Evolent Health, Inc. (EVH) Bundle
Understanding Evolent Health, Inc. (EVH) Revenue Streams
Understanding Evolent Health, Inc.’s Revenue Streams
As of September 30, 2024, Evolent Health, Inc. reported total revenue of $1,908.2 million, reflecting an increase of 35.5% compared to the $1,407.8 million reported in the same period of 2023. This growth was largely driven by new contracts and transitioning existing customers to higher-value services.
Breakdown of Primary Revenue Sources
The company's revenue is primarily derived from three segments: Medicaid, Medicare, and Commercial and Other services. The following table details the revenue disaggregated by line of business for the nine months ended September 30:
| Segment | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) |
|---|---|---|
| Medicaid | $646,819 | $587,611 |
| Medicare | $794,160 | $474,535 |
| Commercial and Other | $467,220 | $345,695 |
| Total | $1,908,199 | $1,407,841 |
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth has shown significant improvement, with a 35.5% increase for the nine months ended September 30, 2024, compared to the previous year. For the three months ended September 30, 2024, total revenue reached $621.4 million, up from $511.0 million in 2023, marking a 21.6% growth rate.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contribution from each segment was as follows:
- Medicaid: 33.9%
- Medicare: 41.6%
- Commercial and Other: 24.5%
This illustrates the increasing importance of the Medicare segment, which saw a substantial growth rate driven by new contracts and service expansions.
Analysis of Significant Changes in Revenue Streams
A notable change in revenue streams includes the growth in the Performance Suite, which generated additional revenue of $343.3 million from new contracts. However, this was partially offset by a $34.8 million decrease in revenue from the run-out of an Administrative Services contract. Furthermore, transitioning customers from the Specialty Technology and Services Suite to the Performance Suite contributed an additional $90.6 million to revenue.
The following table summarizes the revenue performance for the three months ended September 30:
| Segment | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) |
|---|---|---|
| Medicaid | $214,627 | $195,259 |
| Medicare | $238,527 | $208,166 |
| Commercial and Other | $168,246 | $107,590 |
| Total | $621,400 | $511,015 |
A Deep Dive into Evolent Health, Inc. (EVH) Profitability
A Deep Dive into Evolent Health's Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, gross profit was $291.6 million, resulting in a gross profit margin of 15.3%. This is a decrease from the 20.6% gross profit margin reported for the same period in 2023.
Operating Profit Margin: The operating loss for the nine months ended September 30, 2024, was ($21.9 million), translating to an operating margin of (1.1%). In comparison, for the same period in 2023, the operating loss was ($49.9 million), which represented an operating margin of (3.5%).
Net Profit Margin: The net loss attributable to common shareholders for the nine months ended September 30, 2024, was ($62.8 million), yielding a net profit margin of (3.3%). This contrasts with a net loss of ($100.9 million) for the same period in 2023, which resulted in a net profit margin of (7.1%).
| Metric | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Gross Profit Margin | 15.3% | 20.6% |
| Operating Profit Margin | (1.1%) | (3.5%) |
| Net Profit Margin | (3.3%) | (7.1%) |
Trends in Profitability Over Time: The profitability metrics indicate that while revenue has increased, margins have contracted. The gross profit margin has decreased by 5.3 percentage points from 2023 to 2024, primarily due to increased costs associated with higher claims and medical expenses. The operating and net margins have also shown improvement in losses, narrowing compared to previous periods.
Comparison of Profitability Ratios with Industry Averages: The industry average gross profit margin for health tech companies is approximately 25%, indicating that the company is underperforming relative to its peers. The operating margin average in the industry is around 5%, while the net profit margin typically hovers around 3% to 5% for stable firms. This suggests that the company's margins are below industry standards.
Operational Efficiency Analysis: The cost of revenue as a percentage of total revenue increased to 84.7% for the nine months ended September 30, 2024, from 74.5% in 2023. This increase is mainly due to higher medical costs and claims associated with the Performance Suite, which has a lower gross margin. Selling, general, and administrative expenses decreased to 11.3% of total revenue in 2024, down from 19.7% in 2023, reflecting improved cost management strategies.
| Metric | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Cost of Revenue (% of Total Revenue) | 84.7% | 74.5% |
| Selling, General, and Administrative Expenses (% of Total Revenue) | 11.3% | 19.7% |
Debt vs. Equity: How Evolent Health, Inc. (EVH) Finances Its Growth
Debt vs. Equity: How Evolent Health, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Evolent Health, Inc. reported long-term debt of $599.7 million and total current liabilities of $523.7 million.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 0.58, calculated using total debt of $599.7 million and shareholders' equity of $1.04 billion. This ratio is below the industry average of 0.75, indicating a more conservative approach to leveraging debt.
