Earnings call transcript Q3 2022

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Operator

Welcome to Evolent Health's Earnings Conference Call for the Third Quarter Ended September 30, 2022.

As a reminder, this conference call is being recorded.

Your host for the call today from Evolent Health are Seth Blackley, Chief Executive Officer; and John Johnson, Chief Financial Officer. [Operator Instructions] The call will be archived and available later this evening and for the next week via the webcast on the company's website and the section entitled Investor Relations.

We will now hand the call to Seth Frank, Evolent's Vice President of Investor Relations. ahead. go Please

Seth Frank

description of statements and results good statements Securities filings. and expectations. and are conference will cause found call to including experience and from Thank cautionary be or in the evening. the U.S. forward-looking actual could that under and statements Exchange uncertainties differ our federal contain materially periodic the A risks historical present you, uncertainties The to laws. subject the filed company's with risks can included current in reports of some that are Commission, These

the For additional today. information please results on issued quarter company's third to press earlier release refer our outlook, and

the to as posted Relations to company's ir.evolenthealth.com, in Finally, by during in the of earlier direct section the discussed earlier or available company's are the the measures today's SEC IR company's the the Form the press in issued of available website, reminder, presentation of X-K call filed the our with Investor and a release comparable and website reconciliations non-GAAP company section most today. GAAP measures

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I'll the Blackley. call turn now And over Seth to CEO, Evolent's

Seth Blackley

call. on John by summarizing our numbers begin priorities. guidance. XXXX you the more joining our We'll core update and the business and Good in the evening, on for share discuss thank and quarter results, Evolent's updated will you detail operating third three

the after questions your remarks. take then we'll always, As prepared

of organic we I'm pleased growth delivered quarterly and overall another the with our results, results with profitability. where strong quarter Starting

were with in towards or at our beyond. continued Our goals momentum expectations results consolidated XXXX and achieving above

total $XXX.X closed IPG, the approximately of beginning same at the revenue was of quarter August. growth XXXX, contribution Year-over-year XX.X% approximately from the which XXXX. two-month September was XX%, revenue million, excluding period of over Evolent Health's organic ended XX, For growth the

XXX% adjusted to increase year Third $XX.X over ago. growth compared million, million or quarter an one totaled EBITDA of $XX.X

the and quarter and his in this Evolent’s end segment positively at of our middle communicated of section. the Consistent our expectations guidance was revenue across performance-based adjusted for high consolidated Revenue will the of range, was these the EBITDA with in while have in outlook. came QX adjusted the earnings. impacted EBITDA more year, timing in John in detail details variable cover from QX

million quarter for the metrics We Clinical and New a third the XX%. growth XX.X key lives correspond to or million our had and we Services XX.X XXXX. Evolent Health Solutions in Evolent managed by lives PMPM Century Clinical membership Technology both one Health million year X.X end XX, New third driven the million quarter was million Evolent XXXX, Services ended the Evolent's X.X and Partners. lives September to to segment of XX.X segment, Care in which Growth Health compared By segment, Services Turning with includes in as million and of Health pricing. in & ago of XX.X and Suite. at lives the These across Century Performance figures in primarily

disclosure section. John the businesses his we in Vital go-forward and for and a detail on costs in addition, cases providing on are metrics basis. In review average additional IPG those will

penetrated to incentives to priorities, which it's value-based do through deliver care macro were a the high, even in let's efficiently care inflation than health the environment. is to through savings into the is talk X% best approaching and XXXX According the identify care decade, high-quality improvements lower. of has quality primary ways less entities as healthcare fraction percentage move the value-based XX-year more that about last Despite across technology. revenues small for over care, only our the of With of a the possible. linked three We the system estimates, services specialty updates and risk-bearing aligns arrangements. that care scaled to important as value-based to for ever than believe care I Before clinical system. one on IP, recent operating movement core And ways

landscape opportunity in We the underpins the proven believe this our for and the care one given Evolent Health as country. organizations most leading of significant position value-based

strategy that for of, Evolent's two, are pleased eight. margins; of six operating optimal three the let's partners, allocation. our today versus three year capital organic priorities growth; to guide our backdrop, against about our core progress expanding total and one, growth, with talk announce With three, operating to new our to bringing we strong Starting XX organic operating to target

agreements at two of two are live Performance Suite large in will of addition half first of both states, the for first Molina XXXX. the which go The the

XXXX of that over two contribute for the illustrating new partner impact total relationship with One revenues segment cardiology, also the Molina Inclusive states, of oncology partner the live live other this on pleased million still of the will go opportunity, XXXX. both we're the of installed power and go represent base. states cardiology. for across will this our $XXX Clinical revenue and in will these that with less and exists We're of customer growth the having note our than X/X

out drawn practice and long-standing Partners supporting in to and over Care primary several business. the the arrangements care Evolent of specialty Care building been its addition announce years and to Eastern organization record transition of payer across last for capabilities of over XX This care in Washington with lines a has presence State track proven organizations for toward multi-specialty partnering practice Network. was vision Washington our long-term has state risk-based Evolent pleased group providers, Also similar and large contracts its This Partners of value-based its local to payers. a

continue In addition our within signing to partnerships, installed new to grow base. we

of New Century example, Health to geographies. of contract number customer a national new For product we Decisions signed Vital current a partner launch large have the across a with and

sorts to after momentum contribute contribution these believe arrangements acquiring cross-sell validate of we new modest, is specialty these incremental sales While this from EBITDA, drive assets. adjusted above-average our and they also revenue ability

