Evolent Health at Canaccord Conference: Strategic Growth and Challenges

On Wednesday, 13 August 2025, Evolent Health (NYSE:EVH) took center stage at Canaccord Genuity’s 45th Annual Growth Conference. The company highlighted its strong Q2 performance, marked by exceeding EBITDA expectations, while also addressing challenges such as revenue guidance adjustments due to strategic timing shifts. As Evolent Health navigates these complexities, it remains optimistic about future growth and partnerships.

Key Takeaways

• Evolent Health outperformed on EBITDA, prompting an increase in the lower end of their guidance.
• The Aetna partnership go-live was delayed to Q1 next year, impacting revenue guidance.
• Oncology costs are trending below the guided 12%, with a conservative approach maintained.
• Evolent aims for 20% annual EBITDA growth, leveraging AI technologies.
• Anticipated cash from operations for the rest of the year is $65 million.

Financial Results

Evolent Health’s Q2 2024 results showed a strong performance, with EBITDA surpassing expectations. This led the company to raise the bottom end of its EBITDA guidance for 2024. However, revenue guidance was adjusted downward due to timing shifts, including the delay of the Aetna partnership go-live to Q1 next year and a regulatory delay for a performance suite state until September 1.

Operational Updates

• The Aetna partnership go-live was postponed to ensure proper data exchange.
• Stricter data and contractual protections were implemented for performance suite contracts.
• Over 80% of prior authorization requests are now processed through the Evolent portal.

Future Outlook

• Evolent Health is confident in meeting or exceeding $2.5 billion in revenue for 2025.
• The company targets 20% annual EBITDA growth through organic expansion and AI-driven margin improvements.
• Plans are in place to delever by one turn per year, enhancing financial stability.

Q&A Highlights

• Evolent Health is enhancing data connectivity and interoperability, focusing on managed care partnerships.
• The company views regulatory requirements as a potential tailwind for its prior authorization processes.

For a detailed understanding, readers are invited to refer to the full transcript below.

Full transcript - Canaccord Genuity’s 45th Annual Growth Conference:

Richard Close, Analyst, Canaccord: All right. We’ll go ahead and get started with Evolent Health. So good morning. Thank you for attending the conference. I’m Richard Close, and I cover digital and tech enabled health here at Canaccord.

Excited to have Evelyn here again. Excited to have CFO John Johnson here. So I don’t think you’ve been to this conference.

John Johnson, CFO, Evolent Health: The CEO does this for me.

Richard Close, Analyst, Canaccord: Yeah. Usually, is here, so we’ll probably get into a little bit more numbers than we usually do. So with that being said, John, thanks for attending the conference and the support Evelyn has given us over the years attending these. But, you know, last week was extremely hectic for us for us on the sell side. Most of my company’s reporting last week.

You guys did on Thursday, which we had a bunch. But just, you know, give us a quick snapshot on the quarter. Yeah. There was some volatility in the stock. You know, we’ll dig in deeper on specifics, but maybe, you know, just the high level, what we should take away from the second quarter and then looking forward.

John Johnson, CFO, Evolent Health: Yeah. So, you know, headlines for the quarter from our perspective started with outperformance on EBITDA, which we telegraphed a little bit in June. It is our policy this year to to be as transparent as possible on what’s going on in the business on a regular basis between the quarters given some of the dynamics that are facing the industry broadly, in particular with our customers in the MCO side. But our second beat on the EBITDA line, two for two so far this year, we’re feeling really good about the rest of the year, raised the bottom end of our EBITDA guidance as a result of that. And that that beat was really based on performance across the business, strong performance on the fee based side of the business, the tech and services side, and a continued favorable performance in the risk bearing side of the business, our performance suites, where as I suspect we’ll talk more about, we remain pretty conservative, in our reserving posture for this year, with forecasting a 12% trend in oncology for the rest of the year, but having experienced so far this year about a 10 and a half percent trend.

