Evolent Health(EVH) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Evolent Health's total revenue for Q3 2022 was $352.6 million, representing a growth of approximately 58.5% year-over-year [8] - Year-over-year organic revenue growth was approximately 49%, excluding the two-month contribution from IPG [8] - Adjusted EBITDA for Q3 totaled $28.1 million, an increase of $14.3 million or over 100% compared to the previous year [8][9] - The company achieved positive net income for the first time, marking an important milestone in its maturation [27] Business Line Data and Key Metrics Changes - Clinical Solutions revenue grew 53.7% to $245.3 million, up from $159.6 million in the same period last year [35] - Evolent Health Services revenue increased 70.8% to $107.3 million, up from $62.9 million in Q3 2021 [38] - Membership in Evolent Health Services for the Performance Suite was 2.1 million, compared to 1.6 million in Q3 2021, with a PMPM fee of $16.41 versus $13.19 [38] Market Data and Key Metrics Changes - The company ended Q3 with 19.5 million lives managed, a growth of 32% from 14.7 million a year ago [10] - The PMPM fee for Clinical Solutions was $27.02, down from $34.16 in the previous year, driven by a mix shift towards Medicaid and commercial members [36] - Lives on the Technology & Services suite increased to 14.9 million from 11.7 million year-over-year, with a PMPM fee of $0.29 versus $0.36 [36] Company Strategy and Development Direction - Evolent's core operating priorities include strong organic growth, expanding margins, and optimal capital allocation [14] - The company is focused on value-based care, which aligns incentives across the healthcare system [12] - Evolent aims to deepen its capabilities in value-based specialty operations and strategy through leadership enhancements [44][45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the underlying value of their model to drive earnings growth despite challenges from the pandemic [30] - The company sees significant opportunities in the value-based care landscape, with less than 7% of primary care revenues linked to value-based arrangements [12][13] - Evolent is well-positioned for future growth, with a diversified pipeline of opportunities across various health plans [49][85] Other Important Information - The acquisition of IPG closed in August, and integration is progressing well, allowing for cross-sells and new logo conversions [24] - The company ended the quarter with $156.8 million in cash, with expectations of being cash flow positive in Q4 [40] - Evolent's capital allocation strategy focuses on investing in innovation, strategic M&A, and maintaining a disciplined balance sheet [20] Q&A Session Summary Question: Expectations for revenue contribution from new partnerships - The expanded Molina partnership is expected to contribute between $35 million and $40 million of run rate revenue, going live in the first half of next year [48] Question: Recent changes for MSSP implications - The new MSSP rule is seen as generally positive, with adjustments expected to improve future shared savings calculations [51] Question: Insights on Molina's partnership and state engagement - When entering a state, not all lives are managed initially, but there are opportunities for future growth [54] Question: Impact of Medicaid mix on PMPM - The decline in PMPM is attributed to a mix shift towards Medicaid, which has a lower prevalence of certain diseases [57] Question: Cost savings from operations in the Philippines - The company views the opportunity to expand operations in the Philippines as meaningful over a multiyear span [60] Question: Outlook for full capitation relationships - There are ongoing conversations regarding full capitation arrangements, particularly in Medicare Advantage plans [62] Question: Bundled approach in go-to-market strategy - Evolent is adopting a more bundled approach to selling multiple offerings as one contract, which aligns with payer preferences [66] Question: EBITDA guidance and growth trajectory - The company reaffirms its mid-teen EBITDA margin target for 2024, with expectations for continued organic revenue growth [81]