With our for we're specialty confirmation Century, opportunities of XXXX our feedback IPG. platform thesis. significant New and multi-specialty we're in our expansion IPG value-based that pipeline sales been regard expansion seeing seeing broader Related, objectives the thereby primary on to customers the trend deal weighted the positive, specialty fewer a especially unlocking and across early Further Vital has is and pipeline, sales business. of prefer growth driving our partners, beyond,

growth operating Translating core is second strong into pipeline strong priority. our earnings growth

and than that growth organic. by grew EBITDA last over adjusted was of Our more XXX% XX% year, versus

come leverage cost customers. maturation the has our expansion EBITDA revenue from of adjusted fixed growth, Our and solution clinical

from IPG, Regarding forma the Performance Suite. fee-based mix, adjusted product for & the products pro X/X delivered Technology assets, EBITDA our through balance from offerings with year-to-date of comes Services Evolent's the in over risk-based

and an earnings across performance to we the incredibly approach business dollar for us is geographies, lines the and believe opportunity to this available important the and value. the growth different adjusted realize balanced suite PMPM While way drive sustained best remains business EBITDA is earnings of where shareholder highest company, we models

regarding these those, our focused principles future. balance two, a capital Our the strategic third accretive Evolent's is within sheet. We and and optimal to and M&A; innovation business; investing they allocation. one, operating reiterate disciplined allocation articulated on capital today And principles core remain three We've three, into strategy. in priority are, maintaining

give around of constantly ability outcomes. you partner improve Let and to We're best with innovation. the seeking the me example our plans an first towards clinicians to to health area align

& and largest oncology payment national the alternative of model pathways, allows evidence-based in the for which Pathways to quarter, one distinct interventions provide an this collaboration data. with highly we suite real-time focus improved This treatment efficacy also Services accurately. even developed reflect highest-value us an refer into our latest physician dividing we Leveling, country, like potential and payer It medical us our we peer-to-peer regimens our updates innovation, with With Technology strategic more to combine categories. to further allows the more to to differentiates management. nuanced for consultations that up allows platform During the effectiveness in advanced organizations four differentiated as engagement enhancement

allocation Evolent second and target and for our profile up and raise and opportunities for collective our opened IPG principle within The of market capital additions has helped is optimal unit additional Vital strategic expansion. M&A. specialty Our accretive

of Our clients fragmented value-based are care looking pieces for the puzzle. or long-term solution not partnerships, vendors

a I As well. recent a our opening remarks, my And New we of with expansion solution is confirmation to saw as mentioned Decision thesis cross-sell national in IPG client. we're early momentum Century who of customer and Vital a large the seeing this

can also existing M&A within products. our creation value Selective increase

planning increased individuals service. Decisions the Century example, we Health authorization identified data the advanced for find care we integrating by with platform, New of number significantly that the Vital For

place. identified the we candidates from In higher Health Vital Further, with of deploy Health. been Those believe, are service we using Decisions observed jointly have we engagement who were respond first Decisions, planning our Century data outreach services Century inputs. along identified cancer advanced fact, not to Vital Vital Decisions our over otherwise for identified Vital patients patient once cardiology significantly rates. benefit XX% we've and New the and, Decisions who care individuals using the when for These New in may have patients

conversions balance to about pace acquisition for new believe closed drive platform. our third capital principle Regarding which the the will us phase integration, talk a pleased with at allow generation disciplined August, to and I'm of we're and basis we ended our net IPG, logo more next John but in the will the strong pro of and cross-sells allocation have on growth. in forma quarter continued approximately maintaining fund X.Xx the cash of sheet to a detail, pleased leverage

focused front particularly principles remain care. excited are core the drive to by and opportunity within us shareholder we summary, in In our specialty value of value-based on

a the focus challenges as clinical multi-specialty to deep intellectual fee-for-service we to a breadth opportunity market serve highest-priority transition this and and the value-based on emerge health unique plans have providers in partner and as to only from into the facing continue with property care. away We payer-agnostic

to discuss through the the numbers hand Now updated John call take I'll our you outlook. and to

John Johnson

Thank you, Seth.

strong, then the my important for milestone to also I'll we for guidance. with to and positive quarter in numbers, turn EBITDA, focus as our net headlines time, ongoing enterprise. third are where for four growing earnings. an the we adjusted turn As pleased areas on first the I'm are achieved an particular, focus consistent our that in to maturation our There overall the quarter, I will comments income note

strong First, growth. revenue our continued

added launched year. years across we've multiple to in strong our Performance the since come. overall New this first the our for million propel Suite new have growth, delivering of This earnings we As earned by markets, will our more than results quarter $XXX partners, in Century revenue expansion annualized

our the margins bottom As a but drop over Suite reminder, to Performance not immediately time. line ramp do

for during Performance margins year-to-date Suite clients our margin expectations. live maturation For approximately our XX%, who are consistent example, with went XXXX

