Evolent Health Inc.

05/07/2026 | Press release | Distributed by Public on 05/07/2026 06:47

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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 interim consolidated financial statements and the accompanying notes to our interim consolidated financial statements presented in "Part I - Item 1. Financial Statements" of this Form 10-Q; our 2025 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 2026.
INTRODUCTION
Business Overview
We are a market leader in connecting care for people with complex conditions like cancer, cardiovascular disease, and musculoskeletal diagnoses. We work on behalf of health plans and other risk-bearing entities and payers (our customers) to support physicians and other healthcare providers (our users) in providing high quality evidence-based care to their patients. We believe adherence to evidence-based clinical pathways supports better outcomes for patients, a better experience for physicians, and lower costs for the healthcare system overall.
Specialty care represents a significant and fast-growing portion of healthcare costs in the United States, driven in part by the pace of development of new therapies and treatments. To manage these increasing costs, some health plans and other risk-bearing entities historically deployed cost containment strategies that can limit access to care and operate in narrow silos (for example, prior authorization for radiological studies being considered independently from a comprehensive chemotherapy regimen). We believe Evolent can bring an integrated approach to a patient's condition across multiple specialties, using technology to recommend our evidence-based clinical pathways in a way that provides rapid feedback to the provider, seeks to remove barriers to care, and aligns financial incentives with the best evidence.
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.
All of our revenue is recognized in the United States and substantially all of our long-lived assets are located in the United States.
Recent Events
Industry Climate
During 2024, the medical claims costs in our Performance Suite grew at a significantly faster rate than historical norms, negatively impacting our financial results. This growth was driven in part by higher disease prevalence, as well as higher cost per active patient. Based on commentary from other market participants, we believe these cost increases were industry-wide and not specific to Evolent. Our results for 2025 were also impacted by growth in medical claims cost that continued to grow faster than our historical averages.
Changes in Medicaid, and the ACA Health Exchanges, including but not limited to those caused by the passage of the One Big Beautiful Bill Act during 2025, created industry expectations for higher member acuity and lower membership in future years. These expectations are exacerbated by the aggregate medical trends experienced by our customers across all lines of business, which has led those customers to exit markets, adjust their benefits and take other actions that are likely to contribute to lower membership in the future. During the quarter ended March 31, 2026, our customers reported membership declines in Medicaid and Health Exchanges consistent with our expectations.
We are unable to predict how these broader dynamics will impact our business and results of operations in the future, but they could continue to impact our financial condition and results of operations and such future impacts could be material.
Regulatory Uncertainty and Changes
On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was enacted into law. The OBBBA amends U.S. tax law, including provisions related to research and development and interest expense. The OBBBA also makes significant changes to the Medicaid, Medicare and ACA Health Exchanges. Changes include new requirements states must meet to maintain federal support for the Medicaid programs, as well as stricter criteria beneficiaries must meet to qualify for and maintain enrollment in federal healthcare programs. The effect of these changes could result in reductions in members covered by partners' health care plans. The Company continues to evaluate the expected impact of the OBBBA on its business and financial statements, but changes resulting from the OBBBA could have a material adverse effect on our business, results of operations, financial condition or cash flows.
Impact of Inflation
We experience pricing pressures in the form of competitive prices in addition to rising costs for certain inflation-sensitive operating expenses such as labor, employee benefits and facility leases. We do not believe these impacts were material to our revenues or net loss for the three months ended March 31, 2026. However, significant sustained inflation driven by the macroeconomic environment or other factors could negatively impact our margins, profitability and results of operations in future periods.
Customers
The following table summarizes those partners who represented at least 10.0% of our consolidated revenue:
For the Three Months Ended March 31,
2026 2025
Aetna 20.7% *
Blue Cross and Blue Shield of North Carolina * 13.2%
Centene Corporation * 10.6%
Cook County Health and Hospitals System 15.4% 15.7%
Florida Blue 11.0% 14.9%
Molina Healthcare, Inc. 24.0% 21.3%
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* Represents less than 10.0% of the respective balance.
Segment Reporting
We have one operating segment and one reportable segment as our CODM, who is our Chief Executive Officer, assesses the performance of our operations, develops strategy and reviews financial information on a consolidated basis for purposes of evaluating financial performance and allocating resources.
