Non-controlling Interests

In connection with the closing of the IPO, we used the net proceeds of the IPO to purchase 13.2 million newly-issued Class A common units in Evolent Health LLC. Additionally we acquired 2.1 million Class A common units in Evolent Health LLC, at $17.00 per unit, as a result of the merger of the TPG affiliate with and into Evolent Health, Inc. as described in our 2016 Form 10-K. Immediately following the Offering Reorganization and IPO, the Company owned 70.3% of Evolent Health LLC.

During the year ended December 31, 2016, the Company issued shares of its Class A common stock to acquire Passport, Valence Health and Aldera. For each share of Class A common stock issued by the Company, we received a reciprocal number of Class A units from Evolent Health LLC in exchange for contributing the acquired entities to Evolent Health LLC. As a result, our economic interest in Evolent Health LLC increased during the year from 70.3% to 70.8% due to Class A common shares issued for the acquisition of Passport and from 74.6% to 77.4% as a result of Class A common shares issued for the acquisitions of Valence Health and Aldera. In order to account for the change in our ownership interest in Evolent Health LLC, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc.

As described in Note 4, the Company completed a secondary offering of 8.6 million shares of its Class A common stock at a price to the public of $22.50 per share in September 2016. The shares sold in the September 2016 Secondary consisted of 6.4 million existing shares of the Company’s Class A common stock owned and held by the Selling Stockholders and 2.2 million newly-issued shares of the Company’s Class A common stock received by certain Investor Stockholders pursuant to Class B Exchanges. As a result of these Class B Exchanges and Evolent Health LLC’s cancellation of the Class B units during the September 2016 Secondary, the Company’s economic interest in Evolent Health LLC increased from 71.0% to 74.6% as of September 22, 2016, and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc.

As described in Note 4, the Company completed a secondary offering of 7.5 million shares of its Class A common stock at a price to the underwriters of $19.53 per share in March 2017. The shares sold in the March 2017 Secondary consisted of 3.1 million existing shares of the Company’s Class A common stock owned and held by the Investor Stockholders and 4.4 million newly-issued shares of the Company’s Class A common stock received by certain Investor Stockholders pursuant to Class B Exchanges. As a result of these Class B Exchanges and Evolent Health LLC’s cancellation of the Class B units during the March 2017 Secondary, the Company’s economic interest in Evolent Health LLC increased from 77.4% to 83.9% as of March 31, 2017, and, accordingly, we reclassified a portion of our non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc.

As of March 31, 2017, and December 31, 2016, we owned 83.9% and 77.4% of the economic interests in Evolent Health LLC, respectively.

Changes in non-controlling interests (in thousands) for the periods presented were as follows:



	For the Three
	Months Ended
	March 31,
	2017			2016
Non-controlling interests as of beginning-of-period	$	209,588		$	285,238
Cumulative-effect adjustment from adoption of new accounting principle	—			(139		)
Decrease in non-controlling interests as a result of the exchange
of Class B common stock for Class A common stock
as part of the March Secondary Offering	(59,585		)	—
Reclassification of non-controlling interests	1,403			—
Net income (loss) attributable to non-controlling interests	(5,137		)	(51,071		)
Non-controlling interests as of end-of-period	$	146,269		$	234,028