Second, derived arrangements, as you through across know, all including business savings. we our revenue shared performance-based of some units our of

dimension. time This were the Evolent revenue of Partners, is low of XXXX associated part constructive performance visits a physicians implementations cities along than of In with our expenses shared by Services, beneficiaries. two like who XXXX we consistent year savings, XXXX first with Medicare with the ECP Evolent gain national more Medicare range. Care that end the medical in share quarter tale and our earnings on ER lower Health. clinical total performance. quality strong strong performance to and lower beneficiaries for driven was had risk-adjusted relative Bright and metrics had for and primary consistent was recognition this operational care underlying year $X million were with The came In thesis. with These at expected spent both for with strong X% of approximately savings Health in

XXXX shown offset approximately shared third underlying decline adjust. savings is CMS during the X.X%. clinical rate rate dollars, value to adjusted in of not This now comparison model of a had entities savings Had included including in decreasing performance, pandemic, by of in for million of and CMS that this increasing an adjustment the we XXXX attribution of optimistic pandemic-driven however, effect would which care primary by same In shared model wave ECP was like years shared EBITDA. driver savings isolated historic and X.X% Evolent health a the delta their to value by period, such be Care quarter this will model, the We segment impact $XX remain unique Partners about to of COVID in XXXX year-over-year savings the versus of not estimated this the the the on represents the believe come. growth have earnings adjustment and and first on amount. and dynamic of drive such effect an XXXX MSSP the X% the utilization for did

topic. Third

the investors are disclosures driven The case. in we Vital the now Decisions of additional metric With provide financial to revenue IPG, volumes products, our results, acquisition our and principally to planning business. model care our volume advanced IPG of updating case reported financials and and by detail for per respectively, are surgical

& quarter presentation the our acquisition of to XXXX quarterly are As lives per Services average per will Services revenue metrics, new be reporting such, Vital metric. on quarter, Technology of period The lives disclosures and suite two fourth provides beginning since lives investor case exclude and PMPM Decisions comparability. for this the in we Tech no website reported updated in the & Vital count those case. longer total

three things note. let's the are balance to Finally, about there where sheet, talk

of the our the a in P&L loss of debt retirement early. conversion. notes coupon XXXX cost The early we our majority present First, the for represents the and convertible small the on inducement converted on remaining value quarter,

Second, flat excluding impacted working were to QX. cash capital in acquisitions QX, timing deployed was quarter, the part the for that our by of in approximately cash in normalized flow

minimum at remaining million first a end to return Passport cash of the in of expect by to the also We quarter $XX of XXXX. parent the

main flow, which of have about currently recurring capitalized million As $X per cash two software cash we quarter; million about about of per and $X as outside we cash reminder, of adjusted quarter. runs a development think EBITDA: interest, uses

translates conversion EBITDA XX% from to items onetime basis. a on working approximately this and go-forward into cash capital fluctuations, transactions, Excluding

Third, balance sheet item.

our our $XX of resulting attributes million we have the assets, the portion with first of the of tax benefit agreement by acquisition receivable and a released quarter. allowance in our tax covered these is on noncash of net on sheet quarter IPG deferred With positive income, A portion in now investors. valuation tax pre-IPO a a balance our

and million liability. taxpayer speed, our cash not At we noncash becoming course current So do XXXX. also recognized a least at offsetting an anticipate $XX we until

turn about $XXX.X million, talking Now the of XX.X% detailed Solutions same the grew guidance. let's revenue numbers year. up the before $XXX.X to At from a million prior period level, Clinical few in to segment

$XX.X Third with million XXXX $XX.X in quarter EBITDA from adjusted and expectations. in was to Clinical line compared year prior our Solutions the million

on a members million lines of The prior in the Platform platform our QX compared to X.X Turning last $X.XX add of to $X.XX fee and Performance to growth more XX.X change XX.X have Services and commercial of in Suite compared our was a & expectations year Performance with with this in operating is versus faster PMPM QX PMPMs, PMPM Lives metrics the Medicaid million a Similar and million seen fee Technology was line Solutions. Lives was of platform. million decrease $XX.XX business. $XX.XX. as driven suite Suite also Medicaid PMPM for in we in on 'XX. Clinical to of X.X and mix versus year to we commercial with by shift as

thousand quarter. average care case with $X.X the totaled the totaled IPG planning on Total and a of revenue quarterly will approximately that and geographical based revenue XX.X vary Average intensity business third surgery Note variants. quarter. host quarter-to-quarter per for mix, and factors, associated per payer for including thousand cases types the case advanced

Services Health were segment Evolent results strong.

of million, $XXX.X million addition up year-over-year versus Membership The the in compared a in in Health segment of Healthcare EBITDA X.X compared X.X the revenue, $XX.XX was million of PMPM million and quarter our Evolent fee Bright adjusted in of for of third million $X.X prior XXXX. growth. $XX.X Suite to million quarter $XX.XX. from net eliminations, 'XX to XX.X% EHS performance a to with intercompany QX drove increased Third loss Performance $XX.X year. of Services of

we the million Finally, margin the and corporate prior grow. continue current as on EBITDA as cost costs same $X.X year. were quarter in the remain adjusted We quarter both our to expanding flat at disciplined consolidated as in well our structure

wind balance cash accounts cash, million including Passport. the regulated of and $XXX.X $XX.X down sheet. in held in with to the cash equivalents investments, the to finished in related quarter Turning million We

we capitalized decline June cash, was held cash million Excluding $XXX of $XX.X XX, $X of Cash with quarter deployed software million. in development versus Passport, for available sequential for quarter the a the million 'XX. ended

for of $XX We million in also deployed in purchase IPG cash August.