Critical Accounting Policies and Estimates
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 2025 Form 10-K for a complete summary of our significant accounting policies.
Goodwill and Intangible Assets, Net
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. 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 our reporting unit is below its carrying amount. Qualitative factors include macroeconomic, industry and market considerations, overall financial performance, industry, legal and other relevant events and factors affecting the reporting unit. Additionally, as part of this assessment, we may perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in measuring our reporting unit's fair value.
If the Company determines that it is more likely than not that the fair value of our reporting unit is below the carrying amount, a quantitative goodwill assessment is required. In the quantitative evaluation, the fair value is determined and compared to the carrying value. 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). We use a discounted cash flow analysis in order to estimate the fair value of our reporting unit. The discounted cash flow analysis relies on significant judgment and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates and operating margins. These assumptions are based on estimates of future revenue and earnings after considering such factors as general economic and market conditions which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements. The weighted average cost of capital is based on market-based factors/inputs but also considers the specific risk characteristics of the reporting unit's cash flow forecast. A significant change to these estimates and assumptions could cause the estimated fair values of our reporting unit and intangible assets to decline and increase the risk of an impairment charge to earnings. Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
See "Part I - Item 1. Financial Statements - Note 8" in this Form 10-Q for more information related to the 2025 goodwill impairment test. As of March 31, 2026, Evolent assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of its goodwill below its carrying amount and require an interim impairment test. The Company determined there had been no such indicators. Therefore, it was unnecessary to perform a goodwill impairment assessment as of March 31, 2026.
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
Our revenue contracts are typically multi-year arrangements with customers to provide solutions designed to lower the medical expenses of our partners and include our total cost of care management and specialty care management services solutions, provide comprehensive health plan operations and claims processing services, and also include transition or run-out services to customers.
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 partners and providers. 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.
We also deploy our services in capitation arrangements under our specialty care management solution and total cost of care solution, which we call the "Performance Suite." Capitation arrangements under the Performance Suite may include performance-based arrangements and/or gainshare features. 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. As we integrate goods and services provided by third parties into our overall service, we control the services provided to the customer prior to its delivery. As such, we are the principal and we will recognize revenue on a gross basis. In certain cases, we act as an agent and do not control the services from third parties before it is delivered to the customer, thereby recognizing revenue on a net basis.
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 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.
Cost of Revenue (exclusive of depreciation and amortization)
Our cost of revenue includes direct expenses and shared resources that perform services in direct support of our partners. Costs consist primarily of claims expense, employee-related expenses (including compensation, benefits and stock-based compensation), expenses recorded as part of a Medicare shared savings program 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.
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, 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 internal-use software development costs.
Lives on Platform and PMPM Fees
Performance Suite Lives on Platform are calculated by summing monthly members covered for specialty care services for contracts not under ASO arrangements, plus members managed by Complex Care in capitation arrangements and divided by the number of months in the period. Specialty Technology and Services Suite Lives on Platform are calculated by summing monthly members covered for oncology, cardiology, musculoskeletal, advanced imaging and other diagnostics specialty care services for contracts under ASO arrangements divided by the number of months in the period. Administrative Services Lives on Platform are calculated by summing monthly members covered for administrative services implementation and core performance services divided by the number of months in the period. Cases are calculated by summing the number of individuals receiving services through our surgery management and advanced care planning programs in a given period. Members covered for more than one category are counted in each category.
Performance Suite Average PMPM fee is defined as revenue pertaining to our Performance Suite during the period reported divided by Performance Suite Lives on Platform for the period divided by the number of months in the period. Specialty Technology and Services Suite Average PMPM fee is defined as revenue pertaining to the Specialty Technology and Services Suite during the period reported divided by Specialty Technology and Services Suite Lives on Platform for the period divided by the number of months in the period. Administrative Services Average PMPM fee is defined as revenue pertaining to the Administrative Services during the period reported divided by the Administrative Services Lives on Platform for the period divided by the number of months in the period. Revenue per Case is calculated by the revenue pertaining to surgery management and advanced care planning programs divided by the number of cases for a given period.
