10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 _________________________

FORM 10-Q

_________________________

(Mark One)

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

For the quarterly period ended March 31, 2021

OR 

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

For the transition period from              to               

Commission File Number:  001-37415

_________________________

Evolent Health, Inc.

(Exact name of registrant as specified in its charter)

_________________________

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

                           (571) 389-6000

Registrant’s telephone number, including area code

                         _________________________        

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

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

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

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

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

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

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

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

As of May 3, 2021, there were 86,930,683 shares of the registrant’s Class A common stock outstanding.

1

Evolent Health, Inc.

Table of Contents

Item		Page
	PART I
1.	Financial Statements (Unaudited)	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
3.	Quantitative and Qualitative Disclosures About Market Risk	53
4.	Controls and Procedures	54
	PART II
1	Legal Proceedings	55
1A.	Risk Factors	55
2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
3.	Defaults Upon Senior Securities	55
4.	Mine Safety Disclosures	55
5.	Other Information	55
6.	Exhibits	56
	Signatures	57

2

Explanatory Note

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

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FORWARD-LOOKING STATEMENTS - CAUTIONARY LANGUAGE

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

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

•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;

•evolution in the market for value-based care;

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

•our ability to offer new and innovative products and services;

•risks related to completed and future acquisitions, investments, alliances and joint ventures, including the acquisitions of Valence Health Inc., excluding Cicerone Health Solutions, Inc., Aldera Holdings, Inc., New Century Health, and Passport, which may be difficult to integrate, divert management resources, or result in unanticipated costs or dilute our stockholders;

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

•the growth and success of our partners, which is difficult to predict and is subject to factors outside of our control, including governmental funding reductions and other policy changes, enrollment numbers for our partners’ plans, premium pricing reductions, selection bias in at-risk membership and the ability to control and, if necessary, reduce health care costs;

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

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

•the potential negative impact of the COVID-19 pandemic and other public health emergencies;

•our ability to recover the significant upfront costs in our partner relationships;

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

•the increasing number of risk-sharing arrangements we enter into with our partners;

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

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

•consolidation in the health care industry;

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

•risks related to governmental payer audits and actions, including whistleblower claims;

•our ability to partner with providers due to exclusivity provisions in our contracts;

•risks related to our offshore operations;

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

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

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

•our indebtedness, our ability to service our indebtedness, and our ability to obtain additional financing;

•our ability to achieve profitability in the future;

•the impact of litigation, including the ongoing class action lawsuit;

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

•restrictions 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;

•restrictions and penalties as a result of privacy and data protection laws;

•adequate protection of our intellectual property, including trademarks;

•any alleged infringement, misappropriation or violation of third-party proprietary rights;

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•our use of “open source” software;

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

•our reliance on third parties and licensed technologies;

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

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

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

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

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

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

•the terms of agreements between us and certain of our pre-IPO investors;

•the conditional conversion features of the 2024 and 2025 convertible notes, which, if triggered, could require us to settle the 2024 or 2025 convertible notes in cash;

•the impact of the accounting method for convertible debt securities that may be settled in cash;

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

•the potential impact of our securities class action litigation;

•the potential decline of our Class A common stock price if a substantial number of shares are sold or become available for sale;

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

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

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

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

The risks included here are not exhaustive. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements.  Our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Form 10-K"), subsequent Quarterly Reports on Form 10-Q and other documents filed with the SEC include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment.  New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.

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

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

EVOLENT HEALTH, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share data)

	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	236,032	$	319,002
Restricted cash and restricted investments	53,479		14,374
Accounts receivable, net (1)	185,103		124,064
Prepaid expenses and other current assets (1)	33,696		56,295
Current assets of discontinued operations	—		33,914
Total current assets	508,310		547,649
Restricted cash and restricted investments	14,258		6,654
Investments in and advances to equity method investees	4,909		6,498
Property and equipment, net	84,439		86,240
Right-of-use assets - operating	53,686		57,799
Prepaid expenses and other noncurrent assets, net of allowances (1)	6,218		5,773
Contract cost assets	25,322		26,687
Intangible assets, net	259,420		264,992
Goodwill	349,022		349,029
Non-current assets of discontinued operations	—		20,379
Total assets	$	1,305,584	$	1,371,700
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Liabilities
Current liabilities:
Accounts payable (1)	$	78,574	$	31,975
Accrued liabilities (1)	61,069		73,242
Short-term debt, net of discount	26,606		26,557
Operating lease liability - current	7,539		7,357
Accrued compensation and employee benefits	19,360		47,163
Deferred revenue	13,367		10,187
Reserve for claims and performance - based arrangements (1)	207,993		178,827
Current liabilities of discontinued operations	—		27,986
Total current liabilities	414,508		403,294
Long-term debt, net of discount	202,132		263,343
Other long-term liabilities	10,269		22,081
Operating lease liabilities - noncurrent	60,292		62,526
Deferred tax liabilities, net	1,085		679
Non-current liabilities from discontinued operations	—		177
Total liabilities	688,286		752,100
Commitments and Contingencies (See Note 10)
Shareholders' Equity (Deficit)
Class A common stock - $0.01 par value; 750,000,000 shares authorized; 86,778,341 and 85,894,450 shares issued, respectively	868		859
Additional paid-in-capital	1,236,847		1,229,320
Accumulated other comprehensive income (loss)	(309)		(278)
Retained earnings (accumulated deficit)	(598,985)		(589,178)
Treasury stock, at cost; 1,537,582 shares issued, respectively	(21,123)		(21,123)
Total shareholders' equity	617,298		619,600
Total liabilities and shareholders' equity (deficit)	$	1,305,584	$	1,371,700

(1) See Note 19 for amounts attributable to unconsolidated related parties included in these line items.

1

EVOLENT HEALTH, INC.

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

	For the Three Months Ended March 31,
	2021		2020
Revenue
Transformation services (1)	$	345	$	5,238
Platform and operations services (1)	214,726		215,994
Total revenue	215,071		221,232
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (1)	157,832		175,629
Selling, general and administrative expenses (1)	58,591		52,087
Depreciation and amortization expenses	15,187		15,978
Loss on disposal of assets	—		6,447
Change in fair value of contingent consideration and indemnification asset	(594)		(3,818)
Total operating expenses	231,016		246,323
Operating loss	(15,945)		(25,091)
Interest income	123		770
Interest expense	(6,337)		(6,281)
Impairment of equity method investments	—		(47,133)
Gain (loss) from equity method investees	7,783		(412)
Gain on transfer of membership	22,969		—
Loss on repayment of debt	(19,158)		—
Other expense, net	(14)		(70)
Loss from continuing operations before income taxes	(10,579)		(78,217)
Provision for income taxes	611		270
Loss from continuing operations	(11,190)		(78,487)
Gain (loss) from discontinued operations, net of tax (2)	1,383		(265)
Net loss	(9,807)		(78,752)
Net loss attributable to non-controlling interests	—		—
Net loss attributable to common shareholders of Evolent Health, Inc.	$	(9,807)	$	(78,752)
Loss per common share
Basic and diluted
Continuing operations	$	(0.13)	$	(0.93)
Discontinued operations	0.01		—
Basic and diluted loss per share attributable to common shareholders of Evolent Health, Inc.	$	(0.12)	$	(0.93)
Weighted-average common shares outstanding
Basic and diluted	84,670		84,793
Comprehensive loss
Net loss	$	(9,807)	$	(78,752)
Other comprehensive loss, net of taxes, related to:
Foreign currency translation adjustment	(31)		(153)
Total comprehensive loss	(9,838)		(78,905)
Total comprehensive loss attributable to non-controlling interests	—		—
Total comprehensive loss attributable to common shareholders of Evolent Health, Inc.	$	(9,838)	$	(78,905)

————————

(1)See Note 19 for amounts attributable to unconsolidated related parties included in these line items.

(2)Includes $1.9 million gain on disposal of discontinued operations for the three months ended March 31, 2021.

See accompanying Notes to Consolidated Financial Statements

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EVOLENT HEALTH, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

(unaudited, in thousands)

	For the Three Months Ended March 31, 2021
	Class A Common Stock			Additional Paid-In Capital		Accumulated Other Income (Loss)			Retained Earnings (Accumulated Deficit)		Treasury Stock		Total Shareholders' Equity Attributable to Evolent Health, Inc.		Non-Controlling Interests		Total Equity (Deficit)
	Shares	Amount
Balance as of December 31, 2020	85,895	$	859	$	1,229,320	$	(278)		$	(589,178)	$	(21,123)	$	619,600	$	—	$	619,600
Stock-based compensation expense	—	—		3,706		—			—		—		3,706		—		3,706
Exercise of stock options	594	6		6,512		—			—		—		6,518		—		6,518
Restricted stock units vested, net of shares withheld for taxes	290	3		(2,691)		—			—		—		(2,688)		—		(2,688)
Foreign currency translation adjustment	—	—		—		(31)			—		—		(31)		—		(31)
Net loss	—	—		—		—			(9,807)		—		(9,807)		—		(9,807)
Balance as of March 31, 2021	86,779	$	868	$	1,236,847	$	(309)		$	(598,985)	$	(21,123)	$	617,298	$	—	$	617,298
	For the Three Months Ended March 31, 2020
	Class A Common Stock			Additional Paid-In Capital		Accumulated Other Income (Loss)			Retained Earnings (Accumulated Deficit)		Treasury Stock		Total Shareholders' Equity Attributable to Evolent Health, Inc.		Non-Controlling Interests		Total Equity (Deficit)
	Shares	Amount
Balance as of December 31, 2019	84,589	$	846	$	1,173,708	$	(234)		$	(251,962)	$	—	$	922,358	$	6,689	$	929,047
Cumulative-effect adjustment from adoption of ASU 2016-13	—	—		—		—			(2,970)		—		(2,970)		—		(2,970)
Stock-based compensation expense	—	—		3,508		—			—		—		3,508		—		3,508
Exercise of stock options	8	1		83		—			—		—		84		—		84
Restricted stock units vested, net of shares withheld for taxes	237	2		(1,190)		—			—		—		(1,188)		—		(1,188)
Class A common stock issued for Passport earn-out	428	4		3,496		—		—	—		—		3,500		—		3,500
Class A common stock issued for GlobalHealth, Inc. earn-out	188	2		683		—		—	—		—		685		—		685
Disposal of assets	—	—		—		—			—		—		—		(6,689)		(6,689)
Foreign currency translation adjustment	—	—		—		(153)			—		—		(153)		—		(153)
Net loss	—	—		—		—			(78,752)		—		(78,752)		—		(78,752)
Balance as of March 31, 2020	85,450	$	855	$	1,180,288	$	(387)		$	(333,684)	$	—	$	847,072	$	—	$	847,072

See accompanying Notes to Consolidated Financial Statements

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EVOLENT HEALTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	For the Three Months Ended March 31,
	2021		2020
Cash Flows Used In Operating Activities
Net loss	$	(9,807)	$	(78,752)
Adjustments to reconcile net loss to net cash and restricted cash used in operating activities:
Change in fair value of contingent consideration and indemnification asset	(594)		(3,818)
(Gain) loss on disposal of assets	(1,904)		6,447
(Gain) loss from equity method investees	(7,783)		412
Depreciation and amortization expenses	15,347		16,138
Impairment of equity method investments	—		47,133
Stock-based compensation expense	3,706		3,508
Deferred tax (benefit) provision	(59)		58
Amortization of contract cost assets	3,055		5,614
Amortization of deferred financing costs	4,370		3,009
Gain on transfer of membership	(22,969)		—
Loss on repayment of debt	19,158		—
Bad debt expense	2,407		495
Other current operating cash outflows, net	(66)		(621)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net and contract assets	(63,233)		(36,649)
Prepaid expenses and other current and non-current assets	1,037		1,459
Contract cost assets	(1,690)		(3,326)
Accounts payable	9,395		11,068
Accrued liabilities	(9,698)		(678)
Accrued compensation and employee benefits	(28,014)		(18,143)
Deferred revenue	2,684		(2,623)
Reserve for claims and performance-based arrangements	32,501		27,860
Right-of-use operating assets	2,840		6,695
Operating lease liabilities	(771)		(5,920)
Other long-term liabilities	1,925		93
Net cash and restricted cash used in operating activities	(48,163)		(20,541)
Cash Flows Provided by (Used In) Investing Activities
Cash paid for asset acquisitions	(1,472)		—
Proceeds from transfer of membership and release of Passport escrow	42,996		—
Principal repayment of implementation funding loan and regulatory and capital requirements	—		(400)
Disposal of non-strategic assets and divestiture of discontinued operations, net	3,490		(2,287)
Return of equity method investments	9,372		—
Purchases of investments	(2,994)		(1,338)
Maturities and sales of investments	500		618
Investments in internal-use software and purchases of property and equipment	(5,941)		(7,400)
Net cash and restricted cash provided by (used in) investing activities	45,951		(10,807)
Cash Flows (Used In) Provided by Financing Activities
Changes in working capital balances related to claims processing on behalf of partners	39,005		33,678
Repayment and termination of Credit Agreement including settlement of warrants.	(98,420)		—
Proceeds from stock option exercises	6,518		84
Taxes withheld and paid for vesting of restricted stock units	(2,687)		(1,188)
Net cash and restricted cash (used in) provided by financing activities	(55,584)		32,574

See accompanying Notes to Consolidated Financial Statements

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	For the Three Months Ended March 31,
	2021		2020
Effect of exchange rate on cash and cash equivalents and restricted cash	1		41
Net increase (decrease) in cash and cash equivalents and restricted cash	(57,795)		1,267
Cash and cash equivalents and restricted cash as of beginning-of-period (1)	361,564		128,531
Cash and cash equivalents and restricted cash as of end-of-period (1)	$	303,769	$	129,798

————————

(1)As a result of the closing of the sale of True Health SPA, the consolidated statements of operations, consolidated balance sheets, and related financial information reflect the Company’s operations and assets and liabilities of True Health as discontinued operations for all periods presented. Cash flows and comprehensive income have not been adjusted and are included in the consolidated statements of cash flows and consolidated statements of comprehensive income (loss) for all periods presented. See Note 5.

See accompanying Notes to Consolidated Financial Statements

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EVOLENT HEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization

Evolent Health, Inc. was incorporated in December 2014 in the state of Delaware and through its subsidiaries supports leading health systems and physician organizations as well as health plans to move their business models from traditional fee for service reimbursement to value-based care, which we consider to be an integrated clinical and financial responsibility for populations.

The Company made organizational changes, including re-evaluating its reportable segments, as a result of the entry into the agreement to sell True Health on January 11, 2021. Effective during the first quarter of 2021, the Company bifurcated its previous Services segment into two segments. The Company’s Evolent Health Services segment (“EHS”) includes our administrative simplification solution and certain supporting population health infrastructure. Our Clinical Solutions segment includes our specialty management and physician-oriented total cost of care solutions, along with the New Century Health and Evolent Care Partners brands. Refer to Note 21 for a further discussion of our operating results by segment.

Since its inception, the Company has incurred losses from operations. As of March 31, 2021, the Company had unrestricted cash and cash equivalents of $236.0 million. The Company believes it has sufficient liquidity for the next twelve months as of the date the financial statements were available to be issued.

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

Evolent Health LLC Governance

Our operations are conducted through Evolent Health LLC and subsequent to the offering reorganization at the time of our initial public offering (the “Offering Reorganization”), the financial results of Evolent Health LLC were consolidated in the financial statements of Evolent Health, Inc. Evolent Health, Inc. is a holding company whose only business is to act as the sole managing member of Evolent Health LLC. As such, it controls Evolent Health LLC’s business and affairs and is responsible for the management of its business.

Issuances of Common Units

Evolent Health LLC may only issue Class A common units to us, as the sole managing member of Evolent Health LLC. Class B common units may be issued only to persons or entities we permit. Such issuances of Class B common units shall be made in exchange for cash or other consideration. Class B common units may not be transferred as Class B common units except to certain permitted transferees and in accordance with the restrictions on transfer set forth in the third amended and restated operating agreement of Evolent Health LLC. Any such transfer must be accompanied by the transfer of an equal number of shares of our Class B common stock. As of March 31, 2021 and 2020, there are no Class B common units outstanding.

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

Basis of Presentation

In our opinion, the accompanying unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state our financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2020, has been derived from audited financial statements as of that date. The interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain footnote disclosures normally included in financial statements prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) have been omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission (“SEC”). The disclosures provided herein should be read in conjunction with the audited financial statements and notes thereto included in our 2020 Form 10-K.

Summary of Significant Accounting Policies

Certain GAAP policies that significantly affect the determination of our financial position, results of operations and cash flows, are summarized below.

Accounting Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial

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

Principles of Consolidation

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

Cash and Cash Equivalents

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

Restricted Cash and Restricted Investments

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

	March 31, 2021		December 31, 2020 (1)
Collateral for letters of credit for facility leases (2)	$	3,510	$	3,510
Collateral with financial institutions (3)	12,347		4,743
Claims processing services (4)	51,132		12,064
Other	748		1,327
Total restricted cash and restricted investments	$	67,737	$	21,644
Current restricted cash	53,479		14,374
Total current restricted cash and restricted investments	$	53,479	$	14,374
Non-current restricted cash	14,258		6,654
Total non-current restricted cash and restricted investments	$	14,258	$	6,654

————————

(1)Amounts exclude $0.6 million of non-current restricted investments and $0.1 million of current restricted cash from claims processing services reclassified to discontinued operations as of December 31, 2020.

(2)Represents restricted cash related to collateral for letters of credit required in conjunction with lease agreements. See Note 12 for further discussion of our lease commitments.

(3)Represents collateral held with financial institutions for risk-sharing and other arrangements. As of March 31, 2021 and December 31, 2020, approximately $12.3 million and $4.7 million, respectively, of the collateral amounts were held in a FDIC participating bank account. See Note 18 for discussion of fair value measurement and Note 11 for discussion of our risk-sharing arrangements.

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

7

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

	March 31,
	2021		2020
Cash and cash equivalents	$	236,032	$	67,944
Restricted cash and restricted investments	67,737		62,671
Restricted investments included in restricted cash and restricted investments	—		(817)
Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows (1)	$	303,769	$	129,798

————————

(1)As a result of the closing of the sale of True Health SPA, the consolidated statements of operations, consolidated balance sheets, and related financial information reflect the Company’s operations and assets and liabilities of True Health as discontinued operations for all periods presented. Cash flows and comprehensive income have not been adjusted and are included in the consolidated statements of cash flows and consolidated statements of comprehensive income (loss) for all periods presented. See Note 5.

Business Combinations

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

The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed in the acquired entity is recorded as goodwill. Goodwill is assigned to the reporting unit that benefits from the synergies arising from the business combination. If the Company obtains new information about facts and circumstances that existed as of the acquisition date during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded on the Company's consolidated statements of operations and comprehensive income (loss).

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

Goodwill

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

Our goodwill impairment analysis first assesses qualitative factors to determine whether events or circumstances existed that would lead the Company to conclude it is more likely than not that the fair value of a reporting unit is below its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is below the carrying amount, a quantitative goodwill assessment is required. In the quantitative evaluation, the fair value of the relevant reporting unit is determined and compared to the carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value and a charge is reported in goodwill impairment on our consolidated statements of operations and comprehensive income (loss). See Note 9 for additional discussion regarding the goodwill impairment tests conducted during 2021 and 2020.

8

Intangible Assets, Net

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

The following summarizes the estimated useful lives by asset classification:

Corporate trade name	10 - 20 years
Customer relationships	10 - 25 years
Technology	5 years
Provider network contracts	4 - 5 years

Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the asset’s carrying value. The Company evaluates recoverability by determining whether the undiscounted cash flows expected to result from the use and eventual disposition of that asset or group exceed the carrying value at the evaluation date. If the undiscounted cash flows are not sufficient to cover the carrying value, the Company measures an impairment loss as the excess of the carrying amount of the long-lived asset or group over its fair value. See Note 9 for additional discussion regarding our intangible assets.

Reserves for Claims and Performance-based Arrangements

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

The process of estimating reserves involves a considerable degree of judgment by the Company and, as of any given date, is inherently uncertain. The methods for making such estimates and for establishing the resulting liability are continually reviewed, and adjustments are reflected in current results of operations in the period in which they are identified as experience develops or new information becomes known. See Note 22 for additional discussion regarding our reserves for claims and performance-based arrangements.

Leases

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

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

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

Refer to Note 12 for additional lease disclosures.

Revenue Recognition

We derive revenue from two sources: (1) transformation services and (2) platform and operations services. Transformation services consist of implementation services whereby we assist the customer in launching its population health or health plan programs, or implement certain platform and operations services. In certain cases, transformation services can also include revenue associated with our support of certain one-time wind-down activities for clients who are exiting a line of business or population. Platform and operations services generally include multi-year arrangements with customers to provide various population health, health plan

9

operations, specialty care management and claims processing services on an ongoing basis, as well as transition or run-out services to customers receiving primarily TPA services. Revenue is recognized when control of the services is transferred to our customers.

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

• Identify the contract(s) with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to performance obligations

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

See Note 6 for further discussion of our policies related to revenue recognition.

Foreign Currency

The Company formed a subsidiary in India during the first quarter of 2018. The functional currency of our international subsidiary is the Indian Rupee. We translate the financial statements of this subsidiary to U.S. dollars using month-end rates of exchange for assets and liabilities, and monthly average rates of exchange for revenue and expenses. Translation gains and losses are recorded in accumulated other comprehensive income (loss) as a component of shareholders' equity. Foreign currency translation gains and losses did not have a material impact on our consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2021 and 2020.

Note 3. Recently Issued Accounting Standards

Adoption of New Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequently issued additional guidance that modified ASU 2016-13. The standard requires an entity to change its accounting approach for measuring and recognizing credit losses on certain financial assets measured at amortized cost, including trade receivables, certain non-trade receivables, contract assets, held-to-maturity securities, customer advances and certain off-balance sheet credit exposures, by replacing the existing “incurred loss” framework with an expected credit loss recognition model.  The new standard results in earlier recognition of credit losses based on past events, current conditions, and reasonable and supportable forecasts.  The standard is effective for entities with fiscal years beginning after December 15, 2019, including interim periods within such fiscal years. We adopted the requirements of this standard effective January 1, 2020 using the modified retrospective approach and recorded a cumulative effect adjustment of $3.0 million to January 1, 2020 retained earnings (accumulated deficit). Results for reporting periods beginning January 1, 2020 reflect the adoption of ASU 2016-13, while prior period amounts were not adjusted and continue to be reported in accordance with our historical accounting practices. In our previous accounting policy for trade receivables and non-trade receivables, we maintained an allowance for doubtful accounts based solely on specific identification. Under the new accounting standard, we maintain our specific identification process but utilize several factors to develop historical losses reserves, including aging schedules, customer creditworthiness, and historical payment experience, which are then adjusted for current conditions and reasonable and supportable forecasts in measurement of the allowance.  In addition, for customer advances and certain off-balance sheet credit exposures, we evaluate the allowance through a discounted cash flow approach.  For held-to-maturity investment securities, we evaluate (i) historical information adjusted for current conditions and reasonable and supportable forecasts and (ii) qualitative factors to determine whether the zero-loss expectation exception applies. Refer to Note 7 for additional disclosures related to current expected credit losses.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The amendments in the ASU remove certain exceptions to the intraperiod tax allocation of losses and gains from different financial statement components and to the method of recognizing income taxes on interim period losses, and the recognition of deferred tax liabilities for outside basis differences. In addition, the new guidance simplifies aspects of the accounting for franchise taxes and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted this standard starting in the first quarter of 2021, which did not have a material impact on our consolidated financial statements.

Note 4. Transactions

Passport

On May 28, 2019, UHC, Passport Health Solutions, LLC (“PHS I”), the Company and EVH Passport entered into an Asset Purchase Agreement (the “Passport APA”), which provided for the sale of substantially all of the assets of UHC and PHS I, including UHC’s

10

Kentucky Medicaid contract (the “Passport Medicaid Contract”), to EVH Passport for a purchase price of $70.0 million in cash and the issuance of a 30% interest in EVH Passport (the “Passport Purchase Price”) to The University of Louisville, the University of Louisville Physicians, University Medical Center, the Jewish Heritage Fund for Excellence, Norton Healthcare, Inc. and the Louisville/Jefferson County Primary Care Association (collectively, the “Sponsors”).

On June 18, 2019, the Company contributed $40.0 million to UHC in the form of an advance for regulatory capital requirements under an agreement with UHC (the “Passport Note”). The Passport Note carried a fixed interest rate of 6.5% per annum. Additionally, on June 6, 2019, the Company and UHC entered into an Indemnity Agreement (the “Indemnity Agreement”), with an insurance company (the “Surety”). The Surety issued a performance bond in the amount of $25.0 million to secure UHC’s performance under its Medicaid Contract. Pursuant to the Indemnity Agreement, the Company and UHC were jointly and severally liable to the Surety in the maximum amount of the bond, plus certain costs of the Surety, in the event of losses arising under the bond. The bond’s original expiry date was June 30, 2020 and during the three months ended June 30, 2020, was extended to December 31, 2020. The bond was released in October 2020.

On December 30, 2019, UHC, PHS I, the Company and EVH Passport consummated the transactions contemplated by the Passport APA (the “Passport Closing”). At the Passport Closing, $16.2 million of the cash Passport Purchase Price was held back until such time as PHS I delivers to EVH Passport certain owned real property and improvements free and clear of all encumbrances. In addition, at the Passport Closing, EVH Passport and UHC entered into an agreement that provided for the administration and assumption of the financial risks by EVH Passport of UHC’s dual eligible special needs business (the “DNP Business”) until such time as EVH Passport became certified as a Medicare Advantage Organization and the D-SNP Business could be transferred to EVH Passport. On October 1, 2020, the D-SNP Business was transferred from UHC to EVH Passport. At the Passport Closing, EVH Passport assumed UHC’s obligations under the Passport Note and the Indemnity Agreement.

On July 16, 2020, EVH Passport, Evolent Health LLC and Molina Healthcare, Inc. (“Molina”) entered into an Asset Purchase Agreement (the “Molina APA”), which contemplated the sale by EVH Passport to Molina of certain assets, including certain intellectual property rights of EVH Passport and EVH Passport’s rights under the Passport Medicaid Contract. On September 1, 2020, EVH Passport and Molina consummated the transactions contemplated by the Molina APA (the “Molina Closing”), and the Passport Medicaid Contract was novated to Molina. As a result, EVH Passport began to wind down its business. In connection with the Molina Closing, Molina deposited $20.0 million in cash in escrow, which was subsequently released to EVH Passport in January 2021. In addition, at the Molina Closing, Molina and EVH Passport entered into an agreement that provided for the assumption of the financial risks by Molina of the D-SNP Business until such time as Molina’s Kentucky health plan becomes certified as a Medicare Advantage Organization and the D-SNP Business is transferred Molina. The Company and EVH Passport continued to administer the D-SNP Business until January 1, 2021, at which time Molina became responsible for its administration until the D-SNP Business is officially transferred to Molina.

Prior to the Molina Closing, the Company accounted for its investment in EVH Passport as an unconsolidated variable interest entity under the equity method of accounting. As a result of the transaction, the Company concluded that a reconsideration event occurred whereby EVH Passport was determined to be a voting interest entity and that Evolent had a controlling financial interest in EVH Passport; accordingly, the Company consolidated EVH Passport as of September 1, 2020 in its consolidated financial statements. The Company accounted for the transaction as an asset acquisition, as the Company concluded that assets acquired as a result of the consolidation did not meet the criteria to be classified as a business under GAAP. Following the Molina Closing and consolidation of EVH Passport in the Company’s consolidated financials, on November 16, 2020, EVH Passport redeemed the Sponsors’ equity interests in EVH Passport for $20.0 million in cash in accordance with the terms of EVH Passport’s Stockholders’ Agreement, and, as a result, EVH Passport became a wholly owned subsidiary of the Company.

As part of the consolidation, the Company recorded assets primarily consisting of cash and cash equivalents and restricted cash and cash equivalents of $159.8 million, available for sale securities of $88.6 million, receivables related to unsettled sales of securities of $43.0 million and other assets of $50.2 million and total liabilities primarily comprised of reserve for claims and performance-based arrangements of $164.8 million and accrued liabilities of $50.0 million. Subsequent to winddown activities, any remaining capital will be distributed to the Company subject to regulatory approval from the Kentucky Department of Insurance. In addition, the Passport Note was eliminated upon consolidation, and as of December 31, 2020, the outstanding principal balance of the $40.0 million Passport Note was repaid in full by EVH Passport including approximately $3.6 million of accrued interest.

During the three months ended March 31, 2021, EVH Passport received a cash payment from Molina in the amount of $23.0 million based on the number of enrollees above a certain threshold in the D-SNP Business and Molina's Medicaid plan following the open enrollment period for plan year 2021. The foregoing amount represents 50% of the payment that EVH Passport is eligible to receive based on the number of such enrollees. The remaining 50% will be payable in the first quarter of 2022 subject to the satisfaction of certain contingencies.

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Note 5. Discontinued Operations

On January 11, 2021, Evolent Health LLC, EH Holdings and True Health, each wholly owned subsidiaries of the Company, entered into a Stock Purchase Agreement (the “True Health SPA”) with Bright Health Management, Inc. (“Bright HealthCare”), pursuant to which EH Holdings agreed to sell all of its equity interests in True Health to Bright HealthCare. Closing of the transactions contemplated by the True Health SPA occurred on March 31, 2021 and the Company will have no continuing involvement with True Health subsequent to the closing except an existing services agreement for claims processing and other health plan administrative functions.

As of March 31, 2021, the Company determined that True Health met the discontinued operations criteria under ASC 360, and as such, True Health assets and liabilities as of December 31, 2020, and the results of operations for all periods presented are classified as held for sale and are not included in continuing operations in the consolidated financial statements.

The following table summarizes the results of operations of the Company’s True Health business, which are included in loss from discontinued operations in the consolidated statements of operations for the three months ended March 31, 2021 and 2020.

	For the Three Months Ended March 31,
	2021		2020
Revenue
Platform and operations	38		240
Premiums	44,795		32,147
Total revenue	44,833		32,387
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (1)	5,885		3,295
Claims expenses	33,954		23,667
Selling, general and administrative expenses (2)	5,764		5,675
Depreciation and amortization expenses	160		160
Total operating expenses	45,763		32,797
Operating loss	(930)		(410)
Interest income	112		149
Interest expense	(4)		(4)
Other loss	(25)		—
Loss before income taxes and non-controlling interests	(847)		(265)
Benefit for income taxes	(326)		—
Net loss	$	(521)	$	(265)

————————

(1)Cost of revenue includes $2.8 million and $3.1 million of intercompany expenses between the Company and True Health that are recorded in income from continuing operations on the consolidated statements of operations related an existing services agreement for claims processing and other health plan administrative functions for the three months ended March 31, 2021 and 2020, respectively.

(2)Selling, general and administrative expenses includes $1.1 million and $3.1 million of intercompany expenses between the Company and True Health that are recorded in income from continuing operations on the consolidated statements of operations related an existing services agreement for claims processing and other health plan administrative functions for the three months ended March 31, 2021 and 2020, respectively.

The consolidated statements of cash flows for all periods have not been adjusted to separately disclose cash flows related to discontinued operations. Cash flows related to the True Health business during the three months ended March 31, 2021 and 2020 were as follows:

	For the Three Months Ended March 31,
	2021		2020
Cash flows provided by (used in) operating activities	$	5,002	$	2,745
Cash flows provided by (used in) investing activities	(2,494)		(721)

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The following table summarizes the current and long-term assets and liabilities of the discontinued True Health business in the consolidated balance sheets at December 31, 2020:

	December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	21,488
Restricted cash and restricted investments	63
Accounts receivable, net	3,437
Prepaid expenses and other current assets	5,198
Investments, at amortized cost	3,728
Total current assets	33,914
Restricted cash and restricted investments	616
Investments, at amortized cost	10,919
Prepaid expenses and other noncurrent assets, net of allowances	59
Intangible assets, net	3,080
Goodwill	5,705
Total assets	$	54,293
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Liabilities
Current liabilities:
Accounts payable (1)	93
Accrued liabilities	11,265
Accrued compensation and employee benefits	1,115
Deferred revenue	4,140
Reserve for claims and performance-based arrangements	9,858
Total current liabilities	26,471
Other long-term liabilities	128
Deferred tax liabilities, net	49
Total liabilities	$	26,648

————————

(1)Accounts payable exclude $1.5 million between the Company and True Health related an existing services agreement for claims processing and other health plan administrative functions as of December 31, 2020.

Note 6. Revenue Recognition

We derive revenue from two sources: (1) transformation services and (2) platform and operations services.

Transformation Services Revenue

Transformation services consist of implementation services whereby we assist the customer in launching its population health or health plan programs. In certain cases, transformation services can also include revenue associated with our support of certain one-time wind-down activities for clients who are exiting a line of business or population. The transformation services are usually completed within 12 months. We generally receive a fixed fee for transformation services and recognize revenue over time using an input method based on hours incurred compared to the total estimated hours required to satisfy our performance obligation.

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Platform and Operations Services Revenue

Platform and operations services are typically multi-year arrangements with customers to provide various clinical and administrative solutions. In our Clinical Solutions segment, our solutions are designed to lower the medical expenses of our partners and include our total cost of care and specialty care management services. In our Evolent Health Services segment, our solutions are designed to provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers receiving primarily TPA services.

Our performance obligation in these arrangements is to provide an integrated suite of services, including access to our platform that is customized to meet the specialized needs of our customers and members. Generally, we will apply the series guidance to the performance obligation as we have determined that each time increment is distinct. We primarily utilize a variable fee structure for these services that typically includes a monthly payment that is calculated based on a specified per member per month rate, multiplied by the number of members that our partners are managing under a value-based care arrangement or a percentage of plan premiums. Our arrangements may also include other variable fees related to service level agreements, shared medical savings arrangements and other performance measures. Variable consideration is estimated using the most likely amount based on our historical experience and best judgment at the time. Due to the nature of our arrangements, certain estimates may be constrained if it is probable that a significant reversal of revenue will occur when the uncertainty is resolved. We recognize revenue from platform and operations services over time using the time elapsed output method. Fixed consideration is recognized ratably over the contract term. In accordance with the series guidance, we allocate variable consideration to the period to which the fees relate.

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

Contracts with Multiple Performance Obligations

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

Principal vs. Agent

We occasionally use third parties to assist in satisfying our performance obligations. In order to determine whether we are the principal or agent in the arrangement, we review each third-party relationship on a contract by contract basis. We are an agent when our role is to arrange for another entity to provide the services to the customer. In these instances, we do not control the service before it is provided and recognize revenue on a net basis. We are the principal when we control the good or service prior to transferring control to the customer. We recognize revenue on a gross basis when we are the principal in the arrangement.

Disaggregation of Revenue

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

	Evolent Health Services				Clinical Solutions
	For the Three Months Ended March 31,				For the Three Months Ended March 31,
	2021		2020		2021		2020
Medicaid	$	60,929	$	58,445	$	43,339	$	60,462
Medicare	8,338		15,185		85,783		62,354
Commercial and other	15,571		22,747		1,111		2,039
Total	$	84,838	$	96,377	$	130,233	$	124,855

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Transaction Price Allocated to the Remaining Performance Obligations

For contracts with a term greater than one year, we have allocated approximately $80.6 million of transaction price to performance obligations that are unsatisfied as of March 31, 2021. We do not include variable consideration that is allocated entirely to a wholly unsatisfied performance obligation accounted for under the series guidance in the calculation. As a result, the balance represents the value of the fixed consideration in our long-term contracts that we expect will be recognized as revenue in a future period and excludes the majority of our platform and operations revenue, which is primarily derived based on variable consideration as discussed in Note 2. We expect to recognize revenue on approximately 50% and 84% of these remaining performance obligations by December 31, 2021 and December 31, 2022, respectively, with the remaining balance to be recognized thereafter. However, because our existing contracts may be canceled or renegotiated including for reasons outside our control, the amount of revenue that we actually receive may be less or greater than this estimate and the timing of recognition may not be as expected.

Contract Balances

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

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

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers (in thousands):

	March 31, 2021		December 31, 2020 (1)
Short-term receivables (2)	$	180,408	$	124,064
Long-term receivables (2)	4,634		4,554
Short-term contract assets	190		329
Short-term deferred revenue	13,367		10,187
Long-term deferred revenue	5,415		3,593

————————

(1)Amounts exclude $3.4 million of short-term receivables and $4.1 million of short-term deferred revenue reclassified to discontinued operations as of December 31, 2020.

(2)Excludes pharmacy claims receivable and premiums receivable

Changes in contract assets and deferred revenue for the three months ended March 31, 2021 are as follows (in thousands):

Contract assets
Balance as of beginning of period	$	329
Reclassification to receivables, as the right to consideration becomes unconditional	(143)
Contract assets recognized, net of reclassification to receivables	4
Balance as of end of period	$	190
Deferred revenue
Balance as of beginning-of-period	$	17,920
Reclassification to revenue, as a result of performance obligations satisfied	(7,959)
Cash received in advance of satisfaction of performance obligations	8,821
Balance as of end of period	$	18,782

15

The amount of revenue recognized from performance obligations satisfied (or partially satisfied) in previous period was $13.2 million for the three months ended March 31, 2021, due primarily to net gain share as well as changes in other estimates.

Contract Cost Assets

Certain bonuses and commissions earned by our sales team are considered incremental costs of obtaining a contract with a customer that we expect to be recoverable. The capitalized contract acquisition costs are classified as non-current assets and recorded within contract cost assets on our consolidated balance sheets. Amortization expense is recorded within selling, general and administrative expenses on the accompanying consolidated statements of operations and comprehensive income (loss). As of March 31, 2021 and December 31, 2020, the Company had $4.1 million and $3.3 million, respectively, of contract acquisition cost assets, net of accumulated amortization recorded in contract cost assets on the consolidated balance sheets. In addition, the Company recorded amortization expense of $0.4 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively.

In our platforms and operations arrangements, we incur certain costs related to the implementation of our platform before we begin to satisfy our performance obligation to the customer. The costs, which we expect to recover, are considered costs to fulfill a contract. Our contract fulfillment costs primarily include our employee labor costs and third-party vendor costs. The capitalized contract fulfillment costs are classified as non-current and recorded within contract cost assets on our consolidated balance sheets. Amortization expense is recorded within cost of revenue on the accompanying consolidated statements of operations and comprehensive income (loss). As of March 31, 2021 and December 31, 2020, the Company had $21.2 million and $23.4 million, respectively, of contract fulfillment cost assets, net of accumulated amortization recorded in contract cost assets on the consolidated balance sheets. In addition, the Company recorded amortization expense of $2.7 million and $5.1 million for the three months ended March 31, 2021 and 2020, respectively.

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

Note 7. Credit Losses

We are exposed to credit losses primarily through our accounts receivable from revenue transactions, investments held at amortized cost and customer advances for regulatory capital and other notes receivable. We estimate expected credit losses based on past events, current conditions and reasonable and supportable forecasts. Expected credit losses are measured over the remaining contractual life of these assets. As part of our consideration of current and forward-looking economic conditions, we considered the impact of the COVID-19 pandemic on our customers’ and other third parties’ ability to pay. We did not observe notable increases in delinquencies during the three months ended March 31, 2021. Given the nature of our business, our past collection experience during recessionary and pre-recessionary periods, and our forecasted impact of the COVID-19 pandemic on our business, we did not record material changes in our allowances due to the COVID-19 pandemic during the three months ended March 31, 2021.

Accounts Receivable from Revenue Transactions

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

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

Based on an aging analysis of our trade accounts receivable, non-trade accounts receivable and contract assets at March 31, 2021, 64% were current, 24% were past due less than 60 days, with 32% past due less than 120 days. At March 31, 2021, we reported $211.0 million of accounts receivable, certain non-trade accounts receivable included in prepaids and other assets on the consolidated balance sheet and contract assets, net of allowances of $9.4 million. The following table summarizes the changes in allowance for credit losses on our accounts receivables, certain non-trade accounts receivable and contract assets (in thousands):

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	For the Three Months Ended March 31,
	2021		2020
Balance as of beginning of period	$	(7,056)	$	(41)
Cumulative transition adjustment	—		(2,815)
Provision for credit losses	(2,327)		(1,001)
Recoveries	—		447
Balance as of end of period	$	(9,383)	$	(3,410)

Note 8. Property and Equipment, Net

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

	March 31, 2021		December 31, 2020
Computer hardware	$	19,454	$	18,866
Furniture and equipment	3,553		3,559
Internal-use software development costs	142,539		137,085
Leasehold improvements	15,577		15,586
Total property and equipment	181,123		175,096
Accumulated depreciation and amortization expenses	(96,684)		(88,856)
Total property and equipment, net	$	84,439	$	86,240

The Company capitalized $5.5 million and $7.3 million of internal-use software development costs for the three months ended March 31, 2021 and 2020, respectively. The net book value of capitalized internal-use software development costs was $74.1 million and $75.3 million as of March 31, 2021 and December 31, 2020, respectively.

Depreciation expense related to property and equipment was $7.8 million and $6.8 million for the three months ended March 31, 2021 and 2020, respectively, of which amortization expense related to capitalized internal-use software development costs was $6.7 million and $5.6 million, respectively.

Note 9. Goodwill and Intangible Assets, Net

Goodwill

Goodwill has an estimated indefinite life and is not amortized; rather, it is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

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

Our annual goodwill impairment review occurs during the fourth quarter of each fiscal year. We evaluate qualitative factors that could cause us to believe the estimated fair value of each of our reporting units may be lower than the carrying value and trigger a quantitative assessment, including, but not limited to (i) macroeconomic conditions, (ii) industry and market considerations, (iii) our overall financial performance, including an analysis of our current and projected cash flows, revenues and earnings, (iv) a sustained decrease in share price and (v) other relevant entity-specific events including changes in management, strategy, partners, or litigation.

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We did not identify any qualitative factors that would trigger a quantitative goodwill impairment test during the three months ended March 31, 2021. We will perform our annual impairment test as of October 31, 2021.

2020 Goodwill Impairment Test

As of March 31, 2020, the Company assessed whether there were additional events or changes in circumstances since its 2019 annual goodwill impairment test that would indicate that it was more likely than not that the fair values of the reporting units were less than the reporting units’ carrying amounts that would require an additional interim impairment assessment after October 31, 2019. Considering the sharp decrease in the share price of the Company’s Class A common stock during the three months ended March 31, 2020, the Company determined indicators of an impairment were present and we performed an interim goodwill impairment assessment as of March 31, 2020. As a result of this test, the Company determined that there was no goodwill impairment of the reporting unit which recognized an impairment in the year ended December 31, 2019.

During May 2020, the CHFS announced that EVH Passport was not awarded a Kentucky managed Medicaid contract for the next contract period and the Passport Medicaid Contract would expire on December 31, 2020. As a result of this announcement, the Company determined there were events or changes in circumstances since its 2019 annual goodwill impairment test that indicated it was more likely than not that the fair value of one of its two reporting units in the EHS segment was less than the reporting unit’s carrying amount triggering an interim quantitative assessment.

In performing this interim quantitative assessment, we estimated the fair value of the reporting unit by considering a discounted cash flow valuation approach (“income approach”). In determining the estimated fair value in a quantitative analysis, we projected future cash flows based on management’s estimates and long-term plans and applied a discount rate based on the Company’s weighted average cost of capital. This analysis required us to make judgments about revenues, expenses, fixed asset and working capital requirements, capital market assumptions, cash flows and discount rates.

As of May 31, 2020, we determined that the reporting unit under review had an estimated fair value less than its carrying value. As a result, we recorded a non-cash goodwill impairment charge of $215.1 million on our consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2020. In addition, the Company reviewed its interim goodwill impairment analysis as of June 30, 2020 and did not identify any additional information or events that would contradict or change the conclusion reached by the Company as of May 31, 2020.

During the three months ended September 30, 2020, we evaluated qualitative factors that could indicate the fair value of each of our reporting units may be lower than the carrying value. We did not identify any qualitative factors that would trigger a quantitative goodwill impairment test during the three months ended September 30, 2020.

During the Company’s annual impairment analysis as of October 31, 2020, the Company concluded that previous impairment charges of $199.8 million and $215.1 million recorded during the three months ended December 31, 2019 and June 30, 2020, respectively, in one of our two reporting units in the EHS segment left that specific reporting unit with a limited fair value cushion. Therefore, the Company elected to forego the qualitative assessment and proceed directly to the quantitative assessment of the goodwill impairment test for that specific reporting unit. This election does not preclude management from performing the qualitative assessment in any subsequent period. For the remaining reporting units, after assessing the totality of events and circumstances including the results of our previous valuations, the minimal impacts of the Passport loss and COVID-19, the Company does not believe that an event occurred or circumstances changed during the period under consideration that would, more likely than not, reduce the fair value of any reporting unit below their carrying amount. Therefore, the Company concluded that the quantitative assessment was not required.

In performing our October 31, 2020 impairment test for one of the specific reporting units referenced above, we estimated the fair value of our reporting units by considering a discounted cash flow valuation approach (“income approach”). In determining the estimated fair value using the income approach, we projected future cash flows based on management’s estimates and long-term plans and applied a discount rate based on the Company’s weighted average cost of capital. This analysis required us to make judgments about revenues, expenses, fixed asset and working capital requirements, capital market assumptions, cash flows and discount rates. As of October 31, 2020, we determined that the specific reporting unit had an estimated fair value greater than its carrying value and as a result, goodwill is not impaired.

As of December 31, 2020, the Company assessed whether there were additional events or changes in circumstances since its annual goodwill impairment test that would indicate that it was more likely than not that the fair value of the reporting unit was less than the reporting unit’s carrying amounts that would require an interim impairment assessment after October 31, 2020. The Company determined there had been no such indicators, therefore, we did not perform an interim goodwill impairment assessment as of December 31, 2020. As of December 31, 2020, the remaining goodwill attributable to the reporting unit from which we recognized a non-cash goodwill impairment charge earlier in the year was $214.3 million.

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

	EHS		Clinical Solutions		Consolidated
Balance as of December 31, 2020 (1)	$	214,354	$	134,675	$	349,029
Foreign currency translation	(7)		—		(7)
Balance as of March 31, 2021	$	214,347	$	134,675	$	349,022

	EHS		Clinical Solutions		Consolidated
Balance as of December 31, 2019 (1)	$	437,389	$	134,675	$	572,064
Goodwill disposal (2)	(2,200)		—		(2,200)
Foreign currency translation	(67)		—		(67)
Balance as of March 31, 2020	$	435,122	$	134,675	$	569,797

————————

(1)Net of cumulative inception to date impairment of $575.5 million and $360.4 million as of December 31, 2020 and 2019, respectively.

(2)Goodwill written-off upon disposal of a consolidated subsidiary.

Intangible Assets, Net

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

	March 31, 2021							December 31, 2020
	Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Corporate trade name	12.9	$	23,300	$	6,616	$	16,684	13.2	$	23,300	$	6,271	$	17,029
Customer relationships	15.9	278,519		61,305		217,214		16.2	278,519		57,716		220,803
Technology	1.6	82,922		66,158		16,764		1.8	82,922		63,507		19,415
Below market lease, net	2.1	1,218		799		419		2.3	1,118		648		470
Provider network contracts	2.8	13,947		5,608		8,339		2.9	12,175		4,900		7,275
Total intangible assets, net		$	399,906	$	140,486	$	259,420		$	398,034	$	133,042	$	264,992

————————

(1)Amounts exclude $2.2 million and $0.9 million of customer relationships and provider network contracts, net of accumulated amortization, with weighted average remaining useful lives of 15 years and 10 months reclassified to discontinued operations as of December 31, 2020.

Amortization expense related to intangible assets for the three months ended March 31, 2021 and 2020, was $7.5 million and $9.3 million, respectively.

Future estimated amortization of intangible assets (in thousands) as of March 31, 2021, is as follows:

2021	$	21,137
2022	24,629
2023	22,325
2024	16,441
2025	15,736
Thereafter	159,152
Total future amortization of intangible assets	$	259,420

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Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the assets’ carrying value. We did not identify any circumstances during the three months ended March 31, 2021, that would require an impairment test for our intangible assets.

Note 10. Long-term Debt

2024 Notes

In August 2020, the Company issued $117.1 million aggregate principal amount of its 3.50% Convertible Senior Notes due 2024 (the “2024 Notes”) in privately negotiated exchange and/or subscription agreements, with certain holders of its outstanding 2021 Notes and certain new investors. The Company issued $84.2 million aggregate principal amount of 2024 Notes in exchange for $84.2 million aggregate principal amount of the 2021 Notes and an aggregate cash payment of $2.5 million, and issued $32.8 million aggregate principal amount of New Notes for cash at par. We incurred $3.0 million of debt issuance costs in connection with the 2024 Notes, which we are amortizing to non-cash interest expense using the straight-line method over the contractual term of the 2024 Notes. The closing of the private placement of the 2024 Notes occurred on August 19, 2020.

Holders of the 2024 Notes are entitled to cash interest payments, which are payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020, at a rate equal to 3.50% per annum. The 2024 Notes will mature on December 1, 2024, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. Upon maturity the principal amount of the notes may be settled via shares of the Company’s Class A common stock. We recorded interest expense of $1.0 million for the three months ended March 31, 2021.

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

The option to settle the 2024 Notes in cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election, resulted in a bifurcation of the carrying value of the 2024 Notes into a debt component and an equity component. The debt component was determined to be $78.9 million, before issuance costs, based on the fair value of a nonconvertible debt instrument with the same term. The equity component was determined to be $38.1 million, before issuance costs, and was recorded within additional paid-in capital. The equity component is the difference between the aggregate principal amount of the debt and the fair value of the debt component. Issuance costs of $1.7 million and $1.3 million are allocated to the debt and equity components in proportion to the allocation of proceeds. Along with the equity component of $38.1 million, $1.7 million of issuance costs will be amortized to interest expense on the consolidated statements of operations and comprehensive income (loss) using the effective interest method over the contractual term of the 2024 Notes. The equity component recorded within additional paid-in capital will not be remeasured as long as it meets the conditions for equity classification. The Company recorded $1.9 million of interest expense related to the amortization of the debt discount and the issuance costs allocated to the debt component for the three months ended March 31, 2021.

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

Credit Agreement

On December 30, 2019, the Company entered into a credit agreement, by and among the Company, Evolent Health LLC, as the borrower (the “Borrower”), certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrative agent and collateral agent, together with the Company (the “Credit Agreement”), pursuant to

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which the lenders agreed to extend credit to the Borrower in the form of (i) an initial secured term loan in the aggregate principal amount of $75.0 million (the “Initial Term Loan Facility”) and (ii) a delayed draw secured term loan facility in the aggregate principal amount of up to $50.0 million (the “DDTL Facility” and, together with the Initial Term Loan Facility, the “Senior Credit Facilities”), subject to the satisfaction of specified conditions. The Borrower borrowed the loan under the Initial Term Loan Facility on December 30, 2019. In connection with the Credit Agreement, on December 30, 2019, the Company entered into a Security Agreement, by and among the Company, the Borrower, the other guarantors and the collateral agent for the benefit of the secured parties, and a Guarantee Agreement, by the Company and each of the other guarantors in favor of the collateral agent for the benefit of the secured parties. The Senior Credit Facilities were guaranteed by the Company and the Company’s domestic subsidiaries, subject to certain exceptions. The Senior Credit Facilities were secured by a first priority security interest in all of the capital stock of the borrower and each guarantor (other than the Company) and substantially all of the assets of the borrower and each guarantor, subject to certain exceptions.

The proceeds of the Initial Term Loan were used to finance the transactions contemplated by the Passport APA and pay fees and expenses incurred in connection therewith. The proceeds of the DDTL Facility were permitted to be used, subject to the Company’s satisfaction of specified conditions, to finance the repayment or repurchase of the Company’s 2.00% Convertible Senior Notes due December 1, 2021 and to fund permitted acquisitions.  The Initial Term Loan and any loans under the DDTL Facility would have matured on the date that is the earliest of (a) December 30, 2024, (b) the date on which all amounts outstanding under the Credit Agreement would have been declared or have automatically become due and payable under the terms of the Credit Agreement and (c) the date that is ninety-one (91) days prior to the maturity date of the 2021 Convertible Notes unless certain liquidity conditions were satisfied (the foregoing, the “Maturity Date”). The interest rate for each loan under the Senior Credit Facilities was calculated, at the option of the Borrower, at either the Eurodollar rate plus 8.00%, or the base rate plus 7.00%. A commitment fee of 1.00% per annum was payable by the Borrower quarterly in arrears on the unused portion of the DDTL Facility. The Company recorded $2.0 million in interest expense related to our Credit Agreement for the three months ended March 31, 2020.

Amounts outstanding under the Senior Credit Facilities could have been prepaid at the option of the Borrower subject to applicable premiums, including a make-whole premium payable on certain prepayments made prior to the second anniversary of the closing of the Senior Credit Facilities, and a call protection premium payable on the amount prepaid in certain instances as follows: (i) 4.00% of the principal amount so prepaid after the second anniversary of the closing of the Senior Credit Facilities but prior the third anniversary of the closing of the Senior Credit Facilities; (ii) 3.00% of the principal amount so prepaid after the third anniversary of the closing of the Senior Credit Facilities but prior the fourth anniversary of the closing of the Senior Credit Facilities; and (iii) 2.00% of the principal amount so prepaid after the fourth anniversary of the closing of the Senior Credit Facilities but prior the fifth anniversary of the closing of the Senior Credit Facilities. Amounts outstanding under the Senior Credit Facility were subject to mandatory prepayment upon the occurrence of certain events and conditions, including non-ordinary course asset dispositions, receipt of certain casualty proceeds, issuances of certain debt obligations and a change of control transaction.

The Senior Credit Facilities contained customary borrowing conditions, affirmative, negative and reporting covenants, representations and warranties, and events of default, including cross-defaults to other material indebtedness. In addition, the Company was required to comply at certain times with certain financial covenants comprised of a minimum net revenue test and a minimum liquidity test commencing upon closing of the Senior Credit Facilities and a total secured leverage ratio commencing on the last day of the fiscal quarter ending March 31, 2021. If an event of default had occurred, the lenders would be entitled to take enforcement action, including foreclosure on collateral and acceleration of amounts owed under the Senior Credit Facilities. We incurred $4.7 million of debt issuance costs in connection with this Credit Agreement, which was included in long-term debt, net of discount on our consolidated balance sheets and amortized into interest expense over the life of the agreement. The Company recorded $0.6 million in interest expense related to the amortization of the debt discount and the issuance costs for the three months ended March 31, 2020.

On August 19, 2020, an amendment to the Company's Credit Agreement became effective. The amendment effected changes to, among other things, permit the Company's use of cash in the exchange transactions in connection with the issuance of the 2024 Notes, permit the issuance of the 2024 Notes and permit certain note repurchases, as well as to implement amendments to certain minimum liquidity thresholds.

On January 8, 2021, the Company repaid all outstanding amounts owed under, and terminated, the Credit Agreement with Ares Capital Corporation. The total amount paid to Ares Corporation under the Credit Agreement in connection with the prepayment was $98.6 million, which included $9.7 million for the make-whole premium as well as $0.2 million in accrued interest. As a result of this transaction, the Company recorded loss on the repayment of debt of $19.2 million, representing the remaining unamortized debt issuance costs of $9.5 million, the make-whole premium and $35 thousand of legal expenses.

Warrant Agreement

In conjunction with the Company’s entry into the Credit Agreement, the Company entered into warrant agreements whereby it agreed to sell to the holders of the warrants an aggregate of 1,513,786 shares of Class A common stock at a per share purchase price equal to $8.05. The holders could exercise the warrants at any time until thirty days after the maturity of the Credit Agreement. The

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Company, at its sole discretion, could elect to pay the holders in cash in an amount determined based on the fair market value of the Class A common stock for the shares of Class A common stock issuable upon exercise of the warrants in lieu of delivering the shares.

On January 8, 2021, the Company settled the outstanding warrants associated with the Credit Agreement for $13.7 million.

2025 Notes

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

Holders of the 2025 Notes are entitled to cash interest payments, which are payable semiannually in arrears on April 15 and October 15 of each year, beginning on April 15, 2019, at a rate equal to 1.50% per annum. The Company recorded interest expense of $0.6 million and related to the 2025 Notes for the three months ended March 31, 2021 and 2020, respectively. The 2025 Notes will mature on October 15, 2025, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date.

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

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

The option to settle the 2025 Notes in cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election, resulted in a bifurcation of the carrying value of the 2025 Notes into a debt component and an equity component. The debt component was determined to be $100.7 million, before issuance costs, based on the fair value of a nonconvertible debt instrument with the same term. The equity component was determined to be $71.8 million, before issuance costs, and was recorded within additional paid-in capital. The equity component is the difference between the aggregate principal amount of the debt and the debt component. Issuance costs of $3.4 million and $2.5 million are allocated to the debt and equity components in proportion to the allocation of proceeds. Along with the equity component of $71.8 million, $3.4 million of issuance costs will be amortized to interest expense on the consolidated statements of operations and comprehensive income (loss) using the effective interest method over the contractual term of the 2025 Notes. The equity component recorded within additional paid-in capital will not be remeasured as long as it meets the conditions for equity classification. For the three months ended March 31, 2021 and 2020, the Company recorded $2.4 million and $2.2 million, respectively, in interest expense related to the amortization of the debt discount and the issuance costs allocated to the debt component.

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

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2021 Notes

In December 2016, the Company issued $125.0 million aggregate principal amount of its 2.00% Convertible Senior Notes due 2021 (the “2021 Notes”) in a private placement to qualified institutional buyers within the meaning of Rule 144A under the Securities Act. The 2021 Notes were issued at par for net proceeds of $120.4 million. We incurred $4.6 million of debt issuance costs in connection with the 2021 Notes, which we are amortizing to non-cash interest expense using the straight-line method over the contractual term of the 2021 Notes, since this method was not materially different from the effective interest method. The closing of the private placement of the 2021 Notes occurred on December 5, 2016.

Holders of the 2021 Notes are entitled to cash interest payments, which are payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2017, at a rate equal to 2.00% per annum. The 2021 Notes will mature on December 1, 2021, unless earlier repurchased or converted in accordance with their terms prior to such date. In addition, holders of the 2021 Notes may require the Company to repurchase all or part of their 2021 Notes upon the occurrence of a fundamental change at a price equal to 100.00% of the principal amount of the 2021 Notes being repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental repurchase date. Upon maturity the principal amount of the notes may be settled via shares of the Company’s Class A common stock. We recorded interest expense of $0.1 million and $0.6 million for the three months ended March 31, 2021 and 2020, respectively. We recorded non-cash interest expense related to the amortization of deferred financing costs of $49.0 thousand and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

The 2021 Notes are convertible into shares of the Company’s Class A common stock, based on an initial conversion rate of 41.6082 shares of Class A common stock per $1,000 principal amount of the 2021 Notes, which is equivalent to an initial conversion price of approximately $24.03 per share of the Company’s Class A common stock. In the aggregate, the 2021 Notes are initially convertible into 5.2 million shares of the Company’s Class A common stock (excluding any shares issuable by the Company upon a conversion in connection with a make-whole provision upon a fundamental change under the governing indenture). The conversion rate may be adjusted under certain circumstances.