decreased payment, $X.X available by have Excluding cash driven fluctuations. million would by this the for quarter, working capital

be expect to positive meaningfully We cash QX. in flow

to Turning guidance.

to now be the We $X.XX expect are total year we strong and adjusted pleased year. our range with EBITDA We With the full for business are against million our financial to year objectives between $XXX million. narrowing and billion continued core $X.XX between performance, billion. our for revenue $XX progress

quarter million million. forecasting and we are forecasting For to we to million $XX adjusted are $XXX consolidated EBITDA $XXX fourth specifically, $XX of total the revenue of million,

turn for will I closing to call Now the Seth remarks. back

Seth Blackley

In continued fronts, summary, sales including our execution, product and optimal progress John. Thanks, development I'm deployment. pleased capital with across all

Before move to Dan Q&A, successful operations we company's Health, to named strategy. specialty Dan the In our President platform Partnering of Vital of me, been leadership of in as into and Century oversee deepen September, reporting highlight to Dan of leading enhancements as and I'd a the driving further McCarthy, and to two structure. IPG has the help Decisions to strategy lead like with we our value-based Evolent instrumental me, will growth John our specialties. seamless the and Health. New target value-based and specialty well capabilities integration

team to People culture, Beyah Officer. oversee will company's reflecting we our and recently reports and Chief Brand purpose as the our talent Kali marketing value-driven welcomed and a out and me Kali leadership and Filling Evolent's functions.

Kali further Evolent's impact. brand refresh operations reins the joins to identity and level will Talent. People congratulate and of mission and elevate marketing take team, Airlines, capital next us We Huge to is Dan, she Delta well as to as Head reflect Evolent's serves the firm Global the our culture human before talent our assets, to as Kali as bolster Evolent. and Chief Kali the that, of greatest unique global welcome Officer our Our one leadership from where and

And we'll with that, move Q&A. into

Operator

Instructions] Anne of question [Operator first Samuel JPMorgan. from And our will come

Anne Samuel

contribution you're how I was color the new for bit just you on your announced for announced for can little year. could now color expectations growth think a maybe And partnerships partnerships some next the that maybe revenue XX on provide wondering year, we at today. if of from about

John Johnson

I'll revenue year. run hand of half in about and rate to it live year. them talk together, Anne, first the specifics expanded of Seth $XX of will million start next the some we go Great. partnership expect, to during turn, and $XX announced we on sometime That'll million contribute between next revenue. Taking that Molina the

On the this announcement, ECP’s table and partner this is to size. Partners added average Evolent our XXth Care is here, the about

on So probably talk largely Seth you year that performance growth. as we'll based in XXXX. see contribution, 'XX can remember, about

Seth Blackley

is mid-teens in for XXs Yes, the a Anne, the We've meet tell growth while. front, XXs been target. higher on 'XX or or to to. obviously, you beat I'd happy or organic growth always the our target

what really biggest look by we're next signed goals a then If year. will well we've certainly for which at big year-to-date, our also had, pipeline, for we've we've and the got you potentially set the I'd affect 'XX way, achieving up pipeline beyond. just say very And

names. I think group diversified how about that blue large of And that like diversification of of health an grow. I I a things think pipeline, part it's is the is of we important Anne, sort of that it, very one plan part chip

And deliver good we'll I feeling in set takeaways up also next terms and year quite I what but beyond. in after think year, the for the next that. years were think is just So pipeline the for well of

Anne Samuel

maybe And one hear. some That's recent I on MSSP hoping you to provide color for could was one. then other what Evolent. mean changes for the great just might

John Johnson

Yes, take that I'll one. absolutely.

So has day. the rule been for out a

still things. are digesting So I'd highlight we three it. But

their the most dynamic been been to 'XX 'XX too, around remarks final rule included for my model quarter 'XX versa. that in CMS mentioned I fix to have The higher. would value in first from and prepared that saw a had is actually, or in it the and our the is our of shifting vice place, results relevantly, that, meaningfully

proposing sorts for changes the nuanced So like with ACOs we're handle around Pleased they're way these also adjustment that for with the of populations that. ECP. of some that risk the around and how they rebasing calculate pleased they

value. positive think the most So And overall, feels think this our overarching to importantly, of perspective, rule. like macro a thesis I generally it for I reinforces continued push

Operator

The next of Rhyee Cowen. question from Charles comes

Charles Rhyee

a Great Molina Yes. very with far. guys. Seth, big you success partner obviously, so is

-- state still Suite in I when what I'm go being comment through XX% us Maybe Performance the Molina, and it's feel million like states. Molina, sort of in lives so. the you're side? about is the what the don't that asked not contribution then with time. you you $XXX someone of talk you over not if than made percentage from typically that to everybody. to are XX Molina of only like with opportunity. walk how seven it's think a mistaken, into I You that expands And manage up or I'm guessing Can more

