Evolent Health (NYSE:EVH) FY Conference December 02, 2025 11:00 AM ET Company ParticipantsSeth Blackley - CEOJohn Johnson - CFOConference Call ParticipantsJessica Tassan - Equity Research AnalystJessica TassanOkay, great. Hi everyone, thanks so much for joining. My name's Jess Tassin. I cover Managed Care and Healthcare IT at Piper. I'm so excited to be here with Seth Blackley, CEO of Evolent, and John Johnson, CFO of Evolent. Thanks, guys, so much for joining. We appreciate it.Seth BlackleyThanks for havin ...

Financial Data and Key Metrics Changes - Q3 revenue reached $479.5 million, exceeding expectations and at the top of the guidance range, with full-year revenue expected between $1.87 billion and $1.88 billion [3][18] - Adjusted EBITDA for Q3 was $39 million, representing a 23% year-over-year growth [8][19] - The company ended the quarter with $116.7 million in cash and equivalents, and net debt of $910 million [20][22] Business Line Data and Key Metrics Changes - The Performance Suite and Technology and Services Suite contributed to revenue growth, with new contracts expected to add over $550 million in 2026 revenue [4][6] - The specialty Performance Suite care margin was approximately 7%, consistent with year-to-date performance [19] Market Data and Key Metrics Changes - The company anticipates a contraction of approximately 3% in Medicare Advantage membership for 2026, with a significant decline expected in the exchange market [14][15] - Revenue from exchanges this year is around $360 million, split evenly between the Performance Suite and Technology and Services [34][35] Company Strategy and Development Direction - The company is focused on organic growth, margin expansion, and disciplined capital allocation, with a long-term goal to auto-approve over 80% of baseline authorization volume [8][9] - A strategic partnership with American Oncology Network aims to enhance provider alignment and improve cancer care without relying on utilization management [12][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capture market share despite a challenging operating environment, particularly in oncology [10][14] - The outlook for 2026 adjusted EBITDA is uncertain due to potential membership declines in key markets, but new contracts are expected to provide significant growth opportunities [15][17] Other Important Information - The company is transitioning its CFO role, with Mario Ramos set to join as the new CFO [24][25] - The divestiture of Evolent Care Partners is expected to close later this year, with proceeds used to reduce debt [9][22] Q&A Session Summary Question: Discussion on new contract wins and peak margins - Management confirmed that all new contracts are under the enhanced performance suite, with a reasonable mature margin target of around 10% [26][27][29] Question: Factors affecting 2026 EBITDA - Key factors include growth, cost structure efficiencies, and membership trends, with membership being the most uncertain variable [30][31][32] Question: MA growth assumptions for enrollment next year - Management noted that if current partners gain market share, it would positively impact revenue, particularly in the Technology and Services Suite [33] Question: Impact of HIX subsidies expiration - Management expressed confidence in pricing for 2026, with protections in contracts to mitigate acuity shifts [34][36] Question: Oncology trends and their progression - Oncology trends have remained stable throughout the year, with a slight increase in utilization noted in exchanges [37] Question: Pipeline pacing and go-live timing - The demand remains significant, and there is potential for new contracts to go live in 2026 [38] Question: Adversity in exchanges and membership impact - The benefits rush is primarily seen in cardiology, with a conservative approach taken for trend acceleration in the exchange line of business [40][41] Question: Product development and oncology navigation solution - The navigation solution is expected to expand into more markets, with a focus on improving care quality and affordability [46][48] Question: Revenue generation from the American Oncology partnership - The partnership aims to improve quality and reduce costs, with potential indirect revenue generation through payer interest [49]

Financial Performance - Revenue reached $479.5 million, reflecting an 8% sequential increase, driven by new launches in Performance Suite and Specialty Tech & Services[6] - Adjusted EBITDA was $39.0 million, a 23% year-over-year growth[6] - The company narrowed its revenue outlook for 2026 to between $1.87 billion and $1.88 billion[6] - Adjusted EBITDA outlook narrowed to between $144 million and $154 million[6] Capital Allocation - Evolent Health had $116.7 million in cash and cash equivalents as of September 30, 2025, with $47.5 million in revolver availability[6] - The company issued $166.8 million of 4.50% 2031 Notes and repaid $167.4 million of 2025 Notes[6] - Evolent repurchased 4.4 million shares of common stock for $40.0 million[6] - Exchanged $175.0 million of Series A Preferred Stock for second lien term loan on similar terms, with interest now tax deductible[6] - Period-end net leverage was 6.7x on LTM Adjusted EBITDA of $136.0 million[6] Business Growth - Announced two new revenue arrangements, one in the Performance Suite and one in the Technology and Services Suite, bringing YTD total to 13, forecasting approximately $2.5 billion for 2026[6]