The 2021 Notes are convertible, in multiples of $1,000 principal amount, at the option of the holders at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, we will deliver for each $1,000 principal amount of notes converted a number of shares of our Class A common stock equal to the applicable conversion rate (together with a cash payment in lieu of delivering any fractional share) on the third business day following the relevant conversion date.

In August 2020, as part of the issuance of the 2024 Notes, the Company issued $84.2 million aggregate principal amount of the 2024 Notes in exchange for $84.2 million aggregate principal of its 2021 Notes. There was no cash consideration in these exchanges outside of an aggregate cash payment of $2.5 million paid to exchanging noteholders. These exchanges were accounted for as an extinguishment resulting in a net loss on extinguishment of debt of $4.8 million, including an aggregate cash payment of $2.5 million paid to exchanging noteholders.

In August 2020, we also repurchased $14.0 million of the 2021 Notes with $13.9 million of cash and recorded an immaterial gain on extinguishment of debt.

Convertible Senior Notes Carrying Value

The 2025 Notes, 2024 Notes and 2021 Notes are recorded on our accompanying consolidated balance sheets at their net carrying values as of March 31, 2021. However, the 2025 Notes, 2024 Notes and 2021 Notes are privately traded by qualified institutional buyers (within the meaning of Rule 144A under the Securities Act) and their fair values are Level 2 inputs. The 2025 Notes, 2024 Notes and the 2021 Notes also have embedded conversion options and contingent interest provisions, which have not been recorded as separate financial instruments. The following table summarizes the carrying value of the long-term convertible debt (in thousands):

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	March 31, 2021		December 31, 2020
2024 Notes
Carrying value	$	83,369	$	81,462
Unamortized debt discount and issuance costs	33,682		35,589
Principal amount	$	117,051	$	117,051
Remaining amortization period (years)	3.7		3.9
Fair value	$	160,009	$	153,220
2025 Notes
Carrying value	$	118,763	$	116,349
Unamortized debt discount and issuance costs	53,737		56,151
Principal amount	$	172,500	$	172,500
Remaining amortization period (years)	4.5		4.8
Fair value	$	159,744	$	147,488
2021 Notes
Carrying value	$	26,606	$	26,557
Unamortized issuance costs	131		180
Principal amount	$	26,737	$	26,737
Remaining amortization period (years)	0.7		0.9
Fair value	$	27,272	$	26,470

Note 11. Commitments and Contingencies

Commitments

Letters of Credit

As of March 31, 2021 and December 31, 2020, the Company established irrevocable standby letters of credit with a bank for $15.0 million  and $7.4 million for the benefit of a regulatory authorities, real estate and risk-sharing agreements and, as such, held $15.0 million and $7.4 million in restricted cash and restricted investments as collateral as of both March 31, 2021 and December 31, 2020, respectively. The letters of credit have current expiration dates between October 2021 and March 2032 and will automatically extend without amendment for an additional one-year period and will continue to automatically extend after each one-year term from the expiry date, unless the bank elects not to extend beyond the initial or any extended expiry date.

Indemnifications

The Company’s customer agreements generally include a provision by which the Company agrees to defend its partners against third-party claims (a) for death, bodily injury, or damage to personal property caused by Company negligence or willful misconduct, (b) by former or current Company employees arising from such managed service agreements, (c) for intellectual property infringement under specified conditions and (d) for Company violation of applicable laws, and to indemnify them against any damages and costs awarded in connection with such claims. To date, the Company has not incurred any material costs as a result of such indemnities and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements.

Pre-IPO Investor Registration Rights Agreement

We entered into a registration rights agreement with The Advisory Board, UPMC, TPG and another investor to register for sale under the Securities Act shares of our Class A common stock, including those delivered in exchange for Class B common stock and Class B common units. Subject to certain conditions and limitations, this agreement provides these investors with certain demand, piggyback and shelf registration rights. The registration rights granted under the registration rights agreement will terminate upon the date the holders of shares that are a party thereto no longer hold any such shares that are entitled to registration rights. Pursuant to our contractual obligations under this agreement, we filed a registration statement on Form S-3 with the SEC on July 28, 2016, which was declared effective on August 12, 2016.

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We will pay all expenses relating to any demand, piggyback or shelf registration, other than underwriting discounts and commissions and any transfer taxes, subject to specified conditions and limitations. The registration rights agreement includes customary indemnification provisions, including indemnification of the participating holders of shares of Class A common stock and their directors, officers and employees by us for any losses, claims, damages or liabilities in respect thereof and expenses to which such holders may become subject under the Securities Act, state law or otherwise. We did not incur any expenses related to secondary offerings or other sales of shares by our investor stockholders during the three months ended March 31, 2021, and 2020 respectively.

Guarantees

In connection with the Molina Closing, the Company continued to provide administrative support services relating to the Passport Medicaid Contract to Molina through the end of 2020. Following the Molina Closing, EVH Passport began working with regulatory authorities including the Kentucky Department of Insurance (“KY DOI”) regarding the wind down of its operations throughout 2021. As part of that wind down process, the Company, as the parent of EVH Passport, entered into a guarantee for the benefit of the KY DOI to satisfy any EVH Passport liability or obligation in the event EVH Passport is not able to meet its wind down liabilities or obligations. As of March 31, 2021, no amounts have been funded under this guarantee.

Reinsurance Agreements

At the Passport Closing, $16.2 million of the cash Passport Purchase Price was held back until such time as PHS I delivers to EVH Passport certain owned real property and improvements free and clear of all encumbrances. In addition, at the Passport Closing, EVH Passport and UHC entered into an agreement that provided for the administration and assumption of the financial risks by EVH Passport of the D-SNP Business until such time as EVH Passport became certified as a Medicare Advantage Organization and the D-SNP Business could be transferred to EVH Passport. On October 1, 2020, the D-SNP Business was transferred from UHC to EVH Passport.

At the Molina Closing, Molina and EVH Passport entered into an agreement that provided for the assumption of the financial risks by Molina of the D-SNP Business until such time as Molina’s Kentucky health plan becomes certified as a Medicare Advantage Organization and the D-SNP Business is transferred to Molina. The Company and EVH Passport continued to administer the D-SNP Business until January 1, 2021, at which time Molina became responsible for its administration until the D-SNP Business is officially transferred to Molina.

The following summarizes premiums and claims assumed under the Reinsurance Agreements (in thousands):

	For the Three Months Ended March 31,
	2021		2020
Reinsurance premiums assumed	$	8,845	$	—
Reinsurance premiums ceded	—		—
Claims assumed	10,494		—
Claims ceded	—		—
Claims-related administrative expenses	545		—
Increase in reserves for claims and performance-based arrangements attributable to the Reinsurance Agreement	(2,194)		—
Reserves for claims and performance-based arrangements attributable to the Reinsurance Agreement at the beginning of the period	4,002		—
Impact of consolidation on payable for claims and performance-based arrangements attributable to the Reinsurance Agreement	—		—
Reinsurance payments paid (received)	—		—
Payable for claims and performance-based arrangements attributable to the Reinsurance Agreement at the end of the period	$	1,808	$	—

UPMC Reseller Agreement

The Company and UPMC are parties to a reseller, services and non-competition agreement, dated August 31, 2011, which was amended and restated by the parties on June 27, 2013 (as amended through the date hereof, the “UPMC Reseller Agreement”). Under the terms of the UPMC Reseller Agreement, UPMC has appointed the Company as a non-exclusive reseller of certain services, subject to certain conditions and limitations specified in the UPMC Reseller Agreement. In consideration for the Company’s obligations under the UPMC Reseller Agreement and subject to certain conditions described therein, UPMC has agreed not to sell certain products and services directly to a defined list of 20 of the Company’s customers.

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Contingencies

Tax Receivables Agreement

In connection with the Offering Reorganization, the Company entered into the Tax Receivables Agreement (the “TRA”) with certain of its investors, which provides for the payment by the Company to these investors of 85% of the amount of the tax benefits, if any, that the Company is deemed to realize as a result of increases in our tax basis related to exchanges of Class B common units as well as tax benefits attributable to the future utilization of pre-IPO NOLs.

Due to the items noted above, and the fact that Evolent Health, Inc. is in a full valuation allowance position such that the deferred tax assets related to the Company’s historical pre-IPO losses and tax basis increase benefit from exchanges have not been realized, the Company has not recorded a liability pursuant to the TRA.

Litigation Matters

We are engaged from time to time in certain legal disputes arising in the ordinary course of business, including employment claims. When the likelihood of a loss contingency becomes probable and the amount of the loss can be reasonably estimated, we accrue a liability for the loss contingency. We continue to review accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained, and our views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made.

On August 8, 2019, a shareholder of the Company filed a class action complaint against the Company, asserting claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, in the United States District Court, Eastern District of Virginia, Alexandria Division. An amended complaint was filed on January 10, 2020, and a second amended complaint was filed on June 8, 2020. The case, Plymouth County Retirement System v. Evolent Health, Inc., Frank Williams, Nicholas McGrane, Seth Blackley, Christie Spencer, and Steven Wigginton, alleges that the Company’s executives made false or misleading statements regarding its business with Passport. The Company filed a motion to dismiss the second amended complaint, and the Eastern District of Virginia granted in part and denied in part the motion on March 24, 2021. The Company and Plaintiffs then filed separate motions to reconsider that are pending. While the scope of the allegations that remain is still unclear pending the court’s further decision, the case will proceed to discovery. Based on the Company’s investigation so far, we believe the case has little legal or factual merit. However, the outcome of any litigation is uncertain, and at this stage, the Company is currently unable to assess the probability of loss or estimate a range of potential loss, if any, associated with this lawsuit.

The Company is not aware of any other legal proceedings or claims as of March 31, 2021, that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company’s financial position or result of operations.

Credit and Concentration Risk

The Company is subject to significant concentrations of credit risk related to cash and cash equivalents and accounts receivable. As of March 31, 2021, approximately 99.7% of our $303.8 million of cash and cash equivalents (including restricted cash) were held in bank deposits with FDIC participating banks and approximately 0.3% were held in international banks. While the Company maintains its cash and cash equivalents with financial institutions with high credit ratings, it often maintains these deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any realized losses on cash and cash equivalents to date.

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The Company is also subject to significant concentration of accounts receivable risk as a substantial portion of our trade accounts receivable is derived from a small number of our partners. The following table summarizes the partner who represented at least 10.0% of our consolidated trade accounts receivable as of the dates presented:

	March 31, 2021		December 31, 2020
Cook County Health and Hospitals System	44.5	%	61.5	%
Florida Blue Medicare, Inc	14.6	%	*
Neighborhood Health Plan of Rhode Island	11.2	%	*

————————

*     Represents less than 10.0% of the respective balance

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

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

	For the Three Months Ended March 31,
	2021		2020 (1)
Cook County Health and Hospitals Systems	28.8	%	21.5	%
Florida Blue Medicare, Inc.	14.7	%	*
Passport	*		25.3	%

————————

(1)The denominator excludes $44.8 million and $32.1 million of True Health premium revenue reclassified to discontinued operations for the three months ended March 31, 2021 and 2020, respectively.

*     Represents less than 10.0% of the respective balance

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

Note 12. Leases

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

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

The Company leases office space and computer and other equipment under operating lease agreements expiring at various dates through 2031. Under the lease agreements, in addition to base rent, the Company is generally responsible for operating and maintenance costs and related fees. Several of these agreements include tenant improvement allowances, rent holidays or rent escalation clauses. When such items are included in a lease agreement, we record a deferred rent asset or liability on our consolidated balance sheets equal to the difference between rent expense and future minimum lease payments due. The rent expense related to these items is recognized on a straight-line basis over the terms of the leases. The Company’s primary office location is in Arlington, Virginia, which has served as its corporate headquarters since 2013. The Arlington, Virginia office lease expires in January 2032. Certain leases acquired as part of the Valence Health transaction included existing sublease agreements for office locations in Chicago, Illinois.

In connection with various lease agreements, the Company is required to maintain $3.5 million in letters of credit. As of both March 31, 2021 and December 31, 2020, the Company held $3.5 million in restricted cash and restricted investments on the consolidated balance sheet as collateral for the letters of credit, respectively.

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The following table summarizes our primary office leases as of March 31, 2021 (in thousands, other than term):

Location	Lease Termination Term (in years)	Future Minimum Lease Commitments		Letter of Credit Amount Required
Arlington, VA	10.8	$	37,911	$	1,579
Riverside, IL	10.0	43,789		232
Pune, India	2.5	2,083		—
Brea, CA	1.2	1,287		—

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

	For the Three Months Ended March 31,
	2021		2020
Operating lease cost	$	4,818	$	3,056
Amortization of right-of-use assets	—		149
Interest expense	—		2
Variable lease cost	1,321		1,052
Total lease cost	$	6,139	$	4,259

Maturity of lease liabilities (in thousands) as of March 31, 2021, is as follows:

	Operating lease expense
2021	8,844
2022	9,843
2023	8,650
2024	8,378
2025	8,145
Thereafter	47,760
Total lease payments	91,620
Less:
Interest	23,789
Present value of lease liabilities	$	67,831

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

	March 31, 2021
Weighted average discount rate	6.42	%
Weighted average remaining lease term	9.3

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Note 13. Earnings (Loss) Per Common Share

The following table sets forth the computation of basic and diluted earnings per share available for common stockholders (in thousands, except per share data):

	For the Three Months Ended March 31,
	2021		2020
Loss from continuing operations	$	(11,190)	$	(78,487)
Gain (loss) from discontinued operations, net of tax	1,383		(265)
Net loss	(9,807)		(78,752)
Less:
Net loss attributable to non-controlling interests	—		—
Net loss available for common shareholders - basic and diluted	$	(9,807)	$	(78,752)
Weighted-average common shares outstanding - basic and diluted	84,670		84,793
Loss per common share
Basic and diluted
Continuing operations	$	(0.13)	$	(0.93)
Discontinued operations	0.01		—
Basic and diluted loss per share attributable to common shareholders of Evolent Health, Inc.	$	(0.12)	$	(0.93)

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

	For the Three Months Ended March 31,
	2021	2020
Restricted stock units ("RSUs"), performance-based RSUs and leveraged stock units ("LSUs")	1,531	199
Stock options	1,865	972
Convertible senior notes	12,696	10,361
Total	16,092	11,532

Note 14. Stock-based Compensation

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

	For the Three Months Ended March 31,
	2021		2020
Award Type
Stock options	$	404	$	750
Performance-based stock options	—		75
RSUs	1,974		1,856
LSUs	1,085		827
PSUs	243		—
Total compensation expense by award type	$	3,706	$	3,508
Line Item
Cost of revenue	$	595	$	392
Selling, general and administrative expenses	3,111		3,116
Total compensation expense by financial statement line item	$	3,706	$	3,508

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No stock-based compensation was capitalized as software development costs for the three months ended March 31, 2021 and 2020.

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

	For the Three Months Ended March 31,
	2021	2020
RSUs	939	976
PSUs	319	—
LSUs	—	380

Note 15. Income Taxes

For interim periods, we recognize an income tax provision (benefit) based on our estimated annual effective tax rate expected for the full year.

An income tax expense of $0.6 million and $0.3 million was recognized for both the three months ended March 31, 2021 and 2020, respectively, which resulted in effective tax rates of (5.8)% and (0.3)%, respectively. The Company and its U.S. subsidiaries continue to record a valuation allowance against its net deferred tax assets, with the exception of indefinite lived components. The income tax expense recorded during the three months ended March 31, 2021 primarily relates to foreign taxes as well as an increase to those indefinite components from the tax amortization of goodwill.

As of December 31, 2020, the Company had unrecognized tax benefits of $0.7 million that, if recognized, would not affect the effective tax rate due to the valuation allowance against its net deferred tax asset. As of March 31, 2021, there are no changes to the unrecognized tax benefits. The Company is not currently subject to income tax audits in any U.S., state, or foreign jurisdictions for any tax year.

Tax Receivables Agreement

In connection with the Offering Reorganization, the Company entered into the TRA with certain of its investors, which provides for the payment by the Company to these investors of 85% of the amount of the tax benefits, if any, that the Company is deemed to realize as a result of increases in our tax basis related to exchanges of Class B common units as well as tax benefits attributable to the future utilization of pre-IPO NOLs. See Note 11 above and “Part II - Item 8. Financial Statements and Supplementary Data - Note 14” in our 2020 Form 10-K for discussion of our TRA.

Note 16. Investments in and Advances to Equity Method Investees

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

As of March 31, 2021 and December 31, 2020, the Company’s economic interests in its equity method investments ranged between 4% and 39%, and 4% and 38%, respectively, and voting interests in its equity method investments ranged between 25% and 40%, respectively. The Company determined that it has significant influence over these entities but that it does not have control over any of the entities. Accordingly, the investments are accounted for under the equity method of accounting and the Company is allocated its proportional share of the entities’ earnings and losses for each reporting period. The Company’s proportional share of the (gain) losses from these investments was approximately $7.8 million and $0.4 million for the three months ended March 31, 2021 and 2020, respectively.

The Company signed services agreements with certain of the aforementioned entities to provide certain management, operational and support services to help manage elements of their service offerings. Revenue related to these services agreements were $6.3 million and $59.9 million for the three months ended March 31, 2021 and 2020, respectively.

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Note 17. Non-controlling Interests

Immediately following the Offering Reorganization and IPO in May 2015, the Company owned 70.3% of Evolent Health LLC. The Company’s ownership percentage changes with the issuance of Class A or Class B common stock and Class B Exchanges. In order to account for any changes in the Company’s ownership of Evolent Health LLC, we record a reclassification of equity between non-controlling interests and shareholders’ equity attributable to Evolent Health, Inc.

2020

On September 1, 2020, in connection with the consolidation of EVH Passport, the Company recognized a $25.7 million non-controlling interest for the Sponsors’ 30% equity interest in EVH Passport which represented the fair value of the non-controlling interest as of the date of consolidation. Pursuant to the shareholders’ agreement with the Sponsors, the Company was required to acquire the Sponsors’ 30% ownership interest for $20.0 million on or prior to December 31, 2021. On November 16, 2020, the Company acquired the Sponsors’ 30% equity interest and reclassified the non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. As a result of this transaction, the Company recorded a $5.7 million gain on consolidation for the year ended December 31, 2020 in gain (loss) on disposal of assets and consolidation on the consolidated statements of operations.

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

	For the Three Months Ended March 31,
	2021		2020
Non-controlling interests balance as of beginning of period	$	—	$	6,889
Reclassification of non-controlling interests	—		(6,889)
Non-controlling interests balance as of end of period	$	—	$	—

Note 18. Fair Value Measurement

GAAP defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) assuming an orderly transaction in the most advantageous market at the measurement date. GAAP also establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:

•Level 1 - inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date;

•Level 2 - inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date and the fair value can be determined through the use of models or other valuation methodologies; and

•Level 3 - inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the particular asset or liability being measured.

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Recurring Fair Value Measurements

In accordance with GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents (1)	$	5,877	$	—	$	—	$	5,877
Total fair value of assets measured on a recurring basis	$	5,877	$	—	$	—	$	5,877
Liabilities
Warrants (2)	$	—	$	—	$	13,730	$	13,730
Total fair value of liabilities measured on a recurring basis	$	—	$	—	$	13,730	$	13,730

(1) Represents the cash and cash equivalents and restricted cash and restricted investments that were held in money market funds as of December 31, 2020.

(2) Represents the fair value of 1,513,786 shares issuable under the warrant agreements discussed in Note 10.

The Company recognizes any transfers between levels within the hierarchy as of the beginning of the reporting period. There were no transfers between fair value levels for the three months ended March 31, 2021 and 2020, respectively.

In the absence of observable market prices, the fair value is based on the best information available and involves a significant degree of judgment, taking into consideration a combination of internal and external factors, including the appropriate risk adjustments for non-performance and liquidity risks.

In conjunction with the Credit Agreement discussed in Note 10, the Company entered into warrant agreements whereby it agreed to sell to the holders of the warrants an aggregate of 1,513,786 shares of Class A common stock. The fair value of the warrants was estimated based on the Black-Scholes model which incorporates the constant price variation of the stock, the time value of money, the option's strike price, and the time to the option's expiry. The significant unobservable inputs used in the fair value measurement of the warrants are the stock price volatility and annual risk free rate. A significant increase in the stock price or discount rate in isolation would result in a significantly higher fair value of the contingent consideration.

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

	For the Three Months Ended March 31,
	2021		2020
Balance as of beginning of period	$	13,730	$	16,975
Settlements	(13,730)		(3,500)
Realized and unrealized gains (losses), net	—		(6,375)
Balance as of end of period	$	—	$	7,100

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

	December 31, 2020
	Fair		Valuation	Significant	Assumption or
	Value		Technique	Unobservable Inputs	Input Ranges
Warrants	$	13,730	Black-Scholes	Stock price volatility	62.2	%
				Annual risk free rate	0.2	%

Nonrecurring Fair Value Measurements

In addition to the assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. This includes assets and liabilities recorded in business combinations or asset acquisitions, goodwill, intangible assets, property, plant and equipment, held-to-maturity investments and equity method investments. While not

32

carried at fair value on a recurring basis, these items are continually monitored for indicators of impairment that would indicate current carrying value is greater than fair value. In those situations, the assets are considered impaired and written down to current fair value.

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents (those not held in a money market fund), restricted cash, receivables, prepaid expenses, accounts payable, accrued liabilities and accrued compensation approximate their fair values because of the relatively short-term maturities of these items and financial instruments.

See Note 10 for information regarding the fair value of the 2024 Notes, 2025 Notes and 2021 Notes.

Note 19. Related Parties

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

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

The Company also works closely with UPMC, one of its founding investors. The Company’s relationship with UPMC is a subcontractor relationship where UPMC has agreed to execute certain tasks (primarily TPA services) relating to certain customer commitments. We also conduct business with a company in which UPMC holds a significant equity interest.

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

	March 31, 2021		December 31, 2020
Assets
Accounts receivable, net	$	8,615	$	9,474
Prepaid expenses and other current assets	50		51
Prepaid expenses and other noncurrent assets, net of allowances	4,634		4,554
Liabilities
Accounts payable	$	1,898	$	2,509
Accrued liabilities	988		1,520
Reserve for claims and performance-based arrangements	202		435

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

	For the Three Months Ended March 31,
	2021		2020
Revenue
Transformation services	$	—	$	1,700
Platform and operations services	15,575		74,079
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses)	493		3,247
Selling, general and administrative expenses	31		70

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Note 20. Repositioning and Other Changes

We continually assess opportunities to improve operational effectiveness and efficiency to better align our expenses with revenues, while continuing to make investments in our solutions, systems and people that we believe are important to our long-term goals. Across 2020, we divested or agreed to divest a majority of our health plan assets, including certain assets of EVH Passport, which represented a significant revenue stream for the Company. In parallel with these divestitures, we contracted with a third-party vendor to review our operating model and organizational design in order to improve our profitability, create value through our solutions and invest in strategic opportunities in future periods.

In the fourth quarter of 2020, we committed to certain operational efficiency and profitability actions that we are taking in order to accomplish these objectives (“Repositioning Plan”). These actions included making organizational changes across our business as well as other profitability initiatives expected to result in reductions in force, re-aligning of resources as well as other potential operational efficiency and cost-reduction initiatives. The Repositioning Plan is expected to continue through the fourth quarter of 2021.

The Company recorded approximately $5.4 million of repositioning costs in selling, general and administrative expenses during the three months ended March 31, 2021 in connection with the Repositioning Plan. The following tables provide a summary of our total costs associated with the Repositioning Plan for the three months ended March 31, 2021, by major type of cost:

	Incurred For the Three Months Ended March 31, 2021		Total Amount Expected to be Incurred in the Repositioning Plan		Cumulative Amount Incurred through March 31, 2021
Severance and termination benefits	$	109	$	2,500	$	109
Office space consolidation	2,071		2,100		2,071
Professional services	3,200		4,475		4,475
Total	$	5,380	$	9,075	$	6,655

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Note 21. Segment Reporting

Commencing with the three months ended March 31, 2021, we define our reportable segments based on the way the CODM, the chief executive officer, manages the operations for purposes of allocating resources and assessing performance. We classify our operations into two reportable segments as follows:

•Evolent Health Services, which houses our Administrative Simplification solution and certain supporting population health infrastructure; and

•Clinical Solutions, which includes our specialty management and physician-oriented total cost of care solutions, along with the New Century Health and Evolent Care Partners brands.

In the ordinary course of business, our reportable segments enter into transactions with one another. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues and expenses recognized by the segment that is the counterparty to the transaction are eliminated in consolidation and do not affect consolidated results.

The CODM uses revenue in accordance with U.S. GAAP and Adjusted EBITDA as the relevant segment performance measures to evaluate the performance of the segments and allocate resources.

Adjusted EBITDA is a segment performance financial measure that offers a useful view of the overall operation of our businesses and may be different than similarly-titled segment performance financial measures used by other companies.

Adjusted EBITDA is defined as net loss attributable to common shareholders of Evolent Health, Inc. before interest income, interest expense, (provision) benefit for income taxes, depreciation and amortization expenses, adjusted to exclude equity method investment impairment, loss on extinguishment of debt, gain (loss) from equity method investees, gain (loss) on disposal of assets and consolidation, goodwill impairment, changes in fair value of contingent consideration and indemnification asset, other income (expense), net, net loss attributable to non-controlling interests, ASC 606 transition adjustments, purchase accounting adjustments, repositioning costs, stock-based compensation expense, severance costs, amortization of contract cost assets, shareholder advisory services, acquisition-related costs and discontinued operations.

Management considers revenue and Adjusted EBITDA to be the appropriate metrics to evaluate and compare the ongoing operating performance of our segments on a consistent basis across reporting periods as they eliminate the effect of items which are not indicative of each segment's core operating performance.

The following tables present our segment information (in thousands). Prior-year segment information (including segments total Adjusted EBITDA) has been restated to conform to the reporting structure change described in Note 1.

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	Evolent Health Services		Clinical Solutions		Intersegment Eliminations		Subtotal		Corporate (1)		Consolidated
Revenue
For the Three Months Ended March 31, 2021
Transformation services	$	345	$	—	$	—	$	345	$	—	$	345
Platform and operations services	84,941		130,223		(438)		214,726				214,726
Total revenue	$	85,286	$	130,223	$	(438)	$	215,071	$	—	$	215,071
For the Three Months Ended March 31, 2020
Transformation services	$	5,238	$	—	$	—	$	5,238	$	—	$	5,238
Platform and operations services	91,790		124,872		(668)		215,994				215,994
Total revenue	$	97,028	$	124,872	$	(668)	$	221,232	$	—	$	221,232
	Evolent Health Services		Clinical Solutions		Subtotal		Corporate (1)		Segments Total
For the Three Months Ended March 31, 2021
Adjusted EBITDA	$	5,942	$	15,976	$	21,918	$	(7,011)	$	14,907
For the Three Months Ended March 31, 2020
Adjusted EBITDA	$	4,768	$	7,043	$	11,811	$	(7,935)	$	3,876

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(1)Corporate includes various finance, human resources, legal, executive, and other corporate infrastructure expenses.

The following table presents our reconciliation of segments total Adjusted EBITDA to net loss attributable to common shareholders of Evolent Health, Inc. (in thousands):

	For the Three Months Ended March 31,
	2021		2020
Net loss attributable to common shareholders of Evolent Health, Inc.	$	(9,807)	$	(78,752)
Less:
Interest income	123		770
Interest expense	(6,337)		(6,281)
Provision for income taxes	(611)		(270)
Depreciation and amortization expenses	(15,187)		(15,978)
Equity method investment impairment	—		(47,133)
Gain on transfer of membership	22,969		—
Loss on repayment of debt, net	(19,158)		—
Gain (loss) from equity method investees	7,783		(412)
Gain (loss) on disposal of assets	—		(6,447)
Change in fair value of contingent consideration and indemnification asset	594		3,818
Other expense, net	(14)		(70)
Repositioning costs	(5,380)		—
Stock-based compensation expense	(3,706)		(3,508)
Severance costs	(52)		(6,103)
Amortization of contract cost assets	(127)		(440)
Strategy and shareholder advisory expenses	(5,000)		—
Acquisition costs	(1,994)		(309)
Gain (loss) from discontinued operations (1)	1,383		(265)
Adjusted EBITDA	$	14,907	$	3,876

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(1)Includes $1.9 million gain on disposal of discontinued operations for the three months ended March 31, 2021.

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Asset information by segment is not a key measure of performance used by the CODM. Accordingly, we have not disclosed asset information by segment.

Note 22. Reserve for Claims and Performance-Based Arrangements

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

Reserves for claims and performance-based arrangements for our EHS and Clinical Solutions segments reflect actual payments under performance-based arrangements and the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process), and other medical care expenses and services payable that are primarily composed of accruals for incentives and other amounts payable to health care professionals and facilities. Reserves for claims and performance-based arrangements also reflect estimated amounts owed under the reinsurance agreements, as discussed further in Note 11.

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

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

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

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

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

Activity in reserves for claims and performance-based arrangements for the three months ended March 31, 2021 and 2020, was as follows (in thousands):

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	For the Three Months Ended March 31,
	2021								2020
	EHS (1)(2)		Clinical Solutions (1)(2)		True Health		Total		EHS (1)(2)		Clinical Solutions (1)(2)		True Health		Total
Beginning balance	$	122,532	$	56,295	$	9,859	$	188,686	$	4,265	$	50,245	$	6,640	$	61,150
Incurred costs related to current year	104,098		4,189		34,228		142,515		2,519		110,241		23,556		136,316
Incurred costs related to prior year	24		4,151		(241)		3,934		(381)		(257)		111		(527)
Paid costs related to current year	30,761		11,164		23,274		65,199		2,143		75,208		14,883		92,234
Paid costs related to prior year	38,053		10,200		7,378		55,631		3,223		6,597		5,702		15,522
Change during the year	35,308		(13,024)		3,335		25,619		(3,228)		28,179		3,082		28,033
Disposal of discontinued operations	—		—		(13,194)		(13,194)		—		—		—		—
Other adjustments (3)	2,658		4,224		—		6,882		—		(173)		—		(173)
Ending balance	$	160,498	$	47,495	$	—	$	207,993	$	1,037	$	78,251	$	9,722	$	89,010

————————

(1)    Costs incurred to provide specialty care management and EVH Passport are recorded within cost of revenue in our statement of operations.

(2)    There is no single or common claim frequency metric used in the health care industry. The Company believes a relevant metric for its health insurance business is the number of customers for whom an insured medical claim was paid. The number of claims processed for the EHS and Clinical Solutions segments for the three months ended March 31, 2021 were 579,214.

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

Note 23. Supplemental Cash Flow Information

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

	For the Three Months Ended March 31,
	2021	2020
Supplemental Disclosure of Non-cash Investing and Financing Activities
Increase/decrease to goodwill from measurement period adjustments/business combinations	—	2,200
Class A common stock issued for payment of Passport/Global earn-out	—	4,185
Accrued property and equipment purchases	124	213
Effects of Leases
Operating cash flows from operating leases	3,410	2,759
Leased assets obtained in exchange for operating lease liabilities	(2,157)	(7,020)

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the Company’s financial condition and results of operations. The MD&A is provided as a supplement to, and should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated financial statements presented in “Part I – Item 1. Financial Statements” of this Form 10-Q; our 2020 Form 10-K, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; and our current reports on Form 8-K filed in 2021.

INTRODUCTION

Background

Evolent Health, Inc. is a holding company whose principal asset is all of the Class A common units it holds in Evolent Health LLC, and its only business is to act as sole managing member of Evolent Health LLC. Substantially all of our operations are conducted through Evolent Health LLC and its consolidated subsidiaries. The financial results of Evolent Health LLC are consolidated in the financial statements of Evolent Health, Inc.

Business Overview

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

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

Today we manage our operations and allocate resources across two reportable segments: Clinical Solutions and Evolent Health Services. Our Clinical Solutions segment addresses a broad spectrum of clinical needs, with tailored solutions for Specialty Care Management in Oncology and Cardiology and holistic Total Cost of Care improvement. Our economic opportunity in the Clinical Solutions segment, which we believe to be significant, is largely based on (a) the total amount of medical expenses under management, and (b) the amount of savings we are able to generate relative to a benchmark or target. These partnerships, which we refer to as performance-based arrangements, include both capitation and shared savings arrangements. We also generate Clinical Solutions revenue by providing our technology and services platform on a fee basis. We go to market for our Specialty Care Management under the brand name New Century Health, and for our Total Cost of Care solution under the brand name Evolent Care Partners.

The Company’s EHS segment provides an integrated administrative and clinical platform for health plan administration and population health management.

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

We have incurred operating losses since our inception, as we have invested heavily in resources to support our growth. We intend to continue to invest aggressively in the success of our partners, expand our geographic footprint and further develop our capabilities. We also expect to continue to incur operating losses for the foreseeable future and if we are unable to achieve our revenue growth and cost management objectives, we may not be able to achieve profitability.

As of the date the financial statements were available to be issued, we believe we have sufficient liquidity for the next 12 months.

Recent Events

Evolent Health’s Response to COVID-19

On March 11, 2020, the World Health Organization (the “WHO”) declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. While response to the COVID-19 outbreak continues to

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rapidly evolve, it has led to aggressive actions to reduce the spread of the disease that have seriously disrupted activities in large segments of the economy. We are continuing to monitor the COVID-19 outbreak and its impact on our business.

Because of the nature of the services we provide, market dynamics in our end markets and with our significant customers, to date the COVID-19 pandemic has not materially impacted our financial condition or results of operations or our outlook. As of March 31, 2021, we had cash and cash equivalents of $236.0 million and as of the date the financial statements were available to be issued we believe our current cash balance is sufficient to meet our liquidity needs for the next twelve months. The COVID-19 crisis has also adversely impacted global access to capital and caused significant volatility in financial markets. Significant deterioration of the U.S. and global economies could have a significant adverse impact on our investment income, the value of our investments, or future liquidity needs. Although the impact of the COVID-19 pandemic on our business has not been severe to date, the long-term impact of the pandemic on our partners and the global economy is uncertain and will depend on various factors, including the scope, severity and duration of the pandemic. A prolonged economic downturn or recession resulting from the pandemic could adversely affect many of our partners which could, in turn, adversely impact our business, financial condition and results of operations.

Evolent’s focus throughout this pandemic has been the health and safety of its employees and their families, as well as ensuring that we continue to furnish high quality service to our partners. Evolent has deployed a multi-faceted response to COVID-19, overseen by its Emergency Preparedness Team, led by the General Counsel and Chief Compliance Officer, that focuses on maintaining its workforce in a manner that does not disrupt service delivery or operations. Evolent is closely monitoring and overseeing any issues of noncompliance or deficiencies with client operational service level agreements and continuing to review contractual business requirements in light of state and federal mandates, emergency laws and orders, and available financial support opportunities. Evolent is also mindful of the impact COVID-19 has on its vendors and subcontractors, and we will continue to work with them regarding our collective obligations to Evolent’s customers. We require a COVID-19 Business Continuity Attestation from subcontractors and vendors, confirming that operational and financial obligations will be met and aiming to ensure that privacy and security risks or incidents can be mitigated and disclosed in a timely manner.

Summary of Impact of COVID-19

In evaluating the impact of COVID-19 on our business, we considered, among other factors, the nature of the services we provide, end market trends and outlook and customer-specific trends. In evaluating our health plan businesses, we focused on possible changes in membership and medical utilization trends.

Our two most significant service offerings in terms of revenue are specialty care management and administrative health services.  Because both of these services offerings provide critical services to our clients and their members and have relatively long lead times to implement such services, we currently do not anticipate any material near-term disruption to the relevant contracts as a result of the pandemic.

The three key end-markets we serve are Medicaid, Medicare and Commercial.

Across 2020 and into the first quarter of 2021, we saw changes in membership and medical utilization in our end-markets as a result of the COVID-19 pandemic. The pandemic has resulted in a significant increase in unemployment in the United States. Historically, Medicaid enrollment has increased during periods of rising unemployment as individuals lose access to employer sponsored health care and turn to government sponsored health care. In addition, with respect to Medicaid, many states (including Florida, Kentucky and Illinois) put in place new rules during the pandemic eliminating the ability of Medicaid health plans to dis-enroll non-paying members, as well as waiving certain eligibility requirements, which together we expect will result in higher membership during the period of the pandemic. It is possible to see an opposite trend in the commercial market, where employees who are made redundant lose access to employer sponsored health care. We do not expect to see meaningful changes in membership in the Medicare market as a result of COVID-19. In aggregate, as more than 50% of the lives on our platform are currently in Medicaid and we generally earn revenue with respect to those lives based on a per member per month model, we expect to see a net benefit in our business from increased membership in that market in the near-term. We cannot predict the magnitude of this potential benefit, or how long it will last.

With respect to medical utilization, following the declaration of the pandemic by the WHO, many state-wide mandates deferred non-essential medical procedures to allow hospitals to focus on providing care to COVID-19 patients. Across all markets, our partners experienced declines in non-essential care throughout the year ended December 31, 2020 and through the first quarter of 2021, offset in part by increased costs for care of COVID-19 patients. We continue to monitor medical utilization trends closely as the pandemic progresses. Beginning late in the first quarter of 2021 after declaration of the pandemic and continuing across the year, we have seen a modest benefit in our business from lower utilization trends. However, we cannot predict with any certainty the net impact of lower utilization on our business, as it is possible we will experience a surge in utilization if and when consumer behavior changes (for example if the novel coronavirus is controlled by a vaccine or other measures).

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Our largest customers in terms of revenue, Cook County Health and Hospitals Systems and Florida Blue Medicare, Inc., together accounted for approximately 43.5% of revenue for the three months ended March 31, 2021, and Cook County Health and Hospitals Systems accounted for approximately 21.5% of revenue for the three months ended March 31, 2020 and both participate in the Medicaid market. During the three months ended March 31, 2021, we saw a modest increase in the membership at Cook County Health and Hospitals Systems; further increases in unemployment in Illinois could result in higher Medicaid enrollment in the future.

Overall, we are unable to determine or predict the nature, duration, or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity, or capital resources. We are actively monitoring the ongoing situation and may take further actions that change our operations if required by law or that we determine are in the best interests of our employees or partners.

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.

Agreement for the Sale of True Health New Mexico

On January 11, 2021, Evolent LLC, EH Holdings and True Health, each wholly owned subsidiaries of the Company, entered into the SPA with Bright HealthCare, pursuant to which EH Holdings agreed to sell all of its equity interest in True Health to Bright HealthCare for a purchase price of $22.0 million plus excess risk based capital, subject to satisfaction of customary closing conditions, including regulatory approvals. The purchase price is subject to a customary purchase price adjustment following the True Health Closing based in part on actual medical claims experience. The True Health closing occurred on March 31, 2021 and the Company will have no continuing involvement with True Health subsequent to the Closing except an existing services agreement for claims processing and other health plan administrative functions. Refer to “Part I - Item 1. Financial Statements - Note 5” for additional discussion regarding the True Health sale.

In addition, in conjunction with the sale of True Health, the Company made organizational changes, including re-evaluating its reportable segments. Effective during the first quarter of 2021, the Company bifurcated its previous Services segment into two segments. The Company’s Evolent Health Services segment (“EHS”) includes our administrative simplification solution and certain supporting population health infrastructure. Our Clinical Solutions segment includes our specialty management and physician-oriented total cost of care solutions, along with the New Century Health and Evolent Care Partners brands. Refer to “Part I - Item 1. Financial Statements - Note 21 for a further discussion of our operating results by segment.

Passport

On December 30, 2019, UHC, Passport Health Solutions, LLC (“PHS I”), the Company and EVH Passport, closed a transaction whereby EVH Passport acquired substantially all of the assets and assumed substantially all of the liabilities of UHC, including the Passport Medicaid Contract. The purchase price paid by EVH Passport consisted of $70.0 million in cash and a 30% equity interest in EVH Passport issued to the Sponsors; however, $16.2 million of the foregoing cash purchase price was held back until such time as PHS I delivers to EVH Passport certain owned real property and improvements.

On September 1, 2020, EVH Passport and Molina completed the Molina Closing and the Passport Medicaid Contract was novated to Molina. As a result, EVH Passport began to wind down its business. In connection with the Molina Closing, Molina deposited $20.0 million in cash in escrow, which was subsequently released to EVH Passport in January 2021. Prior to the Molina Closing, the Company accounted for its investment in EVH Passport as an unconsolidated variable interest entity under the equity method of accounting. As a result of the Molina Closing, the Company concluded that a reconsideration event occurred whereby EVH Passport was determined to be a voting interest entity and that Evolent had a controlling financial interest in EVH Passport; accordingly, the Company consolidated EVH Passport as of September 1, 2020 in its consolidated financial statements. The Company accounted for the transaction as an asset acquisition, as the Company concluded that assets acquired as a result of the consolidation did not meet the criteria to be classified as a business under GAAP. Following the Molina Closing and consolidation of EVH Passport in the Company’s consolidated financials, EVH Passport redeemed the Sponsors’ equity interests in EVH Passport in accordance with the terms of EVH Passport's Stockholders' Agreement , and, as a result, EVH Passport became a wholly owned subsidiary of the Company. The Company expects a return of capital from EVH Passport, expected to be between $130 million and $170 million in total, which is subject to regulatory approval from the Kentucky Department of Insurance.

Refer to “Part I - Item 1. Financial Statements - Note 4” for additional discussion regarding the Passport transactions.

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Repayment and Termination of Existing Credit Agreement

On January 8, 2021, the Company repaid all outstanding amounts owed under, and terminated, the Credit Agreement with Ares Capital Corporation. The total amount paid to Ares Corporation under the Credit Agreement in connection with the prepayment was $98.6 million, which included $9.7 million for the make-whole premium as well as $0.2 million in accrued interest. In addition to the payment of the Credit Agreement, the Company settled the outstanding warrants associated with the debt for $13.7 million. Refer to “Part I - Item 1. Financial Statements - Note 10” for additional discussion relating to the repayment of the Credit Agreement.

Repositioning Plan

We continually assess opportunities to improve operational effectiveness and efficiency to better align our expenses with revenues, while continuing to make investments in our solutions, systems and people that we believe are important to our long-term goals. Across 2020, we divested or agreed to divest a majority of our health plan assets, including the assets of EVH Passport, which represented a significant revenue stream for the Company. In parallel with these divestitures, we contracted with a third-party vendor to review our operating model and organizational design in order to improve our profitability, create value through our solutions and invest in strategic opportunities in future periods.

In the fourth quarter of 2020, we committed to certain operational efficiency and profitability actions that we are taking in order to accomplish these objectives (“Repositioning Plan”). These actions included making organizational changes across our business as well as other profitability initiatives expected to result in reductions in force, re-aligning of resources as well as other potential operational efficiency and cost-reduction initiatives. The Repositioning Plan is expected to continue through the fourth quarter of 2021.

The Company recorded approximately $5.4 million of repositioning costs in selling, general and administrative expenses during the three months ended March 31, 2021 in connection with the Repositioning Plan. The following tables provide a summary of our total costs associated with the Repositioning Plan for the three months ended March 31, 2021, by major type of cost:

	Incurred For the Three Months Ended March 31, 2021		Total Amount Expected to be Incurred in the Repositioning Plan		Cumulative Amount Incurred through March 31, 2021
Severance and termination benefits	$	109	$	2,500	$	109
Office space consolidation	2,071		2,100		2,071
Professional services	3,200		4,475		4,475
Total	$	5,380	$	9,075	$	6,655

Critical Accounting Policies and Estimates

The MD&A included in our 2020 Form 10-K contains a detailed discussion of our critical accounting policies and estimates. There have been no material changes to our critical accounting policies and estimates since our 2020 Form 10-K. See “Item 1. Financial Statements - Note 2” in this Form 10-Q for a summary of our significant accounting policies and see “Item 1. Financial Statements - Note 3” in this Form 10-Q for information regarding the Company’s adoption of new accounting standards.

Summary of Significant Accounting Policies

Certain GAAP policies that significantly affect the determination of our financial position, results of operations and cash flows, are summarized below. See “Part II - Item 8. Financial Statements and Supplementary Data - Note 2” in our 2020 Form 10-K for a complete summary of our significant accounting policies.

Goodwill

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

Our goodwill impairment analysis first assesses qualitative factors to determine whether events or circumstances existed that would lead the Company to conclude it is more likely than not that the fair value of a reporting unit is below its carrying amount. If the

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

A description of our 2020 goodwill impairment test follows below.

The Company performed an interim goodwill impairment assessment in one of our three reporting units in the EHS segment as of March 31, 2020 due to the decline in the Company’s stock price during the first quarter of 2020 and lack of excess of fair value over the carrying value considering the $199.8 million impairment charge taken in the fourth quarter of 2019. The Company concluded that the fair value of its reporting unit was more than its carrying value as of March 31, 2020. In addition, the Company performed an interim goodwill impairment assessment as of May 31, 2020 and concluded that the fair value of one of our three reporting units in the EHS segment was less than its carrying value by $215.1 million as of May 31, 2020. The decrease in fair value was due to our largest customer, EVH Passport, not obtaining a renewal of its Kentucky managed Medicaid contract, which was its sole business. The non-renewal of EVH Passport’s contract caused a reduction in the Company’s cash flow projections.

As a result of the impairment charges in the fourth quarter of 2019 and second quarter of 2020, the Company elected to forego the qualitative assessment and proceed directly to the quantitative assessment of the goodwill impairment test for the specific reporting unit that incurred those impairment charges. This election does not preclude Management from performing the qualitative assessment in any subsequent period. For the remaining reporting units, after assessing the totality of events and circumstances including the results of our previous valuations, the minimal impacts of the Passport loss and COVID-19, the Company does not believe that an event occurred or circumstances changed during the period under consideration that would, more likely than not, reduce the fair value of any reporting unit below their carrying amount. Therefore, the Company concluded that the quantitative assessment was not required.

In performing our October 31, 2020 impairment test for one of the specific reporting unit reference above, we estimated the fair value of our reporting units by considering a discounted cash flow valuation approach (“income approach”). In determining the estimated fair value using the income approach, we projected future cash flows based on management’s estimates and long-term plans and applied a discount rate based on the Company’s weighted average cost of capital. This analysis required us to make judgments about revenues, expenses, fixed asset and working capital requirements, capital market assumptions, cash flows and discount rates. As of October 31, 2020, we determined that the specific reporting unit had an estimated fair value greater than its carrying value and as a result, goodwill is not impaired.

As of December 31, 2020, the Company assessed whether there were additional events or changes in circumstances since its annual goodwill impairment test that would indicate that it was more likely than not that the fair value of the reporting units was less than the reporting unit’s carrying amounts that would require an interim impairment assessment after October 31, 2020. The Company determined there had been no such indicators, therefore, we did not perform an interim goodwill impairment assessment as of December 31, 2020. As of December 31, 2020, the remaining goodwill attributable to the reporting unit from which we recognized a non-cash goodwill impairment charge earlier in the year was $214.3 million.

Adoption of New Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequently issued additional guidance that modified ASU 2016-13. The standard requires an entity to change its accounting approach for measuring and recognizing credit losses on certain financial assets measured at amortized cost, including trade receivables, certain non-trade receivables, customer advances and certain off-balance sheet credit exposures, by replacing the existing “incurred loss” framework with an expected credit loss recognition model.  The new standard results in earlier recognition of credit losses based on past events, current conditions, and reasonable and supportable forecasts.  The standard is effective for entities with fiscal years beginning after December 15, 2019, including interim periods within such fiscal years. We adopted the requirements of this standard effective January 1, 2020 using the modified retrospective approach and recorded a cumulative effect adjustment of $3.0 million to January 1, 2020 retained earnings (accumulated deficit).  In our previous accounting policy for trade receivables and non-trade receivables, we maintained an allowance for doubtful accounts based on specific identification. Under the new accounting standard, we utilize several factors to develop historical losses, including aging schedules, customer creditworthiness, and historical payment experience, which are then adjusted for current conditions and reasonable and supportable forecasts in measurement of the allowance.  In addition, for customer advances and certain off-balance sheet credit exposures, we evaluate the allowance through a discounted cash flow approach.  Refer to Note 7 for additional disclosures related to current expected credit losses.

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RESULTS OF OPERATIONS

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

Key Components of our Results of Operations

Revenue

We derive revenue primarily from transformation services and platform and operations services.

Transformation Services Revenue

Transformation services consist of implementation services whereby we assist the customer in launching its population health or health plan programs. In certain cases, transformation services can also include revenue associated with our support of certain one-time wind-down activities for clients who are exiting a line of business or population. The transformation services are usually completed within 12 months. We generally receive a fixed fee for transformation services and recognize revenue over time using an input method based on hours incurred compared to the total estimated hours required to satisfy our performance obligation.

Platform and Operations Services Revenue

Platform and operations services are typically multi-year arrangements with customers to provide various clinical and administrative solutions. In our Clinical Solutions segment, our solutions are designed to lower the medical expenses of our partners and include our total cost of care and specialty care management services. In our Evolent Health Services segment, our solutions are designed to provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers receiving primarily TPA services.

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

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

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

Contracts with Multiple Performance Obligations

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

In the ordinary course of business, our reportable segments enter into transactions with one another. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues and expenses recognized by the segment that is the counterparty to the transaction are eliminated in consolidation and do not affect consolidated results.

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Cost of Revenue (exclusive of depreciation and amortization)

Our cost of revenue includes direct expenses and shared resources that perform services in direct support of clients. Costs consist primarily of 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. Subsequent to the consolidation of EVH Passport on September 1, 2020, our cost of revenue includes the consolidated impact of the runout of EVH Passport’s operations, consisting principally of updates to EVH Passport’s claims reserve based on actual claims payments.

Selling, General and Administrative Expenses

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

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.

Evolent Health, Inc. Consolidated Results

(in thousands, except percentages)	For the Three Months Ended March 31,						Change Over Prior Period
	2021			2020			$		%
Revenue
Transformation services	$	345		$	5,238		$	(4,893)	(93.4)%
Platform and operations services	214,726			215,994			(1,268)		(0.6)%
Total revenue	215,071			221,232			(6,161)		(2.8)%
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below)	157,832			175,629			(17,797)		(10.1)%
Selling, general and administrative expenses	58,591			52,087			6,504		12.5%
Depreciation and amortization expenses	15,187			15,978			(791)		(5.0)%
Loss on disposal of assets and consolidation	—			6,447			(6,447)		(100.0)%
Change in fair value of contingent consideration and indemnification asset	(594)			(3,818)			3,224		84.4%
Total operating expenses	231,016			246,323			(15,307)		(6.2)%
Operating loss	$	(15,945)		$	(25,091)		$	9,146	36.5%
Transformation services revenue as a % of total revenue	0.2		%	2.4		%
Platform and operations services revenue as a % of total revenue	99.8		%	97.6		%
Cost of revenue as a % of revenue	73.4		%	79.4		%
Selling, general and administrative expenses as a % of total revenue	27.2		%	23.5		%

Comparison of the Results for the Three Months Ended March 31, 2021 to 2020

Revenue

Total revenue decreased by $6.2 million, or 2.8%, to $215.1 million for the three months ended March 31, 2021, as compared to 2020.

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Transformation services revenue decreased by $4.9 million, or 93.4%, to $0.3 million for the three months ended March 31, 2021, as compared to 2020, due primarily to the timing of implementation activities. Transformation services revenue accounted for 0.2% and 2.4% of our total revenue for the three months ended March 31, 2021 and 2020, respectively.

Platform and operations services revenue decreased by $1.3 million, or (0.6)%, to $214.7 million for the three months ended March 31, 2021, as compared to 2020. We expect our platform and operations growth rate in 2021 to be negatively impacted by the wind-down of EVH Passport’s operations compared to 2020. Platform and operations services revenue accounted for 99.8% and 97.6% of our total revenue for the three months ended March 31, 2021 and 2020, respectively.

Revenue from our Evolent Health Services segment decreased by $(11.5) million for the three months ended March 31, 2021 as compared to 2020 due to the runout of services for EVH Passport, partially offset by new partner additions. Revenue from our Clinical Solutions segment increased by $5.4 million for the three months ended March 31, 2021 as compared to 2020 due to new partner additions including Florida Blue Medicare, Inc., as well as expansion into new markets within current New Century Technology & Services Suite partners.

We had 3.4 million lives on Full Platform and approximately 8.2 million lives on our New Century Technology & Services Suite as of March 31, 2021. Lives on Full Platform are calculated by summing members on our value-based care and comprehensive health plan administrative platform, as well as members covered for oncology specialty care services and members covered for cardiology specialty care services. Lives on New Century Technology & Services Suite are calculated by summing members covered for oncology specialty care services and members covered for cardiology specialty care services for contracts under ASO arrangements. Members covered for more than one category are counted in each category. Management uses lives on Full Platform and lives on New Century Technology & Services Suite as supplemental performance measures because we believe that they provide insight into the unit economics of our services. We believe that these measures are also useful to investors because they allow further insight into the period over period operational performance. We had 39 and 36 operating partners as of March 31, 2021 and 2020, respectively.

Cost of Revenue

Cost of revenue decreased by $17.8 million, or 10.1%, to $157.8 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. Cost of revenue decreased by approximately $2.3 million period over period as a result of lower capitation expenses, offset, in part by growth of our revenue generating services, a decrease of $1.2 million in professional fees due to the nature and timing of our projects, a decrease of $9.1 million in our personnel costs and a decrease of $2.1 million in our technology services, TPA fees and other costs period over period. The principal driver of these decreases was the wind-down of EVH Passport relative to 2020. Cost of revenue for the three months ended March 31, 2021 includes approximately $2.2 million associated with the wind-down of EVH Passport, inclusive of a reduction in Passport’s claims reserve. Approximately $0.6 million and $0.4 million of total personnel costs was attributable to stock-based compensation expense for the three months ended March 31, 2021 and 2020, respectively. Cost of revenue represented 73.4% and 79.4% of total services revenue for the three months ended March 31, 2021 and 2020, respectively. Our cost of revenue decreased as a percentage of our total services revenue due to a change in the mix of our service offerings towards higher gross margin services with divestiture of our health plans combined with our Repositioning Plan. We expect our cost of revenue to decrease as a percentage of total services revenue over the longer-term subject to the composition of our growth.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses increased by $6.5 million, or 12.5%, to $58.6 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. During the three months ended March 31, 2021, personnel costs decreased by $2.6 million period over period due to a reduction in employee headcount. Approximately $3.1 million of total personnel costs were attributable to stock-based compensation expense for both the three months ended March 31, 2021 and 2020, respectively. Professional fees increased by $8.6 million for the three months ended March 31, 2021, as compared to 2020, respectively, primarily due to the Repositioning Plan and shareholder advisory services. Acquisition and severance costs accounted for approximately $2.0 million and $6.4 million of total selling, general and administrative expenses for the three months ended March 31, 2021 and 2020, respectively. Selling, general and administrative expenses represented 27.2% and 23.5% of total revenue for the three months ended March 31, 2021, as compared to 2020, respectively. While our selling, general and administrative expenses are expected to grow as our business grows, we expect them to decrease as a percentage of our total revenue over the long term due to cost saving initiatives introduced in the fourth quarter of 2020.

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Depreciation and Amortization Expenses

Depreciation and amortization expenses decreased $0.8 million, or (5.0)%, to $15.2 million for the three months ended March 31, 2021, as compared to 2020. The decrease was due primarily to lower amortization on existing technology intangibles, offset, in part by, an increase in amortization expense for internal-use software. We expect depreciation and amortization expenses to increase in future periods as we continue to capitalize internal-use software and amortize intangible assets resulting from asset acquisitions and business combinations.

Gain (Loss) on Disposal of Assets and Consolidation

During 2019, the Company, through a non-wholly owned consolidated subsidiary, entered into an agreement with an unrelated party to provide services and support to providers, independent physician associations, and other provider groups. During the three months ended March 31, 2020, the Company sold its interest in the subsidiary and recorded a $6.4 million loss on disposal of assets and consolidation on the consolidated statements of operations. The Company did not have any continuing involvement with the entity after the consummation of this transaction.

Change in Fair Value of Contingent Consideration and Indemnification Asset

We recorded a (gain) loss on change in fair value of contingent consideration and indemnification asset of $(0.6) million and $(3.8) million for the three months ended March 31, 2021 and 2020, respectively. This variance is the result of changes in the fair values of contingent liabilities incurred from entering in the warrant agreements compared to the liabilities acquired as a result of business combinations and asset acquisitions during 2016, 2018, 2019 and 2020.

Discussion of Non-Operating Results

Interest Income

Interest income consists of interest from investing cash in money market funds and interest from both our short-term and long-term investments, interest earned on the capital-only reinsurance agreement with NMHC and interest from the implementation loan and amounts contributed to UHC in the form of an advance for regulatory capital requirements under an agreement with UHC. We recorded interest income of $0.1 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively. Interest income decreased during 2021 as a result of the repayment of the $40.0 million Passport Note.

Interest Expense

Our interest expense is primarily attributable to our 2021 Notes, 2024 Notes, 2025 Notes and Credit Agreement with Ares Capital Corporation.

The Company issued its 2021 Notes in December 2016. Holders of the 2021 Notes are entitled to cash interest payments at a rate equal to 2.00% per annum. In addition, we incurred $4.6 million of debt issuance costs in connection with the 2021 Notes, which we are amortizing to non-cash interest expense using the straight-line method over the contractual term of the 2021 Notes.

The Company issued its 2024 Notes in August 2020. As part of the issuance of the 2024 Notes, the Company consummated an exchange offer pursuant to which it issued $84.2 million aggregate principal amount of the 2024 Notes in exchange for $84.2 million aggregate principal of its 2021 Notes. Holders of the 2024 Notes are entitled to cash interest payments at a rate equal to 3.50% per annum. In addition, the 2024 Notes contain a cash conversion option, which resulted in a debt discount of $38.1 million, allocated to equity. The amount allocated to equity, along with $3.0 million of debt issuance costs in connection with the 2024 Notes, will be amortized to non-cash interest expense using the effective interest method over the contractual term of the 2024 Notes.

The Company issued its 2025 Notes in October 2018. Holders of the 2025 Notes are entitled to cash interest payments at a rate equal to 1.50% per annum. The 2025 Notes contain a cash conversion option, which resulted in a debt discount of $71.8 million, allocated to equity. The amount allocated to equity, along with $3.4 million of issuance costs, will be amortized to non-cash interest expense using the effective interest method over the contractual term of the 2025 Notes.

The Company entered into the Credit Agreement in December 2019 with Ares Credit Corporation in connection with the Company’s acquisition of certain assets of UHC. Ares Capital Corporation was entitled to cash interest payments. The interest rate for each loan under the Senior Credit Facilities was calculated, at the option of the Borrower, at either the Eurodollar rate plus 8.00%, or the base rate plus 7.00%. A commitment fee of 1.00% per annum was payable by the Borrower quarterly in arrears on the unused portion of the

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DDTL Facility. As of December 31, 2020, the Company had $75.0 million outstanding under its Credit Agreement. On January 8, 2021, the Company repaid all outstanding amounts owed under, and terminated, the Credit Agreement with Ares Capital Corporation.

We recorded interest expense (including amortization of deferred financing costs) of approximately $6.3 million for both the three months ended March 31, 2021 and 2020, respectively. See “Part I - Item 1. Financial Statements - Note 10” in this Form 10-Q for further details.

