (1) Refer to the discussion in “Part II - Item 8.
Total growth in the Performance Suite and Specialty Technology and Services Suite was $406.0 million from the addition of new partners 53 and expansion with existing partners, partially offset by a reduction in nationwide Medicaid members as a result of the end of the public health emergency.
Growth was also offset in part by a $39.8 million reduction in revenue from the 55 run out of an Administrative Services contract, and by a reduction in Medicaid membership nationwide as a result of the end of the PHE.
Depreciation and Amortization Expenses Depreciation and amortization expenses increased $7.2 million, or 11.9%, to $67.2 million for the year ended December 31, 2022, as compared to 2021 due primarily to amortization of intangible assets acquired through our asset acquisitions and business combinations.
Depreciation and amortization expenses include $68.9 million and $74.8 million for the year ended December 31, 2024 and 2023, respectively, of amortization expense on intangible assets such as corporate trade names, customer, relationships, provider network contracts and existing technology related to acquisitions and business combinations.
Removed
As a result of this approach, we have seen as much as a 30% increase in adherence to best evidence for populations that we manage. We were an early innovator in value-based care, founded in 2011 by members of our management team, UPMC, an integrated delivery system based in Pittsburgh, Pennsylvania, and The Advisory Board Company.
Added
Acquisitions On August 1, 2024, the Company completed its acquisition of certain assets of Machinify, Inc. and the exclusive, perpetual and royalty-free license of Machinify Auth.
Removed
Segment Update The Company made organizational changes, including re-evaluating its reportable segments, as a result of growth in our value-based specialty care business, both organically and through acquisitions.
Added
The acquisition consideration was $28.5 million which included $19.5 million of cash, $11.0 million which was paid upon closing and $8.5 million which was paid on November 1, 2024, as well as an earn-out consisting of additional consideration of up to $12.5 million payable in cash or shares of the Company’s Class A common stock at the election of the Company in the second quarter of 2025.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−0 removed3 unchanged
Biggest changeIn the case of (a) the revolving loan, interest is calculated at either the Adjusted Term SOFR Rate (as defined in the Certificate of Designation) plus 4.00%, or the base rate plus 3.00% and (b) the Series A Preferred Stock, dividends are to be paid quarterly in cash in arrears at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designation) plus 6.00%.
Biggest changeIn the case of (a) the revolving loan, interest is calculated at either the Adjusted Term SOFR (as defined in the Certificate of Designation) plus 4.00%, or the base rate plus 3.00%, (b) the Series A Preferred Stock, dividends are to be paid quarterly in cash in arrears at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designation) plus 6.00% and (c) the 2024-A Delayed Draw Term Loan and 2024-B Delayed Draw Term Loan, interest is calculated at either the Adjusted Term SOFR plus 5.50% or the base rate plus 4.50%.
Foreign Currency Exchange Risk We have foreign currency risks related to our operating expenses denominated in currencies other than the U.S. dollar, primarily the Indian Rupee and the Philippine Peso. In general, we are a net payer of currencies other than the U.S. dollar.
Foreign Currency Exchange Risk We have de minimis foreign currency risks related to our operating expenses denominated in currencies other than the U.S. dollar, primarily the Indian Rupee and the Philippine Peso. In general, we are a net payer of currencies other than the U.S. dollar.
As of December 31, 2023, we had $575.0 million of aggregate principal amount of convertible notes outstanding, which are fixed rate instruments and not subject to fluctuations in interest rates.
As of December 31, 2024, we had $575.0 million of aggregate principal amount of convertible notes outstanding, which are fixed rate instruments and not subject to fluctuations in interest rates.
For every 1% increase in SOFR, the Company would record additional interest expense of $0.4 million per annum and preferred dividends of $1.8 million per annum. Refer to the discussion in “Part II - Item 8. Financial Statements and Supplementary Data - Note 10” for additional information on our long-term debt.
For every 1% increase in SOFR, the Company would record additional interest expense of $2.63 million per annum and preferred dividends of $1.75 million per annum. Refer to the discussion in “Part II - Item 8. Financial Statements and Supplementary Data - Note 9” for additional information on our long-term debt.
Interest Rate Risk As of December 31, 2023, the Company had cash and cash equivalents and restricted cash and restricted investments of $223.5 million, which consisted of bank deposits with FDIC participating banks of $220.3 million and bank deposits in international banks of $3.2 million.
Interest Rate Risk As of December 31, 2024, the Company had cash and cash equivalents and restricted cash and restricted investments of $178.5 million, which consisted of bank deposits with FDIC participating banks of $169.8 million and bank deposits in international banks of $8.7 million.
In addition, as of December 31, 2023, we have $37.5 million of aggregate principal amount in a secured revolving credit facility and $175.0 million of Series A Preferred Stock outstanding, all of which are floating rate instruments based on the SOFR and subject to fluctuations in interest rates.
In addition, as of December 31, 2024, we have $175.0 million of Series A Preferred Stock outstanding, which are floating rate instruments based on the SOFR and subject to fluctuations in interest rates.
It is difficult to predict the effect hedging activities would have on our results of operations. We recognized a foreign currency translation loss of $0.1 million, $0.8 million and $0.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. 61
It is difficult to predict the effect hedging activities would have on our results of operations. 63
Added
As of February 14, 2025, there was $262.5 million outstanding under the Company’s Credit Facilities, consisting of $125.0 million outstanding under its 2024-A Delayed Draw Term Loan, $75.0 million outstanding under its 2024-B Delayed Draw Term Loan and $62.5 million outstanding under its Revolving Facility, all of which is subject to interest rates based on the SOFR.

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