Core Insights - Evolent Health, Inc. reported strong financial results for Q3 2025, achieving revenue of $479.5 million, which is a decrease from $621.4 million in Q3 2024, but the company is optimistic about future growth with a preliminary revenue forecast of $2.5 billion for 2026 [2][9][14] - The company added two new customer agreements in the quarter, bringing the total for the year to thirteen, and expects to generate over $750 million in new annualized revenue in 2026 [3][4] - Evolent's Adjusted EBITDA for Q3 2025 was $39.0 million, up from $31.8 million in Q3 2024, indicating improved operational efficiency [2][11] Financial Performance - Revenue for the three months ended September 30, 2025, was $479.5 million, down from $621.4 million in the same period last year [9] - The net loss attributable to common shareholders was $26.9 million, an improvement from a loss of $31.2 million in Q3 2024, resulting in a net loss margin of 5.6% compared to 5.0% [9][10] - Adjusted EBITDA increased to $39.0 million with an adjusted EBITDA margin of 8.1%, up from 5.1% in the prior year [2][11] Customer and Market Developments - Evolent signed two new revenue agreements in Q3 2025, contributing to a total of thirteen new contracts for the year [3][4] - A new partnership with a large regional Blues plan will implement Evolent's Performance Suite for Oncology, covering over 650,000 members [5] - The company continues to experience strong demand for its complex specialty care solutions due to rising medical costs impacting health plans [2] Leadership Changes - Mario Ramos has been appointed as the new Chief Financial Officer effective January 1, 2026, bringing extensive experience from CVS Health and WellBe Senior Medical [6][7] - John Johnson will transition to the role of Chief Strategy Officer, and Emily Rafferty will become Executive Vice President, Customer Success [7] Business Outlook - For Q4 2025, Evolent expects revenue to be in the range of $462 million to $472 million, with adjusted EBITDA projected between $30 million and $40 million [13] - The full-year revenue forecast for 2025 is approximately $1.87 billion to $1.88 billion, with adjusted EBITDA expected to be between $144 million and $154 million [14][15]

Financial Data and Key Metrics Changes - Q2 adjusted EBITDA was $37.5 million, in the top half of the range, driven by strong results across technology and services and performance suite models [16] - Q2 revenue was $444 million, $11 million below the midpoint of guidance, primarily due to lower revenue for 2024 and go-live timing issues [19][20] - The company updated its full-year revenue outlook to between $1.85 billion and $1.88 billion [27] Business Line Data and Key Metrics Changes - The performance suite normalized oncology trend was approximately 10.5%, modestly below the initial forecast of 12% [16] - The company achieved four new revenue agreements, bringing the total to 11 new agreements year-to-date [5] - The oncology performance suite offering is expanding to include inpatient or Part A oncology costs, reflecting an addressable market expansion [8] Market Data and Key Metrics Changes - About 25% of Q2 revenue and over 80% of new business announced for 2026 is in Medicare, with expectations of a return to normal macro membership growth [25] - Approximately 10% of Q2 revenue is in the commercial fully insured line of business, expected to remain stable [25] - Medicaid revenue accounted for about 45% of Q2 revenue, with typical annual growth of 2% to 3% expected [25] Company Strategy and Development Direction - The company is focused on organic growth, margin expansion, and capital allocation, with no plans for M&A in the near term [12] - The strategy includes enhancing AI and automation capabilities to improve efficiency and member experience [10] - The company aims to grow adjusted EBITDA at 20% per year despite industry volatility [14] Management's Comments on Operating Environment and Future Outlook - Management noted a challenging operating environment with elevated utilization and lagging premiums [12] - The company expects strong selling conditions in the coming years due to pressures on health plans [8] - Management remains cautiously optimistic about future performance, maintaining a conservative approach to forecasting [9] Other Important Information - The company plans to launch its partnership with Aetna in Q1 2026, targeting 250,000 Medicare Advantage members in Florida [6][7] - The company has a strong late-stage pipeline and anticipates additional growth announcements in the fall [8] Q&A Session Summary Question: Aetna partnership and market density - Management highlighted the significance of the Aetna partnership and its potential for expansion into additional states, with expected margin ramp consistent with typical performance suite margins [29][33] Question: Changes in contract structuring and customer engagement - Management noted that the pipeline has grown to $1 billion, driven by enhanced contract terms and the industry's challenges in managing high-cost specialty categories [35][37] Question: Aetna contract launch timeline - Management expressed confidence in the Aetna contract launch timeframe, emphasizing the importance of having all necessary components in place for a successful rollout [40] Question: Exchange business and ACA risk pools - Management acknowledged the lower margin nature of the exchange business and indicated a focus on protecting downside risks while growing the business [43][45] Question: Performance Suite pipeline and specialty focus - Management indicated that the Performance Suite pipeline is heavily focused on oncology, with a mix of national and regional plans [47][49] Question: Revenue growth expectations for 2026 - Management projected a clear path to exceeding $2.5 billion in revenue for 2026, based on the weighted pipeline and expected go-live timing [53][55]