Impairment of Equity Method Investments

As of March 31, 2020, the Oklahoma Insurance Division (“OID”) informed GlobalHealth, Inc. that in response to the COVID-19 pandemic, the OID required GlobalHealth, Inc. to increase its regulatory capital surplus by May 15, 2020. It would otherwise be placed into receivership if additional financing could not be secured. Certain investors agreed to provide liquidity as necessary to increase statutory capital reserves to no lower than 300%. In connection with the investment, GlobalHealth, Inc. transferred 100% of the equity interests in GlobalHealth, Inc. to the new investors for no consideration. Closing of this transaction occurred on May 13, 2020. As a result of this transaction, we have recorded a non-cash impairment charge of approximately $47.1 million, representing the total value of our investment, in impairment of equity method investments on the consolidated statements of operations for the three months ended March 31, 2020.

Gain (Loss) from Equity Method Investees

The Company has acquired economic interests in several entities that are accounted for under the equity method of accounting. The Company allocated its proportional share of the investees’ earnings and losses each reporting period. The Company’s proportional share of the gains (losses) from these investments was approximately $7.8 million and $(0.4) million for the three months ended March 31, 2021 and 2020, respectively.

Gain from Transfer of Membership

In the three months ended March 31, 2021, EVH Passport received a cash payment from Molina in the amount of $23.0 million based on the number of enrollees above a certain threshold in the D-SNP Business and Molina's Medicaid plan following the open enrollment period for plan year 2021. The foregoing amount represents 50% of the payment that EVH Passport is eligible to receive based on the number of such enrollees. The remaining 50% will be payable in the first quarter of 2022 subject to the satisfaction of certain contingencies.

Loss On Repayment of Debt

On January 8, 2021, the Company repaid all outstanding amounts owed under, and terminated, the Credit Agreement with Ares Capital Corporation. The total amount paid to Ares Corporation under the Credit Agreement in connection with the prepayment was $98.6 million, which included $9.7 million for the make-whole premium, $13.7 million for the settlement of outstanding warrants as well as $0.2 million in accrued interest. As a result of this transaction, the Company recorded loss on the repayment of debt of $19.2 million, representing the remaining unamortized debt issuance costs of $9.5 million, the make-whole premium and $35 thousand of legal expenses.

Provision for Income Taxes

The Company recorded $0.6 million and $0.3 million in income tax expense for the three months ended March 31, 2021 and 2020, respectively, which resulted in effective tax rates of (5.8)% and (0.3)%, respectively. The difference between our effective tax rate and our statutory rate is due primarily to the fact that the Company maintains a full valuation allowance recorded against its net deferred tax assets, with the exception of certain indefinite-lived components.

Loss from Discontinued Operations, Net of Tax

As of March 31, 2021, the Company determined that True Health met the held for sale criteria under ASC 360, and as such, True Health assets and liabilities as of December 31, 2020, and the results of operations for all periods presented are classified as held for sale and are not included in continuing operations in the consolidated financial statements.

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The following table summarizes the results of operations of the Company’s True Health business, which are included in the loss from discontinued operations in the consolidated statements of operations for the three months ended March 31, 2021 and 2020.

	For the Three Months Ended March 31,
	2021		2020
Revenue
Platform and operations	$	38	$	240
Premiums	44,795		32,147
Total revenue	44,833		32,387
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (1)	5,885		3,295
Claims expenses	33,954		23,667
Selling, general and administrative expenses (2)	5,764		5,675
Depreciation and amortization expenses	160		160
Total operating expenses	45,763		32,797
Operating loss	(930)		(410)
Interest income	112		149
Interest expense	(4)		(4)
Other loss	(25)		—
Loss before income taxes and non-controlling interests	(847)		(265)
Benefit for income taxes	(326)		—
Net loss	$	(521)	$	(265)

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(1)Cost of revenue includes $2.8 million and $3.1 million of intercompany expenses between the Company and True Health that are recorded in income from continuing operations on the consolidated statements of operations related an existing services agreement for claims processing and other health plan administrative functions for the three months ended March 31, 2021 and 2020, respectively.

(2)Selling, general and administrative expenses includes $1.1 million and $3.1 million of intercompany expenses between the Company and True Health that are recorded in income from continuing operations on the consolidated statements of operations related an existing services agreement for claims processing and other health plan administrative functions for the three months ended March 31, 2021 and 2020, respectively.

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REVIEW OF CONSOLIDATED FINANCIAL CONDITION

Liquidity and Capital Resources

Since its inception, the Company has incurred operating losses and net cash outflows from operations, with the exception of the three months ended March 31, 2021. The Company incurred operating losses of $15.9 million and $25.1 million for the three months ended March 31, 2021 and 2020, respectively. Net cash and restricted cash from (used in) operating activities was $(48.2) million and $(20.5) million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, the Company had $236.0 million of cash and cash equivalents and $67.7 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 the next twelve months. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities and the timing and extent of our spending to support our investment efforts and expansion into other markets. We may also seek to invest in, or acquire complementary businesses, applications or technologies.

Cash Flows

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

	For the Three Months Ended March 31,
	2021		2020
Net cash and restricted cash used in operating activities	$	(48,163)	$	(20,541)
Net cash and restricted cash provided by (used in) investing activities	45,951		(10,807)
Net cash and restricted cash (used in) provided by financing activities	(55,584)		32,574

Operating Activities

Cash flows used in operating activities of $48.2 million for the three months ended March 31, 2021 were due primarily to our net loss of $9.8 million, a loss on the repayment and termination of our Credit Agreement of $19.2 million, a gain on the disposal of assets of $1.9 million, gain on the transfer of memberships of $23.0 million and non cash items including depreciation and amortization expenses of $15.3 million and stock-based compensation expense of $3.7 million. Our operating cash inflows were affected by the timing of our customer and vendor payments. In addition to these non-cash items, increases in accounts receivables and contract cost assets and claims reserves contributed approximately $30.7 million to our cash outflows. Those cash outflows were partially offset by an increase in accounts payable, accrued expenses and accrued compensation and employee benefits contributed and a decrease in prepaid expenses and other current assets of approximately $27.3 million.

Cash flows used in operating activities of $20.5 million in the three months ended March 31, 2020 were due primarily to our net loss of $78.8 million, partially offset by non-cash items, including an impairment of an equity method investment of $47.1 million, depreciation and amortization expenses of $16.1 million, stock-based compensation expense of $3.5 million and a loss on the disposal of assets of $6.4 million. Our operating cash outflows were affected by the timing of our customer and vendor payments. An increase in accounts receivable and contract assets and contract costs assets and a decrease in accrued compensation and employee benefits contributed approximately $58.1 million to our cash outflows. Those cash outflows were partially offset by increases in accounts payable, accrued liabilities and claims reserves of $38.3 million.

Investing Activities

Cash flows provided by investing activities of $46.0 million in the three months ended March 31, 2021 were primarily attributable to cash flows of $43.0 million from the transfer of membership and release of Passport escrow and returns of investment on equity method investments of $9.4 million offset, in part by $5.9 million from investments in internal-use software and purchases of property and equipment and $3.0 million of purchases of investments.

Cash flows used in investing activities of $10.8 million in the three months ended March 31, 2020 were primarily attributable to purchases of property and equipment of $7.4 million, disposal of non-strategic assets of $2.3 million and purchases of investments of $1.3 million.

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Financing Activities

Cash flows used in financing activities of $55.6 million in the three months ended March 31, 2021 were primarily related to the repayment and termination of our Credit Agreement and settlement of our outstanding warrant agreements with Ares Capital Corporation of $98.4 million, offset, in part by a $39.0 million decrease in net working capital balances held on behalf of our partners for claims processing services.

Cash flows from financing activities of $32.6 million in the three months ended March 31, 2020 were primarily related to a $33.7 million increase in working capital balances held on behalf of our partners for claims processing, offset, in part by $1.2 million of taxes withheld and paid for vests of restricted stock units.

Cash flows from Discontinued Operations

Cash flows related to the True Health business during the three months ended March 31, 2021 and 2020 were as follows:

	For the Three Months Ended March 31,
	2021		2020
Cash flows provided by (used in) operating activities	$	5,002	$	2,745
Cash flows provided by (used in) investing activities	(2,494)		(721)

Contractual Obligations

Our estimated contractual obligations (in thousands) as of March 31, 2021, were as follows:

	2021		2022-2023		2024-2025		2026+		Total
Operating leases for facilities	$	8,844	$	18,493	$	16,523	$	47,760	$	91,620
Purchase obligations related to vendor contracts	13,743		8,292		15		—		22,050
Debt interest and termination payments	7,219		13,369		9,279		—		29,867
Debt principal repayment (1)	26,737		—		289,551		—		316,288
Total contractual obligations	$	56,543	$	40,154	$	315,368	$	47,760	$	459,825

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(1)Debt principal repayments in 2021 includes the remaining $26.7 million of 2021 Notes. Refer to “Part I - Item 1. Financial Statements - Note 10” for additional discussion relating to the repayment of the 2021 Notes.

During the three months ended March 31, 2021, the only material change outside the ordinary course of business in the contractual obligations set forth above was the repayment and termination of our Credit Agreement and settlement of our warrant agreements with Ares Capital Corporation. Refer to the discussion in “Part I - Item 1. Financial Statements - Note 10” for additional information on our long-term debt.

Restricted Cash and Restricted Investments

Restricted cash and restricted investments of $67.7 million is carried at cost and includes cash held on behalf of other entities for pharmacy and claims management services of $51.1 million, collateral for letters of credit required as security deposits for facility leases of $3.5 million, amounts held with financial institutions for risk-sharing arrangements of $12.3 million and other restricted balances of $0.7 million as of March 31, 2021. See “Part I - Item 1. Financial Statements - Note 2” for further details of the Company’s restricted cash balances.

Uses of Capital

Our principal uses of cash are in the operation and expansion of our business. The Company does not anticipate paying a cash dividend on our Class A common stock in the foreseeable future.

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OTHER MATTERS

Off-balance Sheet Arrangements

Through March 31, 2021, the Company had not entered into any off-balance sheet arrangements, other than the operating leases and notes receivable noted above, and did not have any holdings in variable interest entities, other than the unconsolidated variable interest entities discussed in “Part I - Item 1. Financial Statements - Note 16” within this Form 10-Q.

Related Party Transactions

In the ordinary course of business, we enter into transactions with related parties. Information regarding transactions and amounts with related parties is discussed in “Part I - Item 1. Financial Statements - Note 19” within this Form 10-Q.

Other Factors Affecting Our Business

In general, our business is subject to a changing social, economic, legal, legislative and regulatory environment. Although the eventual impact on us of the changing environment in which we operate remains uncertain, these factors and others could have a material effect on our results of operations, liquidity and capital resources. Factors that could cause actual results to differ materially from those set forth in this section are described in “Part I - Item 1A. Risk Factors” and “Forward-Looking Statements – Cautionary Language.”

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Interest Rate Risk

As of March 31, 2021, the Company had cash and cash equivalents and restricted cash and restricted investments of $303.8 million, which consisted of bank deposits with FDIC participating banks of $303.0 million, bank deposits in international banks of $0.8 million. In addition, we have unrestricted investments of $0.1 million, which are classified as held-to-maturity investments.

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

As of March 31, 2021, we had $316.3 million of aggregate principal amount of convertible notes outstanding, which are fixed rate instruments and not subject to fluctuations in interest rates. Refer to the discussion in “Part I - Item 1. Financial Statements - Note 10” for additional information on our long-term debt.

Foreign Currency Exchange Risk

Beginning in 2018, we have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the Indian Rupee. In general, we are a net payor of currencies other than the U.S. dollar. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may, in the future, negatively affect our operating results as expressed in U.S. dollars. At this time, we have not entered into, but in the future we may enter into, derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. It is difficult to predict the effect hedging activities would have on our results of operations. We recognized foreign currency translation loss of $31 thousand for the three months ended March 31, 2021.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q. The Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of March 31, 2021 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

Inherent Limitations of Internal Controls

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

54

PART II

Item 1. Legal Proceedings

For information regarding legal proceedings, see “Part I – Item 1. Financial Statements and Supplementary Data - Note 11 - Commitments and Contingencies - Litigation Matters.”

Item 1A. Risk Factors

Part I, Item 1A. “Risk Factors” in our 2020 Form 10-K, and other documents filed with the SEC include discussions of our risk factors. There have been no material changes from the risk factors described in our 2020 Form 10-K for the quarterly period ended March 31, 2021.

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

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

EVOLENT HEALTH, INC.

Exhibit Index

2.1*	Agreement and Plan of Merger, dated July 12, 2016, by and among Evolent Health, Inc., Electra Merger Sub, LLC, Valence Health, Inc. and North Bridge Growth Management Company LLC and Philip Kamp, in their capacity as the Securityholders’ Representative, filed as Exhibit 2.1 to the Company’s Report on Form 8-K filed with the SEC on July 14, 2016, and incorporated herein by reference
2.2*	First Amendment to Agreement and Plan of Merger, dated October 3, 2016, by and among Evolent Health, Inc., Electra Merger Sub, LLC, Valence Health, Inc. and North Bridge Growth Management Company LLC and Philip Kamp, in their capacity as securityholders’ representative, filed as Exhibit 2.2 to the Company’s Report on Form 8-K filed with the SEC on October 3, 2016, and incorporated herein by reference
2.3*	Agreement and Plan of Merger, dated September 7, 2018, by and among Evolent Health, Inc., Evolent Health LLC, Element Merger Sub, Inc., NCIS Holdings, Inc. and New Century Investment, LLC, in the capacity set forth therein, filed as Exhibit 2.1 to the Company’s Report on Form 8-K filed with the SEC on September 12, 2018, and incorporated herein by reference
2.4*	Asset Purchase Agreement, dated May 28, 2019, by and among University Health Care, Inc., d/b/a Passport Health Plan, Passport Health Solutions, LLC, Evolent Health, Inc. and Justify Holdings, Inc., filed as Exhibit 2.4 to the Company’s Report on Form 10-Q filed with the SEC on August 9, 2019, and incorporated herein by reference
2.5*	First Amendment to Asset Purchase Agreement, dated as of December 30, 2019, by and among University Health Care, Inc., d/b/a Passport Health Plan, Passport Health Solutions, LLC, Justify Holdings, Inc., and Evolent Health, Inc., filed as Exhibit 2.1 to the Company’s Report on Form 8-K with the SEC on December 31, 2019, and incorporated herein by reference
10.1*	Stock Purchase Agreement, dated January 11, 2021, by and among Bright Health Management, Inc., EH Holding Company, Inc., True Health New Mexico, Inc., and solely for the Purpose of Section 9.5, Evolent Health LLC
10.2	Form of Performance Stock Unit Award Agreement under the Evolent Health, Inc. 2015 Omnibus Incentive Compensation Plan
31.1	Certification of the Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
104	The cover page from this Quarterly Report on Form 10-Q, formatted as Inline XBRL

† The Company’s request for confidential treatment with respect to certain portions of this exhibit has been accepted.

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

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

56

SIGNATURES

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

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

Dated: May 5, 2021

57

EX-10.1

Exhibit 10.1

Execution Version

STOCK PURCHASE AGREEMENT

by and among

BRIGHT HEALTH MANAGEMENT, INC.,

EH HOLDING COMPANY, INC.,

TRUE HEALTH NEW MEXICO, INC.,

and

SOLELY FOR THE PURPOSE OF SECTION 9.5, Evolent Health LLC

___________________________

Dated as of January 11, 2021

___________________________

TABLE OF CONTENTS

		Page
ARTICLE I PURCHASE AND SALE		1
Section 1.1	Acquisition	1
Section 1.2	Closing	1
Section 1.3	Certain Closing Deliveries	1
Section 1.4	Purchase Price; Closing Payments	3
Section 1.5	Purchase Price Adjustment.	3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER		4
Section 2.1	Due Organization and Good Standing	4
Section 2.2	Title	5
Section 2.3	Authority; Binding Nature of Agreement	5
Section 2.4	Non-contravention; Consents	5
Section 2.5	Claims; Orders	5
Section 2.6	Brokers	6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED ENTITY		6
Section 3.1	Due Organization and Good Standing	6
Section 3.2	Capitalization; Subsidiaries	6
Section 3.3	Authority; Binding Nature of Agreement	6
Section 3.4	Non-contravention; Consents	7
Section 3.5	Financial Statements; Undisclosed Liabilities	7
Section 3.6	Absence of Certain Changes	8
Section 3.7	IP Rights; Privacy; Cybersecurity	8
Section 3.8	Title to Assets; Real Property	10
Section 3.9	Material Contracts	10
Section 3.10	Compliance With Laws; Permits	12
Section 3.11	Claims; Orders	13
Section 3.12	Tax Matters	13
Section 3.13	Employee Benefit Plans	15
Section 3.14	Labor Matters	16
Section 3.15	Environmental Matters	18
Section 3.16	Affiliate Contracts	18
Section 3.17	Accounts Receivable	19
Section 3.18	Insurance	19
Section 3.19	Brokers	19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER		20
Section 4.1	Due Organization and Good Standing	20
Section 4.2	Authority; Binding Nature of Agreement	20
Section 4.3	Non-contravention; Consents	20
Section 4.4	Claims; Orders	21
Section 4.5	Sufficient Funds	21
Section 4.6	[Reserved]	21
Section 4.7	Purchase for Investment	21

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Section 4.8	Brokers	21
ARTICLE V COVENANTS AND AGREEMENTS		21
Section 5.1	Interim Operations of the Acquired Entity	21
Section 5.2	Consents, Approvals and Filings; Other Actions	23
Section 5.3	Access	25
Section 5.4	Employee Matters	25
Section 5.5	Indemnification; Directors’ and Officers’ Insurance	27
Section 5.6	Termination of Affiliate Contracts	28
Section 5.7	Retention and Access to Records	28
Section 5.8	Exclusivity	29
Section 5.9	Notification of Certain Matters	29
Section 5.10	Transition Services Agreement	29
ARTICLE VI CONDITIONS TO CLOSING		29
Section 6.1	Conditions to Each Party’s Obligation to Effect the Acquisition	29
Section 6.2	Conditions to Obligations of Buyer	30
Section 6.3	Conditions to Obligations of Seller	31
Section 6.4	Effect of the Closing	31
ARTICLE VII TERMINATION		31
Section 7.1	Termination Rights	31
Section 7.2	Effect of Termination; Procedure for Termination	32
ARTICLE VIII INDEMNIFICATION		33
Section 8.1	Survival of Representations and Warranties and Covenants	33
Section 8.2	Indemnification by Seller	33
Section 8.3	Indemnification by Buyer	35
Section 8.4	Indemnification Principles	35
Section 8.5	Manner of Payment	36
Section 8.6	Procedure.	36
Section 8.7	Exclusive Remedy	38
ARTICLE IX OTHER COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS		38
Section 9.1	No Other Representations and Warranties; Non-reliance	38
Section 9.2	Retention of Counsel	39
Section 9.3	Protected Communications	39
Section 9.4	No Waiver of Privilege, Protection From Disclosure or Use	40
Section 9.5	Guaranty	40
ARTICLE X MISCELLANEOUS PROVISIONS		42
Section 10.1	Amendment	42
Section 10.2	Waiver	42
Section 10.3	Entire Agreement; Counterparts	42
Section 10.4	Applicable Law; Jurisdiction; WAIVER OF JURY TRIAL	42
Section 10.5	Remedies; Specific Performance	43
Section 10.6	Payment of Expenses; Transfer Taxes	43
Section 10.7	Tax Matters	44
Section 10.8	Assignability; Third-Party Rights	47
Section 10.9	Notices	47
Section 10.10	Severability	48
Section 10.11	Publicity	48

ii

Section 10.12	Construction	49
Section 10.13	Definitions	50

iii

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT, dated as of January 11, 2021 (this “Agreement”), is by and among Bright Health Management, Inc., a Delaware corporation (“Buyer”), EH Holding Company, Inc., a Delaware corporation (“Seller”), and True Health New Mexico, Inc., a New Mexico corporation (the “Acquired Entity”). Evolent Health LLC, a Delaware limited liability company (“Guarantor”), is party to this Agreement for the limited purpose of the guarantee made in favor of Buyer under Section 9.5 and, to the extent applied mutatis mutandis to such guarantee, Article X.

RECITALS

WHEREAS, Seller owns of record one hundred (100) shares of common stock, par value $0.01 per share, of the Acquired Entity (the “Purchased Common Stock”); and

WHEREAS, on the terms and subject to the conditions hereof, Buyer desires to purchase all of the Purchased Common Stock.

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements hereunder, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE I

PURCHASE AND SALE

Section 1.1Acquisition. On the terms and subject to the conditions hereof, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase from Seller, all of Seller’s right, title and interest in and to the Purchased Common Stock, free and clear of any Lien (the “Acquisition”).

Section 1.2Closing. The Parties shall consummate the Acquisition (the “Closing”) at the offices of Bass, Berry & Sims PLC or electronically (including by email) by the exchange of required closing deliveries on the last Business Day of the month in which each of the conditions set forth in Article VI has been satisfied or waived (except for any such condition that by its nature is to be satisfied at the Closing, but subject to the satisfaction or waiver of such condition at the Closing), unless, in each case, Seller and Buyer otherwise agree in writing to another place, manner, time or date. The Closing shall be deemed to be effective at 11:59 p.m. on the last day of the month in which the Closing occurs (the “Closing Date”).

Section 1.3Certain Closing Deliveries.

(a)At the Closing, Seller shall deliver or cause to be delivered to Buyer the following:

(i)a duly executed and properly completed IRS Form W-9 by Seller;

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(ii)a stock certificate representing the Purchased Common Stock, and stock power in respect thereof, duly executed in blank by Seller;

(iii)written resignations, dated as of the Closing Date, of the directors and officers of the Acquired Entity, as requested by Buyer;

(iv)an amendment, in the form attached hereto as Exhibit A, to that certain Health Plan Services Agreement, dated January 1, 2018, as amended, by and between the Acquired Entity and Guarantor (“Health Plan Services Agreement”);

(v)from and in respect of each of Seller and the Acquired Entity, a certificate, dated as of the Closing Date and executed by the secretary of the Entity, certifying as to (A) no amendments to the certificate of incorporation of the Entity since the date of certification, (B) the bylaws of the Entity, (C) the resolutions approved by the board of directors of the Entity authorizing the execution, delivery, and performance by the Entity of this Agreement and such other documents and instruments contemplated hereby, and the consummation by the Entity of the transactions contemplated by this Agreement and such other documents and instruments contemplated hereby, and (D) the names and signatures of the officers of the Entity authorized to execute this Agreement and the other documents to be delivered by the Entity under this Agreement;

(vi)from and in respect of each of Seller and the Acquired Entity, a certificate of good standing, issued as of a recent date not more than ten (10) Business Days prior to the Closing Date by the Secretary of State of the Entity’s jurisdiction of incorporation;

(vii)a certificate, dated as of the Closing Date and executed by an officer of the Acquired Entity, substantially in the form provided for in Treasury Regulations § 1.1445-2(b)(2);

(viii)the executed Non-Compete Agreement, substantially in the form attached hereto as Exhibit B;

(ix)the documents, consents and agreements identified on Schedule 1.3(a)(ix);

(x)the Transition Services Agreement, duly executed by Guarantor; and

(xi)such other documents and instruments contemplated hereby to be delivered by Seller prior to or at Closing or as Buyer may reasonably request in order to effect the transactions contemplated by this Agreement, including to vest in Buyer good and valid title to all of the Purchased Common Stock.

(b)At the Closing, Buyer shall deliver to Seller the following:

(i)a secretary’s certificate in respect of Buyer comparable in form and substance to that to be delivered by Seller and the Acquired Entity;

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(ii)a certificate of good standing of Buyer, issued as of a recent date not more than ten (10) Business Days prior to the Closing Date by the Secretary of State of the State of Delaware;

(iii)the Transition Services Agreement, duly executed by Buyer; and

(iv)such documents and instruments contemplated hereby to be delivered by Buyer prior to or at Closing.

Section 1.4Purchase Price; Closing Payments.

(a)Payment Statement. No later than five (5) Business Days prior to the Closing Date, Seller shall deliver to Buyer the estimated Most Recent Balance Sheet together with a written statement (the “Payment Statement”) setting forth in reasonable detail, its good faith estimated calculation of the RBC Amount as of the Closing Date and the Purchase Price calculated based on such estimates (the “Estimated Purchase Price”), and wiring instructions for the payments contemplated by Sections 1.4(b). The Most Recent Balance Sheet and the Payment Statement will be prepared in accordance with SAP. In connection with the delivery of the Payment Statement, Seller shall consider in good faith any Buyer comments to the Payment Statement, a final draft of which shall have been shared beforehand with Buyer.

(b)Payment of Closing Consideration. At the Closing, Buyer shall pay to Seller the Estimated Purchase Price, by wire transfer of immediately available funds in accordance with the applicable wiring instructions set forth in the Payment Statement.

Section 1.5Purchase Price Adjustment.

(a)No later than forty-five (45) days after the twelve (12) month anniversary of the Closing, Buyer shall prepare and deliver to Seller the balance sheet of the Acquired Entity (the “Closing Balance Sheet”), as of the Closing Date, together with a statement (the “Proposed Final Closing Statement”), setting forth in reasonable detail its proposed final determination of the RBC Amount as of the Closing Date and the Purchase Price calculated based on such determination. The Closing Balance Sheet and the Proposed Final Closing Statement shall be prepared in accordance with the Run-Out Principles.

(b)If Seller disagrees with any item reflected on the Closing Balance Sheet or Proposed Final Closing Statement, Seller must notify Buyer in writing of its objection (“Notice of Disagreement”) within thirty (30) days after the date on which Seller received the Closing Balance Sheet and the Proposed Final Closing Statement. During such thirty (30) day period, Buyer and the Acquired Entity shall provide Seller and its representatives with reasonable access to personnel, books, records and working papers related to the Closing Balance Sheet and the Proposed Final Closing Statement. If Seller does not deliver a Notice of Disagreement within such 30-day period, the Proposed Final Closing Statement shall be final, binding and conclusive on the Parties for purposes of calculating the Purchase Price. If Seller delivers a Notice of Disagreement within such 30-day period, Seller and Buyer shall attempt to reconcile their differences in good faith, and any written resolution by them as to any disputed amounts shall be final, binding and conclusive on the Parties.

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(c)If Seller and Buyer are unable to reach a resolution with respect to all of the items specified in the Notice of Disagreement within thirty (30) days after the date of receipt by Buyer of the Notice of Disagreement, then either Seller or Buyer may submit the items remaining in dispute for resolution to the Independent Accountants. The Independent Accountants will review only those unresolved items and amounts specifically set forth and objected to in the Notice of Disagreement and will resolve the dispute with respect to each such specific unresolved item solely in accordance with SAP, the Run-Out Principles and this Agreement within thirty (30) days after such submission or such longer period as the Independent Accountants may reasonably require. Buyer and the Acquired Entity shall provide the Independent Accountants, Seller and their respective representatives with reasonable access to personnel, books, records and working papers related to the Closing Balance Sheets and the Proposed Final Closing Statement during the period of review by the Independent Accountants. The Independent Accountants shall act as arbitrator with respect to the determination of the Closing Balance Sheet and the Proposed Final Closing Statement and a decision of the Independent Accountants with respect to the disputed items of the Closing Balance Sheet and/or the Proposed Final Closing Statement will be final, binding and conclusive on the Parties. The fees, costs and expenses of the Independent Accountants shall be allocated between Seller, on the one hand, and Buyer, on the other hand, in the same proportion that the aggregate amount of the disputed items submitted to the Independent Accountants that is unsuccessfully disputed by each such party (as finally determined by the Independent Accountants) bears to the total amount of such disputed items so submitted. All determinations made by the Independent Accountants will be final, conclusive and binding on the parties, absent fraud, arithmetic mistake, or manifest error.

(d)If the Purchase Price as finally determined pursuant to Section 1.5(b) and/or Section 1.5(c) exceeds the Estimated Purchase Price, Buyer shall pay to Seller such excess. If the Purchase Price as finally determined pursuant to Section 1.5(b) and/or Section 1.5(c) is less than the Estimated Purchase Price, Seller shall pay to Buyer the amount of such difference.

(e)Any payments due pursuant to this Section 1.5, if any, as finally determined, shall be made by wire transfer or delivery of other immediately available funds to the account designated by the recipient thereof no later than five (5) Business Days after the date on which the Parties reach an agreement as set forth in Section 1.5(b) or, if applicable, the date on which the Independent Accountants’ determination with respect to all unresolved items and amounts as set forth in Section 1.5(c) is made. Any payments pursuant to this Section 1.5 shall be treated for all Tax purposes as an adjustment to the Purchase Price, except as otherwise required by applicable Law.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as disclosed in the Disclosure Schedule, Seller represents and warrants to Buyer as of the date hereof and as of the Closing Date (as if made on the Closing Date unless the representation or warranty expressly speaks as of a specific date) as follows:

Section 2.1Due Organization and Good Standing. Seller is duly organized and validly existing and in good standing in accordance with the Laws of the jurisdiction of its formation and

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has all requisite Entity power and authority to own, lease and operate its properties and assets and to conduct its businesses in the manner in which its businesses are currently being conducted.

Section 2.2Title. Seller owns and has good and valid title to the Purchased Common Stock, free and clear of any Lien. Except for this Agreement, there are no outstanding options, warrants, rights, calls, convertible securities, or other Contracts obligating Seller to transfer or sell any of the Purchased Common Stock. There are no voting trusts, stockholder agreements, proxies, or other Contracts or understandings in effect to which Seller is a party with respect to the voting or transfer of any of the Purchased Common Stock or any Equity Interests of or in the Acquired Entity. On the Closing Date, Buyer will acquire good and valid title to the Purchased Common Stock, free and clear of any Lien.

Section 2.3Authority; Binding Nature of Agreement. Seller has the requisite power and authority to execute and deliver, and to perform its covenants and agreements under, this Agreement. The execution and delivery hereof by Seller and the performance by Seller of its covenants and agreements hereunder have been duly and validly authorized by all necessary Entity action on the part of Seller. This Agreement has been duly and validly executed and delivered by Seller and, assuming the due authorization, execution and delivery hereof by the other Parties, is a legal, valid and binding obligation of Seller, enforceable against Seller, as applicable, in accordance with its terms, subject to (a) Laws of general application relating to bankruptcy, insolvency, reorganization, moratorium and other Laws affecting creditors’ rights generally and (b) rules of law governing specific performance, injunctive relief and other equitable remedies (such Laws and rules of law, the “Bankruptcy and Equity Exceptions”).

Section 2.4Non-contravention; Consents.

(a)Seller’s execution and delivery hereof does not, and Seller’s performance of its covenants and agreements hereunder shall not, (i) violate the Organizational Documents of Seller, (ii) subject to making or obtaining, as applicable, the Consents and Filings referenced in Section 2.4(b) and Section 3.4(b), violate any Law or (iii) (1) require any consent, approval or authorization (each, a “Consent”) of, or any notice or filing (each, a “Filing”) to or with, any Person that is not a Governmental Authority under, or (2) result in any breach of or, with or without notice or lapse of time or both, be a default or give rise to any right of termination, cancellation, amendment or acceleration of, or result in the creation of a Lien on any asset of Seller, under, any Contract to which Seller is a party or by which Seller, or its properties or assets are bound, except, in the case of the foregoing clause (iii), as would not result in a Seller Material Adverse Effect.

(b)Seller’s execution and delivery hereof does not, and Seller’s performance of its covenants and agreements hereunder shall not, require Seller to make any Filing with or to, or to obtain any Consent from, any Governmental Authority, except for (i) the Filings and Consents listed in Section 2.4(b) of the Disclosure Schedule (the “Specified Filings and Consents”) and (ii) any Filing or Consent the failure of which to make or obtain would not be material.

Section 2.5Claims; Orders. Except as would not result in a Seller Material Adverse Effect, (a) there is no Claim pending or, to Seller’s knowledge, being threatened by or against Seller and (b) Seller is not subject to any Order (other than Orders of general applicability).

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Section 2.6Brokers. No broker, finder or investment banker (except for Moelis & Company (“Moelis”), in respect of which Seller is exclusively liable) is entitled to any brokerage, finder’s or other similar fee or commission in connection with the transactions contemplated hereby based on arrangements made by or on behalf of Seller.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED ENTITY

Except as disclosed in the Disclosure Schedule, the Acquired Entity represents and warrants to Buyer as of the date hereof and as of the Closing Date (as if made on the Closing Date unless the representation or warranty expressly speaks as of a specific date) as follows:

Section 3.1Due Organization and Good Standing. The Acquired Entity is duly organized and validly existing and in good standing in accordance with the Laws of the jurisdiction of its formation and has all Entity power and authority to own, lease and operate its properties and assets and to conduct its businesses in the manner in which its businesses are currently being conducted. The Acquired Entity is duly qualified to do business as a foreign Entity, and is in good standing, in accordance with the Laws of the jurisdictions where the nature of its businesses or the character of its owned and leased properties and assets requires such qualification. Correct and complete copies of the Acquired Entity’s Organizational Documents, minute books, stock certificates representing the Purchased Common Stock, and stock transfer ledger (reflecting all Equity Interests) have been made available to Buyer. There has been no default under, or violation of, the Acquired Entity’s Organizational Documents. The minute books contain correct records of all meetings of, and corporate actions taken by, the board of directors, committees of the board of directors, and stockholders of the Acquired Entity since its incorporation, and no meeting of any such board of directors, committee, or stockholders has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, the Acquired Entity’s Organizational Documents, minute books, and stock transfer ledger will be and remain in the possession of the Acquired Entity.

Section 3.2Capitalization; Subsidiaries.

(a)The authorized capital stock of the Acquired Entity consists of one thousand (1,000) shares of common stock. The Purchased Common Stock (i) is the only issued and outstanding Equity Interests in the Acquired Entity, (ii) has been duly authorized and is validly issued, fully-paid, and non-assessable, (iii) is free of preemptive rights, subscription rights and rights of first refusal and (iv) was not issued in violation of applicable Law. Except for this Agreement, there are no outstanding Contracts obligating the Acquired Entity to issue, transfer, sell, repurchase, or redeem any Equity Interests of the Acquired Entity, nor any Contracts in effect to which the Acquired Entity is a party with respect to the voting or transfer of any of the Equity Interests of the Acquired Entity, including the Purchased Common Stock.

(b)The Acquired Entity does not have any Subsidiaries.

Section 3.3Authority; Binding Nature of Agreement. The Acquired Entity has the requisite power and authority to execute and deliver, and to perform its covenants and agreements under, this Agreement. The execution and delivery hereof by the Acquired Entity and

6

the performance by the Acquired Entity of its covenants and agreements hereunder have been duly and validly authorized by all necessary Entity action on the part of the Acquired Entity. This Agreement has been duly and validly executed and delivered by the Acquired Entity and, assuming the due authorization, execution and delivery hereof by the other Parties, is a legal, valid and binding obligation of the Acquired Entity, enforceable against the Acquired Entity in accordance with its terms, subject to the Bankruptcy and Equity Exceptions.

Section 3.4Non-contravention; Consents.

(a)The Acquired Entity’s execution and delivery hereof does not, and the Acquired Entity’s performance of its covenants and agreements hereunder shall not, (i) violate the Organizational Documents of the Acquired Entity, (ii) subject to making or obtaining, as applicable, the Consents and Filings referenced in Section 2.4(b) and Section 3.4(b), violate any Law or Order, (iii) require any material Consent of, or any Filing to or with, any Person that is not a Governmental Authority under, result in any material breach of or, with or without notice or lapse of time or both, be a material default or give rise to any right of termination, cancellation, amendment or acceleration of, or result in the creation of a material Lien on any asset of the Acquired Entity under, any Material Contract or (iv) result in withdrawal, revocation, termination or suspension of any of the Acquired Entity’s Permits.

(b)The Acquired Entity’s execution and delivery hereof does not, and the Acquired Entity’s performance of its covenants and agreements hereunder shall not, require the Acquired Entity to make any Filing with or to, or to obtain any Consent from, any Governmental Authority, except for the Specified Filings and Consents.

Section 3.5Financial Statements; Undisclosed Liabilities.

(a)The Acquired Entity has made available to Buyer (i) the unaudited statement of the Acquired Entity as of November 30, 2020 (the “Latest Statement”), and (ii) the audited statutory basis financial statements as of the year ended December 31, 2019 for the Acquired Entity (all such financial statements referred to in the foregoing clauses (i) and (ii), the “Financial Statements”). The applicable Financial Statements present fairly, in all material respects, the admitted assets, Liabilities, and capital and surplus of the Acquired Entity as at the respective dates thereof and the results of operations and cash flows of the Acquired Entity for the years then ended in accordance with applicable SAP (except as may be indicated in the notes to the Financial Statements or, in the case of unaudited statements, subject to the absence of footnotes and normal year-end adjustments).

(b)The Acquired Entity has no Liabilities of a type that would be required by SAP to be reflected or reserved against on a balance sheet of the Acquired Entity, except for (i) Liabilities provided for in the Financial Statements or disclosed in the notes thereto, (ii) Liabilities that have arisen in the ordinary course of business since the date of the Latest Statement or Liabilities included in the calculation of the RBC Amount, and (iii) Liabilities incurred in connection with this Agreement and the transactions contemplated hereby.

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(c)Section 3.5(c) of the Disclosure Schedule sets forth the amount of all Indebtedness of the Acquired Entity as of the date hereof.

Section 3.6Absence of Certain Changes. Since the date of the Latest Statement until the date hereof, (a) except for this Agreement, the negotiation, preparation or execution hereof and the process conducted by Seller and the Acquired Entity in connection therewith, the Acquired Entity has conducted its businesses in all material respects in the ordinary course of such businesses, and (b) no Material Adverse Effect has occurred.

Section 3.7IP Rights; Privacy; Cybersecurity.

(a)Section 3.7(a) of the Disclosure Schedule lists all material (i) patents and patent applications (published or unpublished); (ii) trademark registrations and applications; (iii) unregistered trademarks; (iv) domain names; and (v) copyright registrations and applications, in each case, that are owned by the Acquired Entity as of the date hereof. The Acquired Entity is the sole and exclusive owner of the IP Rights that are required to be listed in Section 3.7(a) of the Disclosure Schedule, and to the Acquired Entity’s Knowledge, as of the date hereof, all such IP Rights are in effect and subsisting in all material respects. The Acquired Entity owns or has the right to use all IP Rights used in the conduct of the businesses of the Acquired Entity. All IP Rights owned by the Acquired Entity are owned free and clear of all Liens, other than Permitted Liens.

(b)(i) The conduct of the business of the Acquired Entity does not infringe, misappropriate or otherwise violate any IP Rights owned by any other Person (and the conduct of the business of the Acquired Entity has not done so at any time within the three (3)-year period prior to the date hereof); (ii) the Acquired Entity has no Liability for infringement or misappropriation or other violation of the IP Rights of any third party; and (iii) to the Acquired Entity’s Knowledge, no Person is infringing, misappropriating or otherwise violating any IP Rights owned by the Acquired Entity. No IP Rights owned by the Acquired Entity are subject to any outstanding Order restricting the use thereof by the Acquired Entity or restricting the licensing thereof by the Acquired Entity to any Person. Since the date that is three (3) years prior to the date hereof, no Claims have been asserted in writing by any Person against the Acquired Entity or its Affiliates with respect to the ownership or use by the Acquired Entity of the IP Rights owned or licensed by the Acquired Entity.

(c)The Acquired Entity takes reasonable measures to protect the confidentiality and value of confidential information (including its trade secrets) used or held for use by the Acquired Entity. To the Acquired Entity’s Knowledge, there has been no disclosure since the date that is three (3) years prior to the date hereof of any trade secret owned by the Acquired Entity that has resulted in the loss of trade secret rights therein. Each Person who participated in the creation, invention, modification, improvement or development of any IP Rights owned by the Acquired Entity has executed and delivered to the Acquired Entity a written agreement providing for (i) the non-disclosure by such Person of any confidential information or trade secrets of the Acquired Entity and (ii) the assignment (by way of a present grant of assignment) by such Person to the Acquired Entity of any such IP Rights, and to the Acquired Entity’s Knowledge, no Person is in breach of any such agreement.

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(d) The Acquired Entity has not used Open Source Software in such a way that grants to any third party, any rights or immunities related to any IP Rights owned by the Acquired Entity. Without limiting the foregoing, no Software owned by the Acquired Entity contains, is derived from, is distributed with, or was developed using any Open Source Software in a manner that results in a requirement or condition that such owned Software or any part thereof be (A) disclosed or distributed in source code form, (B) licensed for the purpose of making modifications or derivative works, or (C) redistributable at no charge. The Acquired Entity has complied in all material respects with all terms and conditions applicable to any Open Source Software used in connection with any Software owned by the Acquired Entity.

(e)The Acquired Entity owns, leases or licenses all IT Assets that are necessary to conduct the businesses of the Acquired Entity. In the two (2) years prior to the date hereof, there has been no failure or other material substandard performance of any such IT Assets that has caused any material disruption to the Acquired Entity. To the Acquired Entity’s Knowledge, such IT Assets (i) are free from material defects, viruses, worms, Trojan horses or similar flaws or harmful programs; (ii) have not been subjected to any material “denial of service” or other such attack; and (iii) have not been the subject of any actual or attempted material intrusion or unauthorized access.

(f)The Acquired Entity maintains, and since the date that is three (3) years prior to the date hereof has adopted, implemented and maintained, a data privacy and security compliance program that complies in all material respects with all Privacy/Cybersecurity Laws. The Acquired Entity, and to the Acquired Entity’s Knowledge, each of its third-party processors, is in material compliance with all applicable Privacy/Cybersecurity Laws, including all HIPAA Commitments.

(g)The Acquired Entity has taken commercially reasonable steps to prevent the violation by the Acquired Entity of the rights of any Person with respect to Personal Information, including by (i) implementing and following commercially reasonable security programs and policies containing technical and organizational measures designed to protect and safeguard Personal Information, including periodic review and updating of all such plans and policies, and (ii) performing reasonable diligence to ensure that all third party processors who have access to Personal Information of the Acquired Entity comply with such processor’s obligations under applicable Privacy/Cybersecurity Laws and/or under Contracts with or for the benefit of the Acquired Entity.

(h)Following the Closing Date, the Acquired Entity will retain all rights and permissions necessary to collect, use, store, maintain, manipulate, sell or share any Personal Information or other data covered by Privacy/Cybersecurity Laws held by or for the Acquired Entity in the same manner that such Personal Information was collected, used, stored, maintained, manipulated, sold or shared by the Acquired Entity prior to the Closing Date.

(i)Since the date that is three (3) years prior to the date hereof, no Person has gained material unauthorized access, including any such access that requires disclosure to a Governmental Authority under applicable Law, with respect to Personal Information transmitted or processed by or otherwise possessed or controlled by the Acquired Entity, or used, accessed or disclosed by any such Personal Information for any illegal or unauthorized purpose. Since the

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date that is three (3) years prior to the date hereof, the Acquired Entity has not received written notice of any claims, and there have been no actions (including any known investigation or written notice), from any Governmental Authority or other Person relating to the Acquired Entity’s collection, storage, transfer, loss, damage or unauthorized access, disclosure, use, modification or other misuse of Personal Information or noncompliance with, or alleging a violation by the Acquired Entity of, Privacy/Cybersecurity Laws, and to the Acquired Entity’s Knowledge, there is no reasonable basis for any such claim or action.

Section 3.8Title to Assets; Real Property.

(a)The Acquired Entity owns, and has good title to, or has valid and subsisting leases for, all tangible personal property used or held for use in its businesses and operations, free and clear of any Lien (except for any Permitted Lien).

(b)The Acquired Entity does not own in fee or otherwise any interest (other than a leasehold interest in the Leased Real Property) in any real property.

(c)Except as set forth on Section 3.8(c) the Disclosure Schedule (i) the Acquired Entity has a valid leasehold interest in, and enjoys actual, exclusive, peaceful and undisturbed possession of, each parcel of real property leased, subleased, sub-subleased, licensed or otherwise occupied, or used, by the Acquired Entity as of the date hereof (the “Leased Real Property”), in each case, free and clear of any Lien (except for Permitted Liens) and (ii) there are no leases, subleases, licenses, occupancy agreements, options, rights or other agreements or arrangements to which the Acquired Entity is a party granting to any Person the right to use, occupy or otherwise obtain a real property interest in all or any portion of a Leased Real Property. Seller has made available to Buyer a complete and correct copy of each real property lease relating to the Leased Real Property. Each such lease is in full force and effect and constitutes a legal, valid and binding obligation of the Acquired Entity, enforceable against the Acquired Entity in accordance with its terms. Neither such Acquired Entity nor, to the Acquired Entity’s Knowledge, any other party to any Contract for Leased Real Property is in material default under such Contract.

Section 3.9Material Contracts.

(a)Section 3.9(a) of the Disclosure Schedule lists each Contract to which the Acquired Entity is a party that falls within the following categories and is in effect as of the date hereof (each, a “Material Contract”):

(i)any Contract that would, under its express terms, involve aggregate payments by or to the Acquired Entity of more than Fifty Thousand Dollars ($50,000) during the year ended December 31, 2020 and that is not cancelable by the Acquired Entity without liability on ninety (90) or less days’ notice to the other party thereto;

(ii)any Contract under which the Acquired Entity leases, subleases, sub-subleases or licenses any Leased Real Property;

(iii)any Contract that by its express terms prohibits the Acquired Entity from engaging in any line of business or competing with any Person or otherwise conducting its businesses in any geographic area or during any period of time;

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(iv)any Contract under which the Acquired Entity has incurred Indebtedness;

(v)any Contract providing for the acquisition or disposition by the Acquired Entity of any material assets (whether by merger, sale of stock, sale of assets or otherwise) and under which the Acquired Entity has material continuing obligations after the date hereof (excluding indemnification obligations under which there are no pending claims);

(vi)any Collective Bargaining Agreement;

(vii)any partnership, joint venture or other similar Contract with a third party relating to the formation, creation, operation, management or control of any joint venture or partnership to which any Acquired Entity is a party;

(viii)the Material Provider Contracts;

(ix)any material Contract with a Governmental Authority;

(x)any reinsurance or retrocession Contract or treaty under which the Acquired Entity acts as ceding company or reinsurer;

(xi)any Contract, including any option agreement, providing for the acquisition or disposition by the Acquired Entity of any business, capital stock, or material assets (whether by merger, sale of stock, sale of assets or otherwise);

(xii)any Contract to which the Acquired Entity is a Party under which the Acquired Entity (1) is granted a license or right to use any IP Rights or (2) has granted a material right to use IP Rights, except, in each case, for (A) any license for commercially available non-custom Software or hardware or other commercially available technology for which the Acquired Entity paid an aggregate of no more than Twenty-Five Thousand Dollars ($25,000) and that is not Open Source Software, (B) any non-exclusive license granted to customers, suppliers, service providers and other vendors, contractors or agents of the Acquired Entity in the ordinary course of business, (C) any Contract in which grants of rights to IP Rights are incidental to and not the principle purpose of such Contract, and (D) any Contract which provides for the development by any third party of any IP Rights owned by the Acquired Entity.

(xiii)any Contract under which the Acquired Entity has, directly or indirectly, made any advance, loan, or extension of credit to, or capital contribution or other investment in, any other Person;

(xiv)any Contract, other than any Employee Plan, with (i) any current or former officer or director of the Acquired Entity or (ii) any other current or former employee of, independent contractor of, or consultant to the Acquired Entity providing for, in the case of this clause (xiv), future payments by the Acquired Entity;

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(xv)any Contract restricting the ability of the Acquired Entity to solicit or hire any other Person;

(xvi)for each of the metropolitan statistical areas in which the Acquired Entity provides services, any Contract between the Acquired Entity and any primary care physicians and/or primary care physician organizations that in each of the past two (2) years ending December 31, 2019 and December 31, 2020, respectively, were within the top ten (10) primary care physician providers providing services to the Acquired Entity members (measured by the number of members serviced in such metropolitan statistical area);

(xvii)any Contract that includes any right of first offer or refusal or other similar term favoring any other Person; and

(xviii)any other Contract to which the Acquired Entity is a party that, viewed reasonably, is material to, or used to materially support, the Business.

(b)The Acquired Entity has made available to Buyer copies of all Material Contracts. Except as would not result in, or reasonably be expected to result in, a material Liability to the Acquired Entity, (i) each Material Contract is a valid and binding agreement of the Acquired Entity and is in full force and effect, (ii) neither the Acquired Entity nor, to the Acquired Entity’s Knowledge, any other party thereto is in breach of any Material Contract, and (iii) the Acquired Entity has not received written or, to the Acquired Entity’s Knowledge, oral notice of the intention of any party to a Material Contract to terminate such Material Contract.

(c)Section 3.9(c)(i) of the Disclosure Schedule sets forth a list of the top ten (10) healthcare providers (each, a “Material Provider”), based on payments made by the Acquired Entity to such provider during the twelve (12) month period ending on the last day of the month preceding the date hereof, and all Contracts between the Acquired Entity and such Material Providers (each a “Material Provider Contract”). As of the date hereof, there are no renegotiations, attempts to renegotiate or outstanding rights to negotiate any amount to be paid or payable to or by the Acquired Entity under any Material Provider Contract other than in all material respects in the ordinary course of business consistent with the past practices of the Acquired Entities. Section 3.9(c)(ii) of the Disclosure Schedule sets forth any acute care facility or provider group involving expenditures of at least Six Hundred Twenty-Five Thousand Dollars ($625,000) during the twelve (12) month period ending on the last day of the month preceding the date hereof and (on an annualized basis) 2020.

(d)All services and systems and other support functions provided by or through Affiliates of the Acquired Entity that are material to, or used to materially support, the Acquired Entity or the Business prior to the date hereof and the Closing Date are covered by the Health Plan Services Agreement or will be adequately covered by the Transition Services Agreement, proposed to be implemented in accordance with the TSA Terms.

Section 3.10Compliance With Laws; Permits.

(a)The Acquired Entity is, and since the date that is three (3) years prior to the date hereof has been, in compliance in all material respects with all applicable Laws (except

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for Laws relating to infringement, misappropriation or other violation of IP Rights or Privacy/Cybersecurity Laws, which are addressed by Section 3.7). The Acquired Entity holds all material Permits necessary for the lawful conduct of its businesses as it is currently being conducted and all such Permits are valid and in full force and effect. The Acquired Entity has not received any notice from, any Governmental Authority (i) indicating or alleging that the Acquired Entity does not possess any Permit required to own, lease, and operate its properties and assets or to conduct the Business or (ii) threatening or seeking to withdraw, revoke, terminate, or suspend any of the Acquired Entity’s Permits.

Section 3.11Claims; Orders. Except as would not result in, or reasonably be expected to result in, a material Liability to the Acquired Entity, (a) there is no, and has not at any time in the past three (3) years, been any Claim or proceeding pending or, to the Acquired Entity’s Knowledge, threatened against the Acquired Entity, and (b) the Acquired Entity is not and has not been at any time in the past three (3) years, subject to any Order (other than Orders of general applicability). In the conduct of the Business, neither the Acquired Entity nor, to the Acquired Entity’s Knowledge, any of its directors, officers or employees, have (i) directly or indirectly, given, or agreed to give, any illegal gift, contribution, payment or similar benefit to any provider, customer, governmental official or employee, physician or other Person who was, is or may be in a position to help or hinder the Acquired Entity (or assist in connection with any actual or proposed transaction) or made, or agreed to make, any illegal contribution, or reimbursed any illegal political gift or contribution made by any other Person, to any candidate for federal, state, local or foreign public office or (ii) established or maintained any unrecorded fund or asset or made any false or misleading entries on any books or records for any purpose. Neither the Acquired Entity nor, to the Acquired Entity’s Knowledge, any of its current shareholders, directors, officers or employees have ever been debarred, terminated, excluded or suspended from participation in the Medicare or Medicaid programs or listed on the excluded individuals list maintained by the Office of the Inspector General of the Department of Health and Human Services or the General Services Administration. To the Acquired Entity’s Knowledge, there are no D&O Indemnifiable Claims pending nor any facts or circumstances that would reasonably be expected to give rise to such a Claim.

Section 3.12Tax Matters.

(a)Except as would not result in, or reasonably be expected to result in, a material Liability to the Acquired Entity:

(i)the Acquired Entity has filed (or had filed on its behalf) with the appropriate Taxing Authority all Tax Returns required to be filed by it, and all such Tax Returns are true, correct and complete. The Acquired Entity has fully and timely paid (or had paid on its behalf) all Taxes due and owing whether or not shown on a Tax Return as required by applicable Law. The amounts provided as a current Liability on the Financial Statements for all Taxes will be adequate to cover all unpaid Liabilities for all Taxes, whether or not disputed, that have accrued with respect to or are applicable to the period ended on and including the date thereof or to any periods prior thereto;

(ii)there are no outstanding Liens for unpaid Taxes upon any assets or the shares of the Acquired Entity (except for Taxes not yet due and payable);

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(iii)no audits or other proceedings by any Taxing Authority are in progress or, to the Acquired Entity’s Knowledge, threatened with regard to any Tax Returns of the Acquired Entity. The Acquired Entity has not waived in writing any statute of limitation with respect to Taxes beyond the date hereof or agreed to any extension of time beyond the date hereof with respect to a Tax assessment or deficiency, and is not a beneficiary of any extension of time within which to file a Tax Return that has not yet been filed (other than any automatic, customary or permitted extensions available under Law). The Acquired Entity has not requested or received a ruling from any Taxing Authority or signed a closing or other agreement with any Taxing Authority which would affect any taxable period after the Closing Date;

(iv)the Acquired Entity has not participated in any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4;

(v)the Acquired Entity has withheld and remitted all material amounts of Taxes from payments to employees, independent contractors, creditors, customers, stockholders or other Persons as required by applicable Law to be withheld by the Acquired Entity; and

(vi)the Acquired Entity is not a party to any agreement the primary purpose of which is Tax sharing or Tax allocation that will not be terminated on or before the Closing Date without any further liability to the Acquired Entity. The Acquired Entity is not subject to any joint venture, partnership, or other Contract which is treated as a partnership for federal income tax purposes. The Acquired Entity is not liable for the Taxes of any Person, other than a member of a group of which Seller was contemporaneously a member, as a result of filing unitary, combined, or consolidated Tax Returns, as a transferee or successor, including, without limitation, any Liability for Taxes under Treasury Regulation Section 1.1502-6;

(vii)The Acquired Entity will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or portion thereof) beginning after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) closing agreement as described in section 7121 of the Code (or any corresponding or similar provision of U.S. state, local or non-U.S. income Tax Law) executed on or prior to the Closing Date; (iii) intercompany transactions or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of U.S. state, local or non-U.S. income Tax Law); (iv) installment sale or open transaction disposition made on or prior to the Closing Date; (v) election under section 108(i) of the Code (or similar provision of U.S. state, local or non-U.S. Tax Law); or (vi) prepaid amount received on or prior to the Closing Date. The Acquired Entity has not used any improper Tax accounting method.

(viii)The Acquired Entity has never distributed stock of another Person, or had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by section 355 or 361 of the Code; and

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(ix)No written claim has been made within the past five (5) years by a Taxing Authority in a jurisdiction where Tax Returns with respect to the Acquired Entity are not filed asserting that the Acquired Entity is or may be subject to Tax in that jurisdiction. The Acquired Entity has no permanent establishment or fixed place of business in any other country other than the United States and is not subject to taxation nor does it have any Tax filing obligations in any jurisdiction outside of the United States.

(b)Notwithstanding anything herein to the contrary, (i) except for Section 3.13, the representations and warranties in this Section 3.12 are the Acquired Entity’s sole and exclusive representations and warranties hereunder related to Taxes or Tax matters, and no other representations or warranties in this Article III shall be construed to relate or apply to Taxes or Tax matters, and (ii) nothing herein (including this Section 3.12) shall be construed as providing a representation or warranty related to the existence, amount, expiration date or limitations on (or availability of) any Tax attribute of the Acquired Entity.

Section 3.13Employee Benefit Plans.

(a)Section 3.13(a) of the Disclosure Schedule lists each Business Benefit Plan and identifies each Business Benefit Plan as either an Acquired Entity Employee Plan or a Seller Employee Plan. For each Seller Employee Plan, Seller has provided or made available to Buyer copies of the plan document (including all amendments thereto) with respect to such Seller Employee Plan, or a summary of the material terms of such Seller Employee Plan. For each Acquired Entity Employee Plan and each Assumed Plan (as defined in Section 5.4(c)), the Acquired Entity or Seller has provided or made available to Buyer copies of each of the following documents, as applicable: (i) a copy of the plan document (including all amendments thereto); (ii) a copy of the trust, insurance policy, or other funding vehicle; (iii) a copy of the most recent summary plan description and any current summary of material modifications; (iv) a copy of the annual reports and nondiscrimination testing results for the three (3) most recent years; (v) the most recent determination, opinion or advisory letter received from the IRS; and (vi) the most recent actuarial report and related financial statements related thereto.

(b)None of the Acquired Entity or any trade or business, whether or not incorporated, that together with the Acquired Entity would be deemed a “single employer” within the meaning of Section 4001(b) of ERISA maintains, contributes to, sponsors, or has any Liability with respect to (or has in the past six (6) years maintained, contributed to, sponsored, or had any Liability with respect to) (i) a multiemployer plan within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA, (ii) an arrangement subject to Section 302 or Title IV of ERISA or Section 412 of the Code, (iii) a “multiple employer plan” within the meaning of Section 413(c) of the Code or (iv) a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA.

(c)Each Business Benefit Plan has been operated and administered, in all material respects, in accordance with its terms and applicable Law, including ERISA and the Code and no notice has been issued by any Governmental Authority alleging non-compliance with ERISA or the Code. There are no Claims (other than routine claims for benefits in the ordinary course of business) that are pending, or to the Acquired Entity’s Knowledge, threatened against any Acquired Entity Employee Plan or any Assumed Plan.

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(d)Except as would not result in, or reasonably be expected to result in, a material Liability to the Acquired Entity, each Business Benefit Plan that is intended to be “qualified” within the meaning of Section 401(a) of the Code has received a favorable determination letter or opinion or advisory letter from the IRS as to its qualification and, to the Acquired Entity’s Knowledge, no event has occurred which will or could give rise to disqualification of any such plan.

(e)Except as otherwise provided herein or as required by applicable Law or as forth in Section 3.13(e) of the Disclosure Schedule, neither the execution hereof nor the consummation of the transactions contemplated hereby (either alone or together with any other event) shall (i) entitle any Business Employee or current or former employee, director or officer of the Acquired Entity to any compensatory payment or benefit, (ii) accelerate the time of payment or vesting of any compensation or benefits for any such Business Employee or current or former employee, director or officer of the Acquired Entity, (iii) require the funding of any Acquired Entity Employee Plan or Assumed Plan or other material compensation or benefits (through a grantor trust or otherwise) for any such Business Employee or current or former employee, director or officer of the Acquired Entity or (iv) result in the payment of any amount that would, individually or in combination with any other payment, not be deductible as a result of Section 280G of the Code.

