Evolent Health, Inc.: Form 10-Q for the period ended Sep 30, 2025

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 2024 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 2025.

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 the first three quarters of 2025 were also impacted by growth in medical claims cost that continued to grow faster than our historical averages.

A portion of the Company’s revenue during the three months ended September 30, 2025 related to members on the ACA Health Exchanges, principally but not exclusively pursuant to our revenue agreements with Molina Healthcare, Inc. and Centene Corporation. A combination of elevated medical expenses during 2025 and premium tax credits that are scheduled to expire at the end of 2025 have resulted in industry expectations of lower ACA Health Exchange membership in 2026.

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 and nine months ended September 30, 2025, respectively. 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.

Exchange and Ares Transaction

On June 19, 2025, in connection with the Company’s entry into Amendment No. 5 to the First Lien Credit Agreement, the Company and EVH LLC entered into a Commitment Letter with Ares which provides the Company the Incremental Facility to retire its 2025 Notes on or before October 15, 2025 (the maturity date of the 2025 Notes) and for working capital, subject to certain conditions. The Incremental Facility also provides for an exit fee payable upon the retirement of amounts up to amounts drawn on the Incremental Facility. After the payment of fees and expenses incurred in connection with the Commitment Letter, some of which were paid prior to any borrowing under the Incremental Facility, the Company will have sufficient liquidity for working capital and other general corporate purposes. The Company will not draw on the Incremental Facility due to the retirement of the 2025 Notes. As such, we recorded a $6.0 million loss in related to the Incremental Facility in extinguishment of Series A Preferred Stock and other refinancing fees on the consolidated statement of operations.

On August 7, 2025, the Company completed the exchange of its existing Series A Preferred Stock for a new second lien term loan facility on substantively similar economic terms to the existing Series A Preferred Stock, with no common stock conversion feature. See Part I – Note 9 for further details regarding our second lien term loan facility.

Customers

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

* 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, 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 2024 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. 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 our 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 both a discounted cash flow analysis and market multiple analysis in order to estimate the fair value of our reporting unit. The discounted cash flow analysis relies on significant judgement 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.

On September 23, 2025, the Company agreed to sell Evolent Care Partners Holding Company, Inc., a wholly owned subsidiary. As a result, the Company performed an interim goodwill impairment assessment as of September 11, 2025. We used the income approach, adjusted to exclude the future impact of Evolent Care Partners Holding Company, in our interim goodwill impairment analysis. This analysis required us to make judgments about revenues, expenses, fixed asset and working capital requirements, capital market assumptions, cash flows and discount rates. The quantitative analysis showed that the fair value exceeded the carrying value. We will continue to monitor for such changes in facts or circumstances, which may be indicators of potential impairment triggers.

See “Part I - Item 1. Financial Statements - Note 8” in this Form 10-Q for more information related to the Company’s goodwill impairment analyses.

Adoption of New Accounting Standards

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements, including those companies with a single operating segment. ASU 2023-07 is effective retrospectively for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 for the year ended December 31, 2024. See “Part I - Item 1. Financial Statements - Note 20” in this Form 10-Q for more information related our segments.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 includes requirements that an entity disclose specific categories in the rate reconciliation and provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate. The standard also requires that entities disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) each disaggregated between domestic and foreign. The Company adopted ASU 2023-09 effective January 1, 2025. We do not expect this standard to have a material impact to our results of operations, cash flows or financial condition.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 may be applied prospectively with the option for retrospective application for all prior periods presented. The Company is currently evaluating the impact of adopting this guidance on the Company’s current financial position, results of operations or financial statement disclosures.

In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20) “Induced Conversions of Convertible Debt Instruments” to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. Under the amendments, to account for a settlement of a convertible debt instrument as an induced conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable under the conversion privileges provided in the terms of the instrument. An entity should assess whether this criterion is satisfied as of the date the inducement offer is accepted by the holder. If, when applying this criterion, the convertible debt instrument had been exchanged or modified (without being deemed substantially different) within the one-year period leading up to the offer acceptance date, an entity should compare the terms provided in the inducement offer with the terms that existed one year before the offer acceptance date. The amendments in this Update also clarify that the induced conversion guidance applies to a convertible debt instrument that is not currently convertible as long as it had a substantive conversion feature as of both its issuance date and the date the inducement offer is accepted. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company is examining the impact this pronouncement may have on the Company’s consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Targeted Improvements to the Accounting for Internal-Use Software, to modernize the accounting for software costs that are accounted for under Subtopic 350-40. ASU 2025-06 removes all references to prescriptive and sequential software development stages throughout Subtopic 350-40. Therefore, an entity is required to start capitalizing software costs when both of the following occur: 1) management has authorized and committed to funding the software project and 2) it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in ASU 2025-06 are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The amendments in ASU 2025-06 permits entities to use either 1) a prospective transition approach, 2) a modified transition approach, or 3) a retrospective transition approach. The Company is assessing the impact of the ASU on its consolidated financial statements and related disclosures.