Recent Debt Issuances
In January 2023, Evolent Health issued $168 million in Series A Preferred Stock, which is part of its financing strategy. Additionally, the company has convertible senior notes amounting to $575 million due in 2029, reflecting a strategy that balances equity and debt financing.
Credit Ratings
The company currently holds a credit rating of B+ from S&P, indicating a stable outlook with moderate credit risk.
Refinancing Activity
Recent refinancing activities include the repayment of a term loan facility in 2023, which has reduced interest expenses significantly from $41.97 million in 2023 to $18.00 million in 2024.
Debt Financing vs. Equity Funding
Evolent Health maintains a balanced approach between debt and equity funding to finance its growth. The company has utilized equity financing through the issuance of preferred stock while leveraging debt for operational expansions. The recent issuance of convertible notes and preferred stock highlights this strategy.
| Financial Metric | Amount (in millions) |
|---|---|
| Long-term Debt | $599.7 |
| Current Liabilities | $523.7 |
| Debt-to-Equity Ratio | 0.58 |
| Industry Average Debt-to-Equity Ratio | 0.75 |
| Series A Preferred Stock Issued | $168.0 |
| Convertible Senior Notes Due 2029 | $575.0 |
| Credit Rating | B+ |
| Interest Expense 2023 | $41.97 |
| Interest Expense 2024 | $18.00 |
Assessing Evolent Health, Inc. (EVH) Liquidity
Assessing Evolent Health, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was approximately 0.34, calculated from current assets of $178.4 million and current liabilities of $523.7 million.
Quick Ratio: The quick ratio stands at 0.34, reflecting the company's ability to meet short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is reported as a deficit of $(345.3 million), indicating a significant liquidity concern.
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, operating activities provided cash inflows of $45.0 million. This was driven by a decrease in accounts receivable of $38.8 million.
Investing Cash Flow: Cash used in investing activities was $(43.0 million), primarily for asset acquisitions and business combinations.
Financing Cash Flow: Financing activities resulted in cash outflows of $(97.5 million), largely due to preferred dividends and contingent consideration payments.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $96.6 million in cash and cash equivalents and $31.3 million in restricted cash. The total cash and cash equivalents are considered sufficient to cover operating expenses for at least the next twelve months.
| Metric | Value (as of Sept 30, 2024) |
|---|---|
| Current Ratio | 0.34 |
| Quick Ratio | 0.34 |
| Working Capital | $(345.3 million) |
| Operating Cash Flow | $45.0 million |
| Investing Cash Flow | $(43.0 million) |
| Financing Cash Flow | $(97.5 million) |
| Cash and Cash Equivalents | $96.6 million |
| Restricted Cash | $31.3 million |
Is Evolent Health, Inc. (EVH) Overvalued or Undervalued?
Valuation Analysis
To assess the valuation of Evolent Health, Inc. (EVH), we will analyze key financial metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for Evolent Health is N/A due to the company reporting a net loss. For the trailing twelve months, the loss per share was $0.55 for the nine months ended September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated as the market price per share divided by the book value per share. As of September 30, 2024, the book value per share is approximately $9.04. If the stock price is $12.50, the P/B ratio would be approximately 1.38.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash and cash equivalents. As of September 30, 2024, the total debt is $599.7 million, cash and cash equivalents are $96.6 million, and the market capitalization is approximately $1.44 billion. Using these figures, the EV is approximately $2.1 billion. The EBITDA for the last twelve months is approximately $50 million, leading to an EV/EBITDA ratio of approximately 42.
Stock Price Trends
Over the last 12 months, the stock price of Evolent Health has fluctuated between a low of $8.50 and a high of $15.75. The stock currently trades at approximately $12.50, reflecting a 25% increase from its 12-month low.
Dividend Yield and Payout Ratios
Evolent Health does not currently pay a regular dividend to common shareholders. However, it has Series A Preferred Stock that pays a quarterly dividend of approximately $29.34 per share.
Analyst Consensus on Stock Valuation
Analyst consensus shows a Hold rating for Evolent Health, with a price target range between $10 and $15. The consensus reflects a cautious outlook given the company's recent losses and high valuation metrics.
| Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | 1.38 |
| EV/EBITDA | 42 |
| Current Stock Price | $12.50 |
| 12-Month Low | $8.50 |
| 12-Month High | $15.75 |
| Dividend (Preferred Stock) | $29.34 |
| Analyst Consensus | Hold |
Key Risks Facing Evolent Health, Inc. (EVH)
Key Risks Facing Evolent Health, Inc.
The financial health of the company is influenced by several internal and external risk factors that can significantly impact its performance.
Industry Competition
In a highly competitive healthcare services market, the company faces pressure from both established players and new entrants. The ability to maintain market share can be challenged by innovations from competitors and pricing pressures. As of September 30, 2024, the company reported a net loss attributable to common shareholders of $62.8 million, compared to $100.9 million for the same period in 2023.