(f)No Business Benefit Plan that is a “welfare benefit plan” within the meaning of Section 3(1) of ERISA provides benefits with respect to Business Employees or any current or former employee, director or officer of the Acquired Entity beyond their retirement, other than coverage mandated by applicable Law or benefits the full costs of which are borne by the Business Employee or his or her beneficiary.

(g)Seller and the Acquired Entity do not reasonably expect to incur any material penalties or Liabilities under Section 4980H(a) or Section 4980H(b) of the Code.

Section 3.14Labor Matters.

(a)As of the date hereof, (a) the Acquired Entity is not a party to or subject to, or is currently negotiating in connection with entering into, any Collective Bargaining Agreement, and (b) (i) there is no labor strike, slowdown, stoppage, picketing, interruption of work or lockout pending or, to the Acquired Entity’s Knowledge, threatened against the Acquired Entity and (ii) there are no unfair labor practice complaints pending or, to the Acquired Entity’s Knowledge, threatened against the Acquired Entity before any Governmental Authority.

(b)Section 3.14(b) of the Disclosure Schedule sets forth a list of each Business Employee and independent contractor who is an individual providing services to the Acquired Entity as of the date of this Agreement, and in the case of each such Business Employee and independent contractor, the following information, as applicable, as of the date hereof: (i) title or position; (ii) date of hire or commencement of services; (iii) work location; (iv) whether full-time or part-time and whether exempt or non-exempt from the overtime regulation of the Fair Labor Standards Act; (v) whether covered by the terms of a collective bargaining or similar agreement or an employment or independent contractor agreement; (vi) whether absent (excluding working remotely) from active employment and if so, the date

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such absence commenced, the reason for such absence, and the anticipated date of return to active employment; (vii) annual salary, hourly rate or fee arrangement, and if applicable, bonus target or other incentive compensation, and (viii) accrued but unused vacation or paid time off.

(c)The Acquired Entity is, and since the date that is three (3) years prior to the date hereof has been, in compliance in all material respects with all applicable Laws relating to employment and employment practices, or terms and conditions of employment, including but not limited to, worker classification, wages, hours of work, discrimination, collective bargaining, immigration, workers’ compensation, unemployment compensation, withholding, and occupational safety and health. All independent contractors and consultants providing personal services to the Acquired Entity have been properly classified as independent contractors for purposes of all Laws, including Laws with respect to employee benefits, and all Business Employees have been properly classified under the Fair Labor Standards Act and similar state Laws.

(d)There is no pending or, to Acquired Entity’s Knowledge, threatened charge, Claim, or proceeding against the Acquired Entity by or before the Equal Employment Opportunity Commission or any state or local Governmental Authority and there have been no such charges, Claims or proceedings since the date that is three (3) years prior to the date hereof and, to the Acquired Entity’s Knowledge, there is no state of facts or event which would reasonably be expected to form the basis of any such charge, Claim or proceeding.

(e)The Acquired Entity has not taken and currently has no plans to take any action with respect to the transactions contemplated hereby that could constitute a “mass layoff” or “plant closing” within the meaning of the Worker Adjustment and Retraining Notification Act or could otherwise trigger any notice requirement or Liability under any state or local plant closing notice Law.

(f)No executive officer or other key employee of the Acquired Entity is subject to any non-compete, non-solicitation, nondisclosure, confidentiality, employment, consulting or similar agreement relating to, affecting or in conflict with the present or proposed business activities of the Acquired Entity and, to Sellers’ Knowledge, no executive officer or other management level employee of the Acquired Entity has taken steps or is otherwise planning to terminate his or her employment with the Acquired Entity for any reason (or no reason), including the consummation of the transactions contemplated by this Agreement.

(g)The Acquired Entity has investigated or reviewed all sexual harassment or other harassment, discrimination or retaliation allegations (that were made in writing or if orally, to a member of management or human resources personnel) of which there was Acquired Entity’s Knowledge since the date that is three (3) years prior to the date hereof. With respect to each such allegation with potential merit, the Acquired Entity has taken corrective action that is reasonably calculated to prevent further improper action.

(h)A Form I-9 has been completed and retained with respect to each current Business Employee and, where required by law, former Business Employees. The Acquired Entity has not been the subject of any audit or other action, suit, proceeding, claim, demand, assessment or judgments nor, to Sellers’ knowledge, has the Acquired Entity been the subject of

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an investigation, inquiry or other any audit or other action, suit, proceeding, claim, demand, assessment or judgments from the U.S. Department of Homeland Security, including the Immigration and Customs Enforcement, (or any predecessor thereto, including the U.S. Customs Service or the Immigration and Naturalization Service) or any other immigration-related enforcement proceeding.

(i)If the Acquired Entity has any Contract with a Governmental Authority, the Acquired Entity is and has been in compliance with, to the extent applicable, Executive Order No. 11246 of 1965 (“E.O. 11246”), Section 503 of the Rehabilitation Act of 1973 (“Section 503”) and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (“VEVRAA”), including all implementing regulations. The Acquired Entity maintains and complies with affirmative action plans in compliance with E.O. 11246, Section 503 and VEVRAA, including all implementing regulations. The Acquired Entity is not, and has not been since the date that is three (3) years prior to the date hereof, the subject of any audit, investigation or enforcement action by any Governmental Authority in connection with any Government Contract or related compliance with E.O. 11246, Section 503 and VEVRAA. The Acquired Entity has not been debarred, suspended or otherwise made ineligible from doing business with the United States government or any Governmental Authority contractor.

Section 3.15Environmental Matters.

(a)Except as would not result in, or reasonably be expected to result in, a material Liability to the Acquired Entity, (i) the Acquired Entity is, and at all times has been, in compliance with all applicable Environmental Laws, (ii) the Acquired Entity holds all Environmental Permits necessary for the lawful conduct of its businesses as it is currently being conducted and all such Permits are valid and in full force and effect, (iii) there is no Environmental Claim pending or, to the Acquired Entity’s Knowledge, threatened against the Acquired Entity, and (iv) there has been no Release of Hazardous Materials by the Acquired Entity at any of the properties that are currently or formerly owned, leased, operated or used by the Acquired Entity or at any properties at which the Acquired Entity has assumed liability for any Release of Hazardous Materials.

(b)Notwithstanding anything herein to the contrary, the representations and warranties in this Section 3.15 are the Acquired Entity’s sole and exclusive representations and warranties hereunder related to Environmental Laws, Environmental Permits, Environmental Claims, Releases of Hazardous Materials and any other matter related to the environment, pollution or human health and safety, and no other representations or warranties in this Article III shall relate or apply to Environmental Laws, Environmental Permits, Environmental Claims, Releases of Hazardous Materials and any other matter related to the environment, pollution or human health and safety.

Section 3.16Affiliate Contracts. Section 3.16 of the Disclosure Schedule sets forth all Affiliate Contracts, including the name of the parties thereto and a summary of the subject matter thereof (including any services provided to or by the Acquired Entity). As used herein, “Affiliate Contract” means any Contract between the Acquired Entity, on the one hand, and any Affiliate of the Acquired Entity (inclusive of Seller or any of its Affiliates (other than the Acquired Entity)), on the other hand. Except as set forth on Section 3.16 of the Disclosure Schedule,

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no officer, director, Affiliate or employee of the Acquired Entity (i) is a party to any Contract with the Acquired Entity, (ii) has an interest in any property (real or personal, tangible or intangible) owned, leased, or licensed by the Acquired Entity or otherwise used in the conduct of the Business, (iii) provides any goods or services to the Acquired Entity (other than in such person’s capacity as an officer, director, or Employee), or (iv) to Acquired Entity’s Knowledge, has an interest in any Person that is a customer of, or supplier or vendor to, the Acquired Entity.

Section 3.17Accounts Receivable. All accounts receivable of the Acquired Entity have arisen from bona fide transactions by the Acquired Entity in the ordinary course of business. To the Acquired Entity’s Knowledge, all accounts receivable reflected in the Latest Statement are good and collectible (or have been collected) in the ordinary course of business at the aggregate recorded amounts thereof, net of any applicable allowance for doubtful accounts reflected in the Latest Statement, which allowance was calculated in accordance with SAP.

Section 3.18Insurance.

(a)Section 3.18 of the Disclosure Schedule sets forth a correct list of all policies of fire, liability, directors’ and officers’/errors and omissions, medical, workers’ compensation, title, and other forms of insurance owned or held by the Acquired Entity, or in or under which the Acquired Entity otherwise participates or benefits (collectively, the “Insurance Policies”). The Acquired Entity made available to Buyer complete and correct copies of all of the Insurance Policies owned or held by the Acquired Entity. All of the Insurance Policies are valid, in full force and effect, and enforceable, all premiums thereunder have been paid in full, and no notice of cancellation or termination has been received by the Acquired Entity with respect to any of the Insurance Policies. The Acquired Entity is and has been in material compliance with all such Insurance Policies. Taken together, the Insurance Policies are sufficient for compliance with all (i) applicable Laws and (ii) Contracts to which the Acquired Entity is a party or by which the Acquired Entity or any of its properties or assets is bound, and there is no fact or circumstance to the Acquired Entity’s Knowledge to cause it to reasonably believe they provide inadequate coverage for the operations and assets of the Business and the risks to which the Acquired Entity or the Business is exposed with respect to the pre-Closing period.

(b)Section 3.18 of the Disclosure Schedule also sets forth a correct list of all Claims or proceedings which have been initiated by or on behalf of the Acquired Entity since the date that is three (3) years from the date hereof under any of the Insurance Policies, including any Proceedings that are currently pending.

Section 3.19Brokers. No broker, finder or investment banker (except for Moelis, in respect of which Seller is exclusively liable) is entitled to any brokerage, finder’s or other similar fee or commission in connection with the transactions contemplated hereby based on arrangements made by or on behalf of the Acquired Entity.

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Article IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller and the Acquired Entity as of the date hereof and as of the Closing Date (as if made on the Closing Date unless the representation or warranty expressly speaks as of a specific date) as follows:

Section 4.1Due Organization and Good Standing. Buyer is duly organized and validly existing and in good standing in accordance with the Laws of the jurisdiction of its formation and, except as would not result in a Buyer Material Adverse Effect, has all requisite Entity power and authority to own, lease and operate its properties and assets and to conduct its businesses in the manner in which its businesses are currently being conducted.

Section 4.2Authority; Binding Nature of Agreement. Buyer has the requisite power and authority to execute and delivery, and to perform its covenants and agreements under, this Agreement. The execution and delivery hereof by Buyer and the performance by Buyer of its covenants and agreements hereunder have been duly and validly authorized by all necessary Entity action on the part of Buyer. This Agreement has been duly and validly executed and delivered by Buyer and, assuming the due authorization, execution and delivery hereof by the other Parties, is a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to the Bankruptcy and Equity Exceptions.

Section 4.3Non-contravention; Consents.

(a)Buyer’s execution and delivery hereof does not, and Buyer’s performance of its covenants and agreements hereunder shall not, (i) materially violate the Organizational Documents of Buyer, (ii) subject to making or obtaining, as applicable, the Consents and Filings referenced in Section 2.4(b) and Section 3.4(b), violate any Law or (iii) (1) require any Consent of, or any Filing to or with, any Person that is not a Governmental Authority under, or (2) result in any breach of or, with or without notice or lapse of time or both, be a default or give rise to any right of termination, cancellation, amendment or acceleration of, or result in the creation of a Lien on any asset of Buyer under, any Contract to which Buyer is a party or by which Buyer or its properties or assets are bound, except, in the case of the foregoing clause (iii), as would not result in a Buyer Material Adverse Effect.

(b)Buyer’s execution and delivery hereof does not, and Buyer’s performance of its covenants and agreements hereunder shall not, require Buyer to make any Filing with or to, or to obtain any Consent from, any Governmental Authority, except for (i) the Specified Filings and Consents and (ii) any Filing or Consent the failure of which to make or obtain would not be material.

(c)There are no facts or circumstances related to Buyer or any of its Affiliates that would or would be reasonably expected to prevent, delay or impede the consummation of the transactions contemplated hereby, including the receipt of the Required Consents.

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Section 4.4Claims; Orders. Except as would not result in a Buyer Material Adverse Effect, (a) there is no Claim pending or, to Buyer’s actual knowledge, being threatened against Buyer and (b) Buyer is not subject to any Order.

Section 4.5Sufficient Funds. Buyer has and shall have at the Closing funds immediately available, as and when needed, that are necessary to (a) consummate the Acquisition at the Closing, (b) otherwise perform its covenants and agreements hereunder and (c) pay any fees, expenses or other amounts payable by Buyer in connection with the consummation of the transactions contemplated hereby. Buyer acknowledges and agrees that financing is not a condition to Closing.

Section 4.6[Reserved].

Section 4.7Purchase for Investment. Buyer is acquiring the Purchased Common Stock for its own account and not with a view to distribution in violation of any securities Laws. Buyer has been advised and understands and acknowledges that the Purchased Common Stock has not been registered in accordance with the Securities Act or the “blue sky” Laws of any jurisdiction and may be resold only if registered in accordance with the provisions of the Securities Act or if an exemption from registration is available, unless neither such registration nor such an exemption is required by applicable Law. Buyer has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Purchased Common Stock. Buyer is able to bear the economic risk of an investment in the Purchased Common Stock and is able to afford a complete loss of such investment.

Section 4.8Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other similar fee or commission that could be payable by Seller in connection with the Acquisition based on arrangements made by or on behalf of Buyer.

ARTICLE V

COVENANTS AND AGREEMENTS

Section 5.1Interim Operations of the Acquired Entity.

(a)Prior to the Closing, except (i) as required, permitted or contemplated hereby, (ii) as required by applicable Law, (iii) as set forth in Section 5.1 of the Disclosure Schedule or (iv) with the prior written consent of Buyer (which shall not be unreasonably withheld, conditioned or delayed), the Acquired Entity shall use commercially reasonable efforts to conduct the Businesses in the ordinary course and consistent with past practice in all material respects. Consistent with the foregoing, the Acquired Entity shall use commercially reasonable efforts to maintain its assets in good operating condition and repair and use commercially reasonable efforts to maintain intact the business organization and to preserve the goodwill of the suppliers, contractors, licensors, Business Employees, customers, distributors, and others having business relations with the Acquired Entity. Without limiting the generality of the foregoing, prior to the Closing the Acquired Entity shall not:

(b)amend its Organizational Documents;

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(c)(i) issue or sell any of its Equity Interests, (ii) grant any options, warrants, calls, or other rights to purchase or otherwise acquire any of its Equity Interests, or (iii) split, combine, reclassify, cancel, redeem, or repurchase any of its Equity Interests;

(d)sell, lease, transfer, or otherwise dispose of, or incur any Lien (other than a Permitted Lien) on, any of its properties or assets, except for the sale, transfer, or disposition of finished goods inventory in the ordinary course of business;

(e)make any capital expenditures in an aggregate amount of more than Fifty Thousand Dollars ($50,000);

(f)create, incur, guarantee, or assume any Indebtedness for borrowed money, except Liabilities incurred in the ordinary course of business;

(g)enter into any transaction between the Acquired Entity, on the one hand, and Seller or any of its Affiliates, on the other hand, that (i) is not on an arm’s-length basis or (ii) would be binding on the Acquired Entity after the Closing;

(h)make any loans, advances, or capital contributions to, or investments in, any other Person (including any Affiliate);

(i)acquire any business, Equity Interests, or all or substantially all assets of any other Person (whether by merger, sale of Equity Interests, sale of assets, or otherwise);

(j)create any Subsidiary;

(k)enter into any new line of business;

(l)grant any increase in the base salary or wages, bonus opportunity, or other compensation or benefits payable to any Business Employee, in each case except (i) base salary or hourly wage increases in the ordinary course of business and in a manner consistent with past practice, (ii) as required by Law, or (iii) as required by the terms of any existing Contract or Business Benefit Plan set forth on Section 3.13(a) of the Disclosure Schedule;

(m)(i) amend or modify in any material respect any Material Contract, Contract for Leased Real Property, or IP License, (ii) terminate (other than expiration in accordance with the terms thereof), not renew, or extend any Material Contract, Contract for Leased Real Property, or IP License, or (iii) enter into a Contract that, if entered into prior to the date hereof, would have been a Material Contract, Contract for Leased Real Property, or IP License;

(n)make any change in any accounting principle, policy, or procedure used by it (other than regarding Taxes, which shall be governed by paragraph (o) below), other than changes required by SAP or applicable Law;

(o)make or change any material Tax election, change any material annual Tax accounting period, file any material amended Tax Return, enter into any material closing agreement, settle any material Tax claim or assessment, consent to any material extension or

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waiver of the limitation period applicable to any Tax claim or assessment, or adopt or change any material accounting principle, policy, or procedure used by it regarding Taxes;

(p)accelerate or delay collection of any notes or accounts receivable in advance of or beyond their regular due dates or the dates when the same would have been collected in the ordinary course of business consistent with past practice;

(q)delay or accelerate payment of any account payable or other Liability beyond or in advance of its due date or the date when such Liability would have been paid in the ordinary course of business consistent with past practice;

(r)declare, set aside, or pay any dividend or any other distribution with respect to any Equity Interests;

(s)(i) settle or commence any material Claim or proceeding or (ii) cancel any other debts owed to or Claims held by it other than, in the case of this clause (ii), in the ordinary course of business consistent with past practice;

(t)waive, abandon, or otherwise dispose of any rights in or to any material IP Rights owned by the Acquired Entity;

(u)adopt a complete or partial plan of liquidation, dissolution, restructuring, recapitalization, bankruptcy, suspension of payments, or other reorganization; or

(v)agree to do, approve, or authorize any of the foregoing.

Nothing herein, including Section 5.1(a), shall give Buyer or any of its Representatives, directly or indirectly, the right to control or direct the operations of the Acquired Entity prior to the Closing and, prior to the Closing, Seller and the Acquired Entity shall exercise complete control and supervision over their respective businesses and operations.

Section 5.2Consents, Approvals and Filings; Other Actions.

(a)On the terms and subject to the conditions hereof, each Party shall use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary to cause the conditions in Article VI to be satisfied as soon as reasonably practicable after the date hereof, including using reasonable best efforts to (i) prepare and make all Filings with Governmental Authorities that are necessary to consummate the Closing, (ii) obtain all Consents of Governmental Authorities that are necessary to consummate the Closing, including the Required Filings and the Required Consents, and (iii) obtain all Consents from third parties that are necessary to consummate the Closing.

(b)(i) As soon as reasonably practicable after the date hereof, but in no event later than the later of (A) fifteen (15) Business Days after the date hereof, and (B) five (5) Business Days after Buyer’s receipt of all “Form A Statement”-related information required to be provided by the Acquired Entity or Seller (including without limitation the financial statements and projections required under section 12(a) of the “Form A Statement” and signed and notarized biographical affidavits), Buyer shall file, or cause to be filed, a “Form A Statement” or similar change-of-control applications with the OSI or other applicable Governmental Authorities where

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required by applicable Law seeking approval of Buyer’s acquisition of control of the Acquired Entity, (ii) as soon as reasonably practicable after the date hereof, but in no event later than the time frame provided in preceding clause (i), Buyer shall file, or cause to be filed, any pre-acquisition notifications on “Form E” or similar market share notifications to be filed in each jurisdiction where required by applicable Law related to the transactions contemplated hereby, (iii) each of Buyer and Seller shall provide as soon as reasonably practicable all information required by applicable Law to be provided to any Governmental Authority in connection with any such Filings or Consents and comply at the earliest reasonably practicable date with any request from a Governmental Authority for additional information, documents or other materials received by such Party or its Representatives related to such Filings, the Acquisition or the other transactions contemplated hereby and (iv) each of Buyer, on the one hand, and Seller and the Acquired Entity, on the other hand, shall act in good faith and reasonably cooperate with each other in connection with any such Filings and in obtaining any Consent of a Governmental Authority that is necessary to consummate the Closing. To the extent not prohibited by applicable Law, each Party shall use reasonable best efforts to furnish to each other all information required for any Filing to be made to a Governmental Authority by applicable Law in connection with the Acquisition. Each of Buyer, on the one hand, and Seller and the Acquired Entity, on the other hand, shall give the other reasonable prior notice of any communication with, and any proposed understanding, undertaking or agreement with, any Governmental Authority regarding any such Filing or Consent and shall not independently participate in any meeting, or engage in any substantive conversation, discussion or negotiation, with any Governmental Authority related to any such Filing or Consent, or related to any Claims by such Governmental Authority related to the Acquisition or any of the other transactions contemplated hereby, without giving the other (1) prior written notice of such meeting, conversation, discussion or negotiation and (2) unless prohibited by such Governmental Authority, the opportunity to attend or participate therein. Each of Buyer, on the one hand, and Seller and the Acquired Entity, on the other hand, shall consult and cooperate with the other in good faith in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of such Party in connection with any Claim by a Governmental Authority related to such Filings, the Acquisition or the other transactions contemplated hereby.

(c)Notwithstanding the foregoing or anything else in this Agreement to the contrary, Buyer and its Affiliates shall not be required to propose, offer, commit, agree, or consent to (i) terminate, amend, or modify any existing relationships, ventures, contractual rights or Liabilities of Buyer, any of its Affiliates or the Acquired Entity, (ii) take or agree to take any action that after the Closing that would limit the freedom of Buyer, any of its Affiliates, or the Acquired Entity with respect to, or its ability to retain, one or more of its or its Affiliates’ (including the Acquired Entity’s) businesses, product lines, or assets, or (iii) maintain, as part of any Governmental Authority undertaking as a condition to Closing, total adjusted capital for the Acquired Entity in an amount in excess of five hundred percent (500%) of the minimum required by Law.

(d)Prior to the Closing, each of Buyer and the Acquired Entity shall not, and shall not permit any of its Representatives to, take any action or fail to take any action, or enter into or consummate any transaction, that would or would reasonably be expected to result in any

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of the conditions in Article VI not being satisfied or that would or would reasonably expected to impair, prevent or delay the consummation of the transactions contemplated by this Agreement.

Section 5.3Access. Upon reasonable advance notice, the Acquired Entity shall provide Buyer and its Representatives reasonable access, during normal business hours throughout the period prior to the Closing, to the Acquired Entity’s properties, books, records and personnel, and during such period, the Acquired Entity shall cause to be furnished promptly to Buyer and its Representatives all information concerning the Acquired Entity’s business in its possession or control, or reasonably accessible or available to it through its Affiliates, as Buyer may reasonably request; provided, however, that the Acquired Entity shall not be required to permit any inspection, or to disclose any information, to the limited extent that it would in the reasonable, good-faith judgment of the Acquired Entity upon advice from counsel (i) result in the improper disclosure of any trade secrets of any Person or violate any confidentiality obligation of the Acquired Entity or (ii) jeopardize protections afforded to Seller or the Acquired Entity under the attorney-client privilege or the attorney work product doctrine; provided that the Acquired Entity shall notify Buyer where such limitations are invoked and work in good faith with Buyer to determine the next best practicable compromise or workaround arrangement. All information obtained by Buyer and its Representatives under this Section 5.3(a) shall be treated as “Confidential Information” (within the meaning of the Confidentiality Agreement) for purposes of the Confidentiality Agreement and shall be used solely for consummating the transactions contemplated hereby. Without limiting the foregoing, (1) any such access shall be (A) conducted under the supervision of the Acquired Entity or its Representative’s personnel, (B) subject to all of the standard protocols and procedures of the Acquired Entity including the requirement that visitors be escorted at all times and any applicable restrictions as a result of the COVID-19 pandemic, (C) subject to any additional procedures required by any landlord and (D) in such a manner as does not unreasonably interfere with the normal operations of the Acquired Entity, (2) neither Buyer nor any of its Representatives shall contact or engage in any communication with (A) any current or former director, manager, officer or employee of the Acquired Entity or any of their respective Representatives related hereto, the transactions contemplated hereby or the Acquired Entity, except, in each case under this clause (A), as expressly permitted by this Section 5.3(a) or (B) any customer, vendor, creditor, investor, regulator or other commercial counterparty of the Acquired Entity, except for contacts with such customers, vendors, creditors, investors, regulators or other counterparties made in the ordinary course of business that are unrelated hereto, the transactions contemplated hereby or the Acquired Entity and (3) prior to the Closing, Buyer shall have no right to perform or cause to be performed any invasive or subsurface investigations of any Leased Real Property, including any sampling or testing of the air, soil, surface water, groundwater, building materials or other environmental media. The provision of information under this Section 5.3(a) shall not expand any remedies available hereunder to Buyer in any manner. In addition, the Acquired Entity shall provide Buyer monthly financial statements for each completed month before the Closing Date as soon as practicable and in any event within fifteen (15) days after month-end.

Section 5.4Employee Matters.

(a)On the Closing Date, Buyer shall provide or cause to be provided to each Continuing Employee (i) a base salary or wage rate that is no less favorable than the base salary or wage rate provided by Seller or any of its Affiliates (including the Acquired Entity) to each

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such Continuing Employee immediately prior to the Closing, (ii) incentive opportunities that are no less favorable than those provided by Seller or any of its Affiliates (including the Acquired Entity) to each such Continuing Employee immediately prior to the Closing Date and (iii) employee benefits (excluding severance payments and severance benefits) that are no less favorable in the aggregate (including related to the proportion of employee cost) than those employee benefits provided to similarly situated employees of Buyer and its Subsidiaries. Buyer shall not, at any time during the ninety (90) days following the Closing, effectuate a “plant closing” or “mass layoff,” as those terms are defined in the WARN Act, provided, however, that nothing in this Section 5.4(a) shall restrict Buyer from terminating the employment of Continuing Employees from and after the Closing.

(b)Buyer shall provide or shall cause to be provided to each Continuing Employee with the severance payments and benefits that are provided to similarly situated employees of Buyer and its Subsidiaries at the time of such termination of employment.

(c)As of the Closing Date, the Continuing Employees shall cease participation in all Seller Employee Plans (other than any Assumed Plan). As of the Closing Date, Buyer shall assume and honor, or will cause the Acquired Entity to assume and honor, in accordance with their terms (including terms related to amendment and termination), any Seller Employee Plan listed in Section 5.4(b) of the Disclosure Schedule (the “Assumed Plans”) and any Acquired Entity Employee Plan.

(d)For eligibility, benefit accrual (other than for purposes of a defined benefit plan) and vesting purposes under the employee benefit plans of Buyer and its Affiliates that are offered and provide benefits to Continuing Employees after the Closing Date (the “Buyer Plans”), Buyer shall (and shall cause the Acquired Entity to) use commercially reasonable efforts to cause each Continuing Employee to be credited with his or her years of service or comparable experience with Seller or its Affiliates (including the Acquired Entity and its predecessor to the extent previously credited by Seller or its Affiliates) prior to the Closing Date to the same extent as such employee was entitled prior to the Closing Date to credit for such service under any similar Business Benefit Plan, except to the extent such credit would result in a duplication of benefits. For purposes of each Buyer Plan, if any, providing medical, dental, pharmaceutical or vision benefits to any Continuing Employee, Buyer shall (or shall cause its Affiliates to) use commercially reasonable efforts to (i) waive all pre-existing condition exclusions and actively-at-work requirements of such Buyer Plan for such Continuing Employee and his or her covered dependents, and (ii) credit all eligible expenses incurred by such Continuing Employee and his or her covered dependents under the comparable Business Benefit Plans during the portion of the plan year ending on the date of such Continuing Employee’s participation in the corresponding Buyer Plan begins under such Buyer Plan for purposes of satisfying all deductible, coinsurance, co-pays and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such Buyer.

(e)As of the Closing Date, Seller shall transfer from the medical and dependent care account plans of Seller and its Affiliates under any Seller Employee Plan (each, a “Seller FSA Plan”) to one or more medical and dependent care account plans established or designated by Buyer the account balances of the Continuing Employees, and Buyer shall be

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responsible for the obligations of the Seller FSA Plans to provide benefits to the Continuing Employees with respect to such transferred account balances at or after the Closing Date. Each Continuing Employee shall be permitted to continue to have payroll deductions made as most recently elected by him or her under the applicable Seller FSA Plan. As soon as reasonably practicable following the Closing Date, if the net difference between (i) the aggregate employee contributions under the Seller FSA Plan as of the Closing Date made during the year in which the Closing Date occurs and (ii) the aggregate employee reimbursements under the Seller FSA Plan as of the Closing Date made during the year in which the Closing Date occurs, in each case with respect to a Continuing Employee for the applicable year, (the “Assumed FSA Balance”) is (x) a positive number, then Seller shall transfer to Buyer an amount, in cash, equal to the Assumed FSA Balance, or (y) a negative number, then Buyer shall transfer to Seller an amount, in cash, equal to the positive value of the Assumed FSA Balance.

(f)Effective as of the Closing Date, the Continuing Employees shall no longer actively participate in the Evolent Health 401(k) Plan (the “Seller 401(k) Plan”). Buyer shall designate a tax-qualified defined contribution plan of Buyer (such plan, the “Buyer Savings Plan”) that currently provides for the receipt from the Continuing Employees of “eligible rollover distributions” (as such term is defined in Section 401(a)(31) of the Code.

(g)Buyer and its Affiliates (including the Acquired Entity) shall file and distribute Forms 1094-C and 1095-C with respect to the Continuing Employees in accordance with the requirements of Sections 6055 and 6056 of the Code and the regulations and related guidance promulgated thereunder for the calendar year in which the Closing occurs.  Seller shall provide such information as is reasonably necessary for Buyer and its Affiliates to discharge its obligations under this Section 5.4(g) for the calendar year in which the Closing occurs.

(h)Nothing in this Section 5.4 shall be treated as an amendment of, an undertaking to amend or terminate, or a limitation on the ability of Seller or Buyer or its Affiliates to amend or terminate any employee benefit plan (including any Acquired Entity Employee Plan). No provision hereof shall create any third-party beneficiary rights in any employee or any other natural person service provider of the Acquired Entity or any beneficiary or dependents thereof for the compensation, terms and conditions of employment and benefits that may be provided.

Section 5.5Indemnification; Directors’ and Officers’ Insurance.

(a)From and after the Closing, Buyer shall cause the Acquired Entity to fulfill and honor the obligations of the Acquired Entity under any indemnification provision and any exculpation provision in the Organizational Documents of the Acquired Entity as in effect as of the Closing. Buyer shall not permit any such indemnification or exculpation provision to be amended, repealed or otherwise modified during the six (6) year period after the Closing in any manner that would adversely affect the rights of any Pre-Closing Indemnified Person, unless any such amendment, repeal or modification is required by applicable Law.

(b)Buyer acknowledges (on behalf of itself and its Representatives, including, after the Closing, the Acquired Entity) that the Pre-Closing Indemnified Persons may have certain rights to indemnification, advancement of expenses and/or insurance provided by current direct or indirect equityholders, members or other Affiliates of Seller or its Representatives

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(except for the Acquired Entity) or their respective direct or indirect equityholders (“Indemnitee Affiliates”) separate from the obligations of Buyer and the Acquired Entity hereunder or under their respective Organizational Documents. From and after the Closing, Buyer and the Acquired Entity (each, a “D&O Indemnifying Party”) shall be the indemnitors of first resort (i.e., their obligations to the Pre-Closing Indemnified Persons are primary and any obligation of any Indemnitee Affiliate to advance expenses or to provide indemnification or insurance for the same D&O Expenses or losses, claims, damages, penalties, Taxes, interest, fines, judgments or amounts paid in settlement (collectively, “D&O Costs”) incurred by the Pre-Closing Indemnified Persons are secondary), and the D&O Indemnifying Parties (on behalf of themselves and their respective Subsidiaries) irrevocably waive, relinquish and release the Indemnitee Affiliates from any and all claims against the Indemnitee Affiliates for contribution, subrogation or any other recovery of any kind in respect thereof. For the purposes of this Section 5.5(b), “D&O Expenses” shall mean reasonable attorneys’ fees and all other reasonable costs, charges and expenses paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, to be a witness in or participate in any D&O Indemnifiable Claim, but solely to avoid duplication of bases for recovery, shall exclude losses, claims, damages, judgments and amounts paid in settlement (because such items are included in the definition of D&O Costs) and “D&O Indemnifiable Claim” shall mean any claim related to any threatened, pending or completed claim or investigation, whether criminal, civil, administrative or investigative or otherwise, related to acts or omissions in their official capacities occurring on or prior to the Closing (including for acts or omissions in connection with this Agreement and the transactions contemplated thereby).

(c)If Buyer or any of its respective successors or assigns (i) consolidates with or merges into any other Entity and is not the continuing or surviving Entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then Buyer or its applicable successor or assign shall cause its applicable successors or assigns to assume all of the obligations thereof in this Section 5.5.

(d)The Pre-Closing Indemnified Persons are intended third-party beneficiaries of this Section 5.5, with full rights of enforcement of this Section 5.5 as if a party hereto.

(e)For purposes hereof, each Person who is or was an officer or director of the Acquired Entity at or any time prior to the Closing shall be deemed to be a “Pre-Closing Indemnified Person.”

Section 5.6Termination of Affiliate Contracts. Except for any Affiliate Contract listed in Section 5.6 of the Disclosure Schedule, at or prior to the Closing, Seller and the Acquired Entity shall cause all Affiliate Contracts to be terminated and provide reasonably satisfactory evidence of such termination to Buyer.

Section 5.7Retention and Access to Records. After the Closing Date, Buyer shall cause the Acquired Entity to provide Seller and its Representatives with reasonable access, during normal business hours and upon reasonable advance notice, to the books and records of the Acquired Entity that relate to periods or occurrences prior to the Closing Date for any reasonable and bona fide financial reporting, Tax, accounting purpose, or compliance with Law. Buyer shall, and shall cause the Acquired Entity to, preserve, keep and maintain such books and

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records for a period of seven (7) years after the Closing Date. The rights granted under this Section 5.7 shall expire and be of no further force and effect upon the seventh (7th) anniversary of the Closing Date. Notwithstanding the foregoing, Buyer may dispose of books and records during such seven (7) year period if the same are first offered in writing to Seller and not accepted by Seller within thirty (30) days of such offer.

Section 5.8Exclusivity. From and after the date of this Agreement until the earlier to occur of the Closing Date or termination of this Agreement pursuant to its terms, neither Seller nor the Acquired Entity shall directly or indirectly take, and shall instruct and cause its Affiliates (including without limitation the Acquired Entity’s ultimate parent Entity) and their respective representatives, consultants, financial advisors, attorneys, accountants or other agents not to take, any action to solicit, initiate or engage in discussions or negotiations with, or provide any information to or enter into any agreement with any Person (other than Buyer, its Affiliates and their respective representatives) concerning any Acquisition Proposal and to cease any and all existing communications or discussions with any Person in connection with the foregoing. Seller and the Acquired Entity shall immediately notify Buyer in writing of any communication, offer, inquiry or proposal from any Person regarding an Acquisition Proposal.

Section 5.9Notification of Certain Matters. From the date of this Agreement until the Closing Date, each of Seller and the Acquired Entity, on one hand, and Buyer, on the other hand, shall give the other prompt written notice of: (a) any event, change, or occurrence that (i) causes, or would reasonably be expected to cause, any representation or warranty of such Party set forth in this Agreement to be untrue or inaccurate in any material respect or (ii) causes, or would reasonably be expected to cause, such Party to fail to perform or comply with in any material respect any covenant or agreement of such Party in this Agreement; and (b) any proceeding or Claim commenced or, to Seller’s knowledge, the Acquired Entity’s Knowledge, or Buyer’s knowledge, as applicable, threatened against or otherwise affecting such Party with respect to the transactions contemplated by this Agreement. No such notification will affect any of the representations, warranties, covenants, agreements, rights, or remedies of the Parties contained in this Agreement.

Section 5.10Transition Services Agreement. With respect to the Transition Services Agreement, the definitive form of which will be agreed before Closing, each Party shall (including causing any relevant Affiliate to) promptly hereafter proceed in good faith, and using all commercially reasonable efforts (including making available at all scheduled and other necessary times dedicated senior executive personnel with relevant expertise and legal counsel), to implement the final form of such Contract with reference to the TSA Terms.

ARTICLE VI

CONDITIONS TO CLOSING

Section 6.1Conditions to Each Party’s Obligation to Effect the Acquisition. The respective obligations of Buyer and Seller to consummate the Acquisition shall be subject to the satisfaction (or waiver by Buyer, on the one hand, and Seller, on the other hand) prior to the Closing of the following conditions:

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(a)Governmental Consents. The Filings with or to, and all Consents of, any Governmental Authority listed in Section 6.1(a) of the Disclosure Schedule (the “Required Filings” and the “Required Consents,” respectively) shall have been made or obtained, respectively.

(b)Legal Restraints. No Order issued after the date hereof shall be in effect that makes illegal or prohibits the consummation of the Acquisition (any such Law, a “Legal Restraint”).

Section 6.2Conditions to Obligations of Buyer. The obligation of Buyer to consummate the Acquisition is further subject to the satisfaction (or waiver by Buyer) prior to the Closing of the following conditions:

(a)Representations and Warranties.

(i) Each Sell-Side Fundamental Representation (other than Section 3.12) shall be true and correct as of the Closing Date as if made as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of a specific date, in which case such representation or warranty shall have been true and correct as of such date.

(ii) Each representation and warranty in Article II (except for the Sell-Side Fundamental Representations) shall be true and correct (read, for purposes of this Section 6.2(a)(ii) only, without giving effect to any qualifier as to materiality, “in all material respects,” “material” or Seller Material Adverse Effect) as of the Closing Date as if made as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of a specific date, in which case such representation or warranty shall have been true and correct as of such date), except for any failure to so be true and correct that would not result in a Seller Material Adverse Effect.

(iii) Each representation and warranty in Article III (in each case, except for the Sell-Side Fundamental Representations, but including Section 3.12) shall be true and correct (read, for purposes of this Section 6.2(a)(iii) only, without giving effect to any qualifier as to materiality, “in all material respects,” “material” or Material Adverse Effect) as of the Closing Date as if made as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of a specific date, in which case such representation or warranty shall have been true and correct as of such date), except for any failure to so be true and correct that would not result in a Material Adverse Effect.

(b)Performance of Covenants and Agreements. Seller and the Acquired Entity shall have performed or complied in all material respects with each covenant or agreement herein that are required to be performed or complied with by it prior to the Closing.

(c)Material Adverse Effect. Since the date of this Agreement, no event or change shall have occurred that has had, or would reasonably be expected to have, a Material Adverse Effect.

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(d)Bring-Down Certificate. Buyer shall have received a certificate, dated as of the Closing Date and duly executed on behalf of the Acquired Entity and Seller, confirming the satisfaction of all unwaived conditions in Section 6.2(a), and Section 6.2(b).

Section 6.3Conditions to Obligations of Seller. The obligation of Seller to consummate the Acquisition is further subject to the satisfaction (or waiver by Seller) prior to the Closing of the following conditions:

(a)Representations and Warranties.

(i)Each Buyer Fundamental Representation shall be true and correct as of the Closing Date as if made as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of a specific date, in which case such representation or warranty shall have been true and correct in all material respects as of such date).

(ii)Each representation and warranty in Article IV (except for the Buyer Fundamental Representations) shall be true and correct (read, for purposes of this Section 6.3(a)(ii) only, without giving effect to any qualifier as to materiality, “in all material respects,” “material” or Buyer Material Adverse Effect) in all material respects as of the Closing Date as if made as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of a specific date, in which case such representation or warranty shall have been true and correct as of such date).

(b)Performance of Covenants and Agreements. Buyer shall have performed or complied in all material respects with each covenant or agreement herein that are required to be performed or complied with by it prior to the Closing.

(c)Bring-Down Certificate. Seller shall have received a certificate dated as of the Closing Date and duly executed on behalf of Buyer, confirming the satisfaction of all unwaived conditions in Section 6.3(a) and Section 6.3(b).

Section 6.4Effect of the Closing. If the Closing occurs, all conditions set forth in Section 6.1, Section 6.2 and Section 6.3 shall be deemed to have been satisfied for all purposes hereunder.

ARTICLE VII

TERMINATION

Section 7.1Termination Rights.

(a)Termination by Mutual Consent. Seller and Buyer shall have the right to terminate this Agreement at any time prior to the Closing by mutual written consent.

(b)Termination by Either Seller or Buyer. Seller, on the one hand, and Buyer, on the other hand, shall have the right to terminate this Agreement at any time prior to the Closing, if a Legal Restraint is in effect that has become final and non-appealable or in the event the Closing has not occurred by December 31, 2021 (“Outside Date”); provided, however, that

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the right to terminate this Agreement under this Section 7.1(b) shall not be available to a Party that has breached or failed to perform any of its representations, warranties, covenants, or agreements contained in this Agreement, which breach or failure to perform has been the cause of or has resulted in the failure of the Closing to occur on or prior to the Outside Date.

(c)Termination by Buyer. Buyer shall have the right to terminate this Agreement if any of Seller or the Acquired Entity fails to perform or comply with any of its covenants or agreements hereunder in any material respect, or if any of the representations or warranties of any of Seller or the Acquired Entity herein fails to be true and correct, which failure (i) would give rise to the failure of a condition in Section 6.2(a) or Section 6.2(b), as applicable, and (ii) is not reasonably capable of being cured by Seller or the Acquired Entity, as applicable, within forty-five (45) days after Seller’s receipt of written notice from Buyer of such failure or, if reasonably capable of being cured during such forty-five (45) day period, is not cured by Seller or the Acquired Entity, within such forty-five (45) day period; provided that Buyer shall not be entitled to terminate this Agreement under this Section 7.1(c) if Buyer has failed to perform or comply with any of its covenants or agreements hereunder in any material respect, or if any of the representations or warranties of Buyer herein has failed to be true and correct, which failure (1) would give rise to the failure of a condition in Section 6.3(a) or Section 6.3(b) and (2) has not been cured as of the date such written notice is received by Seller.

(d)Termination by Seller. Seller shall have the right to terminate this Agreement if Buyer materially fails to perform or comply with any of its covenants or agreements hereunder in any material respect, or if any of the representations or warranties of Buyer herein fails to be true and correct, which failure (1) would give rise to the failure of a condition in Section 6.3(a) or Section 6.3(b), as applicable, and (2) is not reasonably capable of being cured by Buyer within forty-five (45) days after receiving written notice from Seller of such failure or, if reasonably capable of being cured during such forty-five (45) day period, is not cured by Buyer within such forty-five (45) day period; provided that Seller shall not be entitled to terminate this Agreement under this Section 7.1(c) if any of Seller or the Acquired Entity has failed to perform or comply with any of its covenants or agreements hereunder in any material respect, or if any of the representations or warranties of Seller or the Acquired Entity herein has failed to be true and correct, which failure (A) would give rise to the failure of a condition in Section 6.3(a) or Section 6.3(b) and (B) has not been cured as of the date such written notice is received by Buyer.

Section 7.2Effect of Termination; Procedure for Termination.

(a)If this Agreement is terminated under Section 7.1, this Agreement shall be void and of no force or effect, without any Liability or obligation on the part of any Party, whether arising prior to or after such termination, based on or relating to this Agreement or the negotiation, execution, performance or subject matter hereof (whether in contract or in tort or otherwise, or whether at law (including at common law or by statute) or in equity); provided, however, that (i) this Section 7.2, Article IX and Article X (other than Section 10.7) shall survive any such termination and shall remain in full force and effect and (ii) no such termination or this Section 7.2(a) shall relieve any Party of any liability for any willful and material breach hereof occurring prior to such termination.

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(b)This Agreement may be terminated only under Section 7.1. In order to terminate this Agreement under Section 7.1, the Party desiring to terminate this Agreement shall give written notice of such termination to Buyer (if the terminating Party is Seller) or Seller (if the terminating party is Buyer) under Section 10.9, specifying the provision hereof under which such termination is effectuated.

ARTICLE VIII

INDEMNIFICATION

Section 8.1Survival of Representations and Warranties and Covenants.

(a)The representations and warranties set forth in this Agreement and all claims with respect thereto shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement until the date that is eighteen (18) months following the Closing Date, except that (i) the Sell-Side Fundamental Representations (other than Section 3.12) and the Buyer Fundamental Representations and all claims with respect thereto shall survive indefinitely, and (ii) the representations and warranties in Section 3.12 and Section 3.13 and the obligations of Seller pursuant to Section 8.2 with respect to such representations and warranties, shall survive the Closing until thirty (30) days following the expiration of the applicable statute of limitations.

(b)All covenants and agreements contained herein to be performed by their terms (i) prior to the Closing shall survive the Closing until the date that is six (6) months following the Closing Date and (ii) on or after the Closing Date shall survive the Closing until fully performed in accordance with the terms specified herein with respect to such covenant or agreement.

(c)In the event that notice of any claim for indemnification under this Article VIII has been given in good faith, within the applicable survival period, the representations and warranties or covenants or other agreements that are the subject of such indemnification claim (and the right to pursue such claim) shall survive with respect to such claim until such time as such claim is finally resolved. Any claim for a breach of a representation or warranty or covenant or other agreement must be delivered prior to the expiration of the applicable survival term set forth in this Section 8.1.

Section 8.2Indemnification by Seller.

(a)Subject to the provisions of this Article VIII, from and after the Closing, Seller shall indemnify, defend and hold harmless Buyer, its Affiliates (including the Acquired Entity after the Closing) and its and their respective Representatives (collectively, the “Buyer Indemnified Parties”) from, against and in respect of any and all damages, losses, judgments, penalties, and costs and expenses (including reasonable and documented out-of-pocket attorneys’ fees) but excluding any punitive or exemplary damages or losses (collectively, “Losses”), actually incurred by any Buyer Indemnified Party arising out of:

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(i)the breach of any representation or warranty made in Article II or Article III (or the certificate delivered pursuant to Section 6.2(d) by or on behalf of Seller at or prior to the Closing) that is not a Sell-Side Fundamental Representation;

(ii)the breach of any Sell-Side Fundamental Representation (or the certificate delivered pursuant to Section 6.2(d) by or on behalf of Seller at or prior to the Closing with respect thereto);

(iii)any breach of any covenant or agreement contained in this Agreement to be performed or complied with by the Acquired Entity prior to the Closing or Seller prior to or after the Closing;

(iv)all Taxes (or the non-payment thereof) imposed on or payable by the Acquired Entity for any Pre-Closing Tax Period or as a result of the Acquired Entity being a member of an affiliated, consolidated, combined or unitary group on or prior to the Closing Date; and

(v)any matter set forth on Schedule 8.2(a)(v).

(b)Notwithstanding any other provision in this Agreement to the contrary, the indemnification provided for in Section 8.2(a) shall be subject to the following limitations:

(i)Seller shall not be required to indemnify Buyer Indemnified Parties with respect to any claim for indemnification arising out of or relating to matters described in Section 8.2(a)(i) unless and until the aggregate amount of all such claims for such matters exceeds one half of one percent (0.50%) of the Purchase Price (the “Deductible”), in which event Buyer Indemnified Parties will be entitled to recover all Losses arising out of or relating to such matters in excess of the Deductible;

(ii) Seller’s aggregate Liability for Losses arising out of or resulting from claims under Section 8.2(a)(i) shall in no event exceed an amount equal to ten percent (10%) of the Purchase Price;

(iii) Except in the case of fraud, Seller’s aggregate Liability for Losses arising out of or resulting from claims under this Agreement shall in no event exceed the Purchase Price. For the avoidance of doubt, the limitations set forth in this Section 8.2(b) shall not apply in the case of fraud; and

(iv) Seller shall have no obligation to indemnify any Buyer Indemnified Party from and against any Taxes of any Person (A) for any taxable period or portion of a taxable period that is not a Pre-Closing Tax Period (or any other Losses directly related to such Taxes) or (B) that are attributable to any transaction occurring after the Closing Date. Additionally, the representations and warranties contained in Section 3.12 may only be relied upon for purposes of Tax Liabilities for Pre-Closing Tax Periods, and are not a guarantee of any Tax assets or the efficacy of any Tax positions taken or to be taken with respect to any Tax period (or portion thereof) ending after the Closing.

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Section 8.3Indemnification by Buyer.

(a)Subject to the provisions of this Article VIII, from and after the Closing, Buyer shall indemnify, defend and hold harmless Seller, its Affiliates and their respective Representatives (collectively, the “Seller Indemnified Parties” and, each of the Buyer Indemnified Parties and the Seller Indemnified Parties, an “Indemnified Party”) against any Losses actually incurred arising out of:

(i)the breach or inaccuracy of any representation or warranty made in Article IV (or the certificate delivered pursuant to Section 6.3(c) by or on behalf of Buyer at or prior to the Closing with respect thereto) that is not a Buyer Fundamental Representation;

(ii)the breach or inaccuracy of any Buyer Fundamental Representation (or the certificate delivered pursuant to Section 6.3(c) by or on behalf of Buyer at or prior to the Closing with respect thereto); and

(iii)any breach of any covenant or agreement contained in this Agreement to be performed or complied with by the Acquired Entity after the Closing or Buyer prior to or after the Closing.

(b)Notwithstanding any other provision in this Agreement to the contrary, except in the case of fraud, Buyer’s aggregate Liability for Losses arising out of or resulting from claims under this Agreement shall in no event exceed the Purchase Price.

Section 8.4Indemnification Principles.

(a)The amount of any and all indemnification payments in respect of Losses under this Agreement shall be determined net of (i) any monies from a third party actually received by the Indemnified Party with respect to such Losses, and (ii) any proceeds actually received by an Indemnified Party under any insurance policies or pursuant to any claim, recovery, settlement or payment by or against any other collateral sources (such as contractual indemnities of any Person which are contained outside of this Agreement), in each case, net of costs or expenses incurred in connection with securing or obtaining such proceeds (including premium costs).

(b)To avoid double counting, the Indemnified Parties shall not be entitled to recover any Losses relating to any matter arising under one provision of this Agreement to the extent that such Indemnified Party had already recovered Losses with respect to such matter pursuant to any other provisions of this Agreement.

(c)No Indemnified Party shall be entitled to indemnification with respect to any Losses to the extent such Losses are accrued or otherwise reflected in the calculation of the Purchase Price in accordance with Section 1.5.

(d)The amount of any Loss subject to indemnification under Section 8.2 shall be calculated net of (i) any tax benefits realized by the Party being indemnified on account of such Loss with respect to the year in which the Loss occurs and the following year, as

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determined on a “with and without” basis, and (ii) any insurance proceeds to the extent actually received by Buyer with respect to the Loss. To the extent that any Buyer Indemnified Party receives any amount under insurance coverage with respect to a Loss for which a Buyer Indemnified Party has previously obtained payment in indemnification under this Article VIII, Buyer shall, as soon as reasonably practicable after receipt of such insurance proceeds, pay and reimburse Seller, for any such duplicative prior indemnification payment up to the amount of the insurance proceeds, but less (i) the cost and expense of pursuing such insurance recovery, (ii) the deductible associated therewith and (iii) the amount of all retro-premium obligations and reasonably anticipated premium increases resulting from such recovery. To the extent that any Buyer Indemnified Party receives any amounts from third parties with respect to a Loss for which a Buyer Indemnified Party has previously obtained payment in indemnification under this Article VIII, Buyer shall, as soon as reasonably practicable after receipt of such amounts, pay and reimburse Seller, for any such duplicative prior indemnification payment up to the amount of the amounts received from such third party, but less the cost and expense of pursuing such recovery. The foregoing requirements with respect to insurance or third-party payments shall not create any obligation on Buyer Indemnified Parties to pursue such potential payment sources, and shall be subject to those insurance or third-party payment not themselves being subject to reduction or reimbursement in connection with any indemnification payment receipts by a Buyer Indemnified Party under this Article VIII.

(e)The representations, warranties, covenants, and agreements of the Parties contained in this Agreement, and the rights and remedies of the Buyer Indemnified Parties and the Seller Indemnified Parties with respect thereto, will not be affected by any investigation, inquiry, or examination made by or on behalf of either Party, or the knowledge of either Party or their respective Representatives, regardless of whether such investigation, inquiry, or examination was conducted, or such knowledge was obtained, prior to, at, or after the execution of this Agreement or the consummation of the Closing and regardless of whether such knowledge was obtained from the other Party, any of its representatives, or any other Person.

Section 8.5Manner of Payment. Any indemnification payment pursuant to Section 8.2 or Section 8.3 shall be effected by wire transfer of immediately available funds to an account designated by the applicable Indemnified Party within ten (10) Business Days after the final determination and resolution thereof.

Section 8.6Procedure.

(a)Direct Claims. If either Indemnified Party shall have a claim for indemnification hereunder for any claim other than with respect to a claim asserted by a third party, the Indemnified Party shall, as promptly as is practicable, give written notice to the party from whom indemnification is sought (the “Indemnifying Party”) of the nature of the claim. Such written notice shall describe the claim in reasonable detail, including, to the extent practicable, copies of any material written evidence thereof and indicate the estimated amount of such claim to the extent feasible. The failure to make timely delivery of such written notice by the Indemnified Party to the Indemnifying Party shall not relieve the Indemnifying Party from any Liability under this Article VIII with respect to such matter, except to the extent the Indemnifying Party is actually prejudiced by failure to give such notice.

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(b)Defense of Third-Party Claims.

(i)Any Indemnified Party making a claim for indemnification under Section 8.2 or Section 8.3 (other than in connection with a Tax Claim, the administration of which shall be governed exclusively by Section 10.7(b)) shall notify the Indemnifying Party of the claim in writing promptly, but in no event more than 10 days, after receiving notice of any action, lawsuit, proceeding, investigation, demand or other Claim against the Indemnified Party by a third party (a “Third-Party Claim”), describing in reasonable detail the claim, the amount or estimated amount of damages sought thereunder (if known and quantifiable, which estimate shall not be conclusive of the final amount of such Third-Party Claim), any other remedy sought thereunder, any relevant time constraints relating thereto, the basis thereof and the provisions of this Agreement upon which such claim for indemnification is made and, to the extent practicable, any other material details pertaining thereto (a “Claim Notice”); provided that the failure to so notify an Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that such failure has a materially prejudicial effect on the defenses or other rights available to the Indemnifying Party with respect to such Third-Party Claim. Following the receipt of the Claim Notice, the Indemnifying Party may notify the Indemnified Party that it desires to assume control of the defense of such Third-Party Claim with counsel reasonably acceptable to the Indemnified Party provided, however, that the Indemnifying Party will not have the right to assume control of the defense of such Third-Party Claim, and shall pay the reasonable fees and expenses of counsel retained by the Indemnified Party, if (A) such Third-Party Claim seeks non-monetary relief (in whole or in part) or relates to or arises in connection with any criminal proceeding or Claim, (B) the Indemnified Party reasonably believes an adverse determination with respect to such Third-Party Claim would be detrimental to or injure the reputation or future business prospects of the Indemnified Party or any of its Affiliates, (C) the named parties in any such action (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party (or their respective Affiliates) and the representation of both parties by the same counsel would be inappropriate due to actual or potential differing or conflicts of interests between them, (D) the Indemnifying Party fails to actively and diligently conduct the defense of such Third Party Claim, or (E) Seller is the Indemnifying Party and Indemnified Party reasonably believes the defense of such Third Party Claim could have a material adverse effect on the Indemnified Party’s or its Affiliates’ relationship with any of its material customers, suppliers, or other business relationships.

(ii)In the event that the Indemnifying Party notifies the Indemnified Party that it desires to defend the Indemnified Party against a Third-Party Claim, the Indemnifying Party shall have the power to direct and control the defense of such Third-Party Claim giving rise to an Indemnified Party’s claim for indemnification at such Indemnifying Party’s expense. Once the Indemnifying Party has duly assumed the defense of a Third-Party Claim, the Indemnified Party shall have the right, but not the obligation, to participate in the defense of such claim and to employ separate counsel of its choice for such purpose; provided that the fees and expenses of such separate counsel shall be borne by the Indemnified Party and shall not be recoverable from such

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Indemnifying Party under this Section 8.6 unless (A) the employment thereof has been specifically authorized by the Indemnifying Party in writing or (B) the Indemnified Party has been advised by legal counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party. If the Indemnifying Party shall control the defense of any such claim, the Indemnifying Party shall be entitled to settle such claims; provided that the Indemnifying Party shall obtain the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed) before settling, compromising, offering to settle or compromise, or ceasing to defend such claim if, pursuant to or as a result of such settlement, compromise or cessation, (A) an Order would be imposed that would materially restrict the future activity or conduct of the Indemnified Party or any of its Affiliates, (B) a violation of Law by the Indemnified Party or any of its Affiliates would be found or admitted, (C) any monetary liability would be imposed on the Indemnified Party that would not be paid or reimbursed by the Indemnifying Party, or (D) any material non-monetary condition or obligation would be imposed on any Indemnified Party or any of its Affiliates.

(iii)The Indemnified Party may not settle any Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed) if the Indemnified Party is seeking or will seek indemnification hereunder with respect to such matter.

(iv)The Indemnified Party and the Indemnifying Party shall and shall cause their Affiliates to reasonably cooperate in connection with the defense of a Third-Party Claim, including by providing reasonable access to each other’s relevant business records, other documents and Representatives, if there is no conflict of interest between the Indemnifying Party and the Indemnified Party in the defense of such Third-Party Claim. The Indemnified Party and the Indemnifying Party shall keep each other reasonably informed with respect to the status of such Third-Party Claim.

Section 8.7Exclusive Remedy. Except with respect to claims alleging fraud and as provided under the provisions hereof providing for equitable remedies, the Parties agree that, from and after the Closing, the sole and exclusive remedies of the Parties to this Agreement and any other Indemnified Person, respectively, for any Losses or damages (including any Losses from claims for breach of contract or warranty) arising out of or based upon the matters set forth in this Agreement are the indemnification and/or reimbursement obligations of the Parties set forth in this Article VIII.

ARTICLE IX

OTHER COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS

Section 9.1No Other Representations and Warranties; Non-reliance.

(a)Except for the representations and warranties expressly in Article IV, Seller and the Acquired Entity acknowledge and agree that none of Buyer or any of its Representatives or direct or indirect equity holders make, or have made, any other express or implied representation or warranty whatsoever (whether at law (including at common law or by statute) or in equity). Except for Seller’s representations and warranties expressly in Article II

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and the Acquired Entity’ representations and warranties expressly in Article III (collectively, the “Sell-Side Representations”), Seller and the Acquired Entity disclaim any other express or implied representation or warranty whatsoever (whether at law (including at common law or by statute) or in equity), including related to any opinion, projection, forecast, statement (including any forward-looking statement), budget, estimate, advice or other similar information (including information related to the future revenues, earnings, results or operations (or any component thereof)), cash flows, financial condition (or any component thereof) or the future business and operations of the Acquired Entity or any of its businesses, assets, employees, Permits, liabilities, operations, prospects or condition (financial or otherwise), as well as any other business plan and cost-related plan information of or related to the foregoing (collectively, “Projections”), in each case, made, communicated or furnished (orally or in writing), or to be made, communicated or furnished (orally or in writing), to Buyer or any of its Representatives, in each case, whether made by Seller, the Acquired Entity or any of their respective Representatives or direct or indirect equity holders or any other Person. Other than as expressly contemplated by this Agreement, any other document contemplated by this Agreement, or any certificate delivered pursuant hereto or thereto, neither Seller, Buyer nor any of their respective Affiliates or Representatives shall have or be subject to any liability or indemnification obligation to Buyer or Seller, as the case may be, or any other Person, resulting from the distribution to Buyer or Seller, as the case may be, or Buyer’s or Seller’s use of, as the case may be, any information not set forth in or incorporated by reference into this Agreement or any Schedule, Annex or Exhibit hereto, including any information, document or material made available in certain “data rooms” (including the Data Room), management presentations or in any other form in expectation or contemplation of the transactions contemplated hereby.