Seth Blackley

Yes, Charles. happy to,

there's each own couple that So the specific state circumstances you for of yes, One I And when lives may set is reasons. of things. you a different all we a I on. think its with of think state, plan work the have enter and a is facts not couple different

those just think for with. generally say are lives do hey, there swaths I big can't are I anything the wouldn't future. we opportunities that,

some in, may lives state be state may there to why around but sell specifics your -- point. so as that this or be to And not

then So available But of also specialties, on which other data kind we cut us. and is cardiology right? the have to both oncology the

pre-IPG specialties. we was be as can are The with geographies, doing of with that That And both Vital, geography the bigger there specialties. obviously, the is but IPG, both about go of even be in other on that and Vital, that against are the populations Some we number then so XX% bit as all of opportunity don't states have those -- the within and the sort well. to course, little pre-thinking and is the specialties total a now, population cuts said, probably serving. opportunity you it is things

the kind right? the we taking job the growth care impact. about plan it thing good from we're we the for happy for of have I of that we're and about to make And good is work with get doing I'd right sure probably So maximum a think most partner, And the excellent. patients that. feel And care the penetrated the we getting I XX% even turn. customer, to, the think in is We're validation say,

I plans. think delivering creating with place partners from similar on it on said think just we all to conversations going going other what our that And and doing value and in stems And we're and a patients again, strong front. we're customers. do, I for

Charles Rhyee

helpful. that the that there a shift kind Maybe else is the that think of maybe in tempering in grows, two PMPM. really to anything -- as for mentioned mix questions. know we between sequentially just greater it? And expect and calls rather I is It this out be assumptions first And still PMPM quick our quarter. significant other mix One, second there Medicaid decline performance? to and That's relative should you of we quarter should we seems

John Johnson

much do, populations. the the just does diseases than oncology, it And of plan. has mix. different prevalence for can as specialties is Medicare you our the with of with moms imagine, example, and babies is it to prevalence Charles, Medicaid higher in

you is now, just nice see are we pretty from can revenues, mix. think our I where

think model grow, going -- further. on as the down I any up know or depending I But that go the it you don't will the of we composition So PMPMs growth, I if down. see,

Operator

The Capital next comes RBC question Markets. from Dodge Sean of

Sean Dodge

want John, the Maybe mentioned margins. can could meaningful be there, fast understand kind then work from is before that operations a cost sites, of be as of pretty be and scale guess you give us a something driver wage can meaningful out better establishing U.S.-based in how over? you I of the I Philippines, a just so work will Maybe some on there how time. sense be that that differential you And savings headcount just transferring doing starting to that there? that of gets ported rate you'll you'll over

John Johnson

thinking I'd things of our on permissions. we couple of of global lens, of government-funded one operations a gating you a question imagine, items, lot biggest since So payers, macro about can say from is work the the a as just with partner

that's as we think we something take very and through can seriously of size scope scale and what do that So the we really offshore.

view over opportunity that expand across said, pretty service intake in we think multiyear the meaningful our I and like certain to clinical as both span. operations the a Philippines customer functions

we next would year, would into on. virtue a know. large, about switch, 'XX also light think we we are our say about similar. it's it I enters growth operations of sort of would a not as sort also our as Pune, something planning as think and you expanding India, being anticipate I of as by view It's think doing quite as a which have process in so we company and we meaningfully our stood operations, it up now

Sean Dodge

ACO lives? You in now? mentioned capitation we Cross lives plan. Care that? having the growth then a relationships the continued full for the capitation the Are conversion full of had those Okay. like Evolent you more you about in should like conversations How Blue outlook on any Evolent lot the That's Partners, and And then of think helpful. kind with a ones you've What's meaningful value-based got of driver care. of

Seth Blackley

Seth. it's take I Sean, can that.

think us. an I for still opportunity it's

think should consider as that And and conversations opportunities front. pipeline opportunity. We on is in something the it an I is that on in different are you

of to the plans, So that a has I there that think to model primary costs. particular, sort in and is, Medicare lots be for interesting network in on capitation network care the that's to take what's marketplace, arrangement at very Advantage going of proven through manage on opportunities any opportunity are when you look the front the a capability

So us I say the in and for would be that pipeline yes, will is certainly opportunity. an

Operator

The next Daniels Blair. of Ryan from William question comes

Ryan Daniels

you, a one strategic Seth. Maybe for

contract? value multiple thought offerings are you effect, the with a some As of assume them it's your at a of bundled offering one an multiplier how go-to-market in and for Meaning for product have contract. Decisions strategy? I about as activity think oncology, selling with initial about if with some bit example, least we how tag going might Vital more advanced M&A Century, on approaches, those can have you you approach thinking of you the New

Seth Blackley

think yes. Ryan, question. a great it's is Yes, answer I The

We are a bundled approach. more definitely going with

what that's payer the Sometimes wants.

fragmentation But they deal And payers inside that this it partnership of is importantly, the many for different that big valuable general, I have look integration patient. which say theme, not many, partners with. of could a more think Ryan, specialties. it a about, for lot talked I'd on isn't. you for out Sometimes those in health the typical But model if to plan, blue-chip them there's we've misses across opportunities fun is large

it, you example. great with of of Vital And and same fall end flagged also examples But other that right? a you can and into lots think life is of Decisions oncology that cardiology concept.