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 transition services agreements (“TSA”) fees associated with our acquisitions, 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.

Consolidated Results

(in thousands, except percentages)

Comparison of the Results For the Three Months Ended September 30, 2025 to 2024

Revenue

Total revenue decreased by $141.9 million, or 22.8%, to $479.5 million for the three months ended September 30, 2025, as compared to 2024. The decrease was primarily from contractual updates with certain customers in our Performance Suite, including (i) $76.5 million from transitioning a customer from Performance Suite to Specialty Technology and Services Suite and (ii) $94.7 million related to the narrowing of scope of certain Performance Suite customers. Both of these contractual updates were accompanied by significant reductions in our medical claims expense. These revenue reductions were offset in part by $46.3 million of growth in other Performance Suite and Specialty Technology and Services contracts, net of reductions in membership at certain of our health plan clients as a result of Medicaid redeterminations and certain customers exiting their Medicare Advantage operations in certain markets, unrelated to Evolent.

The following table represents Evolent’s revenue disaggregated by line of business (in thousands):

The following table represents the Company’s Lives on Platform, Cases, PMPM fees and revenue per case for the three months ended September 30, 2025 and 2024 (Average Lives on Platform/Cases in thousands):

Cost of Revenue

Cost of revenue decreased by $160.9 million, or 29.8%, to $379.8 million for the three months ended September 30, 2025, as compared to 2024, principally as a result of the 22.8% decrease in our revenue compared to year ended September 30, 2024. The decrease included approximately $179.2 million of lower claims cost compared to the prior year period, which is primarily attributable to transitioning certain Performance Suite to Specialty and Technology Service Suite and narrowing of scope offset by $6.1 million from higher personnel costs compared to the prior year.

Approximately $1.2 million and $1.1 million of total cost of revenue was attributable to stock-based compensation expense for the three months ended September 30, 2025, and 2024 respectively. Cost of revenue represented 79.2% and 87.0% of total revenue for the three months ended September 30, 2025, and 2024 respectively. Our cost of revenue decreased as a percentage of our total revenue due to a shift in mix in our business towards higher margin product types. We anticipate continued growth in the cost of treatment for cancer and cardiovascular patients over time, which we expect to be offset by contractual protections within our Performance Suite and the impact of our clinical interventions.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses increased by $10.5 million, or 15.7%, to $77.6 million for the three months ended September 30, 2025, as compared to 2024. The increase was primarily driven by higher personnel costs of $7.8 million, offset by lower stock compensation of $0.1 million due to the achievement and change in projected achievement of certain performance measurements and lower lease expense of $0.7 million due to the termination of certain real estate leases. The lower personnel costs in 2024 principally related to lower-than-target incentive compensation accruals.

Approximately $13.4 million and $13.3 million of total selling, general and administrative costs were attributable to stock-based compensation expense for the three months ended September 30, 2025, and 2024, respectively. Acquisition and severance costs accounted for approximately $2.1 million and $3.8 million of total selling, general and administrative expenses for the three months ended September 30, 2025 and 2024, respectively. Selling, general and administrative expenses represented 16.2% and 10.8% of total revenue for the three months ended September 30, 2025, as compared to 2024, respectively, driven primarily from contractual updates with certain customers in our Performance Suite.

Depreciation and Amortization Expenses

Depreciation and amortization expenses decreased $6.1 million, or 20.5%, to $23.6 million for the three months ended September 30, 2025, as compared to 2024 due primarily due to $5.5 million of accelerated amortization on our retired trade names during 2024 and $0.6 million of lower depreciation of internally developed software. Depreciation and amortization expenses include $13.4 million and $17.2 million for the three months ended September 30, 2025, as compared to 2024, 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.

Gain 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 $1.2 million gain on lease termination related to negotiated termination payments and real estate commissions three months ended September 30, 2025.

Change in Fair Value of Contingent Consideration

We recorded a gain on change in fair value of contingent consideration of $1.1 million for the three months ended September 30, 2025 primarily related to our Machinify earnout offset by our ECP contingent consideration. See “Part I - Item 1. Financial Statements - Note 17” in this Form 10-Q for more information related to changes in the fair value of contingent consideration.