(b)Except for the Sell-Side Representations, Buyer specifically acknowledges and agrees that none of Seller, the Acquired Entity or any of their respective Representatives or direct or indirect equity holders or any other Person make, or have made, any other express or implied representation or warranty whatsoever (whether at law (including at common law or by statute) or in equity), including related to the Acquired Entity or its businesses, assets, employees, Permits, liabilities, operations, prospects, condition (financial or otherwise) or any Projection, and Buyer has not relied on any such representation or warranty in entering into this Agreement (other than the Sell-Side Representations).

Section 9.2Retention of Counsel. In any dispute or proceeding arising solely under or in connection with this Agreement after the Closing, (a) Seller shall have the right, at its election, to retain Bass, Berry & Sims PLC to represent it in such matter, even if such representation shall be adverse to Buyer or the Acquired Entity, (b) Buyer and the Acquired Entity, for themselves and for their respective Representatives, successors and assigns, hereby irrevocably consent to any such representation in any such matter and (c) Buyer and the Acquired Entity, for themselves and for their respective Representatives, successors and assigns, hereby irrevocably waive any actual or potential conflict arising from any such representation in the event of (i) any adversity between the interests of Seller or its direct or indirect equity holders, on the one hand, and Buyer or the Acquired Entity, on the other hand, in any such matter or (ii) any Protected Communication.

Section 9.3Protected Communications. The Parties agree that, effective as of the Closing, without the need for any further action, (a) all right, title and interest of the Acquired

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Entity in and to all Protected Communications shall thereupon transfer to and be vested solely in Seller, and (b) any and all protections from disclosure, including attorney–client privileges and work product protections, associated with or arising from any Protected Communications that would have been exercisable by the Acquired Entity prior to Closing shall thereupon be vested exclusively in Seller and shall be exercised or waived solely as directed by Seller. Notwithstanding the foregoing, if a dispute arises between Buyer, or the Acquired Entity, on the one hand, and any other Person (except for Seller or any of its Representatives), on the other hand, Buyer or the Acquired Entity may exercise any and all protections from disclosure, including attorney–client privileges and work product protections associated with or arising from any Protected Communications, including to prevent Seller and its Representatives from disclosing confidential communications to such other Person; provided that none of Buyer, the Acquired Entity, or any Person acting on any of their behalf, shall, without the prior written consent of Seller, waive or attempt to waive, or take any action that could result in a waiver of, any such protection against disclosure, including the attorney-client privileges or work product protection of, or provide to such Person or its Representatives, any Protected Communication.

Section 9.4No Waiver of Privilege, Protection From Disclosure or Use. The Parties understand and agree that nothing herein, including Section 9.2 and Section 9.3, shall be deemed to be a waiver of any applicable attorney–client privilege or other protection from disclosure or use related to any Protected Communication. Each Party understands and agrees that it has undertaken reasonable efforts to prevent the disclosure of Protected Communications. Notwithstanding those efforts, the Parties understand and agree that the consummation of the transactions contemplated hereby could result in the inadvertent disclosure of Protected Communications. The Parties further understand and agree that any disclosure of any Protected Communications shall not waive or otherwise prejudice any claim of confidentiality, privilege, or protection from disclosure.

Section 9.5Guaranty.

(a)Notwithstanding anything to the contrary in this Agreement, by its execution and delivery of this Agreement, Guarantor hereby unconditionally and irrevocably guarantees (the “Guaranty”) to and for the benefit of Buyer and any Buyer Indemnified Parties (collectively, the “Buyer Guaranteed Parties”) the full, complete and timely payment and performance by Seller of each obligation of Seller under this Agreement, including the punctual and complete payment and performance, if, as and when due, by Seller of all of Seller’s payment obligations to Buyer under this Agreement, including Seller’s indemnification obligations set forth in ARTICLE VIII of this Agreement, and the timely satisfaction and performance of all of Seller’s covenants, agreements and obligations contained in this Agreement (all Seller obligations under this Agreement, whether now or hereafter existing, being referred to collectively as the “Seller Guaranteed Obligations”).

(b)The Guaranty shall be enforceable against Guarantor regardless of whether such action is brought against Seller or any other Person or whether Seller or any other Person is joined in any such action; provided, however, that following the Closing, before bringing any claim against Guarantor for payment or performance of any of the Seller Guaranteed Obligations, each Buyer Guaranteed Party shall use reasonable best efforts to seek performance or payment by Seller for a period of no less than ninety (90) days from the date on which such

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Buyer Guaranteed Party initially notifies Seller of such claim or the facts forming the basis of such claim, except where such Buyer Guaranteed Party reasonably anticipates that it could be materially prejudiced by such delay in bringing a claim against Guarantor.

(c)The Guaranty constitutes a guarantee of payment and performance, and not merely of collection, whether or not recovery may be, or hereafter may become, barred by any statute of limitation or otherwise, and is not conditional or contingent upon any event, contingency or circumstance except as expressly set forth in this Agreement. The Seller Guaranteed Obligations will not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Seller or by any defense which Seller may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding. The Buyer Guaranteed Parties shall not be obligated to file any claim relating to the Seller Guaranteed Obligations in the event that Seller becomes subject to a bankruptcy, reorganization, insolvency or similar proceeding, and the failure of any Purchaser Guaranteed Party to so file shall not affect the Seller Guaranteed Obligations hereunder. In the event that any performance or payment to a Buyer Guaranteed Party in respect of the Seller Guaranteed Obligations is rescinded, annulled, set aside, invalidated, declared to be fraudulent or preferential or must otherwise be returned (as applicable) for any reason whatsoever, Guarantor shall remain liable hereunder with respect to such Seller Guaranteed Obligations as if such performance or payment had not been made. Guarantor hereby expressly, irrevocably and unconditionally waives any defenses which would otherwise operate to impair or diminish Guarantor’s liability under or in connection with the Guaranty, including arising by reason of promptness, diligence, notice of the acceptance of this guarantee and of the Seller Guaranteed Obligations, presentment, demand for payment or performance, notice of non-performance, default, dishonor and protest, notice of the Seller Guaranteed Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium Law or other similar Law now or hereafter in effect, any right to require the marshalling of assets of Seller, and all suretyship defenses generally.

(d)Notwithstanding any payment made by Guarantor hereunder, Guarantor shall not be entitled to be subrogated to any of the rights of any Buyer Guaranteed Party against Seller or any right of offset held by any Buyer Guaranteed Party for the payment of the Seller Guaranteed Obligations, nor shall Guarantor seek or be entitled to seek any contribution or reimbursement from Seller in respect of payments made by Guarantor hereunder, in each case until all of the Seller Guaranteed Obligations are satisfied in full, and in the case of payment obligations, paid in full in cash. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when all of the Seller Guaranteed Obligations shall not have been paid in full, such amount shall be held by Guarantor in trust for the Buyer Guaranteed Parties, segregated from other funds of Guarantor, and shall, forthwith upon receipt by Guarantor, be turned over to Buyer to be applied against the Seller Guaranteed Obligations.

(e)Guarantor represents and warrants as of the date of this Agreement and as of Closing that (i) Guarantor has full power and authority to execute and deliver this Agreement and to perform the obligations under and in connection with the Guaranty, and the execution, delivery and performance of this Agreement by Guarantor has been duly authorized by all

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necessary action on the part of Guarantor, (ii) this Agreement constitutes a legal, valid and binding obligation of Guarantor enforceable in accordance with its terms, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to creditors’ rights generally or to general principles of equity; (iii) the execution, delivery and performance of the Guaranty by Guarantor does not contravene any provision of Guarantor’s Organizational Documents or any Law or Contract binding on Guarantor or any of its assets; and (iv) Guarantor has the financial capacity to pay and perform all of its obligations under the Guaranty, and all funds necessary for Guarantor to fulfill the Seller Guaranteed Obligations shall be available to Guarantor.

(f)Article X shall apply mutatis mutandis to the Guarantor in connection with the Guaranty.

ARTICLE X

MISCELLANEOUS PROVISIONS

Section 10.1Amendment. This Agreement may be amended, supplemented or changed only by a written instrument signed by Buyer and Seller.

Section 10.2Waiver. No failure on the part of any Party to exercise any power, right, privilege or remedy hereunder, and no delay on the part of any Party in exercising any power, right, privilege or remedy hereunder, shall operate as a waiver of such power, right, privilege or remedy, and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No Party shall be deemed to have waived any Claim arising out hereof, or any power, right, privilege or remedy hereunder, unless the waiver of such Claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of Buyer (if Buyer or, after the Closing, the Acquired Entity is the waiving Party) or Seller (if Seller or, prior to the Closing, the Acquired Entity is the waiving Party), and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

Section 10.3Entire Agreement; Counterparts. This Agreement and the Confidentiality Agreement are the entire agreement, and supersede all prior agreements and understandings, both written and oral, among or between any of the Parties related to the subject matter hereof and thereof. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall be one (1) and the same instrument. Delivery of an executed counterpart hereof by facsimile or other electronic transmission shall be effective as delivery of an original counterpart hereof.

Section 10.4Applicable Law; Jurisdiction; WAIVER OF JURY TRIAL. This Agreement, and all Claims and causes of action (whether in contract or in tort or otherwise, or whether at law (including at common law or by statute) or in equity) that may be based on, arise out of or relate hereto or the negotiation, execution, performance or subject matter hereof, shall be governed by the Laws of the State of Delaware applicable to agreements made and to be performed solely therein, without giving effect to principles of conflicts of law. Each Party (a) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the U.S. District Court for the District of Delaware or, to the extent

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such court does not have subject matter jurisdiction, the Superior Court of the State of Delaware, (b) agrees that all Claims and causes of action shall be heard and determined exclusively in the courts identified in clause (a) of this Section 10.4 or any court that has appellate jurisdiction over those courts, (c) waives any objection to laying venue in any such Claim or cause of action in such courts, (d) waives any objection that any such court is an inconvenient forum or does not have jurisdiction over any Party and (e) agrees that service of process upon such Party in any such Claim or cause of action shall be effective if such process is given as a notice under Section 10.9. EACH PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY CLAIM OR CAUSE OF ACTION that may be based on, arise out of or relate HERETO or the negotiation, execution, performance or subject matter hereof.

Section 10.5Remedies; Specific Performance.

(a)Except as otherwise provided herein, prior to the Closing, any and all remedies herein expressly conferred upon a Party shall be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy shall not preclude the exercise of any other remedy.

(b)The Parties acknowledge and agree that irreparable damage would occur if any of the provisions hereof were not performed in accordance with their specific terms or were otherwise breached and that monetary damages, even if available, would not be an adequate remedy therefor. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches hereof and to enforce specifically the performance of terms and provisions hereof, including the right of a Party to cause each other Party to consummate the Acquisition and the other transactions contemplated hereby, in any court referred to in Section 10.4, without proof of actual damages (and each Party waives any requirement for the securing or posting of any bond in connection with such remedy), this being in addition to any other remedy to which they are entitled at law or in equity. The Parties further agree not to assert (i) that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason or (ii) that a remedy of monetary damages would provide an adequate remedy for any such breach.

(c)Without in any way limiting Seller’s or the Acquired Entity’s respective rights under Section 10.5(b), if an award of damages is sought against Buyer for any breach or threatened breach hereof by Buyer occurring prior to the Closing, such damages shall not be limited to reimbursement of expenses or out-of-pocket costs but shall also include the benefit of the bargain lost by Seller and the Acquired Entity (including “lost premium”), taking into consideration relevant matters, including the total amount payable to Seller hereunder, the time value of money (which, in each case, shall be deemed in such event to be damages of Seller and the Acquired Entity and shall be recoverable thereby), the opportunities forgone by Seller and the Acquired Entity while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated hereby.

Section 10.6Payment of Expenses; Transfer Taxes. Except as provided herein, whether or not the Closing occurs, each Party shall pay its own expenses incident to preparing for, entering into and carrying out this Agreement and the transactions contemplated hereby. Any Transfer Taxes will be borne fifty percent (50%) by Seller and fifty percent (50%) by Buyer.

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Further, (a) Buyer shall be responsible for preparing all Transfer Tax Returns and related forms or filings, (b) Buyer shall provide each such Transfer Tax Return or form or filing to Seller for its review and Consent at least five (5) Business Days prior to the due date thereof, (c) Seller shall not have any obligation to execute any such form or filing unless Buyer revises such form or filing for any reasonable comments provided by Seller in respect thereof, and (d) Seller shall remit its allocable portion of any Transfer Taxes shown on a Transfer Tax Return within thirty (30) Business Days following the filing of any such return. Seller shall cooperate with Buyer in preparing and filing all such filings, Transfer Tax Returns, reports and forms as necessary or appropriate to comply with the provisions of all applicable Law in connection with the payment of such Transfer Taxes, and the parties shall cooperate in good faith to minimize the amount of any such Transfer Taxes payable in connection therewith.

Section 10.7Tax Matters.

(a)Preparation of Tax Returns; Payment of Taxes.

(i)Seller shall timely prepare and file (or cause to be timely prepared and filed) (i) all Tax Returns that are required to be filed by or with respect to the Acquired Entity on an affiliated, consolidated, combined or unitary basis with Seller or with at least one Affiliate of Seller for Tax years or periods beginning on or before the Closing Date, and (ii) all other Tax Returns required to be filed with respect to the Acquired Entity that are due (taking into account requests for extensions to file such returns) on or before the Closing Date. In each case, Seller shall timely remit (or cause to be timely remitted) any Taxes shown due on such Tax Returns. As it relates to the Acquired Entity, Seller shall prepare such Tax Returns in accordance with past practices of the Acquired Entity.

(ii)Except as otherwise described in this Section 10.7(a), Buyer shall timely prepare and file (or cause to be timely prepared and filed) all Tax Returns of the Acquired Entity for all taxable periods that are required to be filed after the Closing Date. If such Tax Returns report matters for which indemnification may be claimed from Seller pursuant to Section 8.2, then: (A) Buyer shall prepare (or cause to be prepared) such Tax Returns in accordance with the past practices of the Acquired Entity, (B) completed drafts of such Tax Returns shall be submitted to Seller not later than thirty (30) days prior to the due date for filing such Tax Returns (or, if such due date is within forty-five (45) days following the Closing Date, as promptly as practicable following the Closing Date), (C) Seller shall have the right to review and comment on each such Tax Return prior to the filing thereof, and (D) to the extent relating to matters for which indemnification may be claimed from Seller pursuant to Section 8.2, Buyer shall make any changes to such Tax Returns reasonably requested by Seller. Without limiting the obligations of Seller under Section 8.2, Buyer shall remit (or cause to be remitted) any Taxes due with respect to such Tax Returns filed by it pursuant to this Section 10.7(a).

(iii)The parties hereto shall treat the Closing Date as the last day of the taxable period of the Acquired Entity for all Tax purposes and Buyer shall cause the Acquired Entity to join Buyer’s “consolidated group” effective on the day after the Closing Date pursuant to Treasury Regulation Section 1.1502-76(b). The Parties agree that neither Party will make a ratable allocation election under Treasury Regulation

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Section 1.1502-76(b)(2)(ii) or any other similar provision of Law. In accordance with Treasury Regulation Section 1.1502-76 and any analogous provision of Law, any Tax related to an extraordinary transaction not contemplated by this Agreement that occurs on the Closing Date or after the Closing shall be allocated to the taxable period beginning after the Closing Date. In addition, the principles of the preceding sentence shall apply in the absence of an analogous provision of Law and in the case of Straddle Periods.

(b)Tax Claims.

(i)If any Taxing Authority asserts a Tax Claim, then the Party first receiving notice of such Tax Claim shall provide written notice thereof to the other Party within forty-five (45) days; provided, however, that the failure of such Party to give such prompt notice shall not relieve the other Party of any of its obligations under Article VIII, except to the extent that the other Party is materially and actually prejudiced by such failure. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of the relevant portion of any correspondence received from the Taxing Authority.

(ii)Seller shall have the exclusive right to, at its expense, control, (or assume control of) any Tax Claim or other Tax proceeding, in each case to the extent that such Tax Returns, Tax Claims or other Tax proceedings involve Taxes or information related thereto with respect to the Acquired Entity for any Pre-Closing Tax Period. Except with respect to any Tax paid or Tax Return filed on a consolidated, combined or unitary basis with Seller or any of its Affiliates, Seller shall not settle any Tax Claim or other Tax proceeding it controls pursuant to this Section 10.7(b)(ii) without the consent of Buyer, which consent shall not be unreasonably withheld, conditioned or delayed, if such settlement would adversely affect Buyer or any of its Affiliates for taxable periods (or the portion of Straddle Periods) beginning after the Closing Date. Upon the request of Seller, Buyer shall execute any powers of attorney or similar documents that may be required to effectuate the intent of this Section 10.7(b)(ii). Seller may elect in writing not to control any Tax Claim that Seller otherwise has the right to control pursuant to this Section 10.7(b)(ii). If Seller makes such election with respect to a Tax Claim, Buyer shall have the right and obligation to conduct, at its own expense, such Tax Claim; provided, that Buyer shall not settle, or permit to be settled, any such Tax Claim for which Seller would have an indemnification obligation pursuant to Section 8.2 without the consent of Seller, which consent shall not be unreasonably withheld.

(c)Tax Cooperation. Buyer, the Acquired Entity and Seller shall cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the preparation and filing of Tax Returns and the defense of any Tax Claims. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such Tax Return or Tax Claim and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Buyer, the Acquired Entity and Seller agree to (i)  retain all books and records with respect to Tax matters pertinent to the Acquired Entity relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer or Seller, any extensions thereof) of the

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respective taxable periods, and to abide by all record retention agreements entered into with any Taxing Authority, and (ii)  give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, Buyer or Seller, as the case may be, shall allow the other party to take possession of such books and records.

(d)Allocation of Taxes. For purposes of this Agreement, whenever it is necessary to determine the portion of any Taxes of the Acquired Entity for any Straddle Period, the determination shall be made as follows: (i) the amount of any real property, personal property or similar ad valorem Taxes which are imposed on a periodic basis shall be determined ratably on a per diem basis, and (ii) the amount of any other Taxes that are allocable to the Pre-Closing Tax Period shall be determined based on an interim closing of the books of the Acquired Entity as of the Closing Date.

(e)Tax Covenants.

(i)Buyer shall not take any action not expressly contemplated by this Agreement on the Closing Date that is outside the ordinary course of business, and Buyer shall not cause or permit the Acquired Entity to take any such action on the Closing Date, in each case, if such action could have the effect of increasing the Tax Liability of the Acquired Entity or Seller in respect of any Pre-Closing Tax Period or increasing the liability of Seller under this Agreement;

(ii)After the Closing Date, Buyer shall not, and shall not allow the Acquired Entity to, (i) make or change any material Tax election, (ii) amend any Tax Return, (iii) take any Tax position on any Tax Return, (iv) compromise or settle any Tax Liability or (v) voluntarily approach any Taxing Authority with respect to such Taxes in any jurisdiction, without the prior written consent of Seller (such consent not to be unreasonably withheld, conditioned or delayed) for any Pre-Closing Tax Period. For the avoidance of doubt, Buyer shall be free to file any income Tax Return for any Tax Period (other than a Pre-Closing Tax Period) on any basis that Buyer deems, in its sole discretion, is consistent with applicable Law and any such Tax Return may include, without limitation, accounting method changes, voluntary disclosures and any similar forms or statements that Buyer deems necessary.

(f)Tax Refunds. Except to the extent included as an asset in the Closing Balance Sheet as finally determined, any Tax refund received by Buyer that relates to a Pre-Closing Tax Period of the Acquired Entity (any such refund, a “Pre-Closing Tax Refund”) shall be for the account of Seller. Buyer shall pay, or cause to be paid, any such Tax refund (and interest received from the governmental entity with respect to such refund), net of any reasonable out-of-pocket costs or expenses incurred by Buyer or the Acquired Entity to Seller within forty-five (45) days after receipt thereof. Buyer shall cooperate with Seller in obtaining such refunds, it being understood that (i) any such Pre-Closing Tax Refunds will be claimed in cash rather than as a credit against future Tax liabilities, (ii) Buyer and the Acquired Entity shall cooperate with Seller and take all actions reasonably requested (and all necessary actions incidental to any such request) by Seller, to timely claim any such Pre-Closing Tax Refunds, (iii) the Acquired Entity shall elect to carry back applicable items of loss, deduction or credit from any Pre-Closing Tax Period to prior taxable years to the fullest extent permitted by Law, and (iv) Buyer and the

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Acquired Company shall cooperate with Seller in utilizing any available short-form or accelerated procedures (including filing IRS Form 1139 and any corresponding form for applicable state, local and foreign Tax purposes) and in filing any amended Tax Returns to claim any potential Pre-Closing Tax Refunds.

(g)Section 338(h)(10) Election. Following the Closing, to the extent requested by Buyer, Seller and Buyer shall jointly make timely and irrevocable elections under Section 338(h)(10) of the Code (the “Section 338 Election”) (and any corresponding election under state and local Tax law) with respect to the Acquired Entity, and shall consummate any and all other actions necessary to such effect (including filing all forms, statements and documents that are required to be submitted to any federal, state or local Tax authority to effectuate the Section 338 Election, including IRS Form 8023, IRS Form 8883 and any similar forms, statements or documents required under applicable state or local Law (the “Section 338 Forms”)). Within one hundred twenty (120) days after the Closing Date, Buyer shall prepare and deliver to Seller an allocation of the Purchase Price and the liabilities of the Acquired Entity among the assets of the Acquired Entity as required pursuant to Section 338(h)(10) of the Code and the Treasury Regulations promulgated thereunder (the “Allocation”). The Allocation shall be prepared in a manner consistent with Sections 338 and 1060 of the Code and the regulations thereunder. If Seller objects to any item on the Allocation within thirty (30) days after its receipt thereof by Buyer, the Parties shall confer and seek to reach agreement, and if they cannot agree, the matter shall be referred to the Independent Accountant. The Allocation, as prepared by Buyer if Seller does not object, as adjusted pursuant to an agreement between the Parties or as determined pursuant to the decision of the Independent Accountant shall be final and binding on the Parties (the “Final Allocation”). Buyer and Seller shall cooperate in the preparation of the Section 338 Forms in a manner consistent with the Final Allocation and shall timely file such Section 338 Form with the applicable Taxing Authorities. Seller and Buyer agree that neither of them shall revoke the Section 338 Election following the filing of the Section 338 Forms without the prior written consent of Seller or Buyer, as the case may be. Buyer and Seller will prepare and file all Tax Returns to be filed with any Taxing Authority in a manner consistent with the Final Allocation and will take no position inconsistent with the Final Allocation on any Tax Return or in any proceeding before any Taxing Authority.

Section 10.8Assignability; Third-Party Rights. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any Party without the prior written consent of the other Parties, and any such assignment without such prior written consent shall be null and void. This Agreement shall be binding upon, and shall be enforceable by and inure to the benefit of, the Parties and their respective successors and permitted assigns. Except as provided herein, nothing herein is intended to or shall confer upon any Person (except for the Parties) any right, benefit or remedy of any nature whatsoever.

Section 10.9Notices. All notices and other communications hereunder shall be in writing and shall be deemed given (a) when delivered personally by hand (with written confirmation of receipt by non-automatic means, whether electronic or otherwise), (b) when sent by email (with written confirmation of transmission) or (c) one (1) Business Day after the day sent by an internationally recognized overnight courier (with written confirmation of receipt), in

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each case, at the following addresses and email addresses (or to such other address or email address as a Party may have specified by notice given to the other Party under this Section 10.9):

if to Seller or, prior to the Closing, the Acquired Entity, as follows:

c/o Evolent Health, Inc.

800 N. Glebe Road, Suite 500

Arlington, Virginia 22203

Email: jweinberg@evolenthealth.com

Attn: Jonathan Weinberg, General Counsel

with a copy (which shall not constitute notice) to:

Bass, Berry & Sims PLC

150 Third Avenue South, Suite 2800

Nashville, Tennessee 37201

Email: ahumphreys@bassberry.com; pwilson@bassberry.com

Attention: Angela Humphreys and Price Wilson

if to Buyer or, after the Closing, the Acquired Entity:

Bright Health Management, Inc.

c/o Bright Health, Inc.

219 North Second Street

Suite 401

Minneapolis, MN 55401

Attention: General Counsel

with a copy (which shall not be notice) to:

Mayer Brown LLP

350 S. Grand Avenue, 25th Floor

Los Angeles, CA 90071

Attention: Paul de Bernier / Tareah E. Ikharo (Matter No. 20666486)

Facsimile: +1 213 576 8108

Email: pdebernier@mayerbrown.com / tikharo@mayerbrown.com

Section 10.10Severability. Any term or provision hereof that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

Section 10.11Publicity. No Party shall issue any press release or make any other public announcement relating hereto or the transactions contemplated hereby without the written consent of the relevant other Party/Parties, in any case, as to the form, content, and timing and manner of distribution or publication of such press release or other public disclosure, except (a) to the extent required by applicable Law or the rules of any securities exchange on which such

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Party’s or such Party’s Affiliates securities are listed; provided that, in each case, the disclosing Party provides the relevant other Party/Parties with an opportunity to review and reasonably approve the form of such disclosure. Notwithstanding the foregoing, following any public announcement made in accordance with this Section 10.11, the Parties shall not be prohibited or restricted from making future public disclosures consistent with such public announcement.

Section 10.12Construction.

(a)No Strict Construction. The Parties agree that they have been represented by counsel during the negotiation and execution hereof and, therefore, waive the application of any Law, holding or rule of construction providing that ambiguities in a Contract or other document shall be construed against the Party drafting such Contract or document. Each Party has participated in the drafting and negotiation hereof. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of authorship of any of the provisions hereof.

(b)Time Periods. When calculating the period of time prior to which, within which or after which any act is to be done or step taken pursuant hereto, (i) the date that is the reference date in calculating such period shall be excluded and (ii) if the last day of such period is not a Business Day, the period in question shall end on the next succeeding Business Day.

(c)Dollars. Unless otherwise specifically indicated, any reference herein to “$” means U.S. dollars.

(d)Gender and Number. Any reference herein to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.

(e)Articles, Sections and Headings. When a reference is made herein to an Article or a Section, such reference shall be to an Article or a Section hereof unless otherwise indicated. The table of contents and headings herein are for reference purposes only and shall not affect in any way the meaning or interpretation hereof.

(f)Include. Whenever the words “include,” “includes” or “including” are used herein, they shall be deemed to be followed by the words “without limitation.”

(g)Hereof. The words “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used herein shall refer to this Agreement as a whole and not to any particular provision hereof.

(h)Extent. The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.”

(i)Contracts; Acquired Entity Employee Plans; Laws. (i) Any Contract referred to herein or in the Disclosure Schedule means such Contract as from time to time amended, modified or supplemented prior to the Closing Date, and (ii) any Law defined or referred to herein means such Law as from time to time amended, modified or supplemented prior to the date hereof, and includes all rules and regulations promulgated under such Law.

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(j)Persons. References to a person are also to its successors and permitted assigns.

(k)Exhibits and Disclosure Schedule. The Exhibits hereto and the Disclosure Schedule are incorporated and made a part hereof and are an integral part hereof. The Disclosure Schedule shall be organized into sections that correspond to the Sections hereof. Any item set forth in any section of the Disclosure Schedule that corresponds to a Section shall apply to and qualify such Section (regardless of whether the Disclosure Schedule is explicitly referenced in such Section) and any other Section if such item’s relevance to such other Section is reasonably apparent. Each capitalized term used in any Exhibit or in the Disclosure Schedule but not otherwise defined therein has the meaning given to such term herein. The Disclosure Schedule may include items that are not material in order to avoid any misunderstanding, and such inclusion, or any references to dollar amounts herein or in the Disclosure Schedule, shall not be deemed to be an acknowledgement or representation that such items are material, to establish any standard of materiality or to define further the meaning of such terms for purposes hereof or otherwise. Any summary in the Disclosure Schedule does not purport to be comprehensive and is qualified in its entirety by reference to the text of any documents described in such summary.

(l)Made Available. A document or information shall be deemed to have been “made available” or otherwise delivered to Buyer if such document or information has been posted to the “Project Elite” electronic data room maintained by the Acquired Entity on Intralinks in connection with the transactions contemplated hereby or otherwise delivered, which may be by email, to Buyer or its Representatives prior to 5:00 pm January 9, 2021.

Section 10.13Definitions.

(a)As used herein, each of the following underlined terms has the meaning specified in this Section 10.13(a):

“Acquired Entity’s Knowledge” means the actual knowledge of Mark Epstein, Anne Sapon, F. Kiko Torres, Todd Pilger, Myja Peterson, Jonathan Weinberg and John Johnson, in each case after due inquiry; provided that the inclusion of Mr. Weinberg shall not require disclosure that would operate to waive any legal privilege afforded to information known to (or work product of or held by) Mr. Weinberg in his role as General Counsel of Guarantor, subject to Seller using (and causing Guarantor to use) all commercially reasonable efforts, through a lawful workaround or otherwise, to derive such knowledge for the benefit of Buyer without compromising such legal privilege.

“Acquired Entity Employee Plans” means each Employee Plan that is sponsored or maintained by the Acquired Entity, excluding for clarity any Seller Employee Plan maintained or sponsored by an entity other than the Acquired Entity.

“Acquisition Proposal” means any offer, proposal or indication of interest in (a) the acquisition or recapitalization of the Acquired Entity, (b) a merger, consolidation or other business combination involving the Acquired Entity and (c) the acquisition of any assets of the Acquired Entity other than dispositions in the ordinary course of its business or any outstanding Equity Interests of the Acquired Entity.

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“Affiliate” means, for any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person; provided that, for purposes of the immediately preceding clause, the term “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), for any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“Applicable Reference Time” means 11:59 p.m., local time in New Mexico, on December 31, 2020.

“Base Purchase Price” means Seventeen Million Dollars ($17,000,000).

“Business” means the Acquired Entity’s business of offering, administrating and operating (a) small and large group commercial health insurance plans in the State of New Mexico, (b) administrative services to employer self-funded and other health plans, (c) individual health insurance products sold both on and off the New Mexico health insurance exchange and (d) health insurance products offered through the Federal Employees Health Benefits Program.

“Business Benefit Plan” means each Seller Employee Plan and Acquired Entity Employee Plan.

“Business Day” means a day, except for a Saturday, a Sunday or other day on which commercial banks in New York, New York are authorized or required by Law to close.

“Business Employees” means each employee of the Acquired Entity.

“Buyer Fundamental Representations” means the representations and warranties in Section 4.1, Section 4.2 and Section 4.8.

“Buyer Material Adverse Effect” means any event, change, effect, development or occurrence that would prevent, materially delay or materially impede Buyer’s consummation of the transactions contemplated hereby.

“Claim” means any claim, action, suit (whether in contract or tort or otherwise), arbitration, charge, complaint, demand, proceeding, audit, hearing, or other litigation (whether civil, criminal, administrative, investigative or informal) or any notice of any action or third-party audit, charge, claim, or inquiry that could result in the same.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collective Bargaining Agreement” means any collective bargaining agreement or any other labor-related agreement or arrangement with any labor union, trade union or labor organization.

“Confidentiality Agreement” means that certain letter agreement, dated September 30, 2019, by and among Acquired Entity, Guarantor and Buyer.

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“Continuing Employee” means each employee of the Acquired Entity as of immediately prior to the Closing.

“Contract” means any legally binding agreement, deed, mortgage, lease, license, instrument, note, commitment, undertaking, arrangement or contract, in each case, excluding any Employee Plan.

“Disclosure Schedule” means the disclosure schedule attached as Schedule A.

“Employee Plans” means each (a) “employee benefit plan” within the meaning of Section 3(3) of ERISA (whether or not subject to ERISA), (b) other benefit and compensation plan, policy, program, practice, arrangement or agreement, including pension, profit-sharing, savings, termination, executive compensation, phantom stock, change-in-control, retention, salary continuation, vacation, sick leave, disability, death benefit, insurance, hospitalization, medical, dental, life, employee loan, educational assistance, fringe benefit, deferred compensation, retirement or post-retirement, severance, equity or equity-based, incentive and bonus plan, contract, policy, program, practice, arrangement or agreement, and (c) other employment, consulting or other individual agreement, plan, practice, policy, contract, program, and arrangement.

“Entity” means any corporation (including any nonprofit corporation), general partnership, limited partnership, limited liability partnership, estate, trust, company (including any company limited by shares, limited liability company or joint stock company) or other association, organization or entity (including any Governmental Authority).

“Environmental Claim” means any Claim relating to any Environmental Law or Environmental Permit, including those relating to an actual or alleged Release of, or human exposure to, any Hazardous Materials or violation of any Environmental Law or Environmental Permit.

“Environmental Laws” means all Laws relating to pollution or protection of the environment or human health and safety, including laws relating to releases or threatened releases of Hazardous Materials into the indoor or outdoor environment (including air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, release, transport or handling of Hazardous Materials and all Laws relating to endangered or threatened species of fish, wildlife and plants, and the management or use of natural resources.

“Environmental Permit” means any Permit issued under any applicable Environmental Law.

“Equity Interests” means, for any Person, any (a) shares or units of capital stock or voting securities, membership or limited liability company interests or units, partnership interests or other ownership interests (whether voting or nonvoting) in such Person, (b) other interest or participation (including phantom shares, units or interests or stock appreciation rights) in such Person that confers on the holder thereof the right to receive a share of the profits and losses of, or distribution of assets of, such Person, (c) subscriptions, calls, warrants, options or commitments of any kind or character relating to, or entitling any Person or entity to purchase or

52

otherwise acquire any of the interests in the foregoing clauses (a) and (b), or (d) securities convertible into or exercisable or exchangeable for any of the interests in the foregoing clauses (a)–(c).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended (together with all rules and regulations promulgated thereunder.

“Governmental Authority” means any government, court, regulatory or administrative agency, commission or authority or other governmental instrumentality, whether federal, state or local, domestic, foreign or multinational, or any contractor acting on behalf of such agency, commission, authority or governmental instrumentality.

“Hazardous Materials” means (a) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls and radon gas, (b) any chemicals, materials or substances defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “restricted hazardous materials,” “extremely hazardous substances,” “toxic substances,” “contaminants” or “pollutants” or words of similar meaning and regulatory effect or (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law.

“HIPAA Commitments” means those Privacy/Cybersecurity Laws for “Protected Health Information” or “Electronic Protected Health Information” (as those terms are defined in 45 CFR § 160.103).

“Indebtedness” means, with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money, loans, or advances, (b) all indebtedness for the deferred purchase price of properties, assets, or services (including all earn-out obligations), (c) all obligations evidenced by notes, bonds, debentures, or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement, (e) all obligations under capital leases, (f) all reimbursement, payment, or similar obligations, contingent or otherwise, under any banker’s acceptance, letter of credit, or similar facility to the extent drawn upon, (g) all obligations under surety bonds and performance bonds, (h) all obligations under any interest rate, currency, or other derivative, hedging, swap, or similar instrument, and (i) all Liabilities of any other Person described in clauses (a) through (h) above that such Person has, directly or indirectly, guaranteed or assumed, or that is otherwise its legal obligation. The amount of such Person’s Indebtedness shall include the aggregate principal amount thereof, all accrued and unpaid interest thereon, and any premiums or penalties, including any prepayment penalties, relating thereto.

“Independent Accountants” means a mutually agreed nationally-recognized firm with no material relationships with Buyer, Acquired Entity or Seller (or any of their Affiliates) and with accounting expertise and relevant experience in resolving similar purchase price adjustment disputes, which, subject to such continued criteria, the Parties have initially selected to be Grant Thornton LLP.

“IP Rights” means all proprietary rights in intellectual property throughout the world, including all U.S. and foreign proprietary rights in (a) patents and patent applications, related

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continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions, and extensions thereof and inventions (whether patentable or unpatentable), (b) trademarks, service marks, trade names, domain names, trade dress, design rights, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable subject matter, (d) trade secrets, including any that comprise know-how, inventions, processes, formulae, models and methodologies, (e) Software, (f) domain names, and (g) all applications and registrations, and any renewals, extensions and reversions, for the foregoing.

“IRS” means the U.S. Internal Revenue Service or any successor agency.

“IT Assets” means any and all computers, software, hardware, systems, servers, workstations, routers, hubs, switches, data communications lines and other information technology equipment, and all associated documentation.

“Laws” means any laws, constitutions, treaties, conventions, ordinances, codes, rules, regulations, Orders or other similar requirements (including any stock exchange requirements) enacted, adopted, promulgated or applied by a Governmental Authority, including, without limitation, all Laws relating to the operations, activities or services of the Business and Orders pursuant to such Laws applicable to the Acquired Entity or any assets owned or used by it, including (a) all federal and state fraud and abuse Laws, including, without limitation, the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), the Stark Law (42 U.S.C. § 1395nn), the civil federal False Claims Act (31 U.S.C. §§ 3729 et seq.), the Civil Monetary Penalties Statute (42 U.S.C. § 1320a-7a) and all similar or equivalent state Laws; (b) TRICARE (formerly known as the Civilian Health and Medical Program of the Uniformed Services); (c) Health Insurance Portability and Accountability Act of 1996; (d) Medicare; (e) federal and state Medicaid Laws, as applicable; (f) Patient Protection and Affordable Care Act; (g) Health Care and Education Reconciliation Act of 2010; (h) quality, safety and accreditation standards and requirements of all applicable state Laws or of Governmental Authorities; (i) the Insurance Code of the State of New Mexico, (j) all Laws, mandatory policies, mandatory procedures and requirements pursuant to which healthcare Permits are issued; and (k) any and all other applicable health care Laws, mandatory manual provisions, mandatory policies and mandatory supplier standards, and each of (a) through (k) as may be amended from time to time.

“Liability” means any debt, liability, commitment, or obligation of any nature, whether pecuniary or not, asserted or unasserted, accrued or unaccrued, absolute or contingent, matured or unmatured, liquidated or unliquidated, determined or determinable, known or unknown, and whether due or to become due, including those arising under any Contract, Law, or Order.

“Lien” means any mortgage, lien, pledge, charge, security interest or other security agreement; provided, however, that Lien does not include any restriction on transfer arising under an applicable securities Law.

“Material Adverse Effect” means any event, change, effect, development or occurrence that, individually or in the aggregate with any other events, changes or occurrences, has or could reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of the Acquired Entity; provided, however, that any change arising related

54

to any of the following shall not be a Material Adverse Effect or be considered in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur:

(a)    changes in general economic conditions, including changes in exchange rates, interest rates or monetary policy, or the credit, financial, currency, securities or capital markets;

(b)    changes in general conditions in any industry in which the Acquired Entity operates;

(c)    any natural (including weather-related) disaster, pandemic (including the COVID-19 pandemic), act of terrorism, sabotage, cyberattack, military action or war, or any escalation or worsening thereof;

(d)    changes in SAP, applicable Laws or any accounting requirements applicable to any industry in which the Acquired Entity operates or the interpretation of any of the foregoing after the date hereof;

(e)    the announcement, pendency or anticipated consummation of the Acquisition or any of the other transactions contemplated hereby, the negotiation, execution or performance hereof, the identity of Buyer or any facts or circumstances relating to Buyer or the announcement or other disclosure of Buyer’s plans or intentions for the conduct of any of the businesses of the Acquired Entity after the Closing, including the effect of any of the foregoing on the relationships, contractual or otherwise, of the Acquired Entity with clients, customers, employees, suppliers, vendors, service providers or Governmental Authorities;

(f)    any action or omission required to be taken or omitted by Seller, the Acquired Entity pursuant hereto or which is otherwise taken or omitted with the consent, or at the request, of Buyer;

(g)    any action taken or omitted by Buyer or any of its Representatives, including any breach hereof by Buyer;

(h)    the failure to obtain any Consent of a Governmental Authority or other Person that is necessary, appropriate or advisable to consummate the Closing; and

(i)    any failure by the Acquired Entity to meet any internal or published Projection for any period (provided that the underlying cause of any such failure may be, or be considered in determining, a Material Adverse Effect to the extent not otherwise excluded under the foregoing clauses (a)–(j)); provided, further, that the determination of whether a Material Adverse Effect has occurred shall be measured only against the past performance of the Acquired Entity and not against any Projection.

Notwithstanding the foregoing, any event, change, or occurrence resulting from the matters referred to in clauses (a), (b), (c), and (d) above shall be excluded only to the extent such matters do not disproportionately impact the Acquired Entity as compared to other Persons operating in the same industry.

“Membership Purchase Price” means an amount equal to (a) Five Million Dollars ($5,000,000) if the number of Members as of January 1, 2021 is greater than or equal to thirty

55

thousand (30,000) as shown in written evidence reasonably acceptable to Buyer and (b) Zero Dollars ($0.00) if the number of Members as of January 1, 2021 is less than thirty thousand (30,000) or reasonably acceptable written evidence showing the information in subsection (a) has not been provided to Buyer.

“Members” means individuals (inclusive of dependents and other covered individuals) enrolled in the Acquired Entity’s health plans.

“Most Recent Balance Sheet” means the unaudited balance sheet of the Acquired Entity, dated as of the Closing Date.

“Order” means any judgment, decree, injunction, rule, order, decision, decree, ruling or assessment of any arbitrator or Governmental Authority.

“Open Source Software” means any Software that is subject to the terms of any license agreement in a manner that requires that such Software, or other Software incorporated into, derived from or distributed with such Software, be (a) disclosed or distributed in source code form; (b) licensed for the purpose of making modifications or derivative works; or (c) redistributable at no charge. Without limiting the foregoing, any Software that is subject to the terms of any of the licenses certified by the Open Source Initiative and listed on its website (www.opensource.org) is Open Source Software.

“Organizational Documents” means any corporate, partnership or limited liability organizational documents, including certificates or articles of incorporation, bylaws, certificates of formation, operating agreements (including limited liability company agreements and agreements of limited partnership), certificates of limited partnership, partnership agreements, shareholder agreements and certificates of existence, as applicable.

“OSI” means the New Mexico Office of Superintendent of Insurance.

“Parties” means Buyer, Seller and the Acquired Entity.

“Permit” means any permit, license, registration, certificate, franchise, qualification, waiver, authorization, clearance or similar rights issued, granted or obtained by or from any Governmental Authority.

“Permitted Liens” means (a) mechanics’, carriers’, materialmens’, workers’, repairers’, landlords’ and similar Liens related to any amounts not yet delinquent or that are being contested in good faith, (b) Liens for Taxes not yet due and payable or the amount of which is being contested in good faith, (c) Liens securing rental payments not yet delinquent or that did not arise due to such delinquency, in each case, under capital lease agreements, (d) Liens on real property (including recorded or unrecorded easements, rights of way, covenants, conditions, licenses, reservations, zoning ordinances and similar restrictions affecting real property) that (i) are matters of record, (ii) would be disclosed by a current, accurate survey or physical inspection of such real property, (iii) do not materially interfere with the present uses of such real property or (iv) are otherwise set forth in the title commitments made available to Buyer on or prior to the date hereof, (e) zoning, building codes, environmental and other land use laws regulating the use or occupancy of real property or the activities conducted thereon that are imposed by any

56

Governmental Authority having jurisdiction over such real property that are not violated by the current use or occupancy of such real property or the operation of the businesses of the Acquired Entity as currently conducted, (f) to the extent terminated in connection with the Closing, Liens securing payment, or any other obligations, of the Acquired Entity for Indebtedness, (g) Liens constituting a lease, sublease or occupancy agreement that give any Person any right to occupy any real property, (h) any right, interest, Lien or title of a lessor or sublessor under a lease, sublease or occupancy agreement or in the property being leased, (i) licenses of, or other grants of rights with respect to or obligations related to, IP Rights, (j) Liens arising in the ordinary course of business and not incurred in connection with the borrowing of money, (k) Liens arising under worker’s compensation, unemployment insurance, social security, retirement or similar laws, (l) purchase money Liens, and (m) Liens referred to in the Financial Statements.

“Person” means any individual or Entity.

“Personal Information” means any data and other information that is capable of identifying a specific natural person and any other information or data considered to be personally identifiable information or data under applicable Law; including “Protected Health Information” and “Electronic Protected Health Information” (as those terms are defined in 45 CFR § 160.103).

“Pre-Closing Tax Period” shall mean any taxable period ending on or before the Closing Date and, in the case of any Straddle Period, the portion of such period through the end of the Closing Date.

“Privacy/Cybersecurity Laws” means all Laws governing (a) privacy of Personal Information or (b) the collection, retention, use, storage, processing, transfer, disposal, destruction or disclosure of Personal Information, each of the foregoing clauses (a)–(b) above as and to the extent applicable to the Acquired Entity.

“Protected Communications” means, at any time on or prior to the Closing, any and all communications in whatever form, whether written, oral, video, electronic or otherwise, that shall have occurred between or among any of Seller, the Acquired Entity, or any of their respective equity holders or Representatives and attorneys (including Bass, Berry & Sims PLC) to the limited extent relating to or in connection with this Agreement, the events and negotiations leading to this Agreement, or any of the transactions contemplated herein.

“Purchase Price” means the Base Purchase Price, plus the RBC Amount, plus, if applicable, the Membership Purchase Price.

“RBC Amount” means the difference (which may be a negative number) between (a) an amount equal to the “total adjusted capital” (as defined in the New Mexico Risk-Based Capital Act) of the Acquired Entity as of the Closing Date calculated in accordance with applicable Law, and (b) an amount equal to three hundred percent (300%) of the authorized control level risk-based capital for the Acquired Entity as of the Applicable Reference Time as determined in accordance with applicable Law and the New Mexico Risk-Based Capital Act; provided, however, in determining the RBC Amount for purposes of the Closing Balance Sheet and the Proposed Final Closing Statement, this definition will give effect to the Run-Out Principles; provided, further, that “total adjusted capital” shall not take into account any accrual for premium deficiency reserves.

57

“Release” means any release, spill, emission, leaking, pumping, emitting, depositing, discharging, injecting, escaping, leaching, dispersing, dumping, pouring, disposing or migrating into, onto or through the environment (including air, surface water, ground water, land surface or subsurface strata).

“Representatives” means, for any Person, such Person’s officers, directors, managers, employees, consultants, agents, financial advisors, attorneys, accountants, other advisors, Affiliates and other representatives.

“Run-Out Principles” means the principles and methodologies set forth on Exhibit D.

“SAP” means, as to any insurance company or health maintenance organization conducting an insurance business, the statutory accounting principles prescribed or permitted by Law or Governmental Authorities seated in the jurisdiction where such insurance company or health maintenance organization is domiciled and responsible for the regulation thereof, consistently applied.

“Securities Act” means the Securities Act of 1933.

“Sell-Side Fundamental Representations” means the representations and warranties in Section 2.1, Section 2.2, Section 2.3, Section 2.4(a)(i), Section 2.6, Section 3.1, Section 3.2, Section 3.3, Section 3.4 (but excluding 3.4(a)(iii)), Section 3.8(a), Section 3.12, and Section 3.19.

“Seller Employee Plans” means each Employee Plan that is sponsored or maintained by Seller or any of its Affiliates (other than the Acquired Entity) that covers or otherwise provides for the payment or provision of compensation or benefits to any Business Employee or current or former employee, director or officer of the Acquired Entity (or their respective beneficiaries or dependents) or under which the Acquired Entity has any obligation or liability to provide compensation and/or benefits to or for the benefit of any Business Employee or current or former employee, director or officer of the Acquired Entity (or their respective beneficiaries or dependents), excluding for clarity any Acquired Entity Employee Plan.

“Seller Material Adverse Effect” means any event, change, effect, development or occurrence that would prevent, materially delay or materially impede Seller’s consummation of the transactions contemplated hereby.

“Software” means computer programs, databases, compilations and related materials, including data files, source code, object code, application programming interfaces, architecture, documentation, files, records, schematics, emulation and simulation reports, test vectors and hardware development tools and other software-related specifications and documentation.

“Straddle Period” means any taxable period that includes (but does not end on) the Closing Date.

“Subsidiary” of any Person means any Entity (a) of which fifty percent (50%) or more of the outstanding share capital, voting securities or other voting equity interests are owned, directly or indirectly, by such Person, (b) of which such Person is entitled to elect, directly or indirectly,

58

at least fifty percent (50%) of the board of directors (or managers) or similar governing body of such Entity or (c) if such Entity is a limited partnership or limited liability company, of which such Person or one of its Subsidiaries is a general partner or managing member or has the power to direct the policies, management or affairs.

“Tax Claim” means any audit, hearing, proposed adjustment, arbitration, deficiency, assessment, suit, dispute, claim, proceeding or other litigation commenced, filed or otherwise initiated or convened to investigate or resolve the existence and extent of a liability for Taxes.

“Tax Return” means any return, declaration, report, claim for refund or information return, certificate, bill, statement, or other written information filed or required to be filed with any Taxing Authority relating to Taxes, including any supplement, schedule or attachment thereto, and including any amendment thereof.

“Taxes” means any and all U.S. federal, state, local or non-U.S. taxes (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Taxing Authority, including taxes, fees, duties, customs, tariffs or assessments related to income, franchises, premiums or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation or unemployment compensation, and taxes or other similar charges in the nature of excise, ad valorem or value added.

“Taxing Authority” means the IRS and any other Governmental Authority responsible for the administration, imposition, regulation, determination or collection of any Tax.

“Transition Services Agreement” means a transition services agreement in form and substance mutually agreed by the Parties before Closing and executed and delivered at Closing, and with due reference to the TSA Terms.

“TSA Terms” means the material terms and other matters relevant to the Transition Services Agreement set forth in Exhibit C attached hereto.

“Transfer Taxes” means any and all transfer Taxes (excluding Taxes measured in whole or in part by net income), including sales, use, excise, goods and services, stock, conveyance, gross receipts, registration, business and occupation, securities transactions, real estate, land transfer, stamp, documentary, notarial, filing, recording, permit, license, authorization and similar Taxes, fees, duties, levies, customs, tariffs, imposts, assessments, obligations and charges.

“Treasury Regulations” means the regulations promulgated under the Code.

(a)    In addition to the terms defined in Section 10.13(a), as used herein, each capitalized term listed below has the meaning identified in the Section set forth opposite such term below.

Acquired Entity	Preamble
Acquisition	Section 1.1
Affiliate Contract	Section 3.16

59

Agreement	Preamble
Allocation	Section 10.7(g)
Assumed FSA Balance	Section 5.4(e)
Assumed Plans	Section 5.4(c)
Bankruptcy and Equity Exceptions	Section 2.3
Buyer	Preamble
Buyer Guaranteed Parties	Section 9.5(a)
Buyer Indemnified Parties	Section 8.2(a)
Buyer Plans	Section 5.4(d)
Buyer Savings Plan	Section 5.4(f)
Claim Notice	Section 8.6(b)(i)
Closing	Section 1.2
Closing Balance Sheet	Section 1.5(a)
Closing Date	Section 1.2
Consent	Section 2.4(a)
D&O Costs	Section 5.5(b)
D&O Expenses	Section 5.5(b)
D&O Indemnifiable Claim	Section 5.5(b)
D&O Indemnifying Party	Section 5.5(b)
Deductible	Section 8.2(b)(i)
E.O. 11246	Section 3.14(i)
Estimated Purchase Price	Section 1.4(a)
Filing	Section 2.4(a)
Final Allocation	Section 10.7(g)
Financial Statements	Section 3.5(a)
Guarantor	Preamble
Health Plan Services Agreement	Section 1.3(a)(iv)
Indemnified Party	Section 8.3(a)
Indemnifying Party	Section 8.6(a)
Indemnitee Affiliates	Section 5.5(b)
Insurance Policies	Section 3.18
Latest Statement	Section 3.5(a)
Leased Real Property	Section 3.8(c)
Legal Restraint	Section 6.1(b)
Losses	Section 8.2(a)
Material Contract	Section 3.9(a)
Material Provider	Section 3.9(c)
Material Provider Contract	Section 3.9(c)
Moelis	Section 2.6
Notice of Disagreement	Section 1.5(b)
Outside Date	Section 7.1(b)

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Payment Statement	Section 1.4(a)
Pre-Closing Indemnified Person	Section 5.5(e)
Projections	Section 9.1(a)
Proposed Final Closing Statement	Section 1.5(a)
Purchased Common Stock	Recitals
Required Consents	Section 6.1(a)
Required Filings	Section 6.1(a)
Section 338 Election	Section 10.7(g)
Section 338 Forms	Section 10.7(g)
Section 503	Section 3.14(i)
Seller	Preamble
Seller 401(k) Plan	Section 5.4(f)
Seller FSA Plan	Section 5.4(e)
Seller Guaranteed Obligations	Section 9.5(a)
Seller Indemnified Parties	Section 8.3(a)
Sell-Side Representations	Section 9.1(a)
Specified Filings and Consents	Section 2.4(b)
Third-Party Claim	Section 8.6(b)(i)
VEVRAA	Section 3.14(i)

[Signature Pages Follow]

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IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed and delivered as of the date first written above.

BRIGHT HEALTH MANAGEMENT, INC.

By:     /s/ Cathy Smith    

    Name: Cathy R. Smith

    Title: Chief Financial Officer

[SIGNATURE PAGETO STOCK PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed and delivered as of the date first written above.

EH HOLDING COMPANY, INC.

By:     /s/ Jonathan Weinberg    

    Name: Jonathan Weinberg

    Title: Secretary

[SIGNATURE PAGETO STOCK PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed and delivered as of the date first written above.

TRUE HEALTH NEW MEXICO, INC.

By:     /s/ Mark Epstein    

    Name: Mark Epstein

    Title: CEO and President

[SIGNATURE PAGETO STOCK PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed and delivered as of the date first written above.

SOLELY FOR PURPOSES OF SECTION 9.5

EVOLENT HEALTH LLC

By:     /s/ Jonathan Weinberg    

    Name: Jonathan Weinberg

    Title: Secretary

[SIGNATURE PAGETO STOCK PURCHASE AGREEMENT]

EX-10.2

Exhibit 10.2

EVOLENT HEALTH, INC.

2015 OMNIBUS INCENTIVE COMPENSATION PLAN

PERFORMANCE STOCK UNIT AWARD AGREEMENT

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

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

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

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

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

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

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

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

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

1

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

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

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

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

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

“First Tranche” means 50% of your Target Amount, which will vest and be earned over the First Performance Period.

“Performance Period” means the First Performance Period or the Second Performance Period, as applicable.

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

“Second Tranche” means 50% of your Target Amount, which will vest and be earned over the Second Performance Period.

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

“Stock Price” means the closing price of one Share of the Company’s Class A common stock on the New York Stock Exchange.

“Tranche” means the First Tranche or the Second Tranche, as applicable.

SECTION 3.Performance Goals.

(a)Subject to the service-vesting provisions set forth in Section 4 of this Award Agreement, (i) the total number of PSUs you earn for the First Tranche will be determined at the end of the First Performance Period based on the level of Cumulative Adjusted EBITDA achieved in the First Performance Period, as adjusted pursuant to the Absolute TSR Modifier Percentage, as set forth on Appendix A, and (ii) the total number of PSUs you earn for

2

the Second Tranche will be determined at the end of the Second Performance Period based on the level of Cumulative Adjusted EBITDA achieved in the Second Performance Period, as adjusted pursuant to the Absolute TSR Modifier Percentage, as set forth on Appendix A.

(b)No later than 50 days following the end of each Performance Period, the Committee will review and certify in writing (i) the level of Cumulative Adjusted EBITDA achieved for the applicable Performance Period, (ii) the Absolute TSR Modifier Percentage for the Performance Period, and (iii) the number of PSUs that you have earned, if any, for the Performance Period. The Committee’s certification shall be final, conclusive and binding on you, and on all other persons, to the maximum extent permitted by law.

(c)Notwithstanding the foregoing, the Committee is authorized at any time, in its sole and plenary discretion, to adjust or modify the Performance Goals set forth in Appendix A for either Performance Period (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development affecting the Company, or any of its Affiliates, Subsidiaries, divisions or operating units (to the extent applicable to such Performance Goal), (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company or any of its Affiliates, Subsidiaries, divisions or operating units (to the extent applicable to such Performance Goal), or the financial statements of the Company or any of its Affiliates, Subsidiaries, divisions or operating units (to the extent applicable to such Performance Goal), or (iii) in recognition of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles, law or business conditions.

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

Tranche	Vesting Date
First Tranche	[ ]
Second Tranche	[ ]

SECTION 5.Forfeiture of PSUs. Except as set forth in Section 6, (i) if your service with the Company and all of its Subsidiaries terminates for any reason before [ ], the First Tranche of your PSUs shall be immediately forfeited and you shall be entitled to no further payments or benefits with respect thereto, and (ii) if your service with the Company and all of its Subsidiaries terminates for any reason before [ ], the Second Tranche of your PSUs shall be immediately forfeited and you shall be entitled to no further payments or benefits with respect thereto. Further, if you breach any restrictive covenant contained in any arrangements with the Company or a Subsidiary (including this Award Agreement) to which you are subject, all your PSUs shall be immediately forfeited, and you shall be entitled to no further payments or benefits

3

with respect thereto. Furthermore, any PSUs awarded pursuant to this Award Agreement and any Shares issued to you or cash paid to you under this Award Agreement upon settlement of such PSUs shall be subject to any recoupment or clawback policy the Company maintains, as in effect from time to time.

SECTION 6.Change of Control. If, within twelve (12) months following a Change of Control, your employment is terminated by the Company without Cause or by you for Good Reason, (a) the service vesting requirements of Section 4 shall automatically be deemed satisfied, and all restrictions and forfeiture provisions related thereto shall lapse as of the date of such termination (your “CIC Termination Date”), and (b) the number of PSUs earned shall be the greater of (i) the Target Amount, and (ii) the number of PSUs determined as of your CIC Termination Date based on the Cumulative Adjusted EBITDA and Absolute TSR Modifier Percentage determined as if your CIC Termination Date were the last day of the Performance Period or the last day of each of the Performance Periods, as applicable.

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

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

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

SECTION 10.Withholding, Consents and Legends.

(a)Withholding. The delivery of Shares or cash pursuant to Section 7 of this Award Agreement is conditioned on satisfaction of any applicable withholding taxes in accordance with this Section 10 and Section 9(d) of the Plan. No later than the date as of which an amount first becomes includible in your gross income for Federal, state, local or foreign income tax purposes with respect to any PSUs you shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any Federal, state, local and foreign taxes that are required by applicable laws and regulations to be withheld with respect to

4

such amount. In the event that there is withholding tax liability in connection with the settlement of the PSUs you may satisfy, in whole or in part, any withholding tax liability by having the Company withhold from the number of Shares or cash you would be entitled to receive upon settlement of the PSUs an amount in cash or a number of Shares having a Fair Market Value (which shall either have the meaning set forth in the Plan or shall have such other meaning as determined by the Committee in accordance with applicable withholding requirements) equal to such withholding tax liability.

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

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

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

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

SECTION 13.Dispute Resolution.