Average Unique Members are calculated by summing members covered by our Performance Suite, Specialty Technology and Services Suite and Administrative Services. In cases where partners cross between multiple solutions, we only capture members from the solution with the maximum number of members.
Management uses Lives on Platform, PMPM fees, Cases, Revenue per Case and Average Unique Members because we believe that they provide insight into the unit economics of our services. We believe that these measures are also useful to investors because they allow further insight into the period over period operational performance.
Medical Expense Ratio
Medical Expense Ratio ("MER") is a key performance indicator used by management for purposes of monitoring operating performance and is calculated as GAAP total claims incurred related to our specialty care management services solution divided by GAAP revenue related to our Performance Suite. Management believes MER is useful to investors because it provides insight into the efficiency with which medical costs are managed relative to revenue and helps identify trends in the underlying performance. For periods prior to the consummation of the sale of Evolent Care Partners ("ECP") in December 2025, we present non-GAAP MER excluding revenues from ECP because is not indicative of ongoing operations. See "Part I - Item 1. Financial Statements - Note 5 - Disaggregation of Revenue" in this Form 10-Q for more information related to GAAP revenue by product type and "Part I - Item 1. Financial Statements - Note 19 in this Form 10-Q for more information related to GAAP total claims incurred.
Consolidated Results
(in thousands, except percentages) For the Three Months Ended March 31, Change Over
Prior Period
2026 2025 $ %
Revenue $ 496,246 $ 483,649 $ 12,597 2.6 %
Expenses
Cost of revenue 412,472 381,178 31,294 8.2 %
Selling, general and administrative expenses 72,818 78,409 (5,591) (7.1) %
Depreciation and amortization expenses 21,555 24,058 (2,503) (10.4) %
Loss on lease termination - 1,906 (1,906) (100.0) %
Change in fair value of contingent consideration - (280) 280 100.0 %
Total operating expenses 506,845 485,271 21,574 4.4 %
Operating loss $ (10,599) $ (1,622) $ (8,977) (553.5) %
Cost of revenue as a % of revenue 83.1% 78.8%
Selling, general and administrative expenses as a % of revenue 14.7% 16.2%
Comparison of the Results for the Three Months Ended March 31, 2026 to 2025
Revenue
Total revenue increased $12.6 million, or 2.6%, to $496.2 million for the three months ended March 31, 2026, compared to the same period in 2025. The increase was driven primarily by $83 million from a new Performance Suite contract go-live during the first quarter offset by a reduction of $58 million from the ECP disposition and $17 million from reduction in Medicare memberships.
The following table represents Evolent's revenue disaggregated by line of business and product type (in thousands):
For the Three Months Ended March 31,
2026 2025
Medicaid $ 218,114 $ 188,124
Medicare 162,810 115,318
Commercial and other 115,322 180,207
Total $ 496,246 $ 483,649
Performance Suite (1)
$ 323,303 $ 303,021
Specialty Technology and Services Suite 80,799 82,821
Administrative Services 49,587 57,191
Cases 42,557 40,616
Total $ 496,246 $ 483,649
Revenue from Evolent Care Partners - 57,799
Performance Suite revenue excluding revenue from Evolent Care Partners(2)
$ 323,303 $ 245,222
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(1)Performance Suite revenue includes $323.3 million and $245.2 million related to our specialty care management solution for the three months ended March 31, 2026 and 2025, respectively.
(2)Performance Suite revenue excluding revenue from Evolent Care Partners is non-GAAP and used in calculating MER excluding Evolent Care Partners. Refer to "Comparison of the Results for the Three Months Ended March 31, 2026 to 2025 - Cost of Revenue" for additional information on MER excluding Evolent Care Partners.