Comparison of the Results For the Nine Months Ended September 30, 2025 to 2024

Revenue

Total revenue decreased $500.7 million, or 26.2%, to $1,407.5 million for the nine months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily from contractual updates with certain customers in our Performance Suite, including (i) $334.0 million from transitioning a customer from Performance Suite to Specialty Technology and Services Suite and (ii) $180.9 million related to the narrowing of scope of certain Performance Suite customers. Both of these contractual updates were accompanied by significant reductions in medical claims expense. These revenue reductions were offset in part by $74.2 million of growth in other Performance Suite and Specialty Technology and Services contracts, net of reductions in membership at certain of our health plan clients as a result of Medicaid redeterminations and certain customers exiting their Medicare Advantage operations in certain markets, unrelated to Evolent.

The following table represents Evolent’s revenue disaggregated by line of business (in thousands):

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):

Cost of Revenue

Cost of revenue decreased by $511.7 million, or 31.7%, to $1,104.9 million for the nine months ended September 30, 2025, as compared to 2024, principally as a result of the 26.2% decrease in our revenue compared to year ended September 30, 2024. The decrease included approximately $516.6 million of lower claims cost compared to the prior year period, which is primarily attributable to transitioning certain Performance Suite to Specialty and Technology Service Suite and narrowing of scope, offset in part by $5.4 million of higher personnel costs compared to the prior year.

Approximately $2.9 million and $3.3 million of total cost of revenue was attributable to stock-based compensation expense for the nine months ended September 30, 2025, and 2024, respectively. Cost of revenue represented 78.5% and 84.7% of total revenue for the nine months ended September 30, 2025, and 2024 respectively. Our cost of revenue decreased as a percentage of our total revenue due to a shift in mix in our business towards higher margin product types. 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 increased by $15.9 million, or 7.4%, to $231.2 million for the nine months ended September 30, 2025, as compared to 2024. The increase was primarily driven by higher personnel costs of $17.1 million and a $3.7 million increase in bad debt expense versus the prior period reflecting a return to normal collections timing, offset by lower stock compensation of $8.1 million due to the achievement and change in projected achievement of certain performance measurements and lease expense of $3.6 million due to the termination of certain real estate leases. The lower personnel costs in 2024 related in part to lower-than-target incentive compensation accruals.

Approximately $34.4 million and $42.5 million of total selling, general and administrative expenses were attributable to stock-based compensation expense for the nine months ended September 30, 2025 and 2024, respectively. Acquisition and severance costs accounted for approximately $4.6 million and $5.1 million of total selling, general and administrative expenses for the nine months ended September 30, 2025 and 2024, respectively. Selling, general and administrative expenses represented 16.4% and 11.3% of total revenue for the nine months ended September 30, 2025, as compared to 2024, respectively, driven primarily from contractual updates with certain customers in our Performance Suite.

Depreciation and Amortization Expenses

Depreciation and amortization expenses decreased $18.3 million, or 20.5%, to $70.8 million for the nine months ended September 30, 2025, as compared to 2024 primarily due to $16.7 million of accelerated amortization on our retired trade names and $1.8 million of lower depreciation of internally developed software. Depreciation and amortization expenses include $40.1 million and $51.7 million for the nine months ended September 30, 2025 and 2024, 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 $0.7 million loss on lease termination related to negotiated termination payments and real estate commissions for the nine months ended September 30, 2025.

Change in Fair Value of Contingent Consideration

We recorded a loss on change in fair value of contingent consideration of $1.8 million for the nine months ended September 30, 2025, related to our ECP earnout. We recorded a gain of $9.1 million for the nine months ended September 30, 2024 related to the liabilities acquired as a result of the acquisitions of NIA in January 2023. See “Part I - Item 1. Financial Statements - Note 17” in this Form 10-Q for more information related to changes in the fair value of contingent consideration.

Discussion of Non-Operating Results

Interest Expense

Our interest expense for the nine months ended September 30, 2025 and 2024 is primarily attributable to our First Lien Credit Agreement with Ares as well as the 2025 Notes, 2029 Notes and 2031 Notes. We recorded interest expense (including amortization of deferred financing costs) of approximately $16.5 million and $38.5 million for the three and nine months ended September 30, 2025, respectively, and $6.0 million and $18.0 million for the three and nine months ended September 30, 2024, respectively. The increase in interest expense for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 is driven primarily by interest incurred Ares Term Loan Facility borrowings in January 2025 and Ares Revolving Facility in December 2024. See “Part I - Item 1. Financial Statements - Note 9” in this Form 10-Q for more information related to interest expense by debt issuance.