And more. the MSK very I'd say to want our in example to that They brought do to table are us on positive us the so IPG as just payers more, do were pushing front. general we the

those buy if consistently rate wants because conversations. of bundled anybody could could that And again, revenue thesis, the more than the combined the so their with to actually you bundles. just we would we M&A some more the payer on Ryan, transactions say going that grow I time are own business of over remember,

been thesis advantage IPG. and multiple even very has we with out that feel specialties conversations good about one we we early that place. with given thesis And what's Vital So proven have I a feel structural like it's happening the have in that with think now and

further kind in of together. is of that to we're yes, going and lean time direction answer in yes, terms bundling over things So

Ryan Daniels

revenue. EBITDA without this Does the some If And Okay. of new have X start-up XX XXXX of recognition clearly shared then probably one come color. materially which we at for where John. won't initially won't to generating this lot revenue you and an and thought contract be the associated those costs to of on revenue contribute models. helpful maybe until do them have profits the XXXX, Very given you kind a until in? think of Because would wins the year impact X guidance, versus savings

revenue So little bit present but cost to that? kind you allow a the future at are more incurring of getting more for

John Johnson

a it's great No, Yes. question.

look in fall from percent curve this margin say oriented And us have run if from $XXX feels math going is in target target XXXX getting consistent I mid-teens EBITDA focused our sometime has earnings and that on of and the sort slower where million is the metric, some there point, forward. run faster we EBITDA mid-teens that that between growth. that I out the on was what like rate way an expansion. a by that us. from growth we business roll Suite business what are to would dollar getting EBITDA the laid were good back that in really given that's we see the 'XX growing forward your at we're and in trajectory you XXXX. think XXXX, Performance during As multiyear into you'll And would of an But with the $XXX million. to for of multiyear we point perspective way that at margin lot here, margin were a To of

Operator

comes question The Sandy next of Guggenheim. from Draper

Sandy Draper

Great.

question, after? a you off on up in, I the some level accrued year sounds I a year you there on during it come when MSSP, there. revenue then came the some of I Or the in, think is, the shame numbers this unfortunately, and accrual? like First me, revenue all John, Does but with you. maybe is was shame in and trued not thought

John Johnson

you. not than quite that which an towards savings, the something this only lot if year with are more -- year, one Look, we expect left through, this have for there it are a recognize. MSSP a rules only recognize as is numbers high your have came you booking, What revenue revenue on write. to means on point, A us we are It's is accounting like It's number would we question. a that clear, wasn't us a Yes. achieving. meant extremely we to the shared The data an likelihood for of getting the are final is across technical that likely for what reversal. that not accounting accountant will so a sentence you shame the that not

And my was consistent with so remarks. that the sort prepared of commentary in

it. oriented way of how we're It's all the risk-based think about So with that our that's products. we

Sandy Draper

be Got question one any trying about Okay. has out something message I Seth. in big want but and individual the a segment for of I of balance you if bigger versus the segment I'm it X/X sure on my here and customer, impact you're Bright hit. prepared guess balance EBITDA dropped remarks, not for the And wasn't of they're And wrong, overweight to I side. In second was of I potentially with business, EBITDA happened getting what like goes where then was was other. And it. is helpful. a about That's mix that out to follow-up customer or and when the quite something understood. one was thinking you think talked EBITDA family, I'm don't a big the

you just trying to terms what's developing mix? it sort exactly your what is it's to way trying understand titrate are So actually of was in in Or the said. I And of the this of is sort pipeline? just you

Seth Blackley

Yes, Sandy. question. Good

the question even more maybe broadly. So margin answer

I'll a company actually are think call how tied that hey, these fee-based We've made want our We I is and a comment to was technology-oriented I think, able important. X/X that to on of we And our business X/X majority of the from gotten is the good actually balance, that's from of really And clear arrangements about from questions is is arrangements? it, in products. technology-oriented terms to be performance-based Suite think EBITDA it. forecast fee-based Performance we is coming or that, the how much And products. investors, risk-based I model. think

wouldn't I is. Performance add time. say We'll what have technology we're Suite over more over titrated, We'll time. just the it's business more

the I of think question. one that's kind of part So

we Performance and is services margin business X/X the I is -- tech maturation broader X/X when think of have of the business the Suite.

have. The next talked it of line. Sandy, question think also the performing that I great doing, XXXX is, we the the Performance we margin think, okay, Suite fact of for and business, we wanted today products X/X the call approaching third well that's cohort that on Performance validation that's, is about our for Suite, that ramp to EBITDA And the XX% having And is right? on that the how the

it think I'm said, So we for on now in earlier continuing to connecting the XXXX, track. putting XXXX, for here is, the going it feels feels Performance track good. that now that risk-based is back we're Suite We're business. with by side consistent part have And that we've services piece the data on We're that a to like. hey, be comment tech And model some on to been the what margin year as maturation at the that that to out we the base IPG. with now with I then way mature X/X John's over ramp of very looks

takeaway, that data more in So That about where I away we're you're more hope think to kind we the taking and and the -- we're feel I margin that. the big getting of company. going should how ramp of we from this and feel confirm confident be

Operator

BTIG. Larsen next from The of David question comes

David Larsen

on good quarter. Congrats a

Molina Seth, I that hear then is would for I heard heard XXXX. annual John that Johnson million $XX But additional say of result you, $XXX I in expansions think about think revenue. million generating about in Molina Did all I that in I the say correctly? revenue

John Johnson

million $XXX basis, David. for run rate of Molina. are be $XX million The next to expansions all on annualized going it's year a So for

we have it's at half $XX some that all of next year the won't million first starting point So because in of the year.

we and that is, kind -- math those was on comments. whenever the be are of So from of starts, do part million, actually will get that that. can But the two it what you whatever number the $XXX

David Larsen

Okay. then, higher heard you Is that I this quarter Great. have I $XX calculation. the your if the it think been adjustments John, of would for basically sort in wasn't say million EBITDA that And CMS correct?