Financial Performance - Revenue reached $4443 million, which includes a $46 million reduction due to favorable prior year claims development[6] - Adjusted EBITDA was $375 million, placing it in the upper range of expectations, with an adjusted EBITDA margin of 85%[6] - The company reported a net loss attributable to common shareholders of $511 million for Q2 2025, compared to a net loss of $64 million in Q2 2024[6] Growth & Outlook - Evolent announced four new revenue arrangements in Tech & Services and the Performance Suite, bringing the year-to-date total to 11 new arrangements[6] - The company updated the Q1 2026 go-live date for a new relationship with a large national Performance Suite partner to ensure optimal data exchange[6] - The 2025 full-year revenue is projected to be between $185 billion and $188 billion, with adjusted EBITDA between $140 million and $165 million[8] Capital & Liquidity - As of June 30, 2025, Evolent had $1510 million in cash and cash equivalents, along with $625 million in revolver availability[6] - The period-end net leverage stood at 53x based on LTM Adjusted EBITDA of $1288 million[6] - Total debt was reported as $820574 million, with net debt at $686505 million[18]

Core Insights - Evolent Health reported financial results for the second quarter of 2025, highlighting a significant net loss and a decrease in revenue compared to the previous year, but also an increase in adjusted EBITDA and a positive outlook for future growth [1][2][6][10]. Financial Performance - Revenue for the three months ended June 30, 2025, was $444.3 million, down from $647.1 million in the same period of 2024, representing a decrease of approximately 31.3% [6][10]. - The net loss attributable to common shareholders was $51.1 million, compared to a loss of $6.4 million in the prior year, resulting in a net loss margin of 11.5% [6][10]. - Adjusted EBITDA for the quarter was $37.5 million, with an adjusted EBITDA margin of 8.5%, up from 8.0% in the previous year [7][10]. Business Developments - Evolent signed four new revenue agreements in the second quarter, bringing the total for the year to date to 11, indicating strong demand for its services [3][4]. - The company is experiencing a rapidly accelerating pipeline for new business, with expectations to exceed historical growth rates in 2026 [2][10]. Guidance and Outlook - For the third quarter of 2025, Evolent expects revenue to be in the range of $460 million to $480 million and adjusted EBITDA between $34 million and $42 million [9][10]. - The full-year revenue outlook for 2025 has been revised to approximately $1.85 billion to $1.88 billion, with adjusted EBITDA expected to be in the range of $140 million to $165 million [10][11]. Operational Metrics - The average unique members on the platform increased to 40,201, compared to 39,856 in the previous year [6]. - The average PMPM fee for the Performance Suite decreased to $13.76 from $22.30 year-over-year, reflecting changes in service utilization [6][18].

Financial Performance - Revenue for Q1 2025 was $483.6 million, exceeding expectations, but declined by $156 million compared to Q1 2024 due to previously disclosed contracting changes[6] - Adjusted EBITDA for Q1 2025 was $36.9 million, at the high end of expectations, driven by strong execution across all lines of business[6] - The company had $246.5 million in cash and cash equivalents as of March 31, 2025, after generating $4.6 million in cash flow from operations in the quarter[6] - The company drew $200.0 million on its Term Facility and repaid $37.5 million on its Revolving Facility, resulting in a net increase in debt of $162.5 million in Q1 2025[6] - Net Debt to LTM Adjusted EBITDA was 4.1x, with LTM Adjusted EBITDA of $143.2 million[6] Strategic Initiatives and Outlook - The company announced five new revenue agreements, anticipated to contribute approximately $10 million in incremental annualized revenue[6] - The company officially launched the Oncology Navigation Solution within integrated Oncology Condition Management, expecting it to be available to over 300,000 members by the end of May[6] - The company reiterated its full-year 2025 revenue guidance of $2.06 billion to $2.11 billion and Adjusted EBITDA guidance of $135 million to $165 million[7] - The company lowered its Q2 2025 revenue outlook to $440 million - $470 million due to capitation rate true-ups for 2024 launches in Performance Suite, with no impact on bottom line outlook[7] Operational Metrics - Average lives on the Performance Suite platform were 6,486,000 in Q1 2025[12] - Average lives on the Specialty Technology and Services Suite platform were 77,079,000 in Q1 2025[12] - Performance Suite Average PMPM fee was $15.57 in Q1 2025[12]