Evolent Health, Inc. (NYSE:EVH), a company specializing in management services with a market capitalization of $1.37 billion, has entered into a significant financial agreement, securing $250 million in new financing.
The company, which appears undervalued according to InvestingPro analysis, has seen its stock decline by over 50% in the past six months despite showing strong revenue growth of nearly 38% over the last twelve months.
On December 6, 2024, Evolent Health and its subsidiary EVH LLC amended their existing credit agreement, which originally dated back to August 1, 2022. This amendment, known as Amendment No. 3, introduces additional commitments and new loan facilities, enhancing the company's financial flexibility.
The new financing arrangement comprises a $50 million increase in the existing asset-based revolving credit facility and two new delayed draw term loan facilities totaling $200 million. This additional funding comes at a crucial time, as the company maintains a current ratio of 1.04 and carries total debt of $635 million as of the latest quarter.
The first, a $125 million 2024-A Delayed Draw Term Loan Facility, and the second, a $75 million 2024-B Delayed Draw Term Loan Facility, collectively referred to as the Committed Facilities.
All loans under the amended agreement, including the Committed Facilities, will mature on the earliest of several dates, including the fifth anniversary of the closing date, which is December 6, 2024. The interest rates for these loans are set at either the adjusted term SOFR rate plus a margin or the base rate plus a margin, with potential step-downs based on the company's total secured leverage ratio.
Evolent Health has agreed to upfront fees of 1% of the commitments for the Priority ABL Incremental Facility and will pay additional upfront fees of 2% for the delayed draw term loan facilities when funded. These fees can be reduced under certain conditions. The company also has the option to prepay the amounts outstanding under the agreement, subject to applicable premiums and a call protection premium in certain cases.
The loans under the Committed Facilities are secured by the same collateral and are subject to similar covenants, mandatory prepayment provisions, and events of default as the original credit agreement, with some modifications. The ability to borrow under the new delayed draw term loan facilities is contingent upon maintaining a total secured leverage ratio of less than or equal to 2.00:1.00.
This financial move by Evolent Health, Inc. is based on a press release statement and reflects the company's strategic efforts to strengthen its capital structure and support its growth initiatives. While the company is not currently profitable, InvestingPro data shows analysts expect profitability this year.
For deeper insights into Evolent Health's financial health and growth prospects, including 8 additional ProTips and comprehensive valuation metrics, investors can access the detailed Pro Research Report available on InvestingPro.
In other recent news, Evolent Health has undergone several significant developments. The company has faced an unexpected surge in oncology-related costs, leading to a revised Q3 outlook and a shortfall in its adjusted EBITDA. Despite this, Evolent Health reported a record number of new sign-ins and maintains optimism about its market position and long-term growth.
Oppenheimer, after discussions with Evolent Health's management, has reduced its stock price target for the company from $34 to $28, while maintaining an Outperform rating. The firm has revised its earnings per share estimates for fiscal years 2025 and 2026 to $0.97 and $1.37, respectively.
Evolent Health is considering a shift towards a fee-based model in certain scenarios where profitability is challenged, aiming to establish an EBITDA floor of $200 million. The company also anticipates expected price increases of up to $100 million to enhance its baseline EBITDA.
Furthermore, Evolent Health has reaffirmed its long-term goals of 20% annual growth in adjusted EBITDA and 15% revenue growth, and is considering a share buyback program to enhance shareholder value. The company's revised adjusted EBITDA outlook for the year stands at $160 million to $175 million, with adjusted revenue expectations between $2.55 billion and $2.575 billion. These are some of the recent developments in Evolent Health's business operations.
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