Regulatory Changes
Changes in healthcare regulations can directly affect the company's operations and profitability. The company must continuously adapt to evolving laws and regulations, particularly those related to Medicare and Medicaid. This regulatory environment is complex and can lead to unforeseen compliance costs.
Market Conditions
The overall economic environment, including fluctuations in healthcare spending and policy changes, can impact the demand for services. The company reported total revenue of $1.908 billion for the nine months ended September 30, 2024, a 35.5% increase compared to $1.408 billion in the previous year.
Operational Risks
Operational challenges, including the integration of acquired businesses and the management of service delivery, can affect financial performance. The company experienced a 54.1% increase in cost of revenue, amounting to $1.617 billion for the nine months ended September 30, 2024, largely driven by higher claims costs.
Financial Risks
The company faces financial risks, including liquidity and debt management. As of September 30, 2024, total current liabilities were $523.7 million, with long-term debt of $599.7 million. Interest expenses have also been significant, with $18 million for the nine months ended September 30, 2024.
Strategic Risks
Strategic decisions regarding mergers and acquisitions carry inherent risks. For instance, contingent consideration related to acquisitions was recorded at $9.1 million for the nine months ended September 30, 2024. The company must carefully evaluate these strategic moves to avoid overextending its resources.
Mitigation Strategies
- Investment in Technology: The company is focusing on technology enhancements to improve service delivery and operational efficiency.
- Financial Management: Active management of cash flow and working capital is crucial. As of September 30, 2024, the company had $96.6 million in cash and cash equivalents.
- Regulatory Compliance: Ongoing assessment and alignment with regulatory changes to minimize compliance risks.
| Risk Type | Description | Financial Impact |
|---|---|---|
| Competition | Increased pressure from rivals in the healthcare sector | Net loss of $62.8 million in 2024 |
| Regulatory Changes | Adapting to new healthcare regulations affecting operations | Potential compliance costs |
| Market Conditions | Fluctuations in healthcare spending | Total revenue of $1.908 billion in 2024 |
| Operational Risks | Challenges in service delivery and integration of acquisitions | Cost of revenue increased to $1.617 billion |
| Financial Risks | Liquidity and debt management challenges | Total current liabilities of $523.7 million |
| Strategic Risks | Risks associated with mergers and acquisitions | Contingent consideration of $9.1 million |
Future Growth Prospects for Evolent Health, Inc. (EVH)
Growth Opportunities
The financial health of the company reveals several potential growth opportunities that are pivotal for investors to consider. These opportunities stem from product innovations, market expansions, strategic acquisitions, and partnerships.
Key Growth Drivers
- Product Innovations: The company has reported significant revenue growth from its Performance Suite, which generated $1,344.9 million for the nine months ended September 30, 2024, compared to $840.2 million in the same period of 2023.
- Market Expansions: The total revenue increased by 35.5%, reaching $1.908 billion for the nine months ended September 30, 2024, up from $1.408 billion in the previous year.
- Acquisitions: The acquisition of Machinify in August 2024 is expected to enhance service offerings and operational capabilities.
Future Revenue Growth Projections
Future revenue growth is projected to continue, with analysts estimating an annual growth rate of approximately 25% over the next five years. This growth is anticipated due to the increasing demand for healthcare technology solutions.
Earnings Estimates
For the fiscal year 2024, earnings per share are expected to improve to $(0.55), compared to $(0.91) in 2023, indicating a trend towards profitability.
Strategic Initiatives and Partnerships
Recent strategic initiatives include the expansion of partnerships with major healthcare providers, which have resulted in a $90.6 million revenue increase from transitioning customers to the Performance Suite.
Competitive Advantages
The company maintains a competitive edge through its innovative technology and established market presence. The Performance Suite's average PMPM (per member per month) fee was $21.48 for the nine months ended September 30, 2024, down from $25.56 in the previous year, reflecting adjustments in service scope but still positioning the company well against competitors.
| Metrics | 2024 (9 Months) | 2023 (9 Months) | Growth (%) |
|---|---|---|---|
| Total Revenue | $1,908.2 million | $1,407.8 million | 35.5% |
| Performance Suite Revenue | $1,344.9 million | $840.2 million | 60.0% |
| Average PMPM Fee | $21.48 | $25.56 | -15.2% |
| Net Loss | $(62.8 million) | $(100.9 million) | 37.8% |
| Earnings Per Share | $(0.55) | $(0.91) | 39.6% |
Investors should closely monitor these growth opportunities as they can significantly impact the company's future financial performance and stock value.
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Updated on 16 Nov 2024
Resources:
- Evolent Health, Inc. (EVH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Evolent Health, Inc. (EVH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Evolent Health, Inc. (EVH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.