Gain on Extinguishment of Short-Term Debt, Net

On August 21, 2025, using proceeds from the sale of the 2031 Notes plus available liquidity, the Company repurchased approximately $167.4 million aggregate principal amount of its 2025 Notes for $166.8 million in cash in note repurchases entered into concurrently with the pricing of the sale of the 2031 Notes. As a result of the repurchase of the 2025 Notes, the Company recorded a $0.4 million gain on extinguishment of short-term debt, net during the three and nine months ended September 30, 2025.

Loss on Option Exercise

During the nine months ended September 30, 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.

Extinguishment of Series A Preferred Stock and Other Refinancing Fees

On June 19, 2025, the Company entered into Amendment No. 5 which provided, in part, that failure to consummate the Exchange of our Series A Preferred Stock for new Second Lien Term Loans in certain circumstances will constitute an event of default under the First Lien Credit Agreement. Amendment No. 5 was accounted for as an extinguishment and reissuance of the Series A Preferred Stock. The Series A Preferred Stock post-amendment was recorded at fair value, including a $9.0 million charge to extinguishment of Series A Preferred Stock and other refinancing fees on the consolidated statement of operations and comprehensive income (loss) and the remainder as a deemed dividend.

On June 19, 2025, in connection with the Company’s entry into Amendment No. 5, the Company and EVH LLC entered into a Commitment Letter with Ares which provides the Company additional available non-dilutive debt capital of up to $150.0 million. The Company paid $9.3 million of deferred financing costs related to the Incremental Facility, of which $3.3 million was related to amending the existing 2024 Incremental Facilities. The Company will not draw on the Incremental Facility due to the retirement of the 2025 Notes. As such, we recorded a $6.0 million loss related to the Incremental Facility.

Provision for (Benefit from) Income Taxes

An income tax provision (benefit) of $0.9 million and $1.6 million for the three and nine months ended September 30, 2025, respectively, and $(0.6) million and $(0.3) million for the three and nine months ended September 30, 2024, respectively, which resulted in effective tax rates of (4.5)% and (1.5)% for the three and nine months ended September 30, 2025, respectively, and 2.6% and 0.7% for the three and nine months ended September 30, 2024, respectively. The income tax expense recorded during the three and nine months ended September 30, 2025, primarily relates to non-deductible expenses and state and foreign taxes. The income tax benefit recorded during the three and nine months ended September 30, 2024, primarily relates to the expected tax effect of net losses, partially offset by state and foreign taxes.

Dividends and Accretion of Series A Preferred Stock Including Excise Tax

We paid quarterly regular cash dividends 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%. On August 7, 2025, the Company completed the exchange of its existing Series A Preferred Stock for a new second lien term loan facility on substantively similar economic terms to the existing Series A Preferred Stock, with no common stock conversion feature, pursuant to the Exchange. 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 Inflation Reduction Act of 2022 imposed a non-deductible 1% excise tax on the net value of certain equity transactions made after December 31, 2022. We recorded the applicable excise tax in additional paid-in-capital as part of the preferred equity exchange and a corresponding liability for the excise tax payable in accrued liabilities on our consolidated balance sheet.

The Company paid dividends and recorded accretion of deferred issuance costs and redemption value related to the Series A Preferred Stock and excise tax as presented below (in thousands):

The increase in accretion of redemption value in excess of par excluding extinguishment of Series A Preferred Stock for the three and nine months ended September 30, 2025 was driven by the extinguishment and reissuance of our Series A Preferred Stock as a result of Amendment No. 5.

REVIEW OF CONSOLIDATED FINANCIAL CONDITION

Liquidity and Capital Resources

The Company reported net loss attributable to common shareholders of Evolent Health, Inc. of $150.3 million and $62.8 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, the Company had $116.7 million of cash and cash equivalents and $26.4 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”:

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 $10.0 million for the nine months ended September 30, 2025 were driven primarily by $67.5 million in payments to clients for reconciliations of performance suite contracts from prior years; these contracts have since been restructured. This was included in an overall reduction in reserve for claims and performance-based arrangements of $107.1 million due to the timing of claims payments, offset in part by decreases in accounts receivable of $7.4 million from timing of our partner and vendor payments and an increase in accrued compensation and benefits of $21.7 million due to the timing of 2024 bonus payments and severance of $3.3 million.