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

5

(b)Waiver of Jury Trial. You and the Company hereby waive, to the fullest extent permitted by applicable law, any right either of you may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Award Agreement or the Plan.

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

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

(a)Confidential Information.

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

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

(iii)“Confidential Information” means any and all information of the Company and its Affiliates that is not generally known by those with whom the Company or any of its Affiliates competes or does business, or with whom the Company or any of its Affiliates plans to compete or do business, and any and all information, whether or not publicly known in whole or in part, which, if disclosed by the Company or any of its

6

Affiliates, would assist in competition against them. Confidential Information includes without limitation such information relating to (A) the development, research, testing, manufacturing, marketing and financial activities of the Company and its Affiliates, (B) the products and services of the Company and its Affiliates, (C) the costs, sources of supply, financial performance and strategic plans of the Company and its Affiliates, (D) the identity and special needs of the customers of the Company and its Affiliates and (E) the people and organizations with whom the Company and its Affiliates have business relationships and the nature and substance of those relationships. Confidential Information also includes any information that the Company or any of its Affiliates has received, or may receive hereafter, belonging to customers or others with any understanding, express or implied, that the information would not be disclosed.

(b)Non-Competition and Non-Solicitation.

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

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

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

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

7

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

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

(iii)Notwithstanding anything to the contrary in Section 14(b)(ii) of this Award Agreement, you are permitted to own, individually, as a passive investor (with no director designation rights, voting rights or veto rights or other special governance or voting rights), up to a one percent (1%) interest in any publicly traded entity that is a Competitor.

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

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

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

(d)Protected Rights; Defend Trade Secrets Act.

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

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

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

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

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

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

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

9

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

SECTION 19.Section 409A.

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

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

(c)If, at the time of your separation from service (within the meaning of Section 409A), (i) you shall be a specified employee (within the meaning of Section 409A and using the identification methodology selected by the Company from time to time) and (ii) the Company shall make a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then the Company shall not pay such amount on the otherwise scheduled payment date but shall instead pay it, without interest, on the first Business Day after such six-month period.

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

SECTION 20.Counterparts. This Award Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto

10

and hereto were upon the same instrument. You and the Company hereby acknowledge and agree that signatures delivered by facsimile or electronic means (including by “pdf”) shall be deemed effective for all purposes.

11

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Seth Blackley, certify that:

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

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

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

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

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

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

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

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

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

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

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

Dated:	May 5, 2021	/s/ Seth Blackley
		Name: Seth Blackley
		Title: Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, John Johnson, certify that:

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

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

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

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

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

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

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

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

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

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

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

Dated:	May 5, 2021	/s/ John Johnson
		Name: John Johnson
		Title: Chief Financial Officer

EX-32.1

Exhibit 32.1

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

As Adopted Pursuant to Section 906

Of the Sarbanes-Oxley Act of 2002

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

1.The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2021 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

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

Dated:	May 5, 2021	/s/ Seth Blackley
		Name: Seth Blackley
		Title: Chief Executive Officer

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

EX-32.2

Exhibit 32.2

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

As Adopted Pursuant to Section 906

Of the Sarbanes-Oxley Act of 2002

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

1.The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2021 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

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

Dated:	May 5, 2021	/s/ John Johnson
		Name: John Johnson
		Title: Chief Financial Officer

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

XML

Cover Page - shares	3 Months Ended
	Mar. 31, 2021	May 03, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	001-37415
Entity Registrant Name	Evolent Health, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	32-0454912
Entity Address, Address Line One	800 N. Glebe Road
Entity Address, Address Line Two	Suite 500
Entity Address, City or Town	Arlington
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	22203
City Area Code	571
Local Phone Number	389-6000
Title of 12(b) Security	Class A Common Stock of Evolent Health, Inc., par value $0.01 per share
Trading Symbol	EVH
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		86,930,683
Entity Central Index Key	0001628908
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	FY

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents		$ 236,032	$ 319,002
Restricted cash and restricted investments		53,479	14,374
Accounts receivable, net	[1]	185,103	124,064
Prepaid expenses and other current assets	[1]	33,696	56,295
Current assets of discontinued operations		0	33,914
Total current assets		508,310	547,649
Restricted cash and restricted investments		14,258	6,654
Investments in and advances to equity method investees		4,909	6,498
Property and equipment, net		84,439	86,240
Right-of-use assets - operating		53,686	57,799
Prepaid expenses and other noncurrent assets, net of allowances	[1]	6,218	5,773
Contract cost assets		25,322	26,687
Intangible assets, net		259,420	264,992
Goodwill		349,022	349,029
Non-current assets of discontinued operations		0	20,379
Total assets		1,305,584	1,371,700
Current liabilities:
Accounts payable	[1]	78,574	31,975
Accrued liabilities	[1]	61,069	73,242
Short-term debt, net of discount		26,606	26,557
Operating lease liability - current		7,539	7,357
Accrued compensation and employee benefits		19,360	47,163
Deferred revenue		13,367	10,187
Reserve for claims and performance-based arrangements	[1]	207,993	178,827
Current liabilities of discontinued operations		0	27,986
Total current liabilities		414,508	403,294
Long-term debt, net of discount		202,132	263,343
Other long-term liabilities		10,269	22,081
Operating lease liabilities - noncurrent		60,292	62,526
Deferred tax liabilities, net		1,085	679
Non-current liabilities from discontinued operations		0	177
Total liabilities		688,286	752,100
Commitments and Contingencies (See Note 10)
Shareholders' Equity (Deficit)
Additional paid-in-capital		1,236,847	1,229,320
Accumulated other comprehensive income (loss)		(309)	(278)
Retained earnings (accumulated deficit)		(598,985)	(589,178)
Treasury stock, at cost; 1,537,582 shares issued, respectively		(21,123)	(21,123)
Total shareholders' equity		617,298	619,600
Total liabilities and shareholders' equity (deficit)		1,305,584	1,371,700
Class A Common Stock
Shareholders' Equity (Deficit)
Class A common stock - $0.01 par value; 750,000,000 shares authorized; 86,778,341 and 85,894,450 shares issued, respectively		$ 868	$ 859

[1] See Note 19 for amounts attributable to unconsolidated related parties included in these line items.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	750,000,000	750,000,000
Common stock, shares issued (in shares)	86,778,341	85,894,450
Treasury stock, at cost (in shares)	1,537,582	1,537,582

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Revenue
Total revenue		$ 215,071	$ 221,232
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below)	[1]	157,832	175,629
Selling, general and administrative expenses	[1]	58,591	52,087
Depreciation and amortization expenses		15,187	15,978
Loss on disposal of assets		0	6,447
Change in fair value of contingent consideration and indemnification asset		(594)	(3,818)
Total operating expenses		231,016	246,323
Operating loss		(15,945)	(25,091)
Interest income		123	770
Interest expense		(6,337)	(6,281)
Impairment of equity method investments		0	(47,133)
Gain (loss) from equity method investees		7,783	(412)
Gain on transfer of membership		22,969	0
Loss on repayment of debt, net		(19,158)	0
Other expense, net		(14)	(70)
Loss from continuing operations before income taxes		(10,579)	(78,217)
Provision for income taxes		611	270
Loss from continuing operations		(11,190)	(78,487)
Gain (loss) from discontinued operations, net of tax	[2]	1,383	(265)
Net loss		(9,807)	(78,752)
Net loss attributable to non-controlling interests		0	0
Net loss attributable to common shareholders of Evolent Health, Inc.		$ (9,807)	$ (78,752)
Loss per common share
Continuing operations, basic (in dollars per share)		$ (0.13)	$ (0.93)
Continuing operations, diluted (in dollars per share)		(0.13)	(0.93)
Discontinued operations, basic (in dollars per share)		0.01	0
Discontinued operations, diluted (in dollars per share)		0.01	0
Basic loss per share attributable to common shareholders of Evolent Health, Inc. (in dollars per share)		(0.12)	(0.93)
Diluted loss per share attributable to common shareholders of Evolent Health, Inc. (in dollars per share)		$ (0.12)	$ (0.93)
Weighted-average common shares outstanding
Basic (in shares)		84,670	84,793
Weighted-average common shares outstanding - diluted (in shares)		84,670	84,793
Comprehensive loss
Net loss		$ (9,807)	$ (78,752)
Other comprehensive loss, net of taxes, related to:
Foreign currency translation adjustment		(31)	(153)
Total comprehensive loss		(9,838)	(78,905)
Total comprehensive loss attributable to non-controlling interests		0	0
Total comprehensive loss attributable to common shareholders of Evolent Health, Inc.		(9,838)	(78,905)
Transformation services
Revenue
Total revenue	[1]	345	5,238
Platform and operations services
Revenue
Total revenue	[1]	$ 214,726	$ 215,994

[1] See Note 19 for amounts attributable to unconsolidated related parties included in these line items.

[2] Includes $1.9 million gain on disposal of discontinued operations for the three months ended March 31, 2021

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) shares in Thousands, $ in Thousands	Total	Passport	Global Health	Cumulative Effect, Period of Adoption, Adjustment	Parent	Parent Passport	Parent Global Health	Parent Cumulative Effect, Period of Adoption, Adjustment	Common Stock	Common Stock Passport	Common Stock Global Health	Common Stock Class A Common Stock	Common Stock Class A Common Stock Passport	Common Stock Class A Common Stock Global Health	Additional Paid-In Capital	Additional Paid-In Capital Passport	Additional Paid-In Capital Global Health	Accumulated Other Income (Loss)	Retained Earnings (Accumulated Deficit)	Retained Earnings (Accumulated Deficit) Cumulative Effect, Period of Adoption, Adjustment	Treasury Stock	Non-Controlling Interests
Beginning balance (in shares) at Dec. 31, 2019												84,589
Beginning balance at Dec. 31, 2019	$ 929,047			$ (2,970)	$ 922,358			$ (2,970)				$ 846			$ 1,173,708			$ (234)	$ (251,962)	$ (2,970)		$ 6,689
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	3,508				3,508										3,508
Exercise of stock options (in shares)												8
Exercise of stock options	84				84				$ 1						83
Restricted stock units vested, net of shares withheld for taxes (in shares)												237
Restricted stock units vested, net of shares withheld for taxes	(1,188)				(1,188)				2						(1,190)
Class A common stock issued for earn-out (in shares)													428	188
Class A common stock issued for earn-out		$ 3,500	$ 685			$ 3,500	$ 685			$ 4	$ 2					$ 3,496	$ 683
Disposal of assets	(6,689)																					(6,689)
Foreign currency translation adjustment	(153)				(153)													(153)
Net loss	(78,752)				(78,752)														(78,752)
Ending balance (in shares) at Mar. 31, 2020												85,450
Ending balance at Mar. 31, 2020	847,072				847,072							$ 855			1,180,288			(387)	(333,684)			$ 0
Beginning balance (in shares) at Dec. 31, 2020												85,895
Beginning balance at Dec. 31, 2020	619,600				619,600							$ 859			1,229,320			(278)	(589,178)		$ (21,123)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	3,706				3,706										3,706
Exercise of stock options (in shares)												594
Exercise of stock options	6,518				6,518							$ 6			6,512
Restricted stock units vested, net of shares withheld for taxes (in shares)												290
Restricted stock units vested, net of shares withheld for taxes	(2,688)				(2,688)				$ 3						(2,691)
Foreign currency translation adjustment	(31)				(31)													(31)
Net loss	(9,807)				(9,807)														(9,807)
Ending balance (in shares) at Mar. 31, 2021												86,779
Ending balance at Mar. 31, 2021	$ 617,298				$ 617,298							$ 868			$ 1,236,847			$ (309)	$ (598,985)		$ (21,123)

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Cash Flows Used In Operating Activities
Net loss		$ (9,807)	$ (78,752)
Adjustments to reconcile net loss to net cash and restricted cash used in operating activities:
Change in fair value of contingent consideration and indemnification asset		(594)	(3,818)
(Gain) loss on disposal of assets		(1,904)	6,447
(Gain) loss from equity method investees		(7,783)	412
Depreciation and amortization expenses		15,347	16,138
Impairment of equity method investments		0	47,133
Stock-based compensation expense		3,706	3,508
Deferred tax (benefit) provision		(59)	58
Amortization of contract cost assets		3,055	5,614
Amortization of deferred financing costs		4,370	3,009
Gain on transfer of membership		(22,969)	0
Loss on repayment of debt		19,158	0
Bad debt expense		2,407	495
Other current operating cash outflows, net		(66)	(621)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net and contract assets		(63,233)	(36,649)
Prepaid expenses and other current and non-current assets		1,037	1,459
Contract cost assets		(1,690)	(3,326)
Accounts payable		9,395	11,068
Accrued liabilities		(9,698)	(678)
Accrued compensation and employee benefits		(28,014)	(18,143)
Deferred revenue		2,684	(2,623)
Reserve for claims and performance-based arrangements		32,501	27,860
Right-of-use operating assets		2,840	6,695
Operating lease liabilities		(771)	(5,920)
Other long-term liabilities		1,925	93
Net cash and restricted cash used in operating activities		(48,163)	(20,541)
Cash Flows Provided by (Used In) Investing Activities
Cash paid for asset acquisitions		(1,472)	0
Proceeds from transfer of membership and release of Passport escrow		42,996	0
Principal repayment of implementation funding loan and regulatory and capital requirements		0	(400)
Disposal of non-strategic assets and divestiture of discontinued operations, net		3,490	(2,287)
Return of equity method investments		9,372	0
Purchases of investments		(2,994)	(1,338)
Maturities and sales of investments		500	618
Investments in internal-use software and purchases of property and equipment		(5,941)	(7,400)
Net cash and restricted cash provided by (used in) investing activities		45,951	(10,807)
Cash Flows (Used In) Provided by Financing Activities
Changes in working capital balances related to claims processing on behalf of partners		39,005	33,678
Repayment and termination of Credit Agreement including settlement of warrants.		(98,420)	0
Proceeds from stock option exercises		6,518	84
Taxes withheld and paid for vesting of restricted stock units		(2,687)	(1,188)
Net cash and restricted cash (used in) provided by financing activities		(55,584)	32,574
Effect of exchange rate on cash and cash equivalents and restricted cash		1	41
Net increase (decrease) in cash and cash equivalents and restricted cash		(57,795)	1,267
Cash and cash equivalents and restricted cash as of beginning-of-period	[1]	361,564	128,531
Cash and cash equivalents and restricted cash as of end-of-period	[1]	$ 303,769	$ 129,798

[1] As a result of the closing of the sale of True Health SPA, the consolidated statements of operations, consolidated balance sheets, and related financial information reflect the Company’s operations and assets and liabilities of True Health as discontinued operations for all periods presented. Cash flows and comprehensive income have not been adjusted and are included in the consolidated statements of cash flows and consolidated statements of comprehensive income (loss) for all periods presented. See Note 5.

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Parenthetical) $ in Millions	3 Months Ended
	Mar. 31, 2021 USD ($)
Income Statement [Abstract]
Gain on disposal of discontinued operations	$ 1.9

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Organization

3 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

Evolent Health, Inc. was incorporated in December 2014 in the state of Delaware and through its subsidiaries supports leading health systems and physician organizations as well as health plans to move their business models from traditional fee for service reimbursement to value-based care, which we consider to be an integrated clinical and financial responsibility for populations.

The Company made organizational changes, including re-evaluating its reportable segments, as a result of the entry into the agreement to sell True Health on January 11, 2021. Effective during the first quarter of 2021, the Company bifurcated its previous Services segment into two segments. The Company’s Evolent Health Services segment (“EHS”) includes our administrative simplification solution and certain supporting population health infrastructure. Our Clinical Solutions segment includes our specialty management and physician-oriented total cost of care solutions, along with the New Century Health and Evolent Care Partners brands. Refer to Note 21 for a further discussion of our operating results by segment.

Since its inception, the Company has incurred losses from operations. As of March 31, 2021, the Company had unrestricted cash and cash equivalents of $236.0 million. The Company believes it has sufficient liquidity for the next twelve months as of the date the financial statements were available to be issued.

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

Evolent Health LLC Governance

Our operations are conducted through Evolent Health LLC and subsequent to the offering reorganization at the time of our initial public offering (the “Offering Reorganization”), the financial results of Evolent Health LLC were consolidated in the financial statements of Evolent Health, Inc. Evolent Health, Inc. is a holding company whose only business is to act as the sole managing member of Evolent Health LLC. As such, it controls Evolent Health LLC’s business and affairs and is responsible for the management of its business.

Issuances of Common Units

Evolent Health LLC may only issue Class A common units to us, as the sole managing member of Evolent Health LLC. Class B common units may be issued only to persons or entities we permit. Such issuances of Class B common units shall be made in exchange for cash or other consideration. Class B common units may not be transferred as Class B common units except to certain permitted transferees and in accordance with the restrictions on transfer set forth in the third amended and restated operating agreement of Evolent Health LLC. Any such transfer must be accompanied by the transfer of an equal number of shares of our Class B common stock. As of March 31, 2021 and 2020, there are no Class B common units outstanding.

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

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

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

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

Basis of Presentation

In our opinion, the accompanying unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state our financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2020, has been derived from audited financial statements as of that date. The interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain footnote disclosures normally included in financial statements prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) have been omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission (“SEC”). The disclosures provided herein should be read in conjunction with the audited financial statements and notes thereto included in our 2020 Form 10-K.

Summary of Significant Accounting Policies

Certain GAAP policies that significantly affect the determination of our financial position, results of operations and cash flows, are summarized below.

Accounting Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial

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

Principles of Consolidation

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

Cash and Cash Equivalents

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

Restricted Cash and Restricted Investments

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

	March 31, 2021		December 31, 2020 (1)
Collateral for letters of credit for facility leases (2)	$	3,510	$	3,510
Collateral with financial institutions (3)	12,347		4,743
Claims processing services (4)	51,132		12,064
Other	748		1,327
Total restricted cash and restricted investments	$	67,737	$	21,644
Current restricted cash	53,479		14,374
Total current restricted cash and restricted investments	$	53,479	$	14,374
Non-current restricted cash	14,258		6,654
Total non-current restricted cash and restricted investments	$	14,258	$	6,654

————————

(1)Amounts exclude $0.6 million of non-current restricted investments and $0.1 million of current restricted cash from claims processing services reclassified to discontinued operations as of December 31, 2020.

(2)Represents restricted cash related to collateral for letters of credit required in conjunction with lease agreements. See Note 12 for further discussion of our lease commitments.

(3)Represents collateral held with financial institutions for risk-sharing and other arrangements. As of March 31, 2021 and December 31, 2020, approximately $12.3 million and $4.7 million, respectively, of the collateral amounts were held in a FDIC participating bank account. See Note 18 for discussion of fair value measurement and Note 11 for discussion of our risk-sharing arrangements.

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

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

	March 31,
	2021		2020
Cash and cash equivalents	$	236,032	$	67,944
Restricted cash and restricted investments	67,737		62,671
Restricted investments included in restricted cash and restricted investments	—		(817)
Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows (1)	$	303,769	$	129,798

————————

(1)As a result of the closing of the sale of True Health SPA, the consolidated statements of operations, consolidated balance sheets, and related financial information reflect the Company’s operations and assets and liabilities of True Health as discontinued operations for all periods presented. Cash flows and comprehensive income have not been adjusted and are included in the consolidated statements of cash flows and consolidated statements of comprehensive income (loss) for all periods presented. See Note 5.

Business Combinations

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

The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed in the acquired entity is recorded as goodwill. Goodwill is assigned to the reporting unit that benefits from the synergies arising from the business combination. If the Company obtains new information about facts and circumstances that existed as of the acquisition date during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded on the Company's consolidated statements of operations and comprehensive income (loss).

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

Goodwill

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

Our goodwill impairment analysis first assesses qualitative factors to determine whether events or circumstances existed that would lead the Company to conclude it is more likely than not that the fair value of a reporting unit is below its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is below the carrying amount, a quantitative goodwill assessment is required. In the quantitative evaluation, the fair value of the relevant reporting unit is determined and compared to the carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value and a charge is reported in goodwill impairment on our consolidated statements of operations and comprehensive income (loss). See Note 9 for additional discussion regarding the goodwill impairment tests conducted during 2021 and 2020.

Intangible Assets, Net

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

The following summarizes the estimated useful lives by asset classification:

Corporate trade name	10 - 20 years
Customer relationships	10 - 25 years
Technology	5 years
Provider network contracts	4 - 5 years

Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the asset’s carrying value. The Company evaluates recoverability by determining whether the undiscounted cash flows expected to result from the use and eventual disposition of that asset or group exceed the carrying value at the evaluation date. If the undiscounted cash flows are not sufficient to cover the carrying value, the Company measures an impairment loss as the excess of the carrying amount of the long-lived asset or group over its fair value. See Note 9 for additional discussion regarding our intangible assets.

Reserves for Claims and Performance-based Arrangements

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

The process of estimating reserves involves a considerable degree of judgment by the Company and, as of any given date, is inherently uncertain. The methods for making such estimates and for establishing the resulting liability are continually reviewed, and adjustments are reflected in current results of operations in the period in which they are identified as experience develops or new information becomes known. See Note 22 for additional discussion regarding our reserves for claims and performance-based arrangements.

Leases

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

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

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

Refer to Note 12 for additional lease disclosures.

Revenue Recognition

We derive revenue from two sources: (1) transformation services and (2) platform and operations services. Transformation services consist of implementation services whereby we assist the customer in launching its population health or health plan programs, or implement certain platform and operations services. In certain cases, transformation services can also include revenue associated with our support of certain one-time wind-down activities for clients who are exiting a line of business or population. Platform and operations services generally include multi-year arrangements with customers to provide various population health, health plan

operations, specialty care management and claims processing services on an ongoing basis, as well as transition or run-out services to customers receiving primarily TPA services. Revenue is recognized when control of the services is transferred to our customers.

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

• Identify the contract(s) with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to performance obligations

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

See Note 6 for further discussion of our policies related to revenue recognition.

Foreign Currency

The Company formed a subsidiary in India during the first quarter of 2018. The functional currency of our international subsidiary is the Indian Rupee. We translate the financial statements of this subsidiary to U.S. dollars using month-end rates of exchange for assets and liabilities, and monthly average rates of exchange for revenue and expenses. Translation gains and losses are recorded in accumulated other comprehensive income (loss) as a component of shareholders' equity. Foreign currency translation gains and losses did not have a material impact on our consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2021 and 2020.

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Recently Issued Accounting Standards

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Recently Issued Accounting Standards

Recently Issued Accounting Standards

Adoption of New Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequently issued additional guidance that modified ASU 2016-13. The standard requires an entity to change its accounting approach for measuring and recognizing credit losses on certain financial assets measured at amortized cost, including trade receivables, certain non-trade receivables, contract assets, held-to-maturity securities, customer advances and certain off-balance sheet credit exposures, by replacing the existing “incurred loss” framework with an expected credit loss recognition model.  The new standard results in earlier recognition of credit losses based on past events, current conditions, and reasonable and supportable forecasts.  The standard is effective for entities with fiscal years beginning after December 15, 2019, including interim periods within such fiscal years. We adopted the requirements of this standard effective January 1, 2020 using the modified retrospective approach and recorded a cumulative effect adjustment of $3.0 million to January 1, 2020 retained earnings (accumulated deficit). Results for reporting periods beginning January 1, 2020 reflect the adoption of ASU 2016-13, while prior period amounts were not adjusted and continue to be reported in accordance with our historical accounting practices. In our previous accounting policy for trade receivables and non-trade receivables, we maintained an allowance for doubtful accounts based solely on specific identification. Under the new accounting standard, we maintain our specific identification process but utilize several factors to develop historical losses reserves, including aging schedules, customer creditworthiness, and historical payment experience, which are then adjusted for current conditions and reasonable and supportable forecasts in measurement of the allowance.  In addition, for customer advances and certain off-balance sheet credit exposures, we evaluate the allowance through a discounted cash flow approach.  For held-to-maturity investment securities, we evaluate (i) historical information adjusted for current conditions and reasonable and supportable forecasts and (ii) qualitative factors to determine whether the zero-loss expectation exception applies. Refer to Note 7 for additional disclosures related to current expected credit losses.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The amendments in the ASU remove certain exceptions to the intraperiod tax allocation of losses and gains from different financial statement components and to the method of recognizing income taxes on interim period losses, and the recognition of deferred tax liabilities for outside basis differences. In addition, the new guidance simplifies aspects of the accounting for franchise taxes and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted this standard starting in the first quarter of 2021, which did not have a material impact on our consolidated financial statements.

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Transactions

3 Months Ended

Mar. 31, 2021

Business Combinations [Abstract]

Transactions

Transactions

Passport

On May 28, 2019, UHC, Passport Health Solutions, LLC (“PHS I”), the Company and EVH Passport entered into an Asset Purchase Agreement (the “Passport APA”), which provided for the sale of substantially all of the assets of UHC and PHS I, including UHC’s

Kentucky Medicaid contract (the “Passport Medicaid Contract”), to EVH Passport for a purchase price of $70.0 million in cash and the issuance of a 30% interest in EVH Passport (the “Passport Purchase Price”) to The University of Louisville, the University of Louisville Physicians, University Medical Center, the Jewish Heritage Fund for Excellence, Norton Healthcare, Inc. and the Louisville/Jefferson County Primary Care Association (collectively, the “Sponsors”).

On June 18, 2019, the Company contributed $40.0 million to UHC in the form of an advance for regulatory capital requirements under an agreement with UHC (the “Passport Note”). The Passport Note carried a fixed interest rate of 6.5% per annum. Additionally, on June 6, 2019, the Company and UHC entered into an Indemnity Agreement (the “Indemnity Agreement”), with an insurance company (the “Surety”). The Surety issued a performance bond in the amount of $25.0 million to secure UHC’s performance under its Medicaid Contract. Pursuant to the Indemnity Agreement, the Company and UHC were jointly and severally liable to the Surety in the maximum amount of the bond, plus certain costs of the Surety, in the event of losses arising under the bond. The bond’s original expiry date was June 30, 2020 and during the three months ended June 30, 2020, was extended to December 31, 2020. The bond was released in October 2020.

On December 30, 2019, UHC, PHS I, the Company and EVH Passport consummated the transactions contemplated by the Passport APA (the “Passport Closing”). At the Passport Closing, $16.2 million of the cash Passport Purchase Price was held back until such time as PHS I delivers to EVH Passport certain owned real property and improvements free and clear of all encumbrances. In addition, at the Passport Closing, EVH Passport and UHC entered into an agreement that provided for the administration and assumption of the financial risks by EVH Passport of UHC’s dual eligible special needs business (the “DNP Business”) until such time as EVH Passport became certified as a Medicare Advantage Organization and the D-SNP Business could be transferred to EVH Passport. On October 1, 2020, the D-SNP Business was transferred from UHC to EVH Passport. At the Passport Closing, EVH Passport assumed UHC’s obligations under the Passport Note and the Indemnity Agreement.

On July 16, 2020, EVH Passport, Evolent Health LLC and Molina Healthcare, Inc. (“Molina”) entered into an Asset Purchase Agreement (the “Molina APA”), which contemplated the sale by EVH Passport to Molina of certain assets, including certain intellectual property rights of EVH Passport and EVH Passport’s rights under the Passport Medicaid Contract. On September 1, 2020, EVH Passport and Molina consummated the transactions contemplated by the Molina APA (the “Molina Closing”), and the Passport Medicaid Contract was novated to Molina. As a result, EVH Passport began to wind down its business. In connection with the Molina Closing, Molina deposited $20.0 million in cash in escrow, which was subsequently released to EVH Passport in January 2021. In addition, at the Molina Closing, Molina and EVH Passport entered into an agreement that provided for the assumption of the financial risks by Molina of the D-SNP Business until such time as Molina’s Kentucky health plan becomes certified as a Medicare Advantage Organization and the D-SNP Business is transferred Molina. The Company and EVH Passport continued to administer the D-SNP Business until January 1, 2021, at which time Molina became responsible for its administration until the D-SNP Business is officially transferred to Molina.

Prior to the Molina Closing, the Company accounted for its investment in EVH Passport as an unconsolidated variable interest entity under the equity method of accounting. As a result of the transaction, the Company concluded that a reconsideration event occurred whereby EVH Passport was determined to be a voting interest entity and that Evolent had a controlling financial interest in EVH Passport; accordingly, the Company consolidated EVH Passport as of September 1, 2020 in its consolidated financial statements. The Company accounted for the transaction as an asset acquisition, as the Company concluded that assets acquired as a result of the consolidation did not meet the criteria to be classified as a business under GAAP. Following the Molina Closing and consolidation of EVH Passport in the Company’s consolidated financials, on November 16, 2020, EVH Passport redeemed the Sponsors’ equity interests in EVH Passport for $20.0 million in cash in accordance with the terms of EVH Passport’s Stockholders’ Agreement, and, as a result, EVH Passport became a wholly owned subsidiary of the Company.

As part of the consolidation, the Company recorded assets primarily consisting of cash and cash equivalents and restricted cash and cash equivalents of $159.8 million, available for sale securities of $88.6 million, receivables related to unsettled sales of securities of $43.0 million and other assets of $50.2 million and total liabilities primarily comprised of reserve for claims and performance-based arrangements of $164.8 million and accrued liabilities of $50.0 million. Subsequent to winddown activities, any remaining capital will be distributed to the Company subject to regulatory approval from the Kentucky Department of Insurance. In addition, the Passport Note was eliminated upon consolidation, and as of December 31, 2020, the outstanding principal balance of the $40.0 million Passport Note was repaid in full by EVH Passport including approximately $3.6 million of accrued interest.

During the three months ended March 31, 2021, EVH Passport received a cash payment from Molina in the amount of $23.0 million based on the number of enrollees above a certain threshold in the D-SNP Business and Molina's Medicaid plan following the open enrollment period for plan year 2021. The foregoing amount represents 50% of the payment that EVH Passport is eligible to receive based on the number of such enrollees. The remaining 50% will be payable in the first quarter of 2022 subject to the satisfaction of certain contingencies.

Repositioning and Other Changes

We continually assess opportunities to improve operational effectiveness and efficiency to better align our expenses with revenues, while continuing to make investments in our solutions, systems and people that we believe are important to our long-term goals. Across 2020, we divested or agreed to divest a majority of our health plan assets, including certain assets of EVH Passport, which represented a significant revenue stream for the Company. In parallel with these divestitures, we contracted with a third-party vendor to review our operating model and organizational design in order to improve our profitability, create value through our solutions and invest in strategic opportunities in future periods.

In the fourth quarter of 2020, we committed to certain operational efficiency and profitability actions that we are taking in order to accomplish these objectives (“Repositioning Plan”). These actions included making organizational changes across our business as well as other profitability initiatives expected to result in reductions in force, re-aligning of resources as well as other potential operational efficiency and cost-reduction initiatives. The Repositioning Plan is expected to continue through the fourth quarter of 2021.

The Company recorded approximately $5.4 million of repositioning costs in selling, general and administrative expenses during the three months ended March 31, 2021 in connection with the Repositioning Plan. The following tables provide a summary of our total costs associated with the Repositioning Plan for the three months ended March 31, 2021, by major type of cost:

	Incurred For the Three Months Ended March 31, 2021		Total Amount Expected to be Incurred in the Repositioning Plan		Cumulative Amount Incurred through March 31, 2021
Severance and termination benefits	$	109	$	2,500	$	109
Office space consolidation	2,071		2,100		2,071
Professional services	3,200		4,475		4,475
Total	$	5,380	$	9,075	$	6,655

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Discontinued Operations

3 Months Ended

Mar. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

On January 11, 2021, Evolent Health LLC, EH Holdings and True Health, each wholly owned subsidiaries of the Company, entered into a Stock Purchase Agreement (the “True Health SPA”) with Bright Health Management, Inc. (“Bright HealthCare”), pursuant to which EH Holdings agreed to sell all of its equity interests in True Health to Bright HealthCare. Closing of the transactions contemplated by the True Health SPA occurred on March 31, 2021 and the Company will have no continuing involvement with True Health subsequent to the closing except an existing services agreement for claims processing and other health plan administrative functions.

As of March 31, 2021, the Company determined that True Health met the discontinued operations criteria under ASC 360, and as such, True Health assets and liabilities as of December 31, 2020, and the results of operations for all periods presented are classified as held for sale and are not included in continuing operations in the consolidated financial statements.

The following table summarizes the results of operations of the Company’s True Health business, which are included in loss from discontinued operations in the consolidated statements of operations for the three months ended March 31, 2021 and 2020.

	For the Three Months Ended March 31,
	2021		2020
Revenue
Platform and operations	38		240
Premiums	44,795		32,147
Total revenue	44,833		32,387
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (1)	5,885		3,295
Claims expenses	33,954		23,667
Selling, general and administrative expenses (2)	5,764		5,675
Depreciation and amortization expenses	160		160
Total operating expenses	45,763		32,797
Operating loss	(930)		(410)
Interest income	112		149
Interest expense	(4)		(4)
Other loss	(25)		—
Loss before income taxes and non-controlling interests	(847)		(265)
Benefit for income taxes	(326)		—
Net loss	$	(521)	$	(265)

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(1)Cost of revenue includes $2.8 million and $3.1 million of intercompany expenses between the Company and True Health that are recorded in income from continuing operations on the consolidated statements of operations related an existing services agreement for claims processing and other health plan administrative functions for the three months ended March 31, 2021 and 2020, respectively.

(2)Selling, general and administrative expenses includes $1.1 million and $3.1 million of intercompany expenses between the Company and True Health that are recorded in income from continuing operations on the consolidated statements of operations related an existing services agreement for claims processing and other health plan administrative functions for the three months ended March 31, 2021 and 2020, respectively.

The consolidated statements of cash flows for all periods have not been adjusted to separately disclose cash flows related to discontinued operations. Cash flows related to the True Health business during the three months ended March 31, 2021 and 2020 were as follows:

	For the Three Months Ended March 31,
	2021		2020
Cash flows provided by (used in) operating activities	$	5,002	$	2,745
Cash flows provided by (used in) investing activities	(2,494)		(721)

The following table summarizes the current and long-term assets and liabilities of the discontinued True Health business in the consolidated balance sheets at December 31, 2020:

	December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	21,488
Restricted cash and restricted investments	63
Accounts receivable, net	3,437
Prepaid expenses and other current assets	5,198
Investments, at amortized cost	3,728
Total current assets	33,914
Restricted cash and restricted investments	616
Investments, at amortized cost	10,919
Prepaid expenses and other noncurrent assets, net of allowances	59
Intangible assets, net	3,080
Goodwill	5,705
Total assets	$	54,293
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Liabilities
Current liabilities:
Accounts payable (1)	93
Accrued liabilities	11,265
Accrued compensation and employee benefits	1,115
Deferred revenue	4,140
Reserve for claims and performance-based arrangements	9,858
Total current liabilities	26,471
Other long-term liabilities	128
Deferred tax liabilities, net	49
Total liabilities	$	26,648

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(1)Accounts payable exclude $1.5 million between the Company and True Health related an existing services agreement for claims processing and other health plan administrative functions as of December 31, 2020.

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Revenue Recognition

3 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

We derive revenue from two sources: (1) transformation services and (2) platform and operations services.

Transformation Services Revenue

Transformation services consist of implementation services whereby we assist the customer in launching its population health or health plan programs. In certain cases, transformation services can also include revenue associated with our support of certain one-time wind-down activities for clients who are exiting a line of business or population. The transformation services are usually completed within 12 months. We generally receive a fixed fee for transformation services and recognize revenue over time using an input method based on hours incurred compared to the total estimated hours required to satisfy our performance obligation.

Platform and Operations Services Revenue

Platform and operations services are typically multi-year arrangements with customers to provide various clinical and administrative solutions. In our Clinical Solutions segment, our solutions are designed to lower the medical expenses of our partners and include our total cost of care and specialty care management services. In our Evolent Health Services segment, our solutions are designed to provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers receiving primarily TPA services.

Our performance obligation in these arrangements is to provide an integrated suite of services, including access to our platform that is customized to meet the specialized needs of our customers and members. Generally, we will apply the series guidance to the performance obligation as we have determined that each time increment is distinct. We primarily utilize a variable fee structure for these services that typically includes a monthly payment that is calculated based on a specified per member per month rate, multiplied by the number of members that our partners are managing under a value-based care arrangement or a percentage of plan premiums. Our arrangements may also include other variable fees related to service level agreements, shared medical savings arrangements and other performance measures. Variable consideration is estimated using the most likely amount based on our historical experience and best judgment at the time. Due to the nature of our arrangements, certain estimates may be constrained if it is probable that a significant reversal of revenue will occur when the uncertainty is resolved. We recognize revenue from platform and operations services over time using the time elapsed output method. Fixed consideration is recognized ratably over the contract term. In accordance with the series guidance, we allocate variable consideration to the period to which the fees relate.

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

Contracts with Multiple Performance Obligations

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

Principal vs. Agent

We occasionally use third parties to assist in satisfying our performance obligations. In order to determine whether we are the principal or agent in the arrangement, we review each third-party relationship on a contract by contract basis. We are an agent when our role is to arrange for another entity to provide the services to the customer. In these instances, we do not control the service before it is provided and recognize revenue on a net basis. We are the principal when we control the good or service prior to transferring control to the customer. We recognize revenue on a gross basis when we are the principal in the arrangement.

Disaggregation of Revenue

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

	Evolent Health Services				Clinical Solutions
	For the Three Months Ended March 31,				For the Three Months Ended March 31,
	2021		2020		2021		2020
Medicaid	$	60,929	$	58,445	$	43,339	$	60,462
Medicare	8,338		15,185		85,783		62,354
Commercial and other	15,571		22,747		1,111		2,039
Total	$	84,838	$	96,377	$	130,233	$	124,855

Transaction Price Allocated to the Remaining Performance Obligations

For contracts with a term greater than one year, we have allocated approximately $80.6 million of transaction price to performance obligations that are unsatisfied as of March 31, 2021. We do not include variable consideration that is allocated entirely to a wholly unsatisfied performance obligation accounted for under the series guidance in the calculation. As a result, the balance represents the value of the fixed consideration in our long-term contracts that we expect will be recognized as revenue in a future period and excludes the majority of our platform and operations revenue, which is primarily derived based on variable consideration as discussed in Note 2. We expect to recognize revenue on approximately 50% and 84% of these remaining performance obligations by December 31, 2021 and December 31, 2022, respectively, with the remaining balance to be recognized thereafter. However, because our existing contracts may be canceled or renegotiated including for reasons outside our control, the amount of revenue that we actually receive may be less or greater than this estimate and the timing of recognition may not be as expected.

Contract Balances

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

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

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers (in thousands):

	March 31, 2021		December 31, 2020 (1)
Short-term receivables (2)	$	180,408	$	124,064
Long-term receivables (2)	4,634		4,554
Short-term contract assets	190		329
Short-term deferred revenue	13,367		10,187
Long-term deferred revenue	5,415		3,593

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(1)Amounts exclude $3.4 million of short-term receivables and $4.1 million of short-term deferred revenue reclassified to discontinued operations as of December 31, 2020.

(2)Excludes pharmacy claims receivable and premiums receivable

Changes in contract assets and deferred revenue for the three months ended March 31, 2021 are as follows (in thousands):

Contract assets
Balance as of beginning of period	$	329
Reclassification to receivables, as the right to consideration becomes unconditional	(143)
Contract assets recognized, net of reclassification to receivables	4
Balance as of end of period	$	190
Deferred revenue
Balance as of beginning-of-period	$	17,920
Reclassification to revenue, as a result of performance obligations satisfied	(7,959)
Cash received in advance of satisfaction of performance obligations	8,821
Balance as of end of period	$	18,782

The amount of revenue recognized from performance obligations satisfied (or partially satisfied) in previous period was $13.2 million for the three months ended March 31, 2021, due primarily to net gain share as well as changes in other estimates.

Contract Cost Assets

Certain bonuses and commissions earned by our sales team are considered incremental costs of obtaining a contract with a customer that we expect to be recoverable. The capitalized contract acquisition costs are classified as non-current assets and recorded within contract cost assets on our consolidated balance sheets. Amortization expense is recorded within selling, general and administrative expenses on the accompanying consolidated statements of operations and comprehensive income (loss). As of March 31, 2021 and December 31, 2020, the Company had $4.1 million and $3.3 million, respectively, of contract acquisition cost assets, net of accumulated amortization recorded in contract cost assets on the consolidated balance sheets. In addition, the Company recorded amortization expense of $0.4 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively.

In our platforms and operations arrangements, we incur certain costs related to the implementation of our platform before we begin to satisfy our performance obligation to the customer. The costs, which we expect to recover, are considered costs to fulfill a contract. Our contract fulfillment costs primarily include our employee labor costs and third-party vendor costs. The capitalized contract fulfillment costs are classified as non-current and recorded within contract cost assets on our consolidated balance sheets. Amortization expense is recorded within cost of revenue on the accompanying consolidated statements of operations and comprehensive income (loss). As of March 31, 2021 and December 31, 2020, the Company had $21.2 million and $23.4 million, respectively, of contract fulfillment cost assets, net of accumulated amortization recorded in contract cost assets on the consolidated balance sheets. In addition, the Company recorded amortization expense of $2.7 million and $5.1 million for the three months ended March 31, 2021 and 2020, respectively.

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

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Credit Losses

3 Months Ended

Mar. 31, 2021

Credit Loss [Abstract]

Credit Losses

Credit Losses

We are exposed to credit losses primarily through our accounts receivable from revenue transactions, investments held at amortized cost and customer advances for regulatory capital and other notes receivable. We estimate expected credit losses based on past events, current conditions and reasonable and supportable forecasts. Expected credit losses are measured over the remaining contractual life of these assets. As part of our consideration of current and forward-looking economic conditions, we considered the impact of the COVID-19 pandemic on our customers’ and other third parties’ ability to pay. We did not observe notable increases in delinquencies during the three months ended March 31, 2021. Given the nature of our business, our past collection experience during recessionary and pre-recessionary periods, and our forecasted impact of the COVID-19 pandemic on our business, we did not record material changes in our allowances due to the COVID-19 pandemic during the three months ended March 31, 2021.

Accounts Receivable from Revenue Transactions

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

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

Based on an aging analysis of our trade accounts receivable, non-trade accounts receivable and contract assets at March 31, 2021, 64% were current, 24% were past due less than 60 days, with 32% past due less than 120 days. At March 31, 2021, we reported $211.0 million of accounts receivable, certain non-trade accounts receivable included in prepaids and other assets on the consolidated balance sheet and contract assets, net of allowances of $9.4 million. The following table summarizes the changes in allowance for credit losses on our accounts receivables, certain non-trade accounts receivable and contract assets (in thousands):

	For the Three Months Ended March 31,
	2021		2020
Balance as of beginning of period	$	(7,056)	$	(41)
Cumulative transition adjustment	—		(2,815)
Provision for credit losses	(2,327)		(1,001)
Recoveries	—		447
Balance as of end of period	$	(9,383)	$	(3,410)

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Property and Equipment, Net

3 Months Ended

Mar. 31, 2021

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Property and Equipment, Net

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

	March 31, 2021		December 31, 2020
Computer hardware	$	19,454	$	18,866
Furniture and equipment	3,553		3,559
Internal-use software development costs	142,539		137,085
Leasehold improvements	15,577		15,586
Total property and equipment	181,123		175,096
Accumulated depreciation and amortization expenses	(96,684)		(88,856)
Total property and equipment, net	$	84,439	$	86,240

The Company capitalized $5.5 million and $7.3 million of internal-use software development costs for the three months ended March 31, 2021 and 2020, respectively. The net book value of capitalized internal-use software development costs was $74.1 million and $75.3 million as of March 31, 2021 and December 31, 2020, respectively.

Depreciation expense related to property and equipment was $7.8 million and $6.8 million for the three months ended March 31, 2021 and 2020, respectively, of which amortization expense related to capitalized internal-use software development costs was $6.7 million and $5.6 million, respectively.

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Goodwill and Intangible Assets, Net

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

Goodwill and Intangible Assets, Net

Goodwill

Goodwill has an estimated indefinite life and is not amortized; rather, it is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

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

Our annual goodwill impairment review occurs during the fourth quarter of each fiscal year. We evaluate qualitative factors that could cause us to believe the estimated fair value of each of our reporting units may be lower than the carrying value and trigger a quantitative assessment, including, but not limited to (i) macroeconomic conditions, (ii) industry and market considerations, (iii) our overall financial performance, including an analysis of our current and projected cash flows, revenues and earnings, (iv) a sustained decrease in share price and (v) other relevant entity-specific events including changes in management, strategy, partners, or litigation.

We did not identify any qualitative factors that would trigger a quantitative goodwill impairment test during the three months ended March 31, 2021. We will perform our annual impairment test as of October 31, 2021.

2020 Goodwill Impairment Test

As of March 31, 2020, the Company assessed whether there were additional events or changes in circumstances since its 2019 annual goodwill impairment test that would indicate that it was more likely than not that the fair values of the reporting units were less than the reporting units’ carrying amounts that would require an additional interim impairment assessment after October 31, 2019. Considering the sharp decrease in the share price of the Company’s Class A common stock during the three months ended March 31, 2020, the Company determined indicators of an impairment were present and we performed an interim goodwill impairment assessment as of March 31, 2020. As a result of this test, the Company determined that there was no goodwill impairment of the reporting unit which recognized an impairment in the year ended December 31, 2019.

During May 2020, the CHFS announced that EVH Passport was not awarded a Kentucky managed Medicaid contract for the next contract period and the Passport Medicaid Contract would expire on December 31, 2020. As a result of this announcement, the Company determined there were events or changes in circumstances since its 2019 annual goodwill impairment test that indicated it was more likely than not that the fair value of one of its two reporting units in the EHS segment was less than the reporting unit’s carrying amount triggering an interim quantitative assessment.

In performing this interim quantitative assessment, we estimated the fair value of the reporting unit by considering a discounted cash flow valuation approach (“income approach”). In determining the estimated fair value in a quantitative analysis, we projected future cash flows based on management’s estimates and long-term plans and applied a discount rate based on the Company’s weighted average cost of capital. This analysis required us to make judgments about revenues, expenses, fixed asset and working capital requirements, capital market assumptions, cash flows and discount rates.

As of May 31, 2020, we determined that the reporting unit under review had an estimated fair value less than its carrying value. As a result, we recorded a non-cash goodwill impairment charge of $215.1 million on our consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2020. In addition, the Company reviewed its interim goodwill impairment analysis as of June 30, 2020 and did not identify any additional information or events that would contradict or change the conclusion reached by the Company as of May 31, 2020.

During the three months ended September 30, 2020, we evaluated qualitative factors that could indicate the fair value of each of our reporting units may be lower than the carrying value. We did not identify any qualitative factors that would trigger a quantitative goodwill impairment test during the three months ended September 30, 2020.

During the Company’s annual impairment analysis as of October 31, 2020, the Company concluded that previous impairment charges of $199.8 million and $215.1 million recorded during the three months ended December 31, 2019 and June 30, 2020, respectively, in one of our two reporting units in the EHS segment left that specific reporting unit with a limited fair value cushion. Therefore, the Company elected to forego the qualitative assessment and proceed directly to the quantitative assessment of the goodwill impairment test for that specific reporting unit. This election does not preclude management from performing the qualitative assessment in any subsequent period. For the remaining reporting units, after assessing the totality of events and circumstances including the results of our previous valuations, the minimal impacts of the Passport loss and COVID-19, the Company does not believe that an event occurred or circumstances changed during the period under consideration that would, more likely than not, reduce the fair value of any reporting unit below their carrying amount. Therefore, the Company concluded that the quantitative assessment was not required.

In performing our October 31, 2020 impairment test for one of the specific reporting units referenced above, we estimated the fair value of our reporting units by considering a discounted cash flow valuation approach (“income approach”). In determining the estimated fair value using the income approach, we projected future cash flows based on management’s estimates and long-term plans and applied a discount rate based on the Company’s weighted average cost of capital. This analysis required us to make judgments about revenues, expenses, fixed asset and working capital requirements, capital market assumptions, cash flows and discount rates. As of October 31, 2020, we determined that the specific reporting unit had an estimated fair value greater than its carrying value and as a result, goodwill is not impaired.

As of December 31, 2020, the Company assessed whether there were additional events or changes in circumstances since its annual goodwill impairment test that would indicate that it was more likely than not that the fair value of the reporting unit was less than the reporting unit’s carrying amounts that would require an interim impairment assessment after October 31, 2020. The Company determined there had been no such indicators, therefore, we did not perform an interim goodwill impairment assessment as of December 31, 2020. As of December 31, 2020, the remaining goodwill attributable to the reporting unit from which we recognized a non-cash goodwill impairment charge earlier in the year was $214.3 million.

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

	EHS		Clinical Solutions		Consolidated
Balance as of December 31, 2020 (1)	$	214,354	$	134,675	$	349,029
Foreign currency translation	(7)		—		(7)
Balance as of March 31, 2021	$	214,347	$	134,675	$	349,022

	EHS		Clinical Solutions		Consolidated
Balance as of December 31, 2019 (1)	$	437,389	$	134,675	$	572,064
Goodwill disposal (2)	(2,200)		—		(2,200)
Foreign currency translation	(67)		—		(67)
Balance as of March 31, 2020	$	435,122	$	134,675	$	569,797

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(1)Net of cumulative inception to date impairment of $575.5 million and $360.4 million as of December 31, 2020 and 2019, respectively.

(2)Goodwill written-off upon disposal of a consolidated subsidiary.

Intangible Assets, Net

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

	March 31, 2021							December 31, 2020
	Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Corporate trade name	12.9	$	23,300	$	6,616	$	16,684	13.2	$	23,300	$	6,271	$	17,029
Customer relationships	15.9	278,519		61,305		217,214		16.2	278,519		57,716		220,803
Technology	1.6	82,922		66,158		16,764		1.8	82,922		63,507		19,415
Below market lease, net	2.1	1,218		799		419		2.3	1,118		648		470
Provider network contracts	2.8	13,947		5,608		8,339		2.9	12,175		4,900		7,275
Total intangible assets, net		$	399,906	$	140,486	$	259,420		$	398,034	$	133,042	$	264,992

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(1)Amounts exclude $2.2 million and $0.9 million of customer relationships and provider network contracts, net of accumulated amortization, with weighted average remaining useful lives of 15 years and 10 months reclassified to discontinued operations as of December 31, 2020.

Amortization expense related to intangible assets for the three months ended March 31, 2021 and 2020, was $7.5 million and $9.3 million, respectively.

Future estimated amortization of intangible assets (in thousands) as of March 31, 2021, is as follows:

2021	$	21,137
2022	24,629
2023	22,325
2024	16,441
2025	15,736
Thereafter	159,152
Total future amortization of intangible assets	$	259,420

Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the assets’ carrying value. We did not identify any circumstances during the three months ended March 31, 2021, that would require an impairment test for our intangible assets.

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Long-term Debt

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Long-term Debt

Long-term Debt

2024 Notes

In August 2020, the Company issued $117.1 million aggregate principal amount of its 3.50% Convertible Senior Notes due 2024 (the “2024 Notes”) in privately negotiated exchange and/or subscription agreements, with certain holders of its outstanding 2021 Notes and certain new investors. The Company issued $84.2 million aggregate principal amount of 2024 Notes in exchange for $84.2 million aggregate principal amount of the 2021 Notes and an aggregate cash payment of $2.5 million, and issued $32.8 million aggregate principal amount of New Notes for cash at par. We incurred $3.0 million of debt issuance costs in connection with the 2024 Notes, which we are amortizing to non-cash interest expense using the straight-line method over the contractual term of the 2024 Notes. The closing of the private placement of the 2024 Notes occurred on August 19, 2020.

Holders of the 2024 Notes are entitled to cash interest payments, which are payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020, at a rate equal to 3.50% per annum. The 2024 Notes will mature on December 1, 2024, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. Upon maturity the principal amount of the notes may be settled via shares of the Company’s Class A common stock. We recorded interest expense of $1.0 million for the three months ended March 31, 2021.

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

The option to settle the 2024 Notes in cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election, resulted in a bifurcation of the carrying value of the 2024 Notes into a debt component and an equity component. The debt component was determined to be $78.9 million, before issuance costs, based on the fair value of a nonconvertible debt instrument with the same term. The equity component was determined to be $38.1 million, before issuance costs, and was recorded within additional paid-in capital. The equity component is the difference between the aggregate principal amount of the debt and the fair value of the debt component. Issuance costs of $1.7 million and $1.3 million are allocated to the debt and equity components in proportion to the allocation of proceeds. Along with the equity component of $38.1 million, $1.7 million of issuance costs will be amortized to interest expense on the consolidated statements of operations and comprehensive income (loss) using the effective interest method over the contractual term of the 2024 Notes. The equity component recorded within additional paid-in capital will not be remeasured as long as it meets the conditions for equity classification. The Company recorded $1.9 million of interest expense related to the amortization of the debt discount and the issuance costs allocated to the debt component for the three months ended March 31, 2021.

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

Credit Agreement

On December 30, 2019, the Company entered into a credit agreement, by and among the Company, Evolent Health LLC, as the borrower (the “Borrower”), certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrative agent and collateral agent, together with the Company (the “Credit Agreement”), pursuant to

which the lenders agreed to extend credit to the Borrower in the form of (i) an initial secured term loan in the aggregate principal amount of $75.0 million (the “Initial Term Loan Facility”) and (ii) a delayed draw secured term loan facility in the aggregate principal amount of up to $50.0 million (the “DDTL Facility” and, together with the Initial Term Loan Facility, the “Senior Credit Facilities”), subject to the satisfaction of specified conditions. The Borrower borrowed the loan under the Initial Term Loan Facility on December 30, 2019. In connection with the Credit Agreement, on December 30, 2019, the Company entered into a Security Agreement, by and among the Company, the Borrower, the other guarantors and the collateral agent for the benefit of the secured parties, and a Guarantee Agreement, by the Company and each of the other guarantors in favor of the collateral agent for the benefit of the secured parties. The Senior Credit Facilities were guaranteed by the Company and the Company’s domestic subsidiaries, subject to certain exceptions. The Senior Credit Facilities were secured by a first priority security interest in all of the capital stock of the borrower and each guarantor (other than the Company) and substantially all of the assets of the borrower and each guarantor, subject to certain exceptions.

The proceeds of the Initial Term Loan were used to finance the transactions contemplated by the Passport APA and pay fees and expenses incurred in connection therewith. The proceeds of the DDTL Facility were permitted to be used, subject to the Company’s satisfaction of specified conditions, to finance the repayment or repurchase of the Company’s 2.00% Convertible Senior Notes due December 1, 2021 and to fund permitted acquisitions.  The Initial Term Loan and any loans under the DDTL Facility would have matured on the date that is the earliest of (a) December 30, 2024, (b) the date on which all amounts outstanding under the Credit Agreement would have been declared or have automatically become due and payable under the terms of the Credit Agreement and (c) the date that is ninety-one (91) days prior to the maturity date of the 2021 Convertible Notes unless certain liquidity conditions were satisfied (the foregoing, the “Maturity Date”). The interest rate for each loan under the Senior Credit Facilities was calculated, at the option of the Borrower, at either the Eurodollar rate plus 8.00%, or the base rate plus 7.00%. A commitment fee of 1.00% per annum was payable by the Borrower quarterly in arrears on the unused portion of the DDTL Facility. The Company recorded $2.0 million in interest expense related to our Credit Agreement for the three months ended March 31, 2020.

Amounts outstanding under the Senior Credit Facilities could have been prepaid at the option of the Borrower subject to applicable premiums, including a make-whole premium payable on certain prepayments made prior to the second anniversary of the closing of the Senior Credit Facilities, and a call protection premium payable on the amount prepaid in certain instances as follows: (i) 4.00% of the principal amount so prepaid after the second anniversary of the closing of the Senior Credit Facilities but prior the third anniversary of the closing of the Senior Credit Facilities; (ii) 3.00% of the principal amount so prepaid after the third anniversary of the closing of the Senior Credit Facilities but prior the fourth anniversary of the closing of the Senior Credit Facilities; and (iii) 2.00% of the principal amount so prepaid after the fourth anniversary of the closing of the Senior Credit Facilities but prior the fifth anniversary of the closing of the Senior Credit Facilities. Amounts outstanding under the Senior Credit Facility were subject to mandatory prepayment upon the occurrence of certain events and conditions, including non-ordinary course asset dispositions, receipt of certain casualty proceeds, issuances of certain debt obligations and a change of control transaction.

The Senior Credit Facilities contained customary borrowing conditions, affirmative, negative and reporting covenants, representations and warranties, and events of default, including cross-defaults to other material indebtedness. In addition, the Company was required to comply at certain times with certain financial covenants comprised of a minimum net revenue test and a minimum liquidity test commencing upon closing of the Senior Credit Facilities and a total secured leverage ratio commencing on the last day of the fiscal quarter ending March 31, 2021. If an event of default had occurred, the lenders would be entitled to take enforcement action, including foreclosure on collateral and acceleration of amounts owed under the Senior Credit Facilities. We incurred $4.7 million of debt issuance costs in connection with this Credit Agreement, which was included in long-term debt, net of discount on our consolidated balance sheets and amortized into interest expense over the life of the agreement. The Company recorded $0.6 million in interest expense related to the amortization of the debt discount and the issuance costs for the three months ended March 31, 2020.

On August 19, 2020, an amendment to the Company's Credit Agreement became effective. The amendment effected changes to, among other things, permit the Company's use of cash in the exchange transactions in connection with the issuance of the 2024 Notes, permit the issuance of the 2024 Notes and permit certain note repurchases, as well as to implement amendments to certain minimum liquidity thresholds.

On January 8, 2021, the Company repaid all outstanding amounts owed under, and terminated, the Credit Agreement with Ares Capital Corporation. The total amount paid to Ares Corporation under the Credit Agreement in connection with the prepayment was $98.6 million, which included $9.7 million for the make-whole premium as well as $0.2 million in accrued interest. As a result of this transaction, the Company recorded loss on the repayment of debt of $19.2 million, representing the remaining unamortized debt issuance costs of $9.5 million, the make-whole premium and $35 thousand of legal expenses.

Warrant Agreement

In conjunction with the Company’s entry into the Credit Agreement, the Company entered into warrant agreements whereby it agreed to sell to the holders of the warrants an aggregate of 1,513,786 shares of Class A common stock at a per share purchase price equal to $8.05. The holders could exercise the warrants at any time until thirty days after the maturity of the Credit Agreement. The

Company, at its sole discretion, could elect to pay the holders in cash in an amount determined based on the fair market value of the Class A common stock for the shares of Class A common stock issuable upon exercise of the warrants in lieu of delivering the shares.

On January 8, 2021, the Company settled the outstanding warrants associated with the Credit Agreement for $13.7 million.

2025 Notes

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

Holders of the 2025 Notes are entitled to cash interest payments, which are payable semiannually in arrears on April 15 and October 15 of each year, beginning on April 15, 2019, at a rate equal to 1.50% per annum. The Company recorded interest expense of $0.6 million and related to the 2025 Notes for the three months ended March 31, 2021 and 2020, respectively. The 2025 Notes will mature on October 15, 2025, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date.