John Johnson

that it the it, David. an the speaking, if I adjustment weren't phrase lack is way of Broadly would for

the issue. that read of rolled quirk of attribution Our in it is the lack the it would the But corrected this that of new sort for an -- CMS out the yesterday CMS just have for model. methodology of model adjustment was

David Larsen

Okay.

except it that $XX for irregularity. So would have million been higher

significant mean then just can business? And million of Health at $XX.X just think that a and growth it million quarter. Okay. in Services, for I you driving increase. of sort the overall EBITDA is And that's up came remind me Evolent very this from Is I Is that XQ, the what's of $X.X sort that? in correct? the

John Johnson

Yes. that, Two in main things David.

are numbers right. Your

the implementation of was, half some EHS our second The back lot as EHS partnerships first gain was and driven work in within share our is the in a from the recognition of performance-oriented weighted. know, some of quarter you

and we the tend that back recognize to And this revenue and to more so true quarter contributed the was implementation in EHS half, earnings. nicely

topic from planned we that stopped just of Now guide an on have not the implementations our we of all a XX. impact of And on. October on Bright active I will of on say, does order having by million implementations, implementations couple QX had that the Health course, sort of those

that. customer as flat we we -- circle Bright, revenue into mentioned look on year, to year-over-year. The roughly anticipate we next that As on off for

David Larsen

flat Bright, year. For next

yes, one think the you in change one then back quick that you -- XX% I'll and Are Okay. even guide mid-teen accounting some XXXX? just say sort still the you Group And are. are margin And then least I reaffirming time growth you the just more forward Bright planning EBITDA for hop revenue the yes, in organic then I queue. at heard deal? for after in Health going of

John Johnson

first growth then the EBITDA. and Yes,

of this mid-teens believe that years we for the a are business growth, target to still couple is for better, So come. good a yes,

margin side, Suite, from which Performance EBITDA does is in growth our given EBITDA than the margin, growth of while and lower sort has although that come what probably pace margin, saying to margin been reach with the higher of On of for a would we've the a the growth Services the less & expect has opportunity that our dollar more XXXX and dollar Tech EBITDA but percent percent expansion. we amount suite,

Operator

of from Richard The Genuity. comes next question Canaccord Close

Richard Close

or for the Yes. questions. question Thanks

in third from to the the really quarter Services, just clear, the all case's this be the lives, to Vital and change put Tech fourth now? quarter Decisions out of metric that's pulling & it on Just

John Johnson

change, of up Net that modestly. have would correct. it That's ticked

Richard Close

than diversification talked comment And the you you being a on about little then, maybe going of pipeline, ever. comments opportunities And you Blue Okay. Can Great. Seth, exactly the the forward. bit you're And Blue Cross then larger some made Shield seeing? pipeline the what about diversification. talk on

Seth Blackley

Yes. Sure, Richard.

existing a of additions when a just I over characterize new time, logos places we in with which the think some pipeline the customer look thing while the would current is way very significant or some I talked So good think for you just things. different and is in those to of concentration time, pipeline, while, main a lot across I and large had haven't customers I think having names over comment and from new grow different across lower of company about is that we've, really terms lower the even sorts ones, the continuing

I opportunity, the way is Cross main of think I So it. the that's Richard, Certainly, Blue characterize would that. part

to I a even factors maybe than think national world the with plans, one more that shopping bit the specialty one-stop do Blue side. little the they, is like more on Cross the of

and from that so the ability do bundle, segment. I going to positive back question Ryan, earlier to think, is And a our in

Blue our would And so with we're recently. seeing Cross say, some acceleration, opportunities I

Operator

comes The Tassan Sandler. Jessica question from Piper of next

Jessica Tassan

help understand sales works. us just was maybe hoping at Molina you I process the can how

selling So much another Molina's contracted the not So opportunity remaining is partner from engaged referral? by at successfully of guess have you contracted? then just guys I via point? you a untapped national how there? how this many And what engaged states, one to and Are or you are and or state state just -- XX either plan

Seth Blackley

Jessica. Yes, yes,

relationship national along with national a of answer I'll question the combination we're in dialogue this any conversations generically, process. often is state-based with or So it's that of really generally, a and It partnering sales with. plans whether a

with at I on consensus depends national to us to it's it. need, kind state actually got up objectives have which I'll of who prioritized state-by-state basis who to lots be build may corporate you nuances get day. accomplish as are, the going then to agreement And go call has an trying be approved and so capacity, and next conversations on And denominators, plan's they're that the the on leadership to lease common a that a And the think, at the level, in you've also least kind different of get year, which There's given cycle. next what day, what RFP of to don't. it states into leadership,

this have also like bunch I've not we at this corporate the the single embedded to a really It's sticky. that quarters, where deep a create because very which love over model the is think relationships, teams. I said signature relationship -- way. for corporate. It and builds we it is deep it's teams, but very value it a state-based We

really and how that of like. model also a sort it that's works we So

of states think we're kind the in penetration terms today, in I have. terms good we're they halfway the I states want number that number with relative the In terms number Molina to we're of across states get I engaged in on don't is that plan-by-plan of XX% details to with Jessica. which the opportunity. place think a than specifically, of of revenue And into really less