Cash flows provided by operating activities of $45.0 million for the nine months ended September 30, 2024 were affected by decreases in accounts receivable of $38.8 million from timing of our partner and vendor payments including higher cash receipts from certain performance-based customers, offset by higher payment for claims and performance-based arrangements of $91.4 million, a reduction in accrued compensation and benefits of $24.8 million due to year end bonus payments and severance of $2.9 million and payments for office lease consolidation of $6.7 million. Of the total $88.8 million in NIA contingent consideration paid in the period, $22.2 million represented a change in fair value of NIA contingent consideration in excess of the initial fair value at the acquisition date through payment date, and is therefore presented in cash flows provided by operating activities under changes in accrued expenses.

Investing Activities

Cash flows used in investing activities of $82.4 million for the nine months ended September 30, 2025 were primarily attributable to cash paid for asset acquisitions and business combinations of $56.0 million and investments in internal-use software and purchases of property and equipment of $26.3 million.

Cash flows used in investing activities of $43.0 million for the nine months ended September 30, 2024 were primarily attributable to cash paid for asset acquisitions and business combinations of $16.9 million which is inclusive of $11.0 million for the purchase of Machinify and $3.0 million for investment in future equity notes, and $18.7 million of investments in internal-use software and purchases of property and equipment.

Financing Activities

Cash flows provided by financing activities of $57.1 million for the nine months ended September 30, 2025 were primarily related to $389.7 million of borrowings under our Term Loan Facility, offset, in part by $62.5 million of repayments under our Revolving Facility, $166.8 million of repayments of our 2025 Notes, $40.0 million related to repurchases of our common stock, net of taxes, $45.3 million related to changes in working capital balances related to claims processing and $11.1 million of preferred dividends paid on our Series A Preferred Stock.

Cash flows used in financing activities of $97.5 million for the nine months ended September 30, 2024 were primarily related to $15.3 million of preferred dividends paid on our Series A Preferred Stock and $15.4 million from withholding taxes paid on of vested restricted stock units that were net settled. Additional cash used in financing activities include the portion of the NIA contingent consideration representing the fair value at the acquisition date of $66.6 million.

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 September 30, 2025, were as follows (including as discussed in the narrative below):

(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 remaining termination payments will be $12.9 million in 2026.

(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.

(3) The remaining 2025 Notes were repaid in October 2025.

During the nine months ended September 30, 2025, the Company borrowed $200.0 million under its Term Loan Facility and $15.0 million under its Revolving Facility. As of September 30, 2025, there was $200.0 million and $77.5 million outstanding under the Company’s Term Loan Facility and Revolving Facility, respectively, all of which is 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.

In addition, in August 2025, the Company completed the exchange of 175,000 shares of its Series A Preferred Stock for a second lien term loan facility on substantively similar economic terms to the existing Series A Preferred Stock. The interest rate for the Second Lien Term Loan Facility will be calculated, (a) in the case of Loans that bear interest at ABR, as the Applicable Margin plus the ABR and (b) in the case of Term SOFR Loans, the Applicable Margin plus the relevant Adjusted Term SOFR Rate, in each case subject to step downs based on a total secured leverage ratio. 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.

The Company holds ownership interests in joint ventures and other entities which are accounted for under the equity method. Our joint ventures and other investments may include put or call features under which we could be contractually required to purchase interests from our joint venture partner at an exercise price determined in reference to a multiple of the dollar amount of our joint venture partner’s total capital contributions, the performance of the joint venture, and other factors. During the nine months ended September 30, 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. See “Part I - Item 1. Financial Statements - Note 16” for further details of the Company’s loss on option exercise.

Accounts Receivable, Net

Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. During the nine months ended September 30, 2025, accounts receivable, net, decreased primarily due to the timing of cash receipts from certain customers.

Restricted Cash

Restricted cash of $26.4 million is carried at cost and includes cash held on behalf of other entities for pharmacy and claims management services of $10.5 million, collateral for letters of credit required as security deposits for facility leases of $0.2 million, amounts held with financial institutions for risk-sharing arrangements of $15.7 million as of September 30, 2025. 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 and payment of preferred dividends, as well as potential sales tax obligations. The Company does not anticipate paying a cash dividend on our Class A common stock in the foreseeable future.

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 September 30, 2025, the Company had cash and cash equivalents and restricted cash of $143.0 million, which consisted of bank deposits with FDIC participating banks of $136.2 million and bank deposits in international banks of $6.8 million.