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

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

The option to settle the 2025 Notes in cash or shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election, resulted in a bifurcation of the carrying value of the 2025 Notes into a debt component and an equity component. The debt component was determined to be $100.7 million, before issuance costs, based on the fair value of a nonconvertible debt instrument with the same term. The equity component was determined to be $71.8 million, before issuance costs, and was recorded within additional paid-in capital. The equity component is the difference between the aggregate principal amount of the debt and the debt component. Issuance costs of $3.4 million and $2.5 million are allocated to the debt and equity components in proportion to the allocation of proceeds. Along with the equity component of $71.8 million, $3.4 million of issuance costs will be amortized to interest expense on the consolidated statements of operations and comprehensive income (loss) using the effective interest method over the contractual term of the 2025 Notes. The equity component recorded within additional paid-in capital will not be remeasured as long as it meets the conditions for equity classification. For the three months ended March 31, 2021 and 2020, the Company recorded $2.4 million and $2.2 million, respectively, in interest expense related to the amortization of the debt discount and the issuance costs allocated to the debt component.

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

2021 Notes

In December 2016, the Company issued $125.0 million aggregate principal amount of its 2.00% Convertible Senior Notes due 2021 (the “2021 Notes”) in a private placement to qualified institutional buyers within the meaning of Rule 144A under the Securities Act. The 2021 Notes were issued at par for net proceeds of $120.4 million. We incurred $4.6 million of debt issuance costs in connection with the 2021 Notes, which we are amortizing to non-cash interest expense using the straight-line method over the contractual term of the 2021 Notes, since this method was not materially different from the effective interest method. The closing of the private placement of the 2021 Notes occurred on December 5, 2016.

Holders of the 2021 Notes are entitled to cash interest payments, which are payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2017, at a rate equal to 2.00% per annum. The 2021 Notes will mature on December 1, 2021, unless earlier repurchased or converted in accordance with their terms prior to such date. In addition, holders of the 2021 Notes may require the Company to repurchase all or part of their 2021 Notes upon the occurrence of a fundamental change at a price equal to 100.00% of the principal amount of the 2021 Notes being repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental repurchase date. Upon maturity the principal amount of the notes may be settled via shares of the Company’s Class A common stock. We recorded interest expense of $0.1 million and $0.6 million for the three months ended March 31, 2021 and 2020, respectively. We recorded non-cash interest expense related to the amortization of deferred financing costs of $49.0 thousand and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

The 2021 Notes are convertible into shares of the Company’s Class A common stock, based on an initial conversion rate of 41.6082 shares of Class A common stock per $1,000 principal amount of the 2021 Notes, which is equivalent to an initial conversion price of approximately $24.03 per share of the Company’s Class A common stock. In the aggregate, the 2021 Notes are initially convertible into 5.2 million shares of the Company’s Class A common stock (excluding any shares issuable by the Company upon a conversion in connection with a make-whole provision upon a fundamental change under the governing indenture). The conversion rate may be adjusted under certain circumstances.

The 2021 Notes are convertible, in multiples of $1,000 principal amount, at the option of the holders at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, we will deliver for each $1,000 principal amount of notes converted a number of shares of our Class A common stock equal to the applicable conversion rate (together with a cash payment in lieu of delivering any fractional share) on the third business day following the relevant conversion date.

In August 2020, as part of the issuance of the 2024 Notes, the Company issued $84.2 million aggregate principal amount of the 2024 Notes in exchange for $84.2 million aggregate principal of its 2021 Notes. There was no cash consideration in these exchanges outside of an aggregate cash payment of $2.5 million paid to exchanging noteholders. These exchanges were accounted for as an extinguishment resulting in a net loss on extinguishment of debt of $4.8 million, including an aggregate cash payment of $2.5 million paid to exchanging noteholders.

In August 2020, we also repurchased $14.0 million of the 2021 Notes with $13.9 million of cash and recorded an immaterial gain on extinguishment of debt.

Convertible Senior Notes Carrying Value

The 2025 Notes, 2024 Notes and 2021 Notes are recorded on our accompanying consolidated balance sheets at their net carrying values as of March 31, 2021. However, the 2025 Notes, 2024 Notes and 2021 Notes are privately traded by qualified institutional buyers (within the meaning of Rule 144A under the Securities Act) and their fair values are Level 2 inputs. The 2025 Notes, 2024 Notes and the 2021 Notes also have embedded conversion options and contingent interest provisions, which have not been recorded as separate financial instruments. The following table summarizes the carrying value of the long-term convertible debt (in thousands):

	March 31, 2021		December 31, 2020
2024 Notes
Carrying value	$	83,369	$	81,462
Unamortized debt discount and issuance costs	33,682		35,589
Principal amount	$	117,051	$	117,051
Remaining amortization period (years)	3.7		3.9
Fair value	$	160,009	$	153,220
2025 Notes
Carrying value	$	118,763	$	116,349
Unamortized debt discount and issuance costs	53,737		56,151
Principal amount	$	172,500	$	172,500
Remaining amortization period (years)	4.5		4.8
Fair value	$	159,744	$	147,488
2021 Notes
Carrying value	$	26,606	$	26,557
Unamortized issuance costs	131		180
Principal amount	$	26,737	$	26,737
Remaining amortization period (years)	0.7		0.9
Fair value	$	27,272	$	26,470

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Commitments

Letters of Credit

As of March 31, 2021 and December 31, 2020, the Company established irrevocable standby letters of credit with a bank for $15.0 million  and $7.4 million for the benefit of a regulatory authorities, real estate and risk-sharing agreements and, as such, held $15.0 million and $7.4 million in restricted cash and restricted investments as collateral as of both March 31, 2021 and December 31, 2020, respectively. The letters of credit have current expiration dates between October 2021 and March 2032 and will automatically extend without amendment for an additional one-year period and will continue to automatically extend after each one-year term from the expiry date, unless the bank elects not to extend beyond the initial or any extended expiry date.

Indemnifications

The Company’s customer agreements generally include a provision by which the Company agrees to defend its partners against third-party claims (a) for death, bodily injury, or damage to personal property caused by Company negligence or willful misconduct, (b) by former or current Company employees arising from such managed service agreements, (c) for intellectual property infringement under specified conditions and (d) for Company violation of applicable laws, and to indemnify them against any damages and costs awarded in connection with such claims. To date, the Company has not incurred any material costs as a result of such indemnities and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements.

Pre-IPO Investor Registration Rights Agreement

We entered into a registration rights agreement with The Advisory Board, UPMC, TPG and another investor to register for sale under the Securities Act shares of our Class A common stock, including those delivered in exchange for Class B common stock and Class B common units. Subject to certain conditions and limitations, this agreement provides these investors with certain demand, piggyback and shelf registration rights. The registration rights granted under the registration rights agreement will terminate upon the date the holders of shares that are a party thereto no longer hold any such shares that are entitled to registration rights. Pursuant to our contractual obligations under this agreement, we filed a registration statement on Form S-3 with the SEC on July 28, 2016, which was declared effective on August 12, 2016.

We will pay all expenses relating to any demand, piggyback or shelf registration, other than underwriting discounts and commissions and any transfer taxes, subject to specified conditions and limitations. The registration rights agreement includes customary indemnification provisions, including indemnification of the participating holders of shares of Class A common stock and their directors, officers and employees by us for any losses, claims, damages or liabilities in respect thereof and expenses to which such holders may become subject under the Securities Act, state law or otherwise. We did not incur any expenses related to secondary offerings or other sales of shares by our investor stockholders during the three months ended March 31, 2021, and 2020 respectively.

Guarantees

In connection with the Molina Closing, the Company continued to provide administrative support services relating to the Passport Medicaid Contract to Molina through the end of 2020. Following the Molina Closing, EVH Passport began working with regulatory authorities including the Kentucky Department of Insurance (“KY DOI”) regarding the wind down of its operations throughout 2021. As part of that wind down process, the Company, as the parent of EVH Passport, entered into a guarantee for the benefit of the KY DOI to satisfy any EVH Passport liability or obligation in the event EVH Passport is not able to meet its wind down liabilities or obligations. As of March 31, 2021, no amounts have been funded under this guarantee.

Reinsurance Agreements

At the Passport Closing, $16.2 million of the cash Passport Purchase Price was held back until such time as PHS I delivers to EVH Passport certain owned real property and improvements free and clear of all encumbrances. In addition, at the Passport Closing, EVH Passport and UHC entered into an agreement that provided for the administration and assumption of the financial risks by EVH Passport of the D-SNP Business until such time as EVH Passport became certified as a Medicare Advantage Organization and the D-SNP Business could be transferred to EVH Passport. On October 1, 2020, the D-SNP Business was transferred from UHC to EVH Passport.

At the Molina Closing, Molina and EVH Passport entered into an agreement that provided for the assumption of the financial risks by Molina of the D-SNP Business until such time as Molina’s Kentucky health plan becomes certified as a Medicare Advantage Organization and the D-SNP Business is transferred to Molina. The Company and EVH Passport continued to administer the D-SNP Business until January 1, 2021, at which time Molina became responsible for its administration until the D-SNP Business is officially transferred to Molina.

The following summarizes premiums and claims assumed under the Reinsurance Agreements (in thousands):

	For the Three Months Ended March 31,
	2021		2020
Reinsurance premiums assumed	$	8,845	$	—
Reinsurance premiums ceded	—		—
Claims assumed	10,494		—
Claims ceded	—		—
Claims-related administrative expenses	545		—
Increase in reserves for claims and performance-based arrangements attributable to the Reinsurance Agreement	(2,194)		—
Reserves for claims and performance-based arrangements attributable to the Reinsurance Agreement at the beginning of the period	4,002		—
Impact of consolidation on payable for claims and performance-based arrangements attributable to the Reinsurance Agreement	—		—
Reinsurance payments paid (received)	—		—
Payable for claims and performance-based arrangements attributable to the Reinsurance Agreement at the end of the period	$	1,808	$	—

UPMC Reseller Agreement

The Company and UPMC are parties to a reseller, services and non-competition agreement, dated August 31, 2011, which was amended and restated by the parties on June 27, 2013 (as amended through the date hereof, the “UPMC Reseller Agreement”). Under the terms of the UPMC Reseller Agreement, UPMC has appointed the Company as a non-exclusive reseller of certain services, subject to certain conditions and limitations specified in the UPMC Reseller Agreement. In consideration for the Company’s obligations under the UPMC Reseller Agreement and subject to certain conditions described therein, UPMC has agreed not to sell certain products and services directly to a defined list of 20 of the Company’s customers.

Contingencies

Tax Receivables Agreement

In connection with the Offering Reorganization, the Company entered into the Tax Receivables Agreement (the “TRA”) with certain of its investors, which provides for the payment by the Company to these investors of 85% of the amount of the tax benefits, if any, that the Company is deemed to realize as a result of increases in our tax basis related to exchanges of Class B common units as well as tax benefits attributable to the future utilization of pre-IPO NOLs.

Due to the items noted above, and the fact that Evolent Health, Inc. is in a full valuation allowance position such that the deferred tax assets related to the Company’s historical pre-IPO losses and tax basis increase benefit from exchanges have not been realized, the Company has not recorded a liability pursuant to the TRA.

Litigation Matters

We are engaged from time to time in certain legal disputes arising in the ordinary course of business, including employment claims. When the likelihood of a loss contingency becomes probable and the amount of the loss can be reasonably estimated, we accrue a liability for the loss contingency. We continue to review accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained, and our views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made.

On August 8, 2019, a shareholder of the Company filed a class action complaint against the Company, asserting claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, in the United States District Court, Eastern District of Virginia, Alexandria Division. An amended complaint was filed on January 10, 2020, and a second amended complaint was filed on June 8, 2020. The case, Plymouth County Retirement System v. Evolent Health, Inc., Frank Williams, Nicholas McGrane, Seth Blackley, Christie Spencer, and Steven Wigginton, alleges that the Company’s executives made false or misleading statements regarding its business with Passport. The Company filed a motion to dismiss the second amended complaint, and the Eastern District of Virginia granted in part and denied in part the motion on March 24, 2021. The Company and Plaintiffs then filed separate motions to reconsider that are pending. While the scope of the allegations that remain is still unclear pending the court’s further decision, the case will proceed to discovery. Based on the Company’s investigation so far, we believe the case has little legal or factual merit. However, the outcome of any litigation is uncertain, and at this stage, the Company is currently unable to assess the probability of loss or estimate a range of potential loss, if any, associated with this lawsuit.

The Company is not aware of any other legal proceedings or claims as of March 31, 2021, that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company’s financial position or result of operations.

Credit and Concentration Risk

The Company is subject to significant concentrations of credit risk related to cash and cash equivalents and accounts receivable. As of March 31, 2021, approximately 99.7% of our $303.8 million of cash and cash equivalents (including restricted cash) were held in bank deposits with FDIC participating banks and approximately 0.3% were held in international banks. While the Company maintains its cash and cash equivalents with financial institutions with high credit ratings, it often maintains these deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any realized losses on cash and cash equivalents to date.

The Company is also subject to significant concentration of accounts receivable risk as a substantial portion of our trade accounts receivable is derived from a small number of our partners. The following table summarizes the partner who represented at least 10.0% of our consolidated trade accounts receivable as of the dates presented:

	March 31, 2021		December 31, 2020
Cook County Health and Hospitals System	44.5	%	61.5	%
Florida Blue Medicare, Inc	14.6	%	*
Neighborhood Health Plan of Rhode Island	11.2	%	*

————————

*     Represents less than 10.0% of the respective balance

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

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

	For the Three Months Ended March 31,
	2021		2020 (1)
Cook County Health and Hospitals Systems	28.8	%	21.5	%
Florida Blue Medicare, Inc.	14.7	%	*
Passport	*		25.3	%

————————

(1)The denominator excludes $44.8 million and $32.1 million of True Health premium revenue reclassified to discontinued operations for the three months ended March 31, 2021 and 2020, respectively.

*     Represents less than 10.0% of the respective balance

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

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Leases

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Leases

Leases

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

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

The Company leases office space and computer and other equipment under operating lease agreements expiring at various dates through 2031. Under the lease agreements, in addition to base rent, the Company is generally responsible for operating and maintenance costs and related fees. Several of these agreements include tenant improvement allowances, rent holidays or rent escalation clauses. When such items are included in a lease agreement, we record a deferred rent asset or liability on our consolidated balance sheets equal to the difference between rent expense and future minimum lease payments due. The rent expense related to these items is recognized on a straight-line basis over the terms of the leases. The Company’s primary office location is in Arlington, Virginia, which has served as its corporate headquarters since 2013. The Arlington, Virginia office lease expires in January 2032. Certain leases acquired as part of the Valence Health transaction included existing sublease agreements for office locations in Chicago, Illinois.

In connection with various lease agreements, the Company is required to maintain $3.5 million in letters of credit. As of both March 31, 2021 and December 31, 2020, the Company held $3.5 million in restricted cash and restricted investments on the consolidated balance sheet as collateral for the letters of credit, respectively.

The following table summarizes our primary office leases as of March 31, 2021 (in thousands, other than term):

Location	Lease Termination Term (in years)	Future Minimum Lease Commitments		Letter of Credit Amount Required
Arlington, VA	10.8	$	37,911	$	1,579
Riverside, IL	10.0	43,789		232
Pune, India	2.5	2,083		—
Brea, CA	1.2	1,287		—

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

	For the Three Months Ended March 31,
	2021		2020
Operating lease cost	$	4,818	$	3,056
Amortization of right-of-use assets	—		149
Interest expense	—		2
Variable lease cost	1,321		1,052
Total lease cost	$	6,139	$	4,259

Maturity of lease liabilities (in thousands) as of March 31, 2021, is as follows:

	Operating lease expense
2021	8,844
2022	9,843
2023	8,650
2024	8,378
2025	8,145
Thereafter	47,760
Total lease payments	91,620
Less:
Interest	23,789
Present value of lease liabilities	$	67,831

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

	March 31, 2021
Weighted average discount rate	6.42	%
Weighted average remaining lease term	9.3

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Earnings (Loss) Per Common Share

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Earnings (Loss) Per Common Share

Earnings (Loss) Per Common Share

The following table sets forth the computation of basic and diluted earnings per share available for common stockholders (in thousands, except per share data):

	For the Three Months Ended March 31,
	2021		2020
Loss from continuing operations	$	(11,190)	$	(78,487)
Gain (loss) from discontinued operations, net of tax	1,383		(265)
Net loss	(9,807)		(78,752)
Less:
Net loss attributable to non-controlling interests	—		—
Net loss available for common shareholders - basic and diluted	$	(9,807)	$	(78,752)
Weighted-average common shares outstanding - basic and diluted	84,670		84,793
Loss per common share
Basic and diluted
Continuing operations	$	(0.13)	$	(0.93)
Discontinued operations	0.01		—
Basic and diluted loss per share attributable to common shareholders of Evolent Health, Inc.	$	(0.12)	$	(0.93)

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

	For the Three Months Ended March 31,
	2021	2020
Restricted stock units ("RSUs"), performance-based RSUs and leveraged stock units ("LSUs")	1,531	199
Stock options	1,865	972
Convertible senior notes	12,696	10,361
Total	16,092	11,532

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Stock-based Compensation

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-based Compensation

Stock-based Compensation

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

	For the Three Months Ended March 31,
	2021		2020
Award Type
Stock options	$	404	$	750
Performance-based stock options	—		75
RSUs	1,974		1,856
LSUs	1,085		827
PSUs	243		—
Total compensation expense by award type	$	3,706	$	3,508
Line Item
Cost of revenue	$	595	$	392
Selling, general and administrative expenses	3,111		3,116
Total compensation expense by financial statement line item	$	3,706	$	3,508

No stock-based compensation was capitalized as software development costs for the three months ended March 31, 2021 and 2020.

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

	For the Three Months Ended March 31,
	2021	2020
RSUs	939	976
PSUs	319	—
LSUs	—	380

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Income Taxes

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For interim periods, we recognize an income tax provision (benefit) based on our estimated annual effective tax rate expected for the full year.

An income tax expense of $0.6 million and $0.3 million was recognized for both the three months ended March 31, 2021 and 2020, respectively, which resulted in effective tax rates of (5.8)% and (0.3)%, respectively. The Company and its U.S. subsidiaries continue to record a valuation allowance against its net deferred tax assets, with the exception of indefinite lived components. The income tax expense recorded during the three months ended March 31, 2021 primarily relates to foreign taxes as well as an increase to those indefinite components from the tax amortization of goodwill.

As of December 31, 2020, the Company had unrecognized tax benefits of $0.7 million that, if recognized, would not affect the effective tax rate due to the valuation allowance against its net deferred tax asset. As of March 31, 2021, there are no changes to the unrecognized tax benefits. The Company is not currently subject to income tax audits in any U.S., state, or foreign jurisdictions for any tax year.

Tax Receivables Agreement

In connection with the Offering Reorganization, the Company entered into the TRA with certain of its investors, which provides for the payment by the Company to these investors of 85% of the amount of the tax benefits, if any, that the Company is deemed to realize as a result of increases in our tax basis related to exchanges of Class B common units as well as tax benefits attributable to the future utilization of pre-IPO NOLs. See Note 11 above and “Part II - Item 8. Financial Statements and Supplementary Data - Note 14” in our 2020 Form 10-K for discussion of our TRA.

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Investments In and Advances to Equity Method Investees

3 Months Ended

Mar. 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

Investments In and Advances to Equity Method Investees

Investments in and Advances to Equity Method Investees

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

As of March 31, 2021 and December 31, 2020, the Company’s economic interests in its equity method investments ranged between 4% and 39%, and 4% and 38%, respectively, and voting interests in its equity method investments ranged between 25% and 40%, respectively. The Company determined that it has significant influence over these entities but that it does not have control over any of the entities. Accordingly, the investments are accounted for under the equity method of accounting and the Company is allocated its proportional share of the entities’ earnings and losses for each reporting period. The Company’s proportional share of the (gain) losses from these investments was approximately $7.8 million and $0.4 million for the three months ended March 31, 2021 and 2020, respectively.

The Company signed services agreements with certain of the aforementioned entities to provide certain management, operational and support services to help manage elements of their service offerings. Revenue related to these services agreements were $6.3 million and $59.9 million for the three months ended March 31, 2021 and 2020, respectively.

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Non-controlling Interests

3 Months Ended

Mar. 31, 2021

Noncontrolling Interest [Abstract]

Non-controlling Interests

Non-controlling Interests

Immediately following the Offering Reorganization and IPO in May 2015, the Company owned 70.3% of Evolent Health LLC. The Company’s ownership percentage changes with the issuance of Class A or Class B common stock and Class B Exchanges. In order to account for any changes in the Company’s ownership of Evolent Health LLC, we record a reclassification of equity between non-controlling interests and shareholders’ equity attributable to Evolent Health, Inc.

2020

On September 1, 2020, in connection with the consolidation of EVH Passport, the Company recognized a $25.7 million non-controlling interest for the Sponsors’ 30% equity interest in EVH Passport which represented the fair value of the non-controlling interest as of the date of consolidation. Pursuant to the shareholders’ agreement with the Sponsors, the Company was required to acquire the Sponsors’ 30% ownership interest for $20.0 million on or prior to December 31, 2021. On November 16, 2020, the Company acquired the Sponsors’ 30% equity interest and reclassified the non-controlling interests into shareholders’ equity attributable to Evolent Health, Inc. As a result of this transaction, the Company recorded a $5.7 million gain on consolidation for the year ended December 31, 2020 in gain (loss) on disposal of assets and consolidation on the consolidated statements of operations.

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

	For the Three Months Ended March 31,
	2021		2020
Non-controlling interests balance as of beginning of period	$	—	$	6,889
Reclassification of non-controlling interests	—		(6,889)
Non-controlling interests balance as of end of period	$	—	$	—

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Fair Value Measurement

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurement

Fair Value Measurement

GAAP defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) assuming an orderly transaction in the most advantageous market at the measurement date. GAAP also establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:

•Level 1 - inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date;

•Level 2 - inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date and the fair value can be determined through the use of models or other valuation methodologies; and

•Level 3 - inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the particular asset or liability being measured.

Recurring Fair Value Measurements

In accordance with GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents (1)	$	5,877	$	—	$	—	$	5,877
Total fair value of assets measured on a recurring basis	$	5,877	$	—	$	—	$	5,877
Liabilities
Warrants (2)	$	—	$	—	$	13,730	$	13,730
Total fair value of liabilities measured on a recurring basis	$	—	$	—	$	13,730	$	13,730

(1) Represents the cash and cash equivalents and restricted cash and restricted investments that were held in money market funds as of December 31, 2020.

(2) Represents the fair value of 1,513,786 shares issuable under the warrant agreements discussed in Note 10.

The Company recognizes any transfers between levels within the hierarchy as of the beginning of the reporting period. There were no transfers between fair value levels for the three months ended March 31, 2021 and 2020, respectively.

In the absence of observable market prices, the fair value is based on the best information available and involves a significant degree of judgment, taking into consideration a combination of internal and external factors, including the appropriate risk adjustments for non-performance and liquidity risks.

In conjunction with the Credit Agreement discussed in Note 10, the Company entered into warrant agreements whereby it agreed to sell to the holders of the warrants an aggregate of 1,513,786 shares of Class A common stock. The fair value of the warrants was estimated based on the Black-Scholes model which incorporates the constant price variation of the stock, the time value of money, the option's strike price, and the time to the option's expiry. The significant unobservable inputs used in the fair value measurement of the warrants are the stock price volatility and annual risk free rate. A significant increase in the stock price or discount rate in isolation would result in a significantly higher fair value of the contingent consideration.

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

	For the Three Months Ended March 31,
	2021		2020
Balance as of beginning of period	$	13,730	$	16,975
Settlements	(13,730)		(3,500)
Realized and unrealized gains (losses), net	—		(6,375)
Balance as of end of period	$	—	$	7,100

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

	December 31, 2020
	Fair		Valuation	Significant	Assumption or
	Value		Technique	Unobservable Inputs	Input Ranges
Warrants	$	13,730	Black-Scholes	Stock price volatility	62.2	%
				Annual risk free rate	0.2	%

Nonrecurring Fair Value Measurements

In addition to the assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. This includes assets and liabilities recorded in business combinations or asset acquisitions, goodwill, intangible assets, property, plant and equipment, held-to-maturity investments and equity method investments. While not

carried at fair value on a recurring basis, these items are continually monitored for indicators of impairment that would indicate current carrying value is greater than fair value. In those situations, the assets are considered impaired and written down to current fair value.

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents (those not held in a money market fund), restricted cash, receivables, prepaid expenses, accounts payable, accrued liabilities and accrued compensation approximate their fair values because of the relatively short-term maturities of these items and financial instruments.

See Note 10 for information regarding the fair value of the 2024 Notes, 2025 Notes and 2021 Notes.

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Related Parties

3 Months Ended

Mar. 31, 2021

Related Party Transactions [Abstract]

Related Parties

Related Parties

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

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

The Company also works closely with UPMC, one of its founding investors. The Company’s relationship with UPMC is a subcontractor relationship where UPMC has agreed to execute certain tasks (primarily TPA services) relating to certain customer commitments. We also conduct business with a company in which UPMC holds a significant equity interest.

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

	March 31, 2021		December 31, 2020
Assets
Accounts receivable, net	$	8,615	$	9,474
Prepaid expenses and other current assets	50		51
Prepaid expenses and other noncurrent assets, net of allowances	4,634		4,554
Liabilities
Accounts payable	$	1,898	$	2,509
Accrued liabilities	988		1,520
Reserve for claims and performance-based arrangements	202		435

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

	For the Three Months Ended March 31,
	2021		2020
Revenue
Transformation services	$	—	$	1,700
Platform and operations services	15,575		74,079
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses)	493		3,247
Selling, general and administrative expenses	31		70

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Repositioning and Other Changes

3 Months Ended

Mar. 31, 2021

Restructuring and Related Activities [Abstract]

Repositioning and Other Changes

Transactions

Passport

On May 28, 2019, UHC, Passport Health Solutions, LLC (“PHS I”), the Company and EVH Passport entered into an Asset Purchase Agreement (the “Passport APA”), which provided for the sale of substantially all of the assets of UHC and PHS I, including UHC’s

Kentucky Medicaid contract (the “Passport Medicaid Contract”), to EVH Passport for a purchase price of $70.0 million in cash and the issuance of a 30% interest in EVH Passport (the “Passport Purchase Price”) to The University of Louisville, the University of Louisville Physicians, University Medical Center, the Jewish Heritage Fund for Excellence, Norton Healthcare, Inc. and the Louisville/Jefferson County Primary Care Association (collectively, the “Sponsors”).

On June 18, 2019, the Company contributed $40.0 million to UHC in the form of an advance for regulatory capital requirements under an agreement with UHC (the “Passport Note”). The Passport Note carried a fixed interest rate of 6.5% per annum. Additionally, on June 6, 2019, the Company and UHC entered into an Indemnity Agreement (the “Indemnity Agreement”), with an insurance company (the “Surety”). The Surety issued a performance bond in the amount of $25.0 million to secure UHC’s performance under its Medicaid Contract. Pursuant to the Indemnity Agreement, the Company and UHC were jointly and severally liable to the Surety in the maximum amount of the bond, plus certain costs of the Surety, in the event of losses arising under the bond. The bond’s original expiry date was June 30, 2020 and during the three months ended June 30, 2020, was extended to December 31, 2020. The bond was released in October 2020.

On December 30, 2019, UHC, PHS I, the Company and EVH Passport consummated the transactions contemplated by the Passport APA (the “Passport Closing”). At the Passport Closing, $16.2 million of the cash Passport Purchase Price was held back until such time as PHS I delivers to EVH Passport certain owned real property and improvements free and clear of all encumbrances. In addition, at the Passport Closing, EVH Passport and UHC entered into an agreement that provided for the administration and assumption of the financial risks by EVH Passport of UHC’s dual eligible special needs business (the “DNP Business”) until such time as EVH Passport became certified as a Medicare Advantage Organization and the D-SNP Business could be transferred to EVH Passport. On October 1, 2020, the D-SNP Business was transferred from UHC to EVH Passport. At the Passport Closing, EVH Passport assumed UHC’s obligations under the Passport Note and the Indemnity Agreement.

On July 16, 2020, EVH Passport, Evolent Health LLC and Molina Healthcare, Inc. (“Molina”) entered into an Asset Purchase Agreement (the “Molina APA”), which contemplated the sale by EVH Passport to Molina of certain assets, including certain intellectual property rights of EVH Passport and EVH Passport’s rights under the Passport Medicaid Contract. On September 1, 2020, EVH Passport and Molina consummated the transactions contemplated by the Molina APA (the “Molina Closing”), and the Passport Medicaid Contract was novated to Molina. As a result, EVH Passport began to wind down its business. In connection with the Molina Closing, Molina deposited $20.0 million in cash in escrow, which was subsequently released to EVH Passport in January 2021. In addition, at the Molina Closing, Molina and EVH Passport entered into an agreement that provided for the assumption of the financial risks by Molina of the D-SNP Business until such time as Molina’s Kentucky health plan becomes certified as a Medicare Advantage Organization and the D-SNP Business is transferred Molina. The Company and EVH Passport continued to administer the D-SNP Business until January 1, 2021, at which time Molina became responsible for its administration until the D-SNP Business is officially transferred to Molina.

Prior to the Molina Closing, the Company accounted for its investment in EVH Passport as an unconsolidated variable interest entity under the equity method of accounting. As a result of the transaction, the Company concluded that a reconsideration event occurred whereby EVH Passport was determined to be a voting interest entity and that Evolent had a controlling financial interest in EVH Passport; accordingly, the Company consolidated EVH Passport as of September 1, 2020 in its consolidated financial statements. The Company accounted for the transaction as an asset acquisition, as the Company concluded that assets acquired as a result of the consolidation did not meet the criteria to be classified as a business under GAAP. Following the Molina Closing and consolidation of EVH Passport in the Company’s consolidated financials, on November 16, 2020, EVH Passport redeemed the Sponsors’ equity interests in EVH Passport for $20.0 million in cash in accordance with the terms of EVH Passport’s Stockholders’ Agreement, and, as a result, EVH Passport became a wholly owned subsidiary of the Company.

As part of the consolidation, the Company recorded assets primarily consisting of cash and cash equivalents and restricted cash and cash equivalents of $159.8 million, available for sale securities of $88.6 million, receivables related to unsettled sales of securities of $43.0 million and other assets of $50.2 million and total liabilities primarily comprised of reserve for claims and performance-based arrangements of $164.8 million and accrued liabilities of $50.0 million. Subsequent to winddown activities, any remaining capital will be distributed to the Company subject to regulatory approval from the Kentucky Department of Insurance. In addition, the Passport Note was eliminated upon consolidation, and as of December 31, 2020, the outstanding principal balance of the $40.0 million Passport Note was repaid in full by EVH Passport including approximately $3.6 million of accrued interest.

During the three months ended March 31, 2021, EVH Passport received a cash payment from Molina in the amount of $23.0 million based on the number of enrollees above a certain threshold in the D-SNP Business and Molina's Medicaid plan following the open enrollment period for plan year 2021. The foregoing amount represents 50% of the payment that EVH Passport is eligible to receive based on the number of such enrollees. The remaining 50% will be payable in the first quarter of 2022 subject to the satisfaction of certain contingencies.

Repositioning and Other Changes

We continually assess opportunities to improve operational effectiveness and efficiency to better align our expenses with revenues, while continuing to make investments in our solutions, systems and people that we believe are important to our long-term goals. Across 2020, we divested or agreed to divest a majority of our health plan assets, including certain assets of EVH Passport, which represented a significant revenue stream for the Company. In parallel with these divestitures, we contracted with a third-party vendor to review our operating model and organizational design in order to improve our profitability, create value through our solutions and invest in strategic opportunities in future periods.

In the fourth quarter of 2020, we committed to certain operational efficiency and profitability actions that we are taking in order to accomplish these objectives (“Repositioning Plan”). These actions included making organizational changes across our business as well as other profitability initiatives expected to result in reductions in force, re-aligning of resources as well as other potential operational efficiency and cost-reduction initiatives. The Repositioning Plan is expected to continue through the fourth quarter of 2021.

The Company recorded approximately $5.4 million of repositioning costs in selling, general and administrative expenses during the three months ended March 31, 2021 in connection with the Repositioning Plan. The following tables provide a summary of our total costs associated with the Repositioning Plan for the three months ended March 31, 2021, by major type of cost:

	Incurred For the Three Months Ended March 31, 2021		Total Amount Expected to be Incurred in the Repositioning Plan		Cumulative Amount Incurred through March 31, 2021
Severance and termination benefits	$	109	$	2,500	$	109
Office space consolidation	2,071		2,100		2,071
Professional services	3,200		4,475		4,475
Total	$	5,380	$	9,075	$	6,655

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Segment Reporting

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

Commencing with the three months ended March 31, 2021, we define our reportable segments based on the way the CODM, the chief executive officer, manages the operations for purposes of allocating resources and assessing performance. We classify our operations into two reportable segments as follows:

•Evolent Health Services, which houses our Administrative Simplification solution and certain supporting population health infrastructure; and

•Clinical Solutions, which includes our specialty management and physician-oriented total cost of care solutions, along with the New Century Health and Evolent Care Partners brands.

In the ordinary course of business, our reportable segments enter into transactions with one another. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues and expenses recognized by the segment that is the counterparty to the transaction are eliminated in consolidation and do not affect consolidated results.

The CODM uses revenue in accordance with U.S. GAAP and Adjusted EBITDA as the relevant segment performance measures to evaluate the performance of the segments and allocate resources.

Adjusted EBITDA is a segment performance financial measure that offers a useful view of the overall operation of our businesses and may be different than similarly-titled segment performance financial measures used by other companies.

Adjusted EBITDA is defined as net loss attributable to common shareholders of Evolent Health, Inc. before interest income, interest expense, (provision) benefit for income taxes, depreciation and amortization expenses, adjusted to exclude equity method investment impairment, loss on extinguishment of debt, gain (loss) from equity method investees, gain (loss) on disposal of assets and consolidation, goodwill impairment, changes in fair value of contingent consideration and indemnification asset, other income (expense), net, net loss attributable to non-controlling interests, ASC 606 transition adjustments, purchase accounting adjustments, repositioning costs, stock-based compensation expense, severance costs, amortization of contract cost assets, shareholder advisory services, acquisition-related costs and discontinued operations.

Management considers revenue and Adjusted EBITDA to be the appropriate metrics to evaluate and compare the ongoing operating performance of our segments on a consistent basis across reporting periods as they eliminate the effect of items which are not indicative of each segment's core operating performance.

The following tables present our segment information (in thousands). Prior-year segment information (including segments total Adjusted EBITDA) has been restated to conform to the reporting structure change described in Note 1.

	Evolent Health Services		Clinical Solutions		Intersegment Eliminations		Subtotal		Corporate (1)		Consolidated
Revenue
For the Three Months Ended March 31, 2021
Transformation services	$	345	$	—	$	—	$	345	$	—	$	345
Platform and operations services	84,941		130,223		(438)		214,726				214,726
Total revenue	$	85,286	$	130,223	$	(438)	$	215,071	$	—	$	215,071
For the Three Months Ended March 31, 2020
Transformation services	$	5,238	$	—	$	—	$	5,238	$	—	$	5,238
Platform and operations services	91,790		124,872		(668)		215,994				215,994
Total revenue	$	97,028	$	124,872	$	(668)	$	221,232	$	—	$	221,232
	Evolent Health Services		Clinical Solutions		Subtotal		Corporate (1)		Segments Total
For the Three Months Ended March 31, 2021
Adjusted EBITDA	$	5,942	$	15,976	$	21,918	$	(7,011)	$	14,907
For the Three Months Ended March 31, 2020
Adjusted EBITDA	$	4,768	$	7,043	$	11,811	$	(7,935)	$	3,876

————————

(1)Corporate includes various finance, human resources, legal, executive, and other corporate infrastructure expenses.

The following table presents our reconciliation of segments total Adjusted EBITDA to net loss attributable to common shareholders of Evolent Health, Inc. (in thousands):

	For the Three Months Ended March 31,
	2021		2020
Net loss attributable to common shareholders of Evolent Health, Inc.	$	(9,807)	$	(78,752)
Less:
Interest income	123		770
Interest expense	(6,337)		(6,281)
Provision for income taxes	(611)		(270)
Depreciation and amortization expenses	(15,187)		(15,978)
Equity method investment impairment	—		(47,133)
Gain on transfer of membership	22,969		—
Loss on repayment of debt, net	(19,158)		—
Gain (loss) from equity method investees	7,783		(412)
Gain (loss) on disposal of assets	—		(6,447)
Change in fair value of contingent consideration and indemnification asset	594		3,818
Other expense, net	(14)		(70)
Repositioning costs	(5,380)		—
Stock-based compensation expense	(3,706)		(3,508)
Severance costs	(52)		(6,103)
Amortization of contract cost assets	(127)		(440)
Strategy and shareholder advisory expenses	(5,000)		—
Acquisition costs	(1,994)		(309)
Gain (loss) from discontinued operations (1)	1,383		(265)
Adjusted EBITDA	$	14,907	$	3,876

————————

(1)Includes $1.9 million gain on disposal of discontinued operations for the three months ended March 31, 2021.

Asset information by segment is not a key measure of performance used by the CODM. Accordingly, we have not disclosed asset information by segment.

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Reserves for Claims and Performance-Based Arrangements

3 Months Ended

Mar. 31, 2021

Insurance [Abstract]

Reserves for Claims and Performance-Based Arrangements

Reserve for Claims and Performance-Based Arrangements

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

Reserves for claims and performance-based arrangements for our EHS and Clinical Solutions segments reflect actual payments under performance-based arrangements and the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process), and other medical care expenses and services payable that are primarily composed of accruals for incentives and other amounts payable to health care professionals and facilities. Reserves for claims and performance-based arrangements also reflect estimated amounts owed under the reinsurance agreements, as discussed further in Note 11.

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

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

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

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

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

Activity in reserves for claims and performance-based arrangements for the three months ended March 31, 2021 and 2020, was as follows (in thousands):

	For the Three Months Ended March 31,
	2021								2020
	EHS (1)(2)		Clinical Solutions (1)(2)		True Health		Total		EHS (1)(2)		Clinical Solutions (1)(2)		True Health		Total
Beginning balance	$	122,532	$	56,295	$	9,859	$	188,686	$	4,265	$	50,245	$	6,640	$	61,150
Incurred costs related to current year	104,098		4,189		34,228		142,515		2,519		110,241		23,556		136,316
Incurred costs related to prior year	24		4,151		(241)		3,934		(381)		(257)		111		(527)
Paid costs related to current year	30,761		11,164		23,274		65,199		2,143		75,208		14,883		92,234
Paid costs related to prior year	38,053		10,200		7,378		55,631		3,223		6,597		5,702		15,522
Change during the year	35,308		(13,024)		3,335		25,619		(3,228)		28,179		3,082		28,033
Disposal of discontinued operations	—		—		(13,194)		(13,194)		—		—		—		—
Other adjustments (3)	2,658		4,224		—		6,882		—		(173)		—		(173)
Ending balance	$	160,498	$	47,495	$	—	$	207,993	$	1,037	$	78,251	$	9,722	$	89,010

————————

(1)    Costs incurred to provide specialty care management and EVH Passport are recorded within cost of revenue in our statement of operations.

(2)    There is no single or common claim frequency metric used in the health care industry. The Company believes a relevant metric for its health insurance business is the number of customers for whom an insured medical claim was paid. The number of claims processed for the EHS and Clinical Solutions segments for the three months ended March 31, 2021 were 579,214.

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

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Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2021

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

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

	For the Three Months Ended March 31,
	2021	2020
Supplemental Disclosure of Non-cash Investing and Financing Activities
Increase/decrease to goodwill from measurement period adjustments/business combinations	—	2,200
Class A common stock issued for payment of Passport/Global earn-out	—	4,185
Accrued property and equipment purchases	124	213
Effects of Leases
Operating cash flows from operating leases	3,410	2,759
Leased assets obtained in exchange for operating lease liabilities	(2,157)	(7,020)

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

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

In our opinion, the accompanying unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state our financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2020, has been derived from audited financial statements as of that date. The interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain footnote disclosures normally included in financial statements prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) have been omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission (“SEC”). The disclosures provided herein should be read in conjunction with the audited financial statements and notes thereto included in our 2020 Form 10-K.

Accounting Estimates and Assumptions

Accounting Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial

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

Principles of Consolidation

Principles of Consolidation

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

Cash and Cash Equivalents

Cash and Cash Equivalents

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

Business Combinations

Business Combinations

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

The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed in the acquired entity is recorded as goodwill. Goodwill is assigned to the reporting unit that benefits from the synergies arising from the business combination. If the Company obtains new information about facts and circumstances that existed as of the acquisition date during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded on the Company's consolidated statements of operations and comprehensive income (loss).

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

Goodwill

Goodwill

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

Our goodwill impairment analysis first assesses qualitative factors to determine whether events or circumstances existed that would lead the Company to conclude it is more likely than not that the fair value of a reporting unit is below its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is below the carrying amount, a quantitative goodwill assessment is required. In the quantitative evaluation, the fair value of the relevant reporting unit is determined and compared to the carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value and a charge is reported in goodwill impairment on our consolidated statements of operations and comprehensive income (loss). See Note 9 for additional discussion regarding the goodwill impairment tests conducted during 2021 and 2020.

Intangible Assets, Net

Intangible Assets, Net

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

The following summarizes the estimated useful lives by asset classification:

Corporate trade name	10 - 20 years
Customer relationships	10 - 25 years
Technology	5 years
Provider network contracts	4 - 5 years

Intangible assets are reviewed for impairment if circumstances indicate the Company may not be able to recover the asset’s carrying value. The Company evaluates recoverability by determining whether the undiscounted cash flows expected to result from the use and eventual disposition of that asset or group exceed the carrying value at the evaluation date. If the undiscounted cash flows are not sufficient to cover the carrying value, the Company measures an impairment loss as the excess of the carrying amount of the long-lived asset or group over its fair value. See Note 9 for additional discussion regarding our intangible assets.

Reserves for Claims and Performance-based Arrangements

Reserves for Claims and Performance-based Arrangements

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

The process of estimating reserves involves a considerable degree of judgment by the Company and, as of any given date, is inherently uncertain. The methods for making such estimates and for establishing the resulting liability are continually reviewed, and adjustments are reflected in current results of operations in the period in which they are identified as experience develops or new information becomes known. See Note 22 for additional discussion regarding our reserves for claims and performance-based arrangements.

Leases

Leases

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

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

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

Refer to Note 12 for additional lease disclosures.

Revenue Recognition

Revenue Recognition

We derive revenue from two sources: (1) transformation services and (2) platform and operations services. Transformation services consist of implementation services whereby we assist the customer in launching its population health or health plan programs, or implement certain platform and operations services. In certain cases, transformation services can also include revenue associated with our support of certain one-time wind-down activities for clients who are exiting a line of business or population. Platform and operations services generally include multi-year arrangements with customers to provide various population health, health plan

operations, specialty care management and claims processing services on an ongoing basis, as well as transition or run-out services to customers receiving primarily TPA services. Revenue is recognized when control of the services is transferred to our customers.

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

• Identify the contract(s) with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to performance obligations

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

See Note 6 for further discussion of our policies related to revenue recognition.

Foreign Currency

Foreign Currency

The Company formed a subsidiary in India during the first quarter of 2018. The functional currency of our international subsidiary is the Indian Rupee. We translate the financial statements of this subsidiary to U.S. dollars using month-end rates of exchange for assets and liabilities, and monthly average rates of exchange for revenue and expenses. Translation gains and losses are recorded in accumulated other comprehensive income (loss) as a component of shareholders' equity. Foreign currency translation gains and losses did not have a material impact on our consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2021 and 2020.

Adoption of New Accounting Standards

Adoption of New Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequently issued additional guidance that modified ASU 2016-13. The standard requires an entity to change its accounting approach for measuring and recognizing credit losses on certain financial assets measured at amortized cost, including trade receivables, certain non-trade receivables, contract assets, held-to-maturity securities, customer advances and certain off-balance sheet credit exposures, by replacing the existing “incurred loss” framework with an expected credit loss recognition model.  The new standard results in earlier recognition of credit losses based on past events, current conditions, and reasonable and supportable forecasts.  The standard is effective for entities with fiscal years beginning after December 15, 2019, including interim periods within such fiscal years. We adopted the requirements of this standard effective January 1, 2020 using the modified retrospective approach and recorded a cumulative effect adjustment of $3.0 million to January 1, 2020 retained earnings (accumulated deficit). Results for reporting periods beginning January 1, 2020 reflect the adoption of ASU 2016-13, while prior period amounts were not adjusted and continue to be reported in accordance with our historical accounting practices. In our previous accounting policy for trade receivables and non-trade receivables, we maintained an allowance for doubtful accounts based solely on specific identification. Under the new accounting standard, we maintain our specific identification process but utilize several factors to develop historical losses reserves, including aging schedules, customer creditworthiness, and historical payment experience, which are then adjusted for current conditions and reasonable and supportable forecasts in measurement of the allowance.  In addition, for customer advances and certain off-balance sheet credit exposures, we evaluate the allowance through a discounted cash flow approach.  For held-to-maturity investment securities, we evaluate (i) historical information adjusted for current conditions and reasonable and supportable forecasts and (ii) qualitative factors to determine whether the zero-loss expectation exception applies. Refer to Note 7 for additional disclosures related to current expected credit losses.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The amendments in the ASU remove certain exceptions to the intraperiod tax allocation of losses and gains from different financial statement components and to the method of recognizing income taxes on interim period losses, and the recognition of deferred tax liabilities for outside basis differences. In addition, the new guidance simplifies aspects of the accounting for franchise taxes and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted this standard starting in the first quarter of 2021, which did not have a material impact on our consolidated financial statements.

Fair Value Measurement

Fair Value Measurement

GAAP defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) assuming an orderly transaction in the most advantageous market at the measurement date. GAAP also establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:

•Level 1 - inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date;

•Level 2 - inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date and the fair value can be determined through the use of models or other valuation methodologies; and

•Level 3 - inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the particular asset or liability being measured.

Nonrecurring Fair Value Measurements

In addition to the assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. This includes assets and liabilities recorded in business combinations or asset acquisitions, goodwill, intangible assets, property, plant and equipment, held-to-maturity investments and equity method investments. While not

carried at fair value on a recurring basis, these items are continually monitored for indicators of impairment that would indicate current carrying value is greater than fair value. In those situations, the assets are considered impaired and written down to current fair value.

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents (those not held in a money market fund), restricted cash, receivables, prepaid expenses, accounts payable, accrued liabilities and accrued compensation approximate their fair values because of the relatively short-term maturities of these items and financial instruments.

See Note 10 for information regarding the fair value of the 2024 Notes, 2025 Notes and 2021 Notes.

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

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Schedule of restricted cash and cash equivalents

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

	March 31, 2021		December 31, 2020 (1)
Collateral for letters of credit for facility leases (2)	$	3,510	$	3,510
Collateral with financial institutions (3)	12,347		4,743
Claims processing services (4)	51,132		12,064
Other	748		1,327
Total restricted cash and restricted investments	$	67,737	$	21,644
Current restricted cash	53,479		14,374
Total current restricted cash and restricted investments	$	53,479	$	14,374
Non-current restricted cash	14,258		6,654
Total non-current restricted cash and restricted investments	$	14,258	$	6,654

————————

(1)Amounts exclude $0.6 million of non-current restricted investments and $0.1 million of current restricted cash from claims processing services reclassified to discontinued operations as of December 31, 2020.

(2)Represents restricted cash related to collateral for letters of credit required in conjunction with lease agreements. See Note 12 for further discussion of our lease commitments.

(3)Represents collateral held with financial institutions for risk-sharing and other arrangements. As of March 31, 2021 and December 31, 2020, approximately $12.3 million and $4.7 million, respectively, of the collateral amounts were held in a FDIC participating bank account. See Note 18 for discussion of fair value measurement and Note 11 for discussion of our risk-sharing arrangements.

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

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

	March 31,
	2021		2020
Cash and cash equivalents	$	236,032	$	67,944
Restricted cash and restricted investments	67,737		62,671
Restricted investments included in restricted cash and restricted investments	—		(817)
Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows (1)	$	303,769	$	129,798

————————

(1)As a result of the closing of the sale of True Health SPA, the consolidated statements of operations, consolidated balance sheets, and related financial information reflect the Company’s operations and assets and liabilities of True Health as discontinued operations for all periods presented. Cash flows and comprehensive income have not been adjusted and are included in the consolidated statements of cash flows and consolidated statements of comprehensive income (loss) for all periods presented. See Note 5.

Schedule of intangible assets

The following summarizes the estimated useful lives by asset classification:

Corporate trade name	10 - 20 years
Customer relationships	10 - 25 years
Technology	5 years
Provider network contracts	4 - 5 years

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

	March 31, 2021							December 31, 2020
	Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Corporate trade name	12.9	$	23,300	$	6,616	$	16,684	13.2	$	23,300	$	6,271	$	17,029
Customer relationships	15.9	278,519		61,305		217,214		16.2	278,519		57,716		220,803
Technology	1.6	82,922		66,158		16,764		1.8	82,922		63,507		19,415
Below market lease, net	2.1	1,218		799		419		2.3	1,118		648		470
Provider network contracts	2.8	13,947		5,608		8,339		2.9	12,175		4,900		7,275
Total intangible assets, net		$	399,906	$	140,486	$	259,420		$	398,034	$	133,042	$	264,992

————————

(1)Amounts exclude $2.2 million and $0.9 million of customer relationships and provider network contracts, net of accumulated amortization, with weighted average remaining useful lives of 15 years and 10 months reclassified to discontinued operations as of December 31, 2020.

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Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

Schedule of discontinued operations

The following table summarizes the results of operations of the Company’s True Health business, which are included in loss from discontinued operations in the consolidated statements of operations for the three months ended March 31, 2021 and 2020.

	For the Three Months Ended March 31,
	2021		2020
Revenue
Platform and operations	38		240
Premiums	44,795		32,147
Total revenue	44,833		32,387
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below) (1)	5,885		3,295
Claims expenses	33,954		23,667
Selling, general and administrative expenses (2)	5,764		5,675
Depreciation and amortization expenses	160		160
Total operating expenses	45,763		32,797
Operating loss	(930)		(410)
Interest income	112		149
Interest expense	(4)		(4)
Other loss	(25)		—
Loss before income taxes and non-controlling interests	(847)		(265)
Benefit for income taxes	(326)		—
Net loss	$	(521)	$	(265)

————————

(1)Cost of revenue includes $2.8 million and $3.1 million of intercompany expenses between the Company and True Health that are recorded in income from continuing operations on the consolidated statements of operations related an existing services agreement for claims processing and other health plan administrative functions for the three months ended March 31, 2021 and 2020, respectively.

(2)Selling, general and administrative expenses includes $1.1 million and $3.1 million of intercompany expenses between the Company and True Health that are recorded in income from continuing operations on the consolidated statements of operations related an existing services agreement for claims processing and other health plan administrative functions for the three months ended March 31, 2021 and 2020, respectively.

Cash flows related to the True Health business during the three months ended March 31, 2021 and 2020 were as follows:

	For the Three Months Ended March 31,
	2021		2020
Cash flows provided by (used in) operating activities	$	5,002	$	2,745
Cash flows provided by (used in) investing activities	(2,494)		(721)

The following table summarizes the current and long-term assets and liabilities of the discontinued True Health business in the consolidated balance sheets at December 31, 2020:

	December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	21,488
Restricted cash and restricted investments	63
Accounts receivable, net	3,437
Prepaid expenses and other current assets	5,198
Investments, at amortized cost	3,728
Total current assets	33,914
Restricted cash and restricted investments	616
Investments, at amortized cost	10,919
Prepaid expenses and other noncurrent assets, net of allowances	59
Intangible assets, net	3,080
Goodwill	5,705
Total assets	$	54,293
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Liabilities
Current liabilities:
Accounts payable (1)	93
Accrued liabilities	11,265
Accrued compensation and employee benefits	1,115
Deferred revenue	4,140
Reserve for claims and performance-based arrangements	9,858
Total current liabilities	26,471
Other long-term liabilities	128
Deferred tax liabilities, net	49
Total liabilities	$	26,648

————————

(1)Accounts payable exclude $1.5 million between the Company and True Health related an existing services agreement for claims processing and other health plan administrative functions as of December 31, 2020.

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Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

Disaggregation of revenue

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

	Evolent Health Services				Clinical Solutions
	For the Three Months Ended March 31,				For the Three Months Ended March 31,
	2021		2020		2021		2020
Medicaid	$	60,929	$	58,445	$	43,339	$	60,462
Medicare	8,338		15,185		85,783		62,354
Commercial and other	15,571		22,747		1,111		2,039
Total	$	84,838	$	96,377	$	130,233	$	124,855

Contract with customer, asset and liability

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers (in thousands):

	March 31, 2021		December 31, 2020 (1)
Short-term receivables (2)	$	180,408	$	124,064
Long-term receivables (2)	4,634		4,554
Short-term contract assets	190		329
Short-term deferred revenue	13,367		10,187
Long-term deferred revenue	5,415		3,593

————————

(1)Amounts exclude $3.4 million of short-term receivables and $4.1 million of short-term deferred revenue reclassified to discontinued operations as of December 31, 2020.

(2)Excludes pharmacy claims receivable and premiums receivable

Changes in contract assets and deferred revenue for the three months ended March 31, 2021 are as follows (in thousands):

Contract assets
Balance as of beginning of period	$	329
Reclassification to receivables, as the right to consideration becomes unconditional	(143)
Contract assets recognized, net of reclassification to receivables	4
Balance as of end of period	$	190
Deferred revenue
Balance as of beginning-of-period	$	17,920
Reclassification to revenue, as a result of performance obligations satisfied	(7,959)
Cash received in advance of satisfaction of performance obligations	8,821
Balance as of end of period	$	18,782

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Credit Losses (Tables)

3 Months Ended

Mar. 31, 2021

Credit Loss [Abstract]

Accounts receivable, allowance for credit loss

The following table summarizes the changes in allowance for credit losses on our accounts receivables, certain non-trade accounts receivable and contract assets (in thousands):

	For the Three Months Ended March 31,
	2021		2020
Balance as of beginning of period	$	(7,056)	$	(41)
Cumulative transition adjustment	—		(2,815)
Provision for credit losses	(2,327)		(1,001)
Recoveries	—		447
Balance as of end of period	$	(9,383)	$	(3,410)

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Property and Equipment, Net (Tables)

3 Months Ended

Mar. 31, 2021

Property, Plant and Equipment [Abstract]

Summary of property and equipment

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

	March 31, 2021		December 31, 2020
Computer hardware	$	19,454	$	18,866
Furniture and equipment	3,553		3,559
Internal-use software development costs	142,539		137,085
Leasehold improvements	15,577		15,586
Total property and equipment	181,123		175,096
Accumulated depreciation and amortization expenses	(96,684)		(88,856)
Total property and equipment, net	$	84,439	$	86,240

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Goodwill and Intangible Assets, Net (Tables)

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

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

	EHS		Clinical Solutions		Consolidated
Balance as of December 31, 2020 (1)	$	214,354	$	134,675	$	349,029
Foreign currency translation	(7)		—		(7)
Balance as of March 31, 2021	$	214,347	$	134,675	$	349,022

	EHS		Clinical Solutions		Consolidated
Balance as of December 31, 2019 (1)	$	437,389	$	134,675	$	572,064
Goodwill disposal (2)	(2,200)		—		(2,200)
Foreign currency translation	(67)		—		(67)
Balance as of March 31, 2020	$	435,122	$	134,675	$	569,797

————————

(1)Net of cumulative inception to date impairment of $575.5 million and $360.4 million as of December 31, 2020 and 2019, respectively.

(2)Goodwill written-off upon disposal of a consolidated subsidiary.

Schedule of intangible assets details

The following summarizes the estimated useful lives by asset classification:

Corporate trade name	10 - 20 years
Customer relationships	10 - 25 years
Technology	5 years
Provider network contracts	4 - 5 years

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

	March 31, 2021							December 31, 2020
	Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Corporate trade name	12.9	$	23,300	$	6,616	$	16,684	13.2	$	23,300	$	6,271	$	17,029
Customer relationships	15.9	278,519		61,305		217,214		16.2	278,519		57,716		220,803
Technology	1.6	82,922		66,158		16,764		1.8	82,922		63,507		19,415
Below market lease, net	2.1	1,218		799		419		2.3	1,118		648		470
Provider network contracts	2.8	13,947		5,608		8,339		2.9	12,175		4,900		7,275
Total intangible assets, net		$	399,906	$	140,486	$	259,420		$	398,034	$	133,042	$	264,992

————————

(1)Amounts exclude $2.2 million and $0.9 million of customer relationships and provider network contracts, net of accumulated amortization, with weighted average remaining useful lives of 15 years and 10 months reclassified to discontinued operations as of December 31, 2020.

Schedule of future estimated amortization of intangible assets

Future estimated amortization of intangible assets (in thousands) as of March 31, 2021, is as follows:

2021	$	21,137
2022	24,629
2023	22,325
2024	16,441
2025	15,736
Thereafter	159,152
Total future amortization of intangible assets	$	259,420

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Long-term Debt (Tables)

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Schedule of convertible debt

The following table summarizes the carrying value of the long-term convertible debt (in thousands):

	March 31, 2021		December 31, 2020
2024 Notes
Carrying value	$	83,369	$	81,462
Unamortized debt discount and issuance costs	33,682		35,589
Principal amount	$	117,051	$	117,051
Remaining amortization period (years)	3.7		3.9
Fair value	$	160,009	$	153,220
2025 Notes
Carrying value	$	118,763	$	116,349
Unamortized debt discount and issuance costs	53,737		56,151
Principal amount	$	172,500	$	172,500
Remaining amortization period (years)	4.5		4.8
Fair value	$	159,744	$	147,488
2021 Notes
Carrying value	$	26,606	$	26,557
Unamortized issuance costs	131		180
Principal amount	$	26,737	$	26,737
Remaining amortization period (years)	0.7		0.9
Fair value	$	27,272	$	26,470

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Summary of premiums and claims assumed

The following summarizes premiums and claims assumed under the Reinsurance Agreements (in thousands):

	For the Three Months Ended March 31,
	2021		2020
Reinsurance premiums assumed	$	8,845	$	—
Reinsurance premiums ceded	—		—
Claims assumed	10,494		—
Claims ceded	—		—
Claims-related administrative expenses	545		—
Increase in reserves for claims and performance-based arrangements attributable to the Reinsurance Agreement	(2,194)		—
Reserves for claims and performance-based arrangements attributable to the Reinsurance Agreement at the beginning of the period	4,002		—
Impact of consolidation on payable for claims and performance-based arrangements attributable to the Reinsurance Agreement	—		—
Reinsurance payments paid (received)	—		—
Payable for claims and performance-based arrangements attributable to the Reinsurance Agreement at the end of the period	$	1,808	$	—

Summary of major customers

The following table summarizes the partner who represented at least 10.0% of our consolidated trade accounts receivable as of the dates presented:

	March 31, 2021		December 31, 2020
Cook County Health and Hospitals System	44.5	%	61.5	%
Florida Blue Medicare, Inc	14.6	%	*
Neighborhood Health Plan of Rhode Island	11.2	%	*

————————

*     Represents less than 10.0% of the respective balance

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

	For the Three Months Ended March 31,
	2021		2020 (1)
Cook County Health and Hospitals Systems	28.8	%	21.5	%
Florida Blue Medicare, Inc.	14.7	%	*
Passport	*		25.3	%

————————

(1)The denominator excludes $44.8 million and $32.1 million of True Health premium revenue reclassified to discontinued operations for the three months ended March 31, 2021 and 2020, respectively.