The following table represents the Company's Lives on Platform/ Cases, Average PMPM fees, Revenue per Case and Average Unique Members (Average Lives on Platform/Cases in thousands):
Average Lives on Platform/ Cases Average PMPM Fees / Revenue per Case
For the Three Months Ended March 31, For the Three Months Ended March 31,
2026 2025 2026 2025
Performance Suite
6,078 6,486 $ 17.73 $ 15.57
Specialty Technology and Services Suite 76,101 77,079 0.35 0.36
Administrative Services 1,118 1,213 14.78 15.72
Cases 11 14 3,772 2,947
Average Unique Members 38,903 40,628
Cost of Revenue
Cost of revenue increased by $31.3 million, or 8.2%, to $412.5 million for the three months ended March 31, 2026, as compared to 2025, principally as a result of the 2.6% increase in our revenue compared to year ended March 31, 2025. The increase included approximately $42.7 million of higher claims cost compared to the prior year period, which is primarily attributable to $116.3 million higher claims expense from new and existing Performance Suite contracts, offset by a decrease of $54.4 million of claims from the disposition of ECP in December 2025 and transitioning certain Performance Suite customers to Specialty and Technology Service Suite and narrowing of scope of certain customers totaling $15.6 million and lower personnel costs of $9.8 million compared to the prior year driven by decreased headcount and change in bonus structure for certain employees.
The following table represents the Company's MER for its specialty care management services solution:
For the Three Months Ended March 31,
2026 2025
Total claims incurred related to our specialty care management services solution(1)
$ 301,777 $ 205,992
Performance Suite revenue 323,303 303,021
Performance Suite revenue excluding revenue from Evolent Care Partners (2)
323,303 245,222
MER 93.3 % 68.0 %
MER excluding Evolent Care Partners 93.3 % 84.0 %
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(1)Refer to the discussion in "Part I - Item 1. Financial Statements - Note 19" for additional information on total claims incurred.
(2)Refer to "Comparison of the Results for the Three Months Ended March 31, 2026 to 2025 - Revenue" for additional information on Performance Suite revenue less revenue from Evolent Care Partners.
The increase in MER excluding Evolent Care Partners for the three months ended March 31, 2026 compared to 2025 is driven primarily by the go-live of a Performance Suite contract during the first quarter of 2026.
Approximately $0.5 million and $0.7 million of total cost of revenue was attributable to stock-based compensation expense for the three months ended March 31, 2026, and 2025, respectively. Cost of revenue represented 83.1% and 78.8% of total revenue for the three months ended March 31, 2026, and 2025 respectively. Our cost of revenue increased as a percentage of our total revenue due to the maturation profile of a new Performance Suite contract that went live during the first quarter of 2026. We anticipate continued
growth in the cost of treatment for cancer and cardiovascular patients over time, which we expect to be offset in part by contractual protections within our Performance Suite and the impact of our clinical interventions.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses decreased by $5.6 million, or 7.1%, to $72.8 million for the three months ended March 31, 2026, as compared to 2025. The decrease was primarily driven by lower personnel costs of $4.2 million from reduced headcount and change to the 2026 bonus structure for certain employees including decreased severance of $1.0 million, lower professional fees of $2.8 million driven by transaction costs, lower stock compensation expense due to the achievement and change in projected achievement of certain performance measurements of $0.3 million offset by higher technology costs including cloud services and licensing fees of $1.7 million and a $0.6 million increase in bad debt expense versus the prior period reflecting a return to normal collections timing.
Approximately $10.1 million and $10.4 million of total selling, general and administrative expenses were attributable to stock-based compensation expense for the three months ended March 31, 2026 and 2025, respectively. Acquisition and severance costs accounted for approximately $0.5 million and $1.7 million of total selling, general and administrative expenses for the three months ended March 31, 2026 and 2025, respectively. Selling, general and administrative expenses represented 14.7% and 16.2% of total revenue for the three months ended March 31, 2026, as compared to 2025, respectively, driven primarily from contractual updates with certain customers in our Performance Suite.
Depreciation and Amortization Expenses
Depreciation and amortization expenses decreased $2.5 million, or 10.4%, to $21.6 million, as compared to 2025 primarily due to $0.4 million of lower depreciation on computer hardware and $0.5 million of lower depreciation of internally developed software, $0.6 million of lower amortization on ECP provider network contracts which was sold in December 2025 and $0.9 million lower amortization of certain customer relationships and technology intangibles reaching their useful life. Depreciation and amortization expenses include $12.5 million and $13.4 million for the three months ended March 31, 2026 and 2025, respectively, of amortization expense on intangible assets such as corporate trade names, customer, relationships, provider network contracts and existing technology related to acquisitions and business combinations.