Changes in interest rates affect the interest earned on our cash and cash equivalents (including restricted cash). 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.

During the nine months ended September 30, 2025, the Company borrowed $200.0 million under its Term Loan Facilityand $15.0 million under its Revolving Facility. As of September 30, 2025, there was $200.0 million and $77.5 million outstanding under the Company’s Term Loan Facility and Revolving Facility, respectively, all of which are subject to interest rates based on the SOFR. In addition, on August 7, 2025, the Company completed the exchange of its existing $175.0 million Series A Preferred Stock for a new second lien term loan facility on substantively similar economic terms to the existing Series A Preferred Stock.

In the case of (a) the revolving loan, interest is calculated at either the Adjusted Term SOFR (as defined in the Certificate of Designation) plus 4.00%, or the base rate plus 3.00%, (b) the 2024-A Delayed Draw Term Loan and 2024-B Delayed Draw Term Loan, interest is calculated at either the Adjusted Term SOFR plus 5.50% or the base rate plus 4.50% and (c) the second lien term loan facility, interest is calculated at the Adjusted Term SOFR plus 6.00%. For every 1% increase in SOFR, the Company would record additional interest expense of $4.53 million per annum.

As of September 30, 2025, we had $574.4 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 9” for additional information on our long-term debt.

Foreign Currency Exchange Risk

We have de minimis foreign currency risks related to our operating expenses denominated in currencies other than the U.S. dollar, primarily the Indian Rupee and the Philippine Peso. In general, we are a net payer 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.

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 Exchange Act), 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 September 30, 2025, 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

Management has designed its internal controls over financial reporting under the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013). There were no changes in our internal control over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 controls 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. Although inherent limitations of internal controls will continue to be present, proper segregation of duties controls and a whistle blower hotline are in place across the organization to minimize these limitations.

Our significant business risks are described in Part I, Item 1A. “Risk Factors” to our 2024 Form 10-K. Except as set forth below, there have been no material changes to our risk factors from those disclosed in our 2024 Form 10-K. You should carefully consider the risks described below, as well as the risks described in our 2024 Form 10-K. The risks and uncertainties we describe are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business or operations. Any adverse effect on our business, financial condition or operating results could result in a decline in the value of our securities and the loss of all or part of your investment.

Risks Relating to Indebtedness

We may need to obtain additional financing which may not be available or, if it is available, may result in a reduction in the ownership of our stockholders.

We may need to raise additional funds in order to:

• finance unanticipated working capital requirements;
• develop or enhance our technological infrastructure and our existing solutions;
• fund strategic relationships, including joint ventures and co-investments, including the exercise by our joint venture partners of any put features;
• fund additional implementation engagements;
• acquire complementary businesses, technologies, products or services; or
• refinance and/or payoff existing debt.

Additional financing may not be available on terms favorable to us, or at all. If adequate funds are unavailable or are unavailable on acceptable terms, our ability to fund our expansion strategy, take advantage of unanticipated opportunities, develop or enhance technology or services or otherwise respond to competitive pressures could be significantly limited. If we raise additional funds by issuing equity or convertible debt securities, the ownership of our then-existing stockholders may be reduced, and holders of these securities may have rights, preferences or privileges senior to those of our then-existing stockholders. In addition, any indebtedness we incur and restrictive covenants contained in the agreements related thereto could:

• make it difficult for us to satisfy our obligations, including interest payments on any debt obligations;
• limit our ability to obtain additional financing to operate our business;
• require us to dedicate a substantial portion of our cash flow to payments on our debt, reducing our ability to use our cash flow to fund capital expenditures and working capital and other general operational requirements;
• limit our flexibility to plan for and react to changes in our business and the health care industry;
• place us at a competitive disadvantage relative to our competitors;
• limit our ability to pursue acquisitions; and
• increase our vulnerability to general adverse economic and industry conditions, including changes in interest rates or a downturn in our business or the economy.

The occurrence of any one of these events could cause a significant decrease in our liquidity and impair our ability to pay amounts due on any indebtedness and could have a material adverse effect on our business, financial condition and results of operations.

The conditional conversion feature of the 2029 Notes and 2031 Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the 2029 Notes or 2031 Notes is triggered, holders of such notes will be entitled to convert such notes during specified periods at their option. If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2029 Notes or 2031 Notes, as applicable, as a current rather than long-term liability, which would result in a material reduction of our net working capital.

We may not have the ability to raise the funds necessary to settle conversions of our notes in cash, to repurchase our notes for cash upon a fundamental change or to pay the redemption price for any notes we redeem, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the notes.