Jessica Tassan

multiproduct is then oncology as helpful. well? the the for into just what think and press really has I -- EBITDA an model sale Can contract. That's model noted that, Vital that you like release through MCH revenue switch model guys to I been the to integrated go wanted the you in also revenue just a

Seth Blackley

with and start that, add that John on one, may I'll Yes, Jessica.

out level month case high a One way gave call. in on a of typical customer. two that to if It Tech sort of more Century per example of the the & vital reasonable is it platform we as member of to So They Tech past, will that about the roll Services per have that in & vital are sort fee like but product. right? a is margins comes the want Services out. Tonight, they're fee-based also the it we with model, that Health on deployed. ways kind a New there's Then kind has have we we've talked of

revenue line. we not helpful huge the And so on and line, get they're but EBITDA fees. the on those They're pretty paid significant

the in one the first are Performance patient value performance we it's We oncology. or additional tonight, we're already accomplishing. talked that switch on way. the there, In talked we it, instances, Vital that the some profitability And don't the no proposition and we helps other where live, that's we the opportunity And right? or recognize past. given of about get of recognize Decisions. preferred the that which risk That's for things that's there in ways, on that what meaning cardiology a but Suite, like for is about the for We customer can that's of client deliver model a up through Suite showed we've that, plan is paid Performance the revenue, for additional hopefully part taking but

So those are sort of the two models.

number than a look the a to whether of got together, paid, XX% at both right? You since stat metric, a have that up on XX%, by we it. cases is that good Vital about since not getting we're think engaging the -- we -- we think that's number way getting I Vital acquired And I it. XX% acquired of is up we're cases in is good by paid more or

Operator

of Truist comes from The question Singh Jailendra Securities. next

Jailendra Singh

good EBITDA John million a number. your still being $XXX quick comment 'XX to a First, on million about $XXX for clarification for

from make It's organic to want not contribution IPG, on include based right? Just sure growth. only does that just

John Johnson

had base out for That there target was our business. we a that

would we of that. IPG So on add top

Jailendra Singh

Got it.

I main spending that like, to greater XX, Then now other expectations and transactions with given of X% a question of number, the of X% providing partnerships say Okay. M&A well initially. you my year opportunity mean, Or figure going has right number clearly, keep in annual still here, you industry ahead you recent the exceptional forward? and and partnerships going macro been highlighted of X momentum would that mind say drivers, forward? the XXXX could X target continue to this an to Would

Seth Blackley

think we're Joan, look going number. like XX%. we to to the I -- Yes, our sort that's lot manage beat as too you've that conservative? that really hey, how given and give of we mid-teens conservative I do metric, great good think we it beating that we're question business. it's a them. that of, think exceed we similar get It's have and And objective the the in we question. I Seth. future, It's feel number the Is products a the numbers been to we hopefully number. particular, about continue to in of growing

a again we're next way, rebase XXXX. it we whether in start haven't we So to I'd yet. about different That not it that above think be slightly year. or number But surprised be decided will for if

Jailendra Singh

Okay. for Clearly, business any business? follow-up and in Bright Just the we understand growth in how allocation been you've between think there last dollar long-term contract around two some business, and And about part Century has seen the with update New of businesses? strong one the to opportunities your view strategic the should investment trying the if changes your in EHS EHS pipeline here. quick

Seth Blackley

question. Great Yes.

we've tremendous the the good and been of low quarters several share, opportunity, one things that is specialty think we saying for have focused capital opportunity around I now market growth our that products. M&A

unit, opportunity, there Evolent It's our the the to that to of management going a nothing around utilization that We to changed up happen that can do M&A the be operation, business leadership. customers it's there. to teams do operation, whether really to have, the as a have Philippines front, capital are important is set steady The we're great it technology our also capabilities happens I'd our It job and think supporting And job Pune it we good contributor. has actually meaning specialty is right? team, continue for focusing our also say on market sit business. inside be it's that not a And anyway. M&A not

some completely. is between support there So These cross aren't well. silos the units as business

much, answer question, of while, not And yes, Health I'd We we're doing at those your specialty time dimension as there capabilities been Evolent ways are we on also capital to support it so that and which that's that big to Services. our need I and there focusing in do opportunity this the we expense think utilize the for begin this have side. have we'll the to other dollars don't growth to specialty, used a but is, over

Seth Frank

here. getting in we're close know I questions to other Great. Okay. the time Any queue?

Operator

further are questions at time. no There this

Seth Blackley

you to Okay. of Great. Thanks, couple forward over good everybody. with next John days. Have and the night. connecting I a look

Operator

disconnect. today's now presentation, has you you and concluded. may Conference attending Thank for now

Evolent Health (EVH) 2 Nov 222022 Q3 Earnings call transcript