Loss on Lease Termination
During the year ended December 31, 2024, the Company terminated its Chicago, IL lease effective October 31, 2024. We recorded an additional $1.9 million loss on lease termination related to negotiated termination payments and real estate commissions the three months ended March 31, 2025.
Change in Fair Value of Contingent Consideration
We recorded a loss on change in fair value of contingent consideration of $0.3 million for the three months ended March 31, 2025 primarily related to our Machinify earnout.
Discussion of Non-Operating Results
Interest Expense
We recorded interest expense (including amortization of deferred financing costs) of approximately $16.9 million and $10.4 million for the three months ended March 31, 2026 and 2025, respectively. The increase in interest expense for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 is driven primarily by interest incurred under First Lien Credit Agreement borrowings in January 2025 and the exchange of our Series A Preferred Stock for Second Lien Loan Facility combined with the issuance of our 2031 Notes in August 2025. See "Part I - Item 1. Financial Statements - Note 9" in this Form 10-Q for more information related to interest expense by debt issuance.
Loss on Option Exercise
During the year ended December 31, 2025, we completed the purchase of a portion of one of our equity method investments that we did not own from our joint venture partner for the price of $51.5 million. The purchase price was fixed based on a previously negotiated put/call structure. The loss of $52.5 million represents the difference between the purchase price under the put option and the estimated fair value of the interests acquired. The joint venture was primarily focused on a portfolio of oncology clinics, a member
navigation platform and practice alignment arm. The oncology clinics in the joint venture were shut down or otherwise disposed of prior to the payment of the put option, and the joint venture will have no continuing operations.
Provision for Income Taxes
A provision for income taxes of $0.9 million and $1.5 million was recognized for the three months ended March 31, 2026 and 2025, respectively, which resulted in effective tax rates of (3.5)% and (2.3)%, respectively.
Dividends and Accretion of Series A Preferred Stock Including Excise Tax
During the year ended December 31, 2025, the Company completed the exchange of its existing Series A Preferred Stock for the new Second Lien Term Loan Facility on substantively similar economic terms to the existing Series A Preferred Stock, with no common stock conversion feature. Prior to the Exchange, we paid quarterly regular cash dividends during 2025 on the Series A Preferred Stock at a rate per annum equal to Adjusted Term SOFR (as defined in the Certificate of Designation) plus 6.00%. Prior to the Exchange, the Company accreted redemption value in excess of par at a redemption price per share equal to 150.00% of the then-current liquidation preference per share of the Series A Preferred Stock.
The Company paid dividends and recorded accretion of deferred issuance costs and redemption value related to the Series A Preferred Stock as presented below (in thousands):
For the Three Months Ended March 31,
2026 2025
Cash dividends on Series A Preferred Stock $ - $ 4,577
Accretion of deferred financing costs and redemption value in excess of par excluding extinguishment of Series A Preferred Stock - 3,055
Dividends and accretion of Series A Preferred Stock $ - $ 7,632
REVIEW OF CONSOLIDATED FINANCIAL CONDITION
Liquidity and Capital Resources
The Company reported net loss attributable to common shareholders of Evolent Health, Inc. of $26.6 million and $72.3 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, the Company had $142.0 million of cash and cash equivalents and $26.7 million in restricted cash.
We believe our current cash and cash equivalents will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months as of the date the financial statements were issued. 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, which may require us to seek sources of financing.
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,
2026 2025
Net cash and restricted cash (used in) provided by operating activities $ (984) $ 4,565
Net cash and restricted cash used in investing activities (6,406) (13,093)
Net cash and restricted cash (used in) provided by financing activities (3,973) 107,854
Operating Activities
Cash flows from operating activities primarily represent inflows and outflows associated with our operations. Primary activities include net loss from operations adjusted for non-cash transactions, working capital changes and changes in other assets and liabilities.
Cash flows used in operating activities of $1.0 million for the three months ended March 31, 2026 were driven primarily by an overall increase in reserve for claims and performance-based arrangements of $39.8 million due to the timing of customer settlements and claims payments, offset in part by decreases in accrued liabilities of $21.0 million from timing of customer settlements, our partner and vendor payments and accrued compensation and benefits of $20.0 million due to the timing of 2025 bonus payments.