Holders of our notes have the right to require us to repurchase all or a portion of their notes upon the occurrence of a fundamental change (as defined in the indentures governing the notes) at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional shares), we would be required to settle a portion or all of our conversion obligation through the payment of cash. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of notes surrendered therefore or notes that are being redeemed or converted.

In addition, our ability to repurchase the notes or to pay cash upon redemptions or conversions of the notes may be limited by law, by regulatory authority, or by other agreements governing our future indebtedness. Our failure to repurchase notes at a time when the repurchase is required by the applicable indenture or to pay any cash payable on future conversions of the notes as required by the applicable indenture would constitute a default under the applicable indenture. A default under either of the indentures or the occurrence of a fundamental change itself could also lead to a default under agreements governing our existing and future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash payments upon conversions thereof.

Changes in the accounting treatment for convertible debt securities that may be settled in cash, such as the 2029 Notes and the 2031 Notes, could have a material effect on our reported financial results.

In August 2020, the Financial Accounting Standards Board published an Accounting Standards Update (“ASU 2020-06”), which amends the accounting standards for convertible debt instruments that may be settled entirely or partially in cash upon conversion. ASU 2020-06 eliminates requirements to separately account for liability and equity components of such convertible debt instruments and eliminates the ability to use the treasury stock method for calculating diluted earnings per share for convertible instruments whose principal amount may be settled using shares. Instead, ASU 2020-06 requires (i) the entire amount of the security to be presented as a liability on the balance sheet and (ii) application of the “if-converted” method for calculating diluted earnings per share. Under the “if-converted” method, diluted earnings per share will generally be calculated assuming that the 2025 Notes and the 2029 Notes were converted solely into shares of Class A common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which could adversely affect our diluted earnings per share. However, if the principal amount of the convertible debt security being converted is required to be paid in cash and only the excess is permitted to be settled in shares, the if-converted method will produce a similar result as the “treasury stock” method prior to the adoption of ASU 2020-06 for such convertible debt security. Because we will be permitted to settle conversions of the notes in cash, shares of common stock, or a combination thereof, the “if-converted” method for calculating diluted earnings per share is expected to be required with respect to the 2029 Notes and 2031 Notes. Further amendments to these accounting standards may require us to reflect the notes in a manner that adversely affects our reported diluted earnings per share.

We are exposed to interest rate risk under the Credit Agreements, which could cause the Company’s debt service obligations to increase significantly.

We are exposed to market risk from changes in interest rates. Interest under all Credit Facilities under our Credit Agreements is based on the Secured Overnight Funding Rate (“SOFR”), a floating rate, subject to a minimum rate. The Federal Reserve has raised, and may in the future further raise, interest rates to combat the effects of recent high inflation. Any further increase in the SOFR will increase the Company’s debt service obligations, which could have a negative impact on the Company’s cash flow, financial position or operating results, including cash available for servicing the Company’s indebtedness, or result in increased borrowing costs in the future.

We have significant debt and other obligations, which could adversely affect our financial health and our ability to obtain financing in the future, and to react to changes in our business.

We have $1,085.0 million of principal amount of indebtedness outstanding as of September 30, 2025. This significant amount of debt and other cash needs could have important consequences to us, including:

• requiring a substantial portion of our cash flow from operations to make payments on this debt, thereby limiting the cash we have available to fund future growth opportunities, such as capital expenditures and acquisitions;
• restrictive covenants in our debt arrangements s, which could limit our operations and borrowing;
• increasing our vulnerability to general adverse economic and industry conditions and limiting our flexibility in planning for, or reacting to, changes in our business and industry, due to the need to use our cash to service our outstanding debt ;
• placing us at a competitive disadvantage relative to our competitors that are not as highly leveraged and that may therefore be more able to invest in their business or use their available cash to pursue other opportunities, including acquisitions; and
• limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to service our debt and make necessary capital expenditures.

Our ability to make scheduled payments of the principal of, to pay interest or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive to our stockholders. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our obligations and have a material adverse effect on our results of operations and financial condition.

Restrictive covenants in our Credit Agreements may interfere with our ability to access our revolving credit facilities, or to obtain new financing or to engage in other business activities.

Our Credit Agreements impose significant operating and financial restrictions on us. These restrictions limit our ability and/or the ability of certain of our subsidiaries to, among other things:

• incur or guarantee additional debt;
• incur certain liens;
• merge or consolidate;
• transfer or sell assets;
• make certain investments;
• pay dividends and make other distributions on, or redeem or repurchase, capital stock; and
• enter into transactions with affiliates.