*     Represents less than 10.0% of the respective balance

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Leases (Tables)

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Schedule of maturity of lease liabilities

The following table summarizes our primary office leases as of March 31, 2021 (in thousands, other than term):

Location	Lease Termination Term (in years)	Future Minimum Lease Commitments		Letter of Credit Amount Required
Arlington, VA	10.8	$	37,911	$	1,579
Riverside, IL	10.0	43,789		232
Pune, India	2.5	2,083		—
Brea, CA	1.2	1,287		—

Maturity of lease liabilities (in thousands) as of March 31, 2021, is as follows:

	Operating lease expense
2021	8,844
2022	9,843
2023	8,650
2024	8,378
2025	8,145
Thereafter	47,760
Total lease payments	91,620
Less:
Interest	23,789
Present value of lease liabilities	$	67,831

Schedule of components of lease expense, weighted-average discount rate and weighted-remaining lease terms

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

	For the Three Months Ended March 31,
	2021		2020
Operating lease cost	$	4,818	$	3,056
Amortization of right-of-use assets	—		149
Interest expense	—		2
Variable lease cost	1,321		1,052
Total lease cost	$	6,139	$	4,259

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

	March 31, 2021
Weighted average discount rate	6.42	%
Weighted average remaining lease term	9.3

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Earnings (Loss) Per Common Share (Tables)

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Computation of basic and diluted earnings per share

The following table sets forth the computation of basic and diluted earnings per share available for common stockholders (in thousands, except per share data):

	For the Three Months Ended March 31,
	2021		2020
Loss from continuing operations	$	(11,190)	$	(78,487)
Gain (loss) from discontinued operations, net of tax	1,383		(265)
Net loss	(9,807)		(78,752)
Less:
Net loss attributable to non-controlling interests	—		—
Net loss available for common shareholders - basic and diluted	$	(9,807)	$	(78,752)
Weighted-average common shares outstanding - basic and diluted	84,670		84,793
Loss per common share
Basic and diluted
Continuing operations	$	(0.13)	$	(0.93)
Discontinued operations	0.01		—
Basic and diluted loss per share attributable to common shareholders of Evolent Health, Inc.	$	(0.12)	$	(0.93)

Schedule of antidilutive securities excluded from computation of earnings per share

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

	For the Three Months Ended March 31,
	2021	2020
Restricted stock units ("RSUs"), performance-based RSUs and leveraged stock units ("LSUs")	1,531	199
Stock options	1,865	972
Convertible senior notes	12,696	10,361
Total	16,092	11,532

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Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-based compensation expense

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

	For the Three Months Ended March 31,
	2021		2020
Award Type
Stock options	$	404	$	750
Performance-based stock options	—		75
RSUs	1,974		1,856
LSUs	1,085		827
PSUs	243		—
Total compensation expense by award type	$	3,706	$	3,508
Line Item
Cost of revenue	$	595	$	392
Selling, general and administrative expenses	3,111		3,116
Total compensation expense by financial statement line item	$	3,706	$	3,508

Schedule of share-based awards granted

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

	For the Three Months Ended March 31,
	2021	2020
RSUs	939	976
PSUs	319	—
LSUs	—	380

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Non-controlling Interests (Tables)

3 Months Ended

Mar. 31, 2021

Noncontrolling Interest [Abstract]

Schedule of changes in non-controlling interests

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

	For the Three Months Ended March 31,
	2021		2020
Non-controlling interests balance as of beginning of period	$	—	$	6,889
Reclassification of non-controlling interests	—		(6,889)
Non-controlling interests balance as of end of period	$	—	$	—

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Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Summary of assets at fair value on recurring basis

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents (1)	$	5,877	$	—	$	—	$	5,877
Total fair value of assets measured on a recurring basis	$	5,877	$	—	$	—	$	5,877
Liabilities
Warrants (2)	$	—	$	—	$	13,730	$	13,730
Total fair value of liabilities measured on a recurring basis	$	—	$	—	$	13,730	$	13,730

(1) Represents the cash and cash equivalents and restricted cash and restricted investments that were held in money market funds as of December 31, 2020.

(2) Represents the fair value of 1,513,786 shares issuable under the warrant agreements discussed in Note 10.

Summary of liabilities at fair value on recurring basis

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents (1)	$	5,877	$	—	$	—	$	5,877
Total fair value of assets measured on a recurring basis	$	5,877	$	—	$	—	$	5,877
Liabilities
Warrants (2)	$	—	$	—	$	13,730	$	13,730
Total fair value of liabilities measured on a recurring basis	$	—	$	—	$	13,730	$	13,730

(1) Represents the cash and cash equivalents and restricted cash and restricted investments that were held in money market funds as of December 31, 2020.

(2) Represents the fair value of 1,513,786 shares issuable under the warrant agreements discussed in Note 10.

Changes in contingent consideration measured at fair value

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

	For the Three Months Ended March 31,
	2021		2020
Balance as of beginning of period	$	13,730	$	16,975
Settlements	(13,730)		(3,500)
Realized and unrealized gains (losses), net	—		(6,375)
Balance as of end of period	$	—	$	7,100

Valuation techniques and significant unobservable inputs of Level 3 fair value measurements

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

	December 31, 2020
	Fair		Valuation	Significant	Assumption or
	Value		Technique	Unobservable Inputs	Input Ranges
Warrants	$	13,730	Black-Scholes	Stock price volatility	62.2	%
				Annual risk free rate	0.2	%

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Related Parties (Tables)

3 Months Ended

Mar. 31, 2021

Related Party Transactions [Abstract]

Schedule of related parties

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

	March 31, 2021		December 31, 2020
Assets
Accounts receivable, net	$	8,615	$	9,474
Prepaid expenses and other current assets	50		51
Prepaid expenses and other noncurrent assets, net of allowances	4,634		4,554
Liabilities
Accounts payable	$	1,898	$	2,509
Accrued liabilities	988		1,520
Reserve for claims and performance-based arrangements	202		435

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

	For the Three Months Ended March 31,
	2021		2020
Revenue
Transformation services	$	—	$	1,700
Platform and operations services	15,575		74,079
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses)	493		3,247
Selling, general and administrative expenses	31		70

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Repositioning and Other Changes (Tables)

3 Months Ended

Mar. 31, 2021

Restructuring and Related Activities [Abstract]

Costs associated with the Repositioning Plan

The following tables provide a summary of our total costs associated with the Repositioning Plan for the three months ended March 31, 2021, by major type of cost:

	Incurred For the Three Months Ended March 31, 2021		Total Amount Expected to be Incurred in the Repositioning Plan		Cumulative Amount Incurred through March 31, 2021
Severance and termination benefits	$	109	$	2,500	$	109
Office space consolidation	2,071		2,100		2,071
Professional services	3,200		4,475		4,475
Total	$	5,380	$	9,075	$	6,655

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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Reconciliation of revenue from segments to consolidated

The following tables present our segment information (in thousands). Prior-year segment information (including segments total Adjusted EBITDA) has been restated to conform to the reporting structure change described in Note 1.

	Evolent Health Services		Clinical Solutions		Intersegment Eliminations		Subtotal		Corporate (1)		Consolidated
Revenue
For the Three Months Ended March 31, 2021
Transformation services	$	345	$	—	$	—	$	345	$	—	$	345
Platform and operations services	84,941		130,223		(438)		214,726				214,726
Total revenue	$	85,286	$	130,223	$	(438)	$	215,071	$	—	$	215,071
For the Three Months Ended March 31, 2020
Transformation services	$	5,238	$	—	$	—	$	5,238	$	—	$	5,238
Platform and operations services	91,790		124,872		(668)		215,994				215,994
Total revenue	$	97,028	$	124,872	$	(668)	$	221,232	$	—	$	221,232
	Evolent Health Services		Clinical Solutions		Subtotal		Corporate (1)		Segments Total
For the Three Months Ended March 31, 2021
Adjusted EBITDA	$	5,942	$	15,976	$	21,918	$	(7,011)	$	14,907
For the Three Months Ended March 31, 2020
Adjusted EBITDA	$	4,768	$	7,043	$	11,811	$	(7,935)	$	3,876

————————

(1)Corporate includes various finance, human resources, legal, executive, and other corporate infrastructure expenses.

Reconciliation of Adjusted EBITDA to net loss

The following table presents our reconciliation of segments total Adjusted EBITDA to net loss attributable to common shareholders of Evolent Health, Inc. (in thousands):

	For the Three Months Ended March 31,
	2021		2020
Net loss attributable to common shareholders of Evolent Health, Inc.	$	(9,807)	$	(78,752)
Less:
Interest income	123		770
Interest expense	(6,337)		(6,281)
Provision for income taxes	(611)		(270)
Depreciation and amortization expenses	(15,187)		(15,978)
Equity method investment impairment	—		(47,133)
Gain on transfer of membership	22,969		—
Loss on repayment of debt, net	(19,158)		—
Gain (loss) from equity method investees	7,783		(412)
Gain (loss) on disposal of assets	—		(6,447)
Change in fair value of contingent consideration and indemnification asset	594		3,818
Other expense, net	(14)		(70)
Repositioning costs	(5,380)		—
Stock-based compensation expense	(3,706)		(3,508)
Severance costs	(52)		(6,103)
Amortization of contract cost assets	(127)		(440)
Strategy and shareholder advisory expenses	(5,000)		—
Acquisition costs	(1,994)		(309)
Gain (loss) from discontinued operations (1)	1,383		(265)
Adjusted EBITDA	$	14,907	$	3,876

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Reserves for Claims and Performance-Based Arrangements (Tables)

3 Months Ended

Mar. 31, 2021

Insurance [Abstract]

Activity in claims reserves

Activity in reserves for claims and performance-based arrangements for the three months ended March 31, 2021 and 2020, was as follows (in thousands):

	For the Three Months Ended March 31,
	2021								2020
	EHS (1)(2)		Clinical Solutions (1)(2)		True Health		Total		EHS (1)(2)		Clinical Solutions (1)(2)		True Health		Total
Beginning balance	$	122,532	$	56,295	$	9,859	$	188,686	$	4,265	$	50,245	$	6,640	$	61,150
Incurred costs related to current year	104,098		4,189		34,228		142,515		2,519		110,241		23,556		136,316
Incurred costs related to prior year	24		4,151		(241)		3,934		(381)		(257)		111		(527)
Paid costs related to current year	30,761		11,164		23,274		65,199		2,143		75,208		14,883		92,234
Paid costs related to prior year	38,053		10,200		7,378		55,631		3,223		6,597		5,702		15,522
Change during the year	35,308		(13,024)		3,335		25,619		(3,228)		28,179		3,082		28,033
Disposal of discontinued operations	—		—		(13,194)		(13,194)		—		—		—		—
Other adjustments (3)	2,658		4,224		—		6,882		—		(173)		—		(173)
Ending balance	$	160,498	$	47,495	$	—	$	207,993	$	1,037	$	78,251	$	9,722	$	89,010

————————

(1)    Costs incurred to provide specialty care management and EVH Passport are recorded within cost of revenue in our statement of operations.

(2)    There is no single or common claim frequency metric used in the health care industry. The Company believes a relevant metric for its health insurance business is the number of customers for whom an insured medical claim was paid. The number of claims processed for the EHS and Clinical Solutions segments for the three months ended March 31, 2021 were 579,214.

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

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Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2021

Supplemental Cash Flow Elements [Abstract]

Schedule of cash flow, supplemental disclosures

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

	For the Three Months Ended March 31,
	2021	2020
Supplemental Disclosure of Non-cash Investing and Financing Activities
Increase/decrease to goodwill from measurement period adjustments/business combinations	—	2,200
Class A common stock issued for payment of Passport/Global earn-out	—	4,185
Accrued property and equipment purchases	124	213
Effects of Leases
Operating cash flows from operating leases	3,410	2,759
Leased assets obtained in exchange for operating lease liabilities	(2,157)	(7,020)

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Organization (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) segment shares	Dec. 31, 2020 USD ($) shares	Mar. 31, 2020 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of operating segments | segment	2
Cash and cash equivalents | $	$ 236,032	$ 319,002	$ 67,944
Class B Common Stock
Class of Stock [Line Items]
Common stock, shares outstanding (in shares) | shares	0	0

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Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles - Restricted Cash and Restricted Investments (Details) - USD ($) $ in Thousands		Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Restricted Cash and Cash Equivalents Items [Line Items]
Total restricted cash and restricted investments		$ 67,737	$ 21,644	$ 62,671
Current restricted cash		53,479	14,374
Total current restricted cash and restricted investments		53,479	14,374
Non-current restricted cash		14,258	6,654
Total non-current restricted cash and restricted investments		14,258	6,654
Cash and cash equivalents		236,032	319,002	67,944
Restricted cash and restricted investments		67,737	21,644	62,671
Restricted investments included in restricted cash and restricted investments		0		(817)
Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows (1)	[1]	303,769	361,564	$ 129,798	$ 128,531
Discontinued Operations, Disposed of by Sale | True Health
Restricted Cash and Cash Equivalents Items [Line Items]
Non-current restricted investments			600
Current restricted cash from claims processing services			100
Collateral for letters of credit for facility leases
Restricted Cash and Cash Equivalents Items [Line Items]
Total restricted cash and restricted investments		3,510	3,510
Restricted cash and restricted investments		3,510	3,510
Collateral with financial institutions
Restricted Cash and Cash Equivalents Items [Line Items]
Total restricted cash and restricted investments		12,347	4,743
Restricted cash and restricted investments		12,347	4,743
Claims processing services
Restricted Cash and Cash Equivalents Items [Line Items]
Total restricted cash and restricted investments		51,132	12,064
Restricted cash and restricted investments		51,132	12,064
Other
Restricted Cash and Cash Equivalents Items [Line Items]
Total restricted cash and restricted investments		748	1,327
Restricted cash and restricted investments		748	1,327
Bank time deposits
Restricted Cash and Cash Equivalents Items [Line Items]
Total restricted cash and restricted investments		12,300	4,700
Restricted cash and restricted investments		$ 12,300	$ 4,700

[1] As a result of the closing of the sale of True Health SPA, the consolidated statements of operations, consolidated balance sheets, and related financial information reflect the Company’s operations and assets and liabilities of True Health as discontinued operations for all periods presented. Cash flows and comprehensive income have not been adjusted and are included in the consolidated statements of cash flows and consolidated statements of comprehensive income (loss) for all periods presented. See Note 5.

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Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles - Goodwill (Details) - reportingunit		1 Months Ended	3 Months Ended
	Oct. 31, 2020	May 31, 2020	Mar. 31, 2021
Accounting Policies [Abstract]
Number of reporting units for goodwill testing	2	2	3

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Basis of Presentation, Summary of Significant Accounting Policies and Change in Accounting Principles - Intangible Assets, Net (Details)	3 Months Ended
	Mar. 31, 2021
Corporate trade name | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful life	10 years
Corporate trade name | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful life	20 years
Customer relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful life	10 years
Customer relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful life	25 years
Technology
Finite-Lived Intangible Assets [Line Items]
Useful life	5 years
Provider network contracts | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful life	4 years
Provider network contracts | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful life	5 years

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Recently Issued Accounting Standards (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment	$ (929,047)	$ (617,298)	$ (619,600)	$ (847,072)
Accounting Standards Update [Extensible List]	us-gaap:AccountingStandardsUpdate201613Member
Cumulative Effect, Period of Adoption, Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment	$ 2,970
Retained Earnings (Accumulated Deficit)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment	251,962	$ 598,985	$ 589,178	$ 333,684
Retained Earnings (Accumulated Deficit) | Cumulative Effect, Period of Adoption, Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment	$ 2,970

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Transactions - Passport (Details) - USD ($)						1 Months Ended	3 Months Ended
	Dec. 31, 2020	Nov. 16, 2020	Sep. 01, 2020	Jun. 06, 2019	May 28, 2019	Jan. 31, 2021	Mar. 31, 2021	Dec. 31, 2019	Jun. 18, 2019
Passport Asset Acquisition
Business Acquisition [Line Items]
Cash and equivalents			$ 159,800,000
Debt securities, available-for-sale			88,600,000
Receivables related to unsettled sales of securities			43,000,000.0
Other assets			50,200,000
Accrued medical expenses			164,800,000
Accrued liabilities			50,000,000.0
Molina
Business Acquisition [Line Items]
Asset Purchase Agreement, escrow payments			$ 20,000,000.0
Cash Released From Escrow						$ 20,000,000.0
Passport Note
Business Acquisition [Line Items]
Interest rate									6.50%
Proceeds from collection of notes receivable	$ 40,000,000.0
Proceeds from interest received	3,600,000
Passport Note | Notes Receivable
Business Acquisition [Line Items]
Notes receivable, net									$ 40,000,000.0
Passport | Variable Interest Entity
Business Acquisition [Line Items]
Payments to acquire interest					$ 70,000,000.0
Interest in investment		30.00%	30.00%		30.00%
Performance bond amount				$ 25,000,000.0
Payments to acquire equity method investments, amount held back	$ 16,200,000							$ 16,200,000
Payments to redeem Sponsors' equity		$ 20,000,000.0
Proceeds from transfer of membership							$ 23,000,000.0
Transfer of membership, percentage of payment based on number of enrollees							50.00%
Transfer of membership, percentage of payment subject to satisfaction of contingencies							50.00%

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Discontinued Operations - Summary of Results of Operations (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Expenses
Gain (loss) from discontinued operations, net of tax (2)	[1]	$ 1,383	$ (265)
Discontinued Operations, Disposed of by Sale | True Health
Revenue
Total revenue		44,833	32,387
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below)		5,885	3,295
Claims expenses		33,954	23,667
Selling, general and administrative expenses		5,764	5,675
Depreciation and amortization expenses		160	160
Total operating expenses		45,763	32,797
Operating loss		(930)	(410)
Interest income		112	149
Interest expense		(4)	(4)
Other loss		(25)	0
Loss before income taxes and non-controlling interests		(847)	(265)
Benefit for income taxes		(326)	0
Gain (loss) from discontinued operations, net of tax (2)		(521)	(265)
Discontinued Operations, Disposed of by Sale | True Health | Platform and operations services
Revenue
Total revenue		38	240
Discontinued Operations, Disposed of by Sale | True Health | Premiums
Revenue
Total revenue		44,795	32,147
Discontinued Operations, Disposed of by Sale | True Health | Services Agreements
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below)		2,800	3,100
Selling, general and administrative expenses		$ 1,100	$ 3,100

[1] Includes $1.9 million gain on disposal of discontinued operations for the three months ended March 31, 2021

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Discontinued Operations - Summary of Cash Flows (Details) - True Health - Discontinued Operations, Disposed of by Sale - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash flows provided by (used in) operating activities	$ 5,002	$ 2,745
Cash flows provided by (used in) investing activities	$ (2,494)	$ (721)

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Discontinued Operations - Summary of Current and Long-term Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Total current assets	$ 0	$ 33,914
Current liabilities:
Current liabilities of discontinued operations	$ 0	27,986
True Health | Discontinued Operations, Disposed of by Sale
Current assets:
Cash and cash equivalents		21,488
Restricted cash and restricted investments		63
Accounts receivable, net		3,437
Prepaid expenses and other current assets		5,198
Investments, at amortized cost		3,728
Total current assets		33,914
Restricted cash and restricted investments		616
Investments, at amortized cost		10,919
Prepaid expenses and other noncurrent assets, net of allowances		59
Intangible assets, net		3,080
Goodwill		5,705
Total assets		54,293
Current liabilities:
Accounts payable		93
Accrued liabilities		11,265
Accrued compensation and employee benefits		1,115
Deferred revenue		4,140
Reserve for claims and performance-based arrangements		9,858
Current liabilities of discontinued operations		26,471
Other long-term liabilities		128
Deferred tax liabilities, net		49
Total liabilities		26,648
True Health | Discontinued Operations, Disposed of by Sale | Services Agreements
Current assets:
Accounts receivable, net		1,500
Current liabilities:
Accounts payable		$ 1,500

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Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Evolent Health Services
Disaggregation of Revenue [Line Items]
Total revenue	$ 84,838	$ 96,377
Evolent Health Services | Medicaid
Disaggregation of Revenue [Line Items]
Total revenue	60,929	58,445
Evolent Health Services | Medicare
Disaggregation of Revenue [Line Items]
Total revenue	8,338	15,185
Evolent Health Services | Commercial and other
Disaggregation of Revenue [Line Items]
Total revenue	15,571	22,747
Clinical Solutions
Disaggregation of Revenue [Line Items]
Total revenue	130,233	124,855
Clinical Solutions | Medicaid
Disaggregation of Revenue [Line Items]
Total revenue	43,339	60,462
Clinical Solutions | Medicare
Disaggregation of Revenue [Line Items]
Total revenue	85,783	62,354
Clinical Solutions | Commercial and other
Disaggregation of Revenue [Line Items]
Total revenue	$ 1,111	$ 2,039

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Revenue Recognition - Transaction Price Allocated to the Remaining Performance Obligations (Details) $ in Millions	Mar. 31, 2021 USD ($)
Revenue from Contract with Customer [Abstract]
Revenue, remaining performance obligation	$ 80.6
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, percentage	50.00%
Revenue, remaining performance obligation, expected timing of satisfaction, period	9 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, percentage	84.00%
Revenue, remaining performance obligation, expected timing of satisfaction, period	12 months

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Revenue Recognition - Contract Balances (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Revenue from Contract with Customer [Abstract]
Short-term receivables	$ 180,408	$ 124,064
Long-term receivables	4,634	4,554
Short-term contract assets	190	329
Short-term deferred revenue	13,367	10,187
Long-term deferred revenue	5,415	3,593
Contract assets
Balance as of beginning of period	329
Reclassification to receivables, as the right to consideration becomes unconditional	(143)
Contract assets recognized, net of reclassification to receivables	4
Balance as of end of period	190
Deferred revenue
Balance as of beginning-of-period	17,920
Reclassification to revenue, as a result of performance obligations satisfied	(7,959)
Cash received in advance of satisfaction of performance obligations	8,821
Balance as of end of period	18,782
Revenue recognized from performed obligations	$ 13,200
Discontinued Operations, Disposed of by Sale | True Health
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Accounts receivable, net, after gross-up		3,400
Deferred revenue		$ 4,140

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Revenue Recognition - Contract Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Capitalized Contract Cost [Line Items]
Contract cost amortization	$ 3,055	$ 5,614
Capitalized contract cost, amortization period	5 years
Bonuses and Commissions
Capitalized Contract Cost [Line Items]
Contract cost assets	$ 4,100		$ 3,300
Contract cost amortization	400	500
Contract Fulfillment Costs
Capitalized Contract Cost [Line Items]
Contract cost assets	21,200		$ 23,400
Contract cost amortization	$ 2,700	$ 5,100

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Credit Losses - Accounts Receivable (Narrative) (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Accounts Receivable, Noncurrent, Past Due [Line Items]
Percentage of receivables, current	64.00%
Accounts receivable, net	$ 211,000
Allowance for doubtful accounts	$ 9,383	$ 7,056	$ 3,410	$ 41
Past due less than 60 days
Accounts Receivable, Noncurrent, Past Due [Line Items]
Percentage of receivables, past due	24.00%
Past due less than 120 days
Accounts Receivable, Noncurrent, Past Due [Line Items]
Percentage of receivables, past due	32.00%

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Credit Losses - Schedule of Changes in Allowance for Accounts Receivable (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance as of beginning of period	$ (7,056)	$ (41)
Provision for credit losses	(2,327)	(1,001)
Recoveries	0	447
Allowance for doubtful accounts, ending balance	(9,383)	(3,410)
Cumulative Effect, Period of Adoption, Adjustment
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance as of beginning of period	$ 0	$ (2,815)

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Property and Equipment, Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Property and Equipment [Line Items]
Total property and equipment	$ 181,123		$ 175,096
Accumulated depreciation and amortization expenses	(96,684)		(88,856)
Total property and equipment, net	84,439		86,240
Depreciation expense	7,800	$ 6,800
Capitalized computer software, amortization	6,700	5,600
Computer hardware
Property and Equipment [Line Items]
Total property and equipment	19,454		18,866
Furniture and equipment
Property and Equipment [Line Items]
Total property and equipment	3,553		3,559
Internal-use software development costs
Property and Equipment [Line Items]
Total property and equipment	142,539		137,085
Total property and equipment, net	74,100		75,300
Capitalized computer software additions	5,500	$ 7,300
Leasehold improvements
Property and Equipment [Line Items]
Total property and equipment	$ 15,577		$ 15,586

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Goodwill and Intangible Assets, Net - Impairment Testing (Details)		1 Months Ended	3 Months Ended			6 Months Ended	12 Months Ended
	Oct. 31, 2020 reportingunit	May 31, 2020 reportingunit	Mar. 31, 2021 USD ($) reportingunit	Jun. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jun. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2020 USD ($)	Mar. 31, 2020 USD ($)
Finite-Lived Intangible Assets [Line Items]
Number of reporting units for goodwill testing | reportingunit	2	2	3
Goodwill, impairment loss				$ 215,100,000	$ 199,800,000	$ 215,100,000	$ 0
Number of reporting units, fair value in excess of carrying amount | reportingunit	1	1
Goodwill			$ 349,022,000		$ 572,064,000		$ 572,064,000	$ 349,029,000	$ 569,797,000
Valuation, Income Approach
Finite-Lived Intangible Assets [Line Items]
Goodwill								$ 214,300,000

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Goodwill and Intangible Assets, Net - Schedule of Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Dec. 31, 2019
Goodwill [Roll Forward]
Balance as of beginning of period	$ 349,029	$ 572,064
Goodwill disposal		(2,200)
Foreign currency translation	(7)	(67)
Balance as of end of period	349,022	569,797
Cumulative inception to date impairment			$ 575,500	$ 360,400
Evolent Health Services
Goodwill [Roll Forward]
Balance as of beginning of period	214,354	437,389
Goodwill disposal		(2,200)
Foreign currency translation	(7)	(67)
Balance as of end of period	214,347	435,122
Clinical Solutions
Goodwill [Roll Forward]
Balance as of beginning of period	134,675	134,675
Goodwill disposal		0
Foreign currency translation	0	0
Balance as of end of period	$ 134,675	$ 134,675

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Goodwill and Intangible Assets, Net - Intangible Assets, Net (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 399,906		$ 398,034
Accumulated Amortization	140,486		133,042
Total future amortization of intangible assets	259,420		264,992
Amortization of intangible assets	$ 7,500	$ 9,300
Discontinued Operations, Disposed of by Sale | True Health
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net			$ 3,080
Corporate trade name
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life	12 years 10 months 24 days		13 years 2 months 12 days
Gross Carrying Amount	$ 23,300		$ 23,300
Accumulated Amortization	6,616		6,271
Total future amortization of intangible assets	$ 16,684		$ 17,029
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life	15 years 10 months 24 days		16 years 2 months 12 days
Gross Carrying Amount	$ 278,519		$ 278,519
Accumulated Amortization	61,305		57,716
Total future amortization of intangible assets	$ 217,214		$ 220,803
Customer relationships | Discontinued Operations, Disposed of by Sale | True Health
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life			15 years
Intangible assets, net			$ 2,200
Technology
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life	1 year 7 months 6 days		1 year 9 months 18 days
Gross Carrying Amount	$ 82,922		$ 82,922
Accumulated Amortization	66,158		63,507
Total future amortization of intangible assets	$ 16,764		$ 19,415
Below market lease, net
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life	2 years 1 month 6 days		2 years 3 months 18 days
Gross Carrying Amount	$ 1,218		$ 1,118
Accumulated Amortization	799		648
Total future amortization of intangible assets	$ 419		$ 470
Provider network contracts
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life	2 years 9 months 18 days		2 years 10 months 24 days
Gross Carrying Amount	$ 13,947		$ 12,175
Accumulated Amortization	5,608		4,900
Total future amortization of intangible assets	$ 8,339		$ 7,275
Provider network contracts | Discontinued Operations, Disposed of by Sale | True Health
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Remaining Useful Life			10 months
Intangible assets, net			$ 900

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Goodwill and Intangible Assets, Net - Amortization of Intangible Assets 10K (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
2021	$ 21,137
2022	24,629
2023	22,325
2024	16,441
2025	15,736
Thereafter	159,152
Total future amortization of intangible assets	$ 259,420	$ 264,992

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Long-term Debt - 2024 Notes (Details) - Senior Notes $ / shares in Units, shares in Millions	1 Months Ended		3 Months Ended
	Aug. 31, 2020 USD ($) shares $ / shares	Dec. 31, 2016 USD ($) shares $ / shares	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)	Dec. 30, 2019	Dec. 31, 2017 USD ($)
Debt Instrument [Line Items]
Payments of debt issuance costs	$ 2,500,000
2024 Notes
Debt Instrument [Line Items]
Face amount	$ 117,100,000		$ 117,051,000		$ 117,051,000
Interest rate	3.50%
Debt conversion, converted instrument, amount	$ 84,200,000
Debt issuance costs	$ 3,000,000.0
Interest expense			1,000,000.0
Conversion price (in dollars per share) | $ / shares	$ 18.23
Initial conversion amount (in shares) | shares	6.4
Long-term debt, net of discount	$ 78,900,000
Debt issuance costs, net, debt component	$ 1,700,000
Non-cash amortization of debt discount and debt issuance costs			1,900,000
Repurchase covenant, repurchase price due to fundamental change as percentage of principal amount	100.00%
Repurchase covenant, sale price as a percentage of conversion price	130.00%
Repurchase covenant, trading days, minimum	20 days
Repurchase covenant, consecutive trading days, minimum	30 days
Repurchase covenant, repurchase price due to change in sale price as percentage of conversion price	100.00%
2024 Notes | Common Stock
Debt Instrument [Line Items]
Debt issuance costs	$ 1,300,000
Proceeds from issuance of debt	$ 38,100,000
2024 Notes | Common Stock | Class A Common Stock
Debt Instrument [Line Items]
Initial conversion rate per $ 1000 principal amount	0.0548667
2021 Notes
Debt Instrument [Line Items]
Face amount		$ 125,000,000.0	26,737,000		$ 26,737,000
Interest rate		2.00%				2.00%
Debt conversion, original debt, amount	$ 84,200,000
Debt issuance costs							$ 4,600,000
Interest expense			$ 100,000	$ 600,000
Proceeds from issuance of debt		$ 120,400,000
Repurchase covenant, repurchase price due to fundamental change as percentage of principal amount		100.00%
2021 Notes | Common Stock | Class A Common Stock
Debt Instrument [Line Items]
Initial conversion rate per $ 1000 principal amount		0.0416082
Conversion price (in dollars per share) | $ / shares		$ 24.03
Initial conversion amount (in shares) | shares		5.2
New Notes
Debt Instrument [Line Items]
Debt conversion, converted instrument, amount	$ 32,800,000

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Long-term Debt - Credit Agreement (Details) - USD ($)			3 Months Ended
	Jan. 08, 2021	Dec. 30, 2019	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Dec. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Loss on repayment of debt, net			$ (19,158,000)	$ 0
Initial Term Loan Facility | Secured Debt
Debt Instrument [Line Items]
Face amount		$ 75,000,000.0
Credit Agreement | Line of Credit
Debt Instrument [Line Items]
Repayments of long-term lines of credit	$ 98,600,000
Payments of make-whole premium	9,700,000
Accrued interest	200,000
Loss on repayment of debt, net	19,200,000
Unamortized debt issuance cost	9,500,000
Legal expenses	$ 35,000
Credit Agreement | Line of Credit | DDTL Facility
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 50,000,000.0
Commitment fee percentage		1.00%
2021 Notes | Senior Notes
Debt Instrument [Line Items]
Face amount			26,737,000		$ 26,737,000		$ 125,000,000.0
Interest rate		2.00%					2.00%
Interest expense			$ 100,000	600,000
Debt issuance costs						$ 4,600,000
Senior Credit Facilities | Secured Debt
Debt Instrument [Line Items]
Interest expense				2,000,000.0
Debt issuance costs		$ 4,700,000
Non-cash amortization of debt discount and debt issuance costs				$ 600,000
Senior Credit Facilities | Secured Debt | After the Second Anniversary of the Closing of the Senior Credit Facilities but Prior to the Third Anniversary
Debt Instrument [Line Items]
Redemption, call protection premium, percentage		4.00%
Senior Credit Facilities | Secured Debt | After the Third Anniversary of the Closing of the Senior Credit Facilities but Prior to the Fourth Anniversary
Debt Instrument [Line Items]
Redemption, call protection premium, percentage		3.00%
Senior Credit Facilities | Secured Debt | After the Fourth Anniversary of the Closing of the Senior Credit Facilities but Prior to the Fifth Anniversary
Debt Instrument [Line Items]
Redemption, call protection premium, percentage		2.00%
Senior Credit Facilities | Secured Debt | Maximum
Debt Instrument [Line Items]
Term		91 days
Senior Credit Facilities | Secured Debt | Eurodollar
Debt Instrument [Line Items]
Basis spread on variable rate		8.00%
Senior Credit Facilities | Secured Debt | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate		7.00%

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Long-term Debt - Warrant Agreement (Details) - Class A Common Stock - USD ($) $ / shares in Units, $ in Millions	Jan. 08, 2021	Dec. 30, 2019
Class of Warrant or Right [Line Items]
Warrants agreed to be sold (in shares)		1,513,786
Exercise price of warrants or rights (in dollars per share)		$ 8.05
Period during which warrants or rights exercisable, after maturity of credit agreement		30 days
Credit Agreement
Class of Warrant or Right [Line Items]
Payments to settle outstanding warrants	$ 13.7

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Long-term Debt - 2025 Notes (Details) - 2025 Notes $ / shares in Units, shares in Millions	1 Months Ended	3 Months Ended
	Oct. 31, 2018 USD ($) shares $ / shares	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)	Oct. 24, 2018 USD ($)	Oct. 22, 2018 USD ($)
Debt Instrument [Line Items]
Debt issuance costs	$ 5,900,000
Senior Notes
Debt Instrument [Line Items]
Face amount	$ 172,500,000	$ 172,500,000		$ 172,500,000	$ 22,500,000	$ 150,000,000.0
Interest rate	1.50%
Proceeds from issuance of debt	$ 166,600,000
Debt issuance costs	$ 3,400,000
Interest expense		600,000
Conversion price (in dollars per share) | $ / shares	$ 33.43
Initial conversion amount (in shares) | shares	5.2
Carrying amount	$ 100,700,000
Non-cash amortization of debt discount and debt issuance costs		$ 2,400,000	$ 2,200,000
Repurchase covenant, repurchase price due to fundamental change as percentage of principal amount	100.00%
Repurchase covenant, sale price as a percentage of conversion price (at least)	130.00%
Repurchase covenant, trading days, minimum	20 days
Repurchase covenant, consecutive trading days, minimum	30 days
Repurchase covenant, repurchase price due to change in sale price as percentage of conversion price	100.00%
Senior Notes | Common Stock
Debt Instrument [Line Items]
Proceeds from issuance of debt	$ 71,800,000
Debt issuance costs	$ 2,500,000
Senior Notes | Class A Common Stock | Common Stock
Debt Instrument [Line Items]
Initial conversion rate per $ 1000 principal amount	0.0299135

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Long-term Debt - 2021 Notes (Details) $ / shares in Units, shares in Millions	1 Months Ended		3 Months Ended
	Aug. 31, 2020 USD ($) shares $ / shares	Dec. 31, 2016 USD ($) shares $ / shares	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)	Dec. 30, 2019	Dec. 31, 2017 USD ($)
Debt Instrument [Line Items]
Amortization of deferred financing costs			$ 4,370,000	$ 3,009,000
Repayments of senior debt			98,420,000	0
Senior Notes
Debt Instrument [Line Items]
Payments of debt issuance costs	$ 2,500,000
Net loss on extinguishment of debt, including fees paid to lenders	4,800,000
Senior Notes | 2021 Notes
Debt Instrument [Line Items]
Face amount		$ 125,000,000.0	26,737,000		$ 26,737,000
Interest rate		2.00%				2.00%
Proceeds from issuance of debt		$ 120,400,000
Debt issuance costs							$ 4,600,000
Repurchase covenant, repurchase price due to fundamental change as percentage of principal amount		100.00%
Interest expense			100,000	600,000
Amortization of deferred financing costs			49,000.0	$ 200,000
Debt conversion, original debt, amount	84,200,000
Face amount of debt repaid	14,000,000.0
Repayments of senior debt	13,900,000
Senior Notes | 2021 Notes | Class A Common Stock | Common Stock
Debt Instrument [Line Items]
Initial conversion rate per $ 1000 principal amount		0.0416082
Conversion price (in dollars per share) | $ / shares		$ 24.03
Initial conversion amount (in shares) | shares		5.2
Senior Notes | 2024 Notes
Debt Instrument [Line Items]
Face amount	$ 117,100,000		117,051,000		$ 117,051,000
Interest rate	3.50%
Debt issuance costs	$ 3,000,000.0
Repurchase covenant, repurchase price due to fundamental change as percentage of principal amount	100.00%
Interest expense			$ 1,000,000.0
Conversion price (in dollars per share) | $ / shares	$ 18.23
Initial conversion amount (in shares) | shares	6.4
Debt conversion, converted instrument, amount	$ 84,200,000
Senior Notes | 2024 Notes | Common Stock
Debt Instrument [Line Items]
Proceeds from issuance of debt	38,100,000
Debt issuance costs	$ 1,300,000
Senior Notes | 2024 Notes | Class A Common Stock | Common Stock
Debt Instrument [Line Items]
Initial conversion rate per $ 1000 principal amount	0.0548667

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Long-term Debt - Convertible Senior Notes Carrying Value (Details) - Senior Notes - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020	Aug. 31, 2020	Oct. 31, 2018	Oct. 24, 2018	Oct. 22, 2018	Dec. 31, 2016
2024 Notes
Debt Instrument [Line Items]
Carrying value	$ 83,369,000	$ 81,462,000
Unamortized debt discount and issuance costs	33,682,000	35,589,000
Principal amount	$ 117,051,000	$ 117,051,000	$ 117,100,000
Remaining amortization period (years)	3 years 8 months 12 days	3 years 10 months 24 days
2024 Notes | Level 2
Debt Instrument [Line Items]
Fair value	$ 160,009,000	$ 153,220,000
2025 Notes
Debt Instrument [Line Items]
Carrying value	118,763,000	116,349,000
Unamortized debt discount and issuance costs	53,737,000	56,151,000
Principal amount	$ 172,500,000	$ 172,500,000		$ 172,500,000	$ 22,500,000	$ 150,000,000.0
Remaining amortization period (years)	4 years 6 months	4 years 9 months 18 days
2025 Notes | Level 2
Debt Instrument [Line Items]
Fair value	$ 159,744,000	$ 147,488,000
2021 Notes
Debt Instrument [Line Items]
Carrying value	26,606,000	26,557,000
Unamortized debt discount and issuance costs	131,000	180,000
Principal amount	$ 26,737,000	$ 26,737,000					$ 125,000,000.0
Remaining amortization period (years)	8 months 12 days	10 months 24 days
2021 Notes | Level 2
Debt Instrument [Line Items]
Fair value	$ 27,272,000	$ 26,470,000

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Commitments and Contingencies - Additional Information (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted funds	$ 67,737,000	$ 21,644,000	$ 62,671,000
Percent of tax savings to be paid	85.00%
Passport | Variable Interest Entity
Restricted Cash and Cash Equivalents Items [Line Items]
Payments to acquire equity method investments, amount held back		16,200,000		$ 16,200,000
Collateral with financial institutions
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted funds	$ 12,347,000	4,743,000
Letter of Credit | Line of Credit
Restricted Cash and Cash Equivalents Items [Line Items]
Maximum borrowing capacity	15,000,000.0	7,400,000
Letter of Credit | Line of Credit | Restricted Cash For Letters Of Credit
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted funds	15,000,000.0	$ 7,400,000
Letter of Credit | Line of Credit | Collateral with financial institutions
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted funds	$ 15,000,000.0

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Commitments and Contingencies - Reinsurance Agreements (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Insurance Loss Reserves [Roll Forward]
Reinsurance premiums assumed	$ 8,845	$ 0
Reinsurance premiums ceded	0	0
Claims assumed	10,494	0
Claims ceded	0	0
Claims-related administrative expenses	545	0
Increase in reserves for claims and performance-based arrangements attributable to the Reinsurance Agreement	(2,194)	0
Reserves for claims and performance-based arrangements attributable to the Reinsurance Agreement at the beginning of the period	4,002	0
Impact of consolidation on payable for claims and performance-based arrangements attributable to the Reinsurance Agreement	0	0
Reinsurance payments paid (received)	0
Reinsurance payments paid (received)		0
Payable for claims and performance-based arrangements attributable to the Reinsurance Agreement at the end of the period	$ 1,808	$ 0

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Commitments and Contingencies - Concentration Risk (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Mar. 31, 2021	Mar. 31, 2020	Sep. 30, 2020	Dec. 31, 2020	Dec. 31, 2019
Concentration Risk [Line Items]
Percentage of cash and cash equivalents held with FDIC participating bank		99.70%
Cash and cash equivalents (including restricted cash)	[1]	$ 303,769	$ 129,798		$ 361,564	$ 128,531
Percentage of cash held in international banks (less than)		0.30%
Discontinued Operations, Disposed of by Sale | True Health
Concentration Risk [Line Items]
Revenue		$ 44,833	32,387
Premiums | Discontinued Operations, Disposed of by Sale | True Health
Concentration Risk [Line Items]
Revenue		$ 44,795	$ 32,147
Cook County Health and Hospitals System | Customer Concentration Risk | Accounts Receivable | Customer Receivable
Concentration Risk [Line Items]
Concentration risk		44.50%		61.50%
Cook County Health and Hospitals System | Customer Concentration Risk | Revenues
Concentration Risk [Line Items]
Concentration risk		28.80%	21.50%
Florida Blue Medicare, Inc. | Customer Concentration Risk | Accounts Receivable | Customer Receivable
Concentration Risk [Line Items]
Concentration risk		14.60%
Florida Blue Medicare, Inc. | Customer Concentration Risk | Revenues
Concentration Risk [Line Items]
Concentration risk		14.70%
Neighborhood Health Plan of Rhode Island | Customer Concentration Risk | Accounts Receivable | Customer Receivable
Concentration Risk [Line Items]
Concentration risk		11.20%
Passport | Customer Concentration Risk | Revenues
Concentration Risk [Line Items]
Concentration risk			25.30%

[1] As a result of the closing of the sale of True Health SPA, the consolidated statements of operations, consolidated balance sheets, and related financial information reflect the Company’s operations and assets and liabilities of True Health as discontinued operations for all periods presented. Cash flows and comprehensive income have not been adjusted and are included in the consolidated statements of cash flows and consolidated statements of comprehensive income (loss) for all periods presented. See Note 5.

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Leases - Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020
Lessee, Lease, Description [Line Items]
Restricted funds	$ 67,737	$ 21,644	$ 62,671
Lease Agreements
Lessee, Lease, Description [Line Items]
Letters of credit outstanding, amount	3,500
Restricted funds	$ 3,500	$ 3,500

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Leases - Material Office Leases (Details) $ in Thousands	Mar. 31, 2021 USD ($)
Lessee, Lease, Description [Line Items]
Future Minimum Lease Commitments	$ 91,620
Arlington, VA
Lessee, Lease, Description [Line Items]
Lease Termination Term (in years)	10 years 9 months 18 days
Future Minimum Lease Commitments	$ 37,911
Letter of Credit Amount Required	$ 1,579
Riverside, IL
Lessee, Lease, Description [Line Items]
Lease Termination Term (in years)	10 years
Future Minimum Lease Commitments	$ 43,789
Letter of Credit Amount Required	$ 232
Pune, India
Lessee, Lease, Description [Line Items]
Lease Termination Term (in years)	2 years 6 months
Future Minimum Lease Commitments	$ 2,083
Letter of Credit Amount Required	$ 0
Brea, CA
Lessee, Lease, Description [Line Items]
Lease Termination Term (in years)	1 year 2 months 12 days
Future Minimum Lease Commitments	$ 1,287
Letter of Credit Amount Required	$ 0

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Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Leases [Abstract]
Operating lease cost	$ 4,818	$ 3,056
Amortization of right-of-use assets	0	149
Interest expense	0	2
Variable lease cost	1,321	1,052
Total lease cost	$ 6,139	$ 4,259

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Leases - Maturity of Lease Liabilities (Details) $ in Thousands	Mar. 31, 2021 USD ($)
Leases [Abstract]
2021	$ 8,844
2022	9,843
2023	8,650
2024	8,378
2025	8,145
Thereafter	47,760
Total lease payments	91,620
Less:
Interest	23,789
Present value of lease liabilities	$ 67,831

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Leases - Weighted-average Discount Rate and Weighted-remaining Lease Terms (Details)	Mar. 31, 2021
Leases [Abstract]
Weighted average discount rate	6.42%
Weighted average remaining lease term	9 years 3 months 18 days

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Earnings (Loss) Per Common Share - Computation of Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Earnings Per Share [Abstract]
Loss from continuing operations		$ (11,190)	$ (78,487)
Gain (loss) from discontinued operations, net of tax	[1]	1,383	(265)
Net loss		(9,807)	(78,752)
Less:
Net loss attributable to non-controlling interests		0	0
Net loss attributable to common shareholders of Evolent Health, Inc.		$ (9,807)	$ (78,752)
Weighted-average common shares outstanding - basic (in shares)		84,670	84,793
Weighted-average common shares outstanding - diluted (in shares)		84,670	84,793
Loss per common share, Basic and diluted
Continuing operations, basic (in dollars per share)		$ (0.13)	$ (0.93)
Continuing operations, diluted (in dollars per share)		(0.13)	(0.93)
Discontinued operations, diluted (in dollars per share)		0.01	0
Discontinued operations, basic (in dollars per share)		0.01	0
Diluted loss per share attributable to common shareholders of Evolent Health, Inc. (in dollars per share)		(0.12)	(0.93)
Basic loss per share attributable to common shareholders of Evolent Health, Inc. (in dollars per share)		$ (0.12)	$ (0.93)

[1] Includes $1.9 million gain on disposal of discontinued operations for the three months ended March 31, 2021

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Earnings (Loss) Per Common Share - Antidilutive Securities (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of antidilutive securities excluded from the calculation of earning per share (in shares)	16,092	11,532
Restricted stock units ("RSUs"), performance-based RSUs and leveraged stock units ("LSUs")
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of antidilutive securities excluded from the calculation of earning per share (in shares)	1,531	199
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of antidilutive securities excluded from the calculation of earning per share (in shares)	1,865	972
Convertible senior notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of antidilutive securities excluded from the calculation of earning per share (in shares)	12,696	10,361

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Stock-based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	$ 3,706	$ 3,508
Cost of revenue
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	595	392
Selling, general and administrative expenses
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	3,111	3,116
Stock options
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	404	750
Performance-based stock options
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	0	75
RSUs
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	1,974	1,856
LSUs
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	1,085	827
PSUs
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	$ 243	$ 0

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Stock-based Compensation - Narrative (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2019
Share-based Payment Arrangement [Abstract]
Stock-based compensation capitalized as software development costs	$ 0	$ 0	$ 0

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Stock-based Compensation - Schedule of Share-based Awards Granted (Details) - shares	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	939,000	976,000
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	319,000	0
LSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	0	380,000

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Income Taxes - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 611	$ 270
Effective rate	(5.80%)	(0.30%)
Unrecognized tax benefits			$ 700
Tax receivable agreement, percent of cash savings paid to shareholders	85.00%

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Investments In and Advances to Equity Method Investees - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Schedule of Equity Method Investments [Line Items]
(Gain) loss from equity method investees	$ (7,783)	$ 412
Equity Method Investee | Services Agreements
Schedule of Equity Method Investments [Line Items]
Income from long-term services agreement	$ 6,300	$ 59,900
Minimum
Schedule of Equity Method Investments [Line Items]
Economic interest percentage	4.00%		4.00%
Voting interest percentage	25.00%
Maximum
Schedule of Equity Method Investments [Line Items]
Economic interest percentage	39.00%		38.00%
Voting interest percentage	40.00%

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Non-controlling Interests (Details) - USD ($) $ in Thousands				3 Months Ended		12 Months Ended
	Nov. 16, 2020	Sep. 01, 2020	May 28, 2019	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	May 31, 2015
Passport | Variable Interest Entity
Noncontrolling Interest [Line Items]
Noncontrolling interest, increase from business combination		$ 25,700
Interest in investment	30.00%	30.00%	30.00%
Requirement to acquire ownership, consideration, amount		$ 20,000
Gain on consolidation						$ 5,700
Non-Controlling Interests
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward]
Non-controlling interests balance as of beginning of period				$ 0	$ 6,889	6,889
Reclassification of non-controlling interests				0	(6,889)
Non-controlling interests balance as of end of period				$ 0	$ 0	$ 0
Evolent Health LLC
Noncontrolling Interest [Line Items]
Parent's ownership percentage							70.30%

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Fair Value Measurement - Assets and Liabilities on Recurring Basis (Details) $ in Thousands	Dec. 31, 2020 USD ($) shares
Liabilities
Warrants and rights outstanding (in shares) | shares	1,513,786
Fair Value, Recurring
Assets
Cash and cash equivalents	$ 5,877
Total fair value of assets measured on a recurring basis	5,877
Liabilities
Warrants	13,730
Total fair value of liabilities measured on a recurring basis	13,730
Level 1 | Fair Value, Recurring
Assets
Cash and cash equivalents	5,877
Total fair value of assets measured on a recurring basis	5,877
Liabilities
Warrants	0
Total fair value of liabilities measured on a recurring basis	0
Level 2 | Fair Value, Recurring
Assets
Cash and cash equivalents	0
Total fair value of assets measured on a recurring basis	0
Liabilities
Warrants	0
Total fair value of liabilities measured on a recurring basis	0
Level 3 | Fair Value, Recurring
Assets
Cash and cash equivalents	0
Total fair value of assets measured on a recurring basis	0
Liabilities
Warrants	13,730
Total fair value of liabilities measured on a recurring basis	$ 13,730

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Fair Value Measurement - Additional Information (Details)	Dec. 30, 2019 shares
Class A Common Stock
Business Acquisition [Line Items]
Warrants agreed to be sold (in shares)	1,513,786

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Fair Value Measurement - Changes in Contingent Consideration and Other (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance as of beginning of period	$ 13,730	$ 16,975
Settlements	(13,730)	(3,500)
Realized and unrealized gains (losses), net	0	(6,375)
Balance as of end of period	$ 0	$ 7,100

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Fair Value Measurement - Valuation Techniques and Significant Unobservable Inputs (Details) - Fair Value, Recurring $ in Thousands	Dec. 31, 2020 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value	$ 13,730
Level 3
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value	13,730
Level 3 | Warrants | Black-Scholes
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value	$ 13,730
Level 3 | Warrants | Black-Scholes | Stock price volatility
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assumption or Input Ranges	0.622
Level 3 | Warrants | Black-Scholes | Annual risk free rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assumption or Input Ranges	0.002

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Related Parties - Assets and Liabilities (Details) - USD ($) $ in Thousands		Mar. 31, 2021	Dec. 31, 2020
ASSETS
Accounts receivable, net	[1]	$ 185,103	$ 124,064
Prepaid expenses and other current assets	[1]	33,696	56,295
Prepaid expenses and other noncurrent assets, net of allowances	[1]	6,218	5,773
Liabilities
Accounts payable	[1]	78,574	31,975
Accrued liabilities	[1]	61,069	73,242
Affiliated Entity
ASSETS
Accounts receivable, net		8,615	9,474
Prepaid expenses and other current assets		50	51
Prepaid expenses and other noncurrent assets, net of allowances		4,634	4,554
Liabilities
Accounts payable		1,898	2,509
Accrued liabilities		988	1,520
Reserve for claims and performance-based arrangements		$ 202	$ 435

[1] See Note 19 for amounts attributable to unconsolidated related parties included in these line items.

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Related Parties - Revenues and Expenses (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Revenue
Total revenue		$ 215,071	$ 221,232
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below)	[1]	157,832	175,629
Selling, general and administrative expenses	[1]	58,591	52,087
Affiliated Entity
Expenses
Cost of revenue (exclusive of depreciation and amortization expenses presented separately below)		493	3,247
Selling, general and administrative expenses		31	70
Transformation services
Revenue
Total revenue	[1]	345	5,238
Transformation services | Affiliated Entity
Revenue
Total revenue		0	1,700
Platform and operations services
Revenue
Total revenue	[1]	214,726	215,994
Platform and operations services | Affiliated Entity
Revenue
Total revenue		$ 15,575	$ 74,079

[1] See Note 19 for amounts attributable to unconsolidated related parties included in these line items.

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Repositioning and Other Changes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Restructuring Cost and Reserve [Line Items]
Incurred For the Three Months Ended March 31, 2021	$ 5,380	$ 0
Total Amount Expected to be Incurred in the Repositioning Plan	9,075
Cumulative Amount Incurred through March 31, 2021	6,655
Severance and termination benefits
Restructuring Cost and Reserve [Line Items]
Incurred For the Three Months Ended March 31, 2021	109
Total Amount Expected to be Incurred in the Repositioning Plan	2,500
Cumulative Amount Incurred through March 31, 2021	109
Office space consolidation
Restructuring Cost and Reserve [Line Items]
Incurred For the Three Months Ended March 31, 2021	2,071
Total Amount Expected to be Incurred in the Repositioning Plan	2,100
Cumulative Amount Incurred through March 31, 2021	2,071
Professional services
Restructuring Cost and Reserve [Line Items]
Incurred For the Three Months Ended March 31, 2021	3,200
Total Amount Expected to be Incurred in the Repositioning Plan	4,475
Cumulative Amount Incurred through March 31, 2021	$ 4,475

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Segment Reporting - Additional Information (Details)	3 Months Ended
	Mar. 31, 2021 segment
Segment Reporting [Abstract]
Number of operating segments	2

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Segment Reporting - Revenue from Segments to Consolidated (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		$ 215,071	$ 221,232
Adjusted EBITDA		14,907	3,876
Evolent Health Services
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		85,286	97,028
Adjusted EBITDA		5,942	4,768
Clinical Solutions
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		130,223	124,872
Adjusted EBITDA		15,976	7,043
Intersegment Eliminations
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		(438)	(668)
Operating Segments
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		215,071	221,232
Adjusted EBITDA		21,918	11,811
Corporate
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		0	0
Adjusted EBITDA		(7,011)	(7,935)
Transformation services
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	[1]	345	5,238
Transformation services | Evolent Health Services
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		345	5,238
Transformation services | Clinical Solutions
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		0	0
Transformation services | Intersegment Eliminations
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		0	0
Transformation services | Operating Segments
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		345	5,238
Transformation services | Corporate
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		0	0
Platform and operations services
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	[1]	214,726	215,994
Platform and operations services | Evolent Health Services
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		84,941	91,790
Platform and operations services | Clinical Solutions
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		130,223	124,872
Platform and operations services | Intersegment Eliminations
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		(438)	(668)
Platform and operations services | Operating Segments
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues		214,726	215,994
Platform and operations services | Corporate
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues

[1] See Note 19 for amounts attributable to unconsolidated related parties included in these line items.

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Segment Reporting - Reconciliation of Adjusted EBITDA (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Segment Reporting [Abstract]
Net loss attributable to common shareholders of Evolent Health, Inc.		$ (9,807)	$ (78,752)
Interest income		123	770
Interest expense		(6,337)	(6,281)
Provision for income taxes		(611)	(270)
Depreciation and amortization expenses		(15,187)	(15,978)
Equity method investment impairment		0	(47,133)
Gain on transfer of membership		22,969	0
Loss on repayment of debt, net		(19,158)	0
Gain (loss) from equity method investees		7,783	(412)
Gain (loss) on disposal of assets		0	(6,447)
Change in fair value of contingent consideration and indemnification asset		594	3,818
Other expense, net		(14)	(70)
Repositioning costs		(5,380)	0
Stock-based compensation expense		(3,706)	(3,508)
Severance costs		(52)	(6,103)
Amortization of contract cost assets		(127)	(440)
Strategy and shareholder advisory expenses		(5,000)	0
Acquisition costs		(1,994)	(309)
Gain (loss) from discontinued operations	[1]	1,383	(265)
Adjusted EBITDA		$ 14,907	$ 3,876

[1] Includes $1.9 million gain on disposal of discontinued operations for the three months ended March 31, 2021

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Reserves for Claims and Performance-Based Arrangements (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) claim	Mar. 31, 2020 USD ($)
Liability for Unpaid Claims and Claims Adjustment Expense, Period Increase (Decrease) [Abstract]
Beginning balance	$ 188,686	$ 61,150
Incurred costs related to current year	142,515	136,316
Incurred costs related to prior year	3,934	(527)
Paid costs related to current year	65,199	92,234
Paid costs related to prior year	55,631	15,522
Change during the year	25,619	28,033
Disposal of discontinued operations	(13,194)	0
Other adjustments	6,882	(173)
Ending balance	207,993	89,010
Evolent Health Services
Liability for Unpaid Claims and Claims Adjustment Expense, Period Increase (Decrease) [Abstract]
Beginning balance	122,532	4,265
Incurred costs related to current year	104,098	2,519
Incurred costs related to prior year	24	(381)
Paid costs related to current year	30,761	2,143
Paid costs related to prior year	38,053	3,223
Change during the year	35,308	(3,228)
Disposal of discontinued operations	0	0
Other adjustments	2,658	0
Ending balance	160,498	1,037
Clinical Solutions
Liability for Unpaid Claims and Claims Adjustment Expense, Period Increase (Decrease) [Abstract]
Beginning balance	56,295	50,245
Incurred costs related to current year	4,189	110,241
Incurred costs related to prior year	4,151	(257)
Paid costs related to current year	11,164	75,208
Paid costs related to prior year	10,200	6,597
Change during the year	(13,024)	28,179
Disposal of discontinued operations	0	0
Other adjustments	4,224	(173)
Ending balance	47,495	78,251
True Health
Liability for Unpaid Claims and Claims Adjustment Expense, Period Increase (Decrease) [Abstract]
Beginning balance	9,859	6,640
Incurred costs related to current year	34,228	23,556
Incurred costs related to prior year	(241)	111
Paid costs related to current year	23,274	14,883
Paid costs related to prior year	7,378	5,702
Change during the year	3,335	3,082
Disposal of discontinued operations	(13,194)	0
Other adjustments	0	0
Ending balance	$ 0	$ 9,722
Number of claims processed, including denied claims | claim	579,214

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Supplemental Disclosure of Non-cash Investing and Financing Activities
Increase/decrease to goodwill from measurement period adjustments/business combinations	$ 0	$ 2,200
Class A common stock issued for payment of Passport/Global earn-out	0	4,185
Accrued property and equipment purchases	124	213
Effects of Leases
Operating cash flows from operating leases	3,410	2,759
Leased assets obtained in exchange for operating lease liabilities	$ (2,157)	$ (7,020)