Cash flows provided by operating activities of $4.6 million for the three months ended March 31, 2025 were affected by increases in accounts receivable of $15.8 million from timing of our partner and vendor payments, offset by a reduction reserve for claims and performance-based arrangements of $15.1 million due to the timing of claims payments and a reduction in accrued compensation and benefits of $2.2 million due to the timing of 2024 bonus payments and severance of $1.0 million.
Investing Activities
Cash flows used in investing activities of $6.4 million for the three months ended March 31, 2026 were primarily related to investments in internal-use software and purchases of property and equipment.
Cash flows used in investing activities of $13.1 million in the three months ended March 31, 2025 were primarily attributable to cash paid for asset acquisitions and business combinations of $4.5 million and $8.6 million of investments in internal-use software and purchases of property and equipment.
Financing Activities
Cash flows used in financing activities of $107.9 million in the three months ended March 31, 2025 were primarily related to $221.0 million of borrowings under our Term Loan Facility, offset in part by $62.5 million of repayments under our Revolving Facility and $41.5 million related to changes in working capital balances related to claims processing.

Contractual and Other Obligations
We believe that the amount of cash and cash equivalents on hand and cash flows from operations, plus borrowings under our credit facilities and if necessary, additional funding through other forms of financing, will be adequate for us to execute our business strategy and meet anticipated requirements for lease obligations, capital expenditures working capital and debt service for the next twelve months and in the long-term. Our estimated known contractual and other obligations (in thousands) as of March 31, 2026, were as follows (including as discussed in the narrative below):
2026 2027-2028 2029-2030 2031+ Total
Operating leases for facilities (1)
$ 8,494 $ 3,089 $ 1,110 $ 47 $ 12,740
Purchase obligations related to vendor contracts 12,178 10,271 2,617 - 25,066
Convertible notes interest payments (2)
17,840 43,183 29,095 7,504 97,622
Convertible notes principal repayment - - 402,500 166,750 569,250
Total $ 38,512 $ 56,543 $ 435,322 $ 174,301 $ 704,678
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(1)During the year ended December 31, 2024, the Company terminated its Chicago, IL lease and recognized the impact in its operating lease liability - current and operating lease liability - noncurrent on its consolidated balance sheet. The Company paid $6.4 million of lease termination payments on both January 1, 2026 and April 1, 2026, respectively, and has no further obligations under its Chicago lease.
(2)Refer to the discussion in "Part I - Item 1. Financial Statements - Note 9" for additional information on payment dates for our convertible notes interest.
As of March 31, 2026, there was $117.2 million, $72.5 million and $175.0 million principal balance subject to interest under the Company's Term Loan Facility, Revolving Facility and Second Lien Term Loan Facility, respectively, all of which are subject to interest rates based on the SOFR. The interest rate for all Loans will be calculated, at the option of the borrowers, (a) in the case of the Revolving Facility, at either the Adjusted Term SOFR plus 4.00%, or the base rate plus 3.00% and (b) in the case of the Term Loan Facility, at either the Adjusted Term SOFR plus 5.50% or the base rate plus 4.50%, subject to step downs based on a total secured leverage ratio. The Company used the funds borrowed under its Committed Facilities for general corporate purposes, including working capital and management of future liabilities. The interest rate for the Second Lien Term Loan will be calculated (a) in the case of loans that bear interest at ABR, 5.00% plus the ABR and (b) in the case of Term SOFR Loans, 6.00% plus the relevant Adjusted Term SOFR Rate, in each case subject to step downs based on a total secured leverage ratio.
Accounts Receivable, Net
Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. During the three months ended March 31, 2026, accounts receivable, net, increased primarily due to the timing of cash receipts from certain customers.
Restricted Cash
Restricted cash of $26.7 million is carried at cost and includes cash held on behalf of other entities for claims processing services of $10.8 million, collateral for letters of credit required as security deposits for facility leases of $0.2 million, and amounts held with financial institutions for risk-sharing arrangements of $15.7 million as of March 31, 2026. 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, payment of interest and other amounts payable in connection with financings, including on our convertible debt and secured borrowings, as well as potential tax obligations. The Company does not anticipate paying a cash dividend on our Class A common stock in the foreseeable future.
Evolent Health Inc. published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 07, 2026 at 12:47 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]