In addition, pursuant to our Credit Agreements, we are required to comply with certain financial covenants consisting of a minimum liquidity test, and a total secured leverage test. As a result of these restrictions, we will be limited as to how we conduct our business, and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that the Company will be able to maintain compliance with these covenants in the future and, if it fails to do so, that it will be able to obtain waivers from the lenders and/or amend the covenants. The Company’s failure to comply with the restrictive covenants described above as well as the terms of any future indebtedness could result in an event of default, which, if not cured or waived, could result in it being required to repay these borrowings before their due date and the lenders would be entitled to foreclose on collateral. If the Company is forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected. In addition, we may be unable to access future borrowings under our revolving facility if we are unable to satisfy the applicable conditions precedent.

Risks Relating to Our Business and Strategy

Our revenues and the growth of our business rely, in part, on the growth and success of our partners and certain revenues from our engagements, which are difficult to predict and are subject to factors outside of our control, including governmental funding reductions and other policy changes.

We enter into agreements with our partners under which a significant portion of our fees are variable, including fees which are dependent upon the number of members that are covered by partners’ health care plans each month, expansion of partners and the services that we provide, as well as performance-based metrics. The number of members covered by a partner’s health care plan is often impacted by factors outside of our control, such as the actions of our partner or third parties. In addition, ongoing payment of fees by our partners could be negatively impacted by the general financial condition of partners. Accordingly, revenue under these agreements is unpredictable. If the number of members covered by one or more of our partners’ plans were to be reduced by a material amount, or if member enrollment numbers in new plans are lower than expected, such decrease would lead to a decrease in our expected revenue, which could harm our business, financial condition and results of operations. In addition, growth forecasts of our partners are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. Even if the markets in which partners compete meet the size estimates and growth forecasted, their health plan membership could fail to grow at similar rates, if at all. In addition, a portion of the revenue under certain of our service contracts is tied to the partners’ continued participation in specified payer programs over which we have no control. If a partner ceases to participate or is disqualified from participation in any such program, this would lead to a decrease in our expected revenue under the relevant contract. For example, as Medicare Advantage plans make changes to manage their profitability, membership declines in Medicare Advantage plans have followed. Membership in Medicare, Medicaid and the Exchange has also declined recently, and is expected to continue declining into 2026. A significant number of Medicare Advantage prescription drug plan geographies or local markets across the country were terminated for 2025, including many local markets that were our customers in 2024, which could have an adverse impact on our financial results and profitability in 2025 and beyond.

In addition, broader policy shifts as a result of the new administration could impact our partners’ businesses. For example, Medicaid policy may shift to block grants or other structures that may result in lower overall Medicaid membership. It is also possible that state or federal regulations may eliminate utilization management, which would negatively impact our revenue and increase our medical costs. 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.

In addition, the transition to value-based care may be challenging for our partners. For example, fully-capitated or other provider risk arrangements have had a history of financial challenges for providers. Our partners may also have difficulty in value-based care if premium pricing is under pressure or if they incur selection bias in the health plans under which they assume risk and in so doing the premium, capitation amount or other risk-sharing arrangement they undertake may not adequately reflect the health status of the membership. Our partners may choose not to continue to capitalize affiliated health plans or subsidize losses to their reimbursement rates. Furthermore, revenue under our partner contracts may differ from our projections because of the termination of the contract for cause or at specified life cycle events, or because of fee reductions that are occasionally agreed to after the contract is initially signed.

Our partners derive a substantial portion of their revenue from third-party private and federal and state governmental payers, including Medicaid programs. Revenue under certain of our agreements could be negatively impacted as a result of governmental funding reductions impacting government-sponsored programs, changes in reimbursement rates, and premium pricing reductions, as well as the inability of partners to control and, if necessary, reduce health care costs, all of which are out of our control. We are unable to predict the impact on the Company’s operations of future regulations or legislation affecting Medicaid programs, or the healthcare industry in general. For example, our partners generally received less Medicaid-based revenue following the Biden administration’s termination of the COVID-19 public health emergency and the subsequent state Medicaid redeterminations. Because certain partners’ revenues are highly reliant on third-party payer reimbursement funding rates and mechanisms, overall reductions of rates from such payers could adversely impact the liquidity of our partners, resulting in their inability to make payments to us on agreed payment terms. See “Risk Factors—Risks Relating to Our Industry and Market—The health care regulatory and political framework is uncertain and evolving” in our 2024 Form 10-K for additional information.