We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Evolent Health (EVH) Buys Valence for $145M, Shares Surge
Read MoreHide Full Article
Shares of Evolent HealthInc. (EVH - Free Report) surged almost 20% to close at $22.35 on Jul 13, after the company announced that it is acquiring Chicago-based Valence Health. The deal excludes some contracts that Valence has with the state insurance co-ops.
Evolent will pay $145 million (almost 1.7x estimated 2016 revenues) upfront along with an earn-out of up to $50 million, of which $35 million will be paid from the company’s cash reserves. The company will also issue approximately 5.8 million Evolent class A shares as an upfront payment. The company expects to complete the acquisition within 120 days subject to customary closing conditions.
As a standalone business, Valence is estimated to generate revenues of $80-$85 million (nearly 90% recurring), up more than 30% year-over-year in calendar year 2016. Approximately 25% of revenues come from the population health and advisory services, while Medicaid and pediatric services generate the rest.
Valence has a strong clientele that includes the likes of The University of Chicago, Cincinnati Children’s, NorthShore and many others. Notably, the deal will provide significant scale to Evolent’s business, as the combined entity will serve 23 long-term operating partners and more than 1.8 million lives in 30 plus states.
Per Evolent, the acquisition will accelerate its break-even EBITDA target in 2017 by one or two quarters. The company now expects to achieve the second quarter and full-year 2016 targets.
For the second quarter of 2016, Evolent had projected adjusted revenues between $51 million and $52 million. Adjusted EBITDA was likely to be in the range of a negative $7–$6 million. Moreover, for the full-year revenues were estimated to be in the range of $212–$220 million. Adjusted EBITDA projection was in the range a negative $28–$24 million.
Apart from financial benefits, the acquisition strengthens Evolent’s inherent capabilities and expands its growth prospect. Management noted that Valence’s expertise in Medicaid and pediatric value-based care administration will fill-up important gaps in Evolent’s business model.
Evolent also noted that almost 90 contracts are in strategic or initial phases that can be long term opportunities for the company. Per management, the deal will help Evolent to address the needs of the fast growing value-based care market, which is projected to grow more than $45 billion by 2020.
Zacks Rank & Key Picks
Evolent Health has a Zacks Rank #3 (Hold).
Better-ranked stocks include Box Inc. (BOX - Free Report) , Omnicell (OMCL - Free Report) and Streamline Health (STRM - Free Report) . While Box and Omnicell sports a Zacks Rank #1 (Strong Buy), Streamline carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Evolent Health (EVH) Buys Valence for $145M, Shares Surge
Shares of Evolent Health Inc. (EVH - Free Report) surged almost 20% to close at $22.35 on Jul 13, after the company announced that it is acquiring Chicago-based Valence Health. The deal excludes some contracts that Valence has with the state insurance co-ops.
Evolent will pay $145 million (almost 1.7x estimated 2016 revenues) upfront along with an earn-out of up to $50 million, of which $35 million will be paid from the company’s cash reserves. The company will also issue approximately 5.8 million Evolent class A shares as an upfront payment. The company expects to complete the acquisition within 120 days subject to customary closing conditions.
As a standalone business, Valence is estimated to generate revenues of $80-$85 million (nearly 90% recurring), up more than 30% year-over-year in calendar year 2016. Approximately 25% of revenues come from the population health and advisory services, while Medicaid and pediatric services generate the rest.
Valence has a strong clientele that includes the likes of The University of Chicago, Cincinnati Children’s, NorthShore and many others. Notably, the deal will provide significant scale to Evolent’s business, as the combined entity will serve 23 long-term operating partners and more than 1.8 million lives in 30 plus states.
EVOLENT HEALTH Price and Consensus
EVOLENT HEALTH Price and Consensus | EVOLENT HEALTH Quote
Per Evolent, the acquisition will accelerate its break-even EBITDA target in 2017 by one or two quarters. The company now expects to achieve the second quarter and full-year 2016 targets.
For the second quarter of 2016, Evolent had projected adjusted revenues between $51 million and $52 million. Adjusted EBITDA was likely to be in the range of a negative $7–$6 million. Moreover, for the full-year revenues were estimated to be in the range of $212–$220 million. Adjusted EBITDA projection was in the range a negative $28–$24 million.
Apart from financial benefits, the acquisition strengthens Evolent’s inherent capabilities and expands its growth prospect. Management noted that Valence’s expertise in Medicaid and pediatric value-based care administration will fill-up important gaps in Evolent’s business model.
Evolent also noted that almost 90 contracts are in strategic or initial phases that can be long term opportunities for the company. Per management, the deal will help Evolent to address the needs of the fast growing value-based care market, which is projected to grow more than $45 billion by 2020.
Zacks Rank & Key Picks
Evolent Health has a Zacks Rank #3 (Hold).
Better-ranked stocks include Box Inc. (BOX - Free Report) , Omnicell (OMCL - Free Report) and Streamline Health (STRM - Free Report) . While Box and Omnicell sports a Zacks Rank #1 (Strong Buy), Streamline carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>