Evolent (EVH) Q1 Loss Wider than Expected, Stock Down

Shares of Evolent Health Inc. EVH fell 4% to close at $10.72 on May 12, following the announcement of first-quarter 2016 results. The company reported adjusted loss of 16 cents per share, which was narrower than the year-ago equivalent of 43 cents.

Including stock-based compensation expenses, Evolent reported loss of 24 cents per share, wider than the Zacks Consensus Estimate of a loss of 19 cents.

Adjusted revenues surged 33.7% to $49.5 million and beat the Zacks Consensus Estimate of $47 million as well as management's guided range of $47–$48 million.

Transformation revenues (16.6% of adjusted revenues) declined 21% year over year to $8.2 million in the quarter. Management reminded that transformation revenue can fluctuate sequentially based on the timing of when contracts are executed with new and existing partners, the scope of delivery and the timing of work being performed.

Platform and Operations revenues (83.4% of adjusted revenues) soared 55% to $41.3 million driven by a 160.4% increase in the number of lives on Evolent's platform. The growth was based on increasing partner count, which was 13 at the end of the quarter.

As of Mar 31, 2016, Evolent had more than $1.2 million lives on the platform. In the first quarter alone, the company added over 50,000 lives in two markets through the expansion into the Medicare Shared Savings Program and an additional 417,000 lives in Medicaid.

Adjusted EBITDA was a negative $6.6 million, compared with a negative $8.8 million in the year-ago quarter. This was narrower than the company's guided range of a negative $9.5–$8.5 million.

Evolent reported operating loss of $10 million as compared with a loss of $10.3 million in the year-ago quarter. The wider loss figure can be primarily attributed to higher operating expenses.

Guidance

For full-year 2016, Evolent reiterated its adjusted revenue guidance at the range of $212–$220 million. Adjusted EBITDA projection is maintained in the band of a negative $28–$24 million.

For the second quarter of 2016, adjusted revenue is projected between $51 million and $52 million. Adjusted EBITDA is likely to be in the range of a negative $7–$6 million.

Zacks Rank & Key Picks

Currently, Evolent carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the broader medical sector are Quality Systems QSII, athenahealth ATHN and Medidata Solutions MDSO. All the three stocks sport a Zacks Rank #2 (Buy).
 

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