So leaning conservative. The last thing that I’ll note on the quarter on the the EBITDA side, and then I’ll talk a little bit about revenue. New piece of news today since we reported, we have closed completed our review of claims paid in June or sorry, July. It’s one more month of data and are seeing that trend continue. So we’ve seen favorable development on claims from the first half of the year in July and are are continued to see trends a little bit below our 12% forecast.

So that’s feeling really good. Obviously, one month out of the quarter, but nice to see that favorable development.

Richard Close, Analyst, Canaccord: When you say new news, was that in a filing?

John Johnson, CFO, Evolent Health: Or Nope. I just said it on the transcript.

Richard Close, Analyst, Canaccord: Okay. Good deal.

John Johnson, CFO, Evolent Health: Yep.

Richard Close, Analyst, Canaccord: Good to hear. So you talked about the, you know, EBITDA be you raised the low end of the guidance, but revenue came down

John Johnson, CFO, Evolent Health: It did.

Richard Close, Analyst, Canaccord: For for ’25. That more or less is some timing of performance suite, the risk based contracts. You know, what what changed there? Is there anything to be concerned with? Yeah.

Just thoughts on that.

John Johnson, CFO, Evolent Health: Yeah. I’d highlight three things on the revenue line that changed our outlook for the year. The first two are go live timing, and the third is shifting our guidance philosophy. The first two, we had we announced on Thursday, last Thursday, a large new partnership with Aetna for their MA population in Florida that we had anticipated would go live in q three. We now expect that to go live in the first quarter of next year.

It’s a little bigger. We’ve added the group MA lives to that deal in in addition to the individual MA lives. So nice to see that expand. The reason for that timing shift really gets down to ensuring that we have the right data exchange mechanisms set up between the two entities. As as you know, these risk arrangements live and die by data visibility.

And we’ve done a ton of work with all of our partners over the last nine months to ensure that we have really good monthly visibility into paid claims. And together with with the new partner, we concluded we needed a little bit of extra time to ensure that that was exactly where we needed it to be with Aetna before we went live to ensure a a a good go live that we can then hopefully earn the right to expand with them into other states. That’s the biggest change in the guide. The smaller piece of the change, was one, one performance suite state. We expected to, go live actually during q two, that got held up in a regulatory, item with the state.

It was unrelated to Evolent. That item has been resolved, and that will now go live in September 1. The third thing that I just note about the guidance this year, our typical guidance philosophy for the top line is to give a bottom end of the range that we would view as fully contracted. And then space for new go get growth beyond that as you go up in the range. When we updated the guidance for the rest of this year, we shifted the fully contracted point to the midpoint of our guidance to ensure that we had space if there were, for example, faster deterioration in exchange membership than we are currently forecasting.

And so that that’s the third piece of the waterfall on the revenue side.

Richard Close, Analyst, Canaccord: You know, talking about the Aetna contract moving to January 1 and the reason being the data, Does that prevent something from off the table something happening like last year where you got claims dumped on you I think several times if I’m not mistaken.

John Johnson, CFO, Evolent Health: Yeah. Yeah. It does. And that’s an area, as as I noted, where I have spent an inordinate amount of time over the last eleven months or ten months, since October, really ensuring across the board, both with existing performance suite customers and new contractual arrangements, that we have both the right operational setup in terms of the data feeds, the right operational reviews to sit down between our teams and our customers’ teams on a monthly basis, often including actuaries from both sides to review. Here’s how we’re seeing the claims develop and ensure that we’re having that regular communication, make sure that we’re not missing anything.

And then more and more having contractual protections in place that limit that liability. So we feel really good about having closed the door on that particular risk.

Richard Close, Analyst, Canaccord: So you’re saying the changes that you made last year, the more narrow corridors, getting the data, you feel like you’re in a good spot overall on all performance suite contracts?

John Johnson, CFO, Evolent Health: We do. That’s right.

Richard Close, Analyst, Canaccord: Okay. Good deal. Maybe talking a little bit about the cost trend in oncology, 12% is in the guidance, you’ve been trending below that. You know, how do how do you think about, you know, the or the not the opportunity, but the potential for spikes and

John Johnson, CFO, Evolent Health: Mhmm.

Richard Close, Analyst, Canaccord: You know, how that’s factored in Yeah. To guidance?

John Johnson, CFO, Evolent Health: Yeah. So if you look at the drivers of trend, there’s You can boil it down to two things. There’s the prevalence of the disease and there’s the cost per active month to treat. We have really good insight into the prevalence number because the vast bulk of the expenses that we’re on risk for require a prior authorization which happens before the cost is incurred, so we know it’s happening. The you then make an assumption on how those prior authorizations translate into claims, at what rate, and then you see that as it as the claims complete.

I’d note two things on the possibility for surprise. One is that the trends that we’re seeing in the authorization data have been nicely consistent across the board, even here into the first couple of weeks of August. That is quite distinct from what we saw and the industry saw last year, which was pretty significant volatility in that prevalence line across, you know, the quarters last year. So we’re seeing a lot more stability in the underlying driver of trend that that is prevalence. On the cost side, here, we’re also seeing stability relative to our forecast.

And at the same time, as we’ve noted, we remain pretty conservative in our reserving posture. And so despite having seen that trend in q two from the authorization data be around 10 and a half percent or 10%. We reserved higher than that on the cost side just to ensure that we’re adequately covered in case there is some adverse deterioration. So both through stability so far this year in these drivers of trend and through an increase in our aggregate conservatism, we feel quite good about where we’re positioned for the rest of the year.

Richard Close, Analyst, Canaccord: You guys have any insight into, like, what specifically caused the spikes last year and maybe the easing of that this year?

John Johnson, CFO, Evolent Health: Yeah. You know, I think the prevalence side, where we and the the industry saw such a spike in the number of cancer cases per thousand members, We have concluded at this point that it’s largely pandemic driven. I think we and and the rest of the industry had expected a sort of COVID bounce back that you saw in a number of other specialties, and it never materialized until last year. Candidly not sure why it happened in ’24 and not ’23, but we believe that was the primary driver of that. And that’s supported a little bit by the moderating of trend that we’re now seeing this year on the prevalence side.

Richard Close, Analyst, Canaccord: Just to jump back maybe on the Aetna contract, CVS Aetna. Obviously, looks like a great relationship. You have relationships with Centene and Molina previously, other large nationals as well. Can you talk a little bit about maybe the difference between the Aetna partnership and relationship versus some of the existing relationships?

John Johnson, CFO, Evolent Health: You know, the thing that I’d say that the the philosophy that we try to bring to this is we would love to be the enterprise partner of choice in our specialties. We think one of the things that we hear from partners, whether it’s some of the big nationals that you mentioned or regional plans, is there is a preference for vendor consolidation. You’ve heard even some of the big nationals mention that. We see Evolent as nicely positioned to be that consolidating enterprise partner, both through our breadth, having coverage of the biggest specialties that that drive cost trend, and the depth of our clinical value creation, which we believe to be industry leading. That’s the aspiration.

Now we think we have to also earn that growth. And so if you look at what we have been able to do and deliver on with some of these larger partners, you’ve seen us start relatively small and then expand meaningfully over time to new states, new populations, new specialties. And that is the playbook. That’s what we would love to do for each new partner over time as we’re demonstrating the value that we can bring and earning that growth.

Richard Close, Analyst, Canaccord: Good. Obviously, a lot of news and uncertainty coming out of DC, the signing of the one big beautiful bill. You talked some on the various aspects, expectations, how it impacts your book of business. Can you talk a little bit about the Medicaid and how you think about that? That’s a two, three year process down the road.

And then ACA, and and and what is the potential impact on your business? How have you factored that into your thinking?

John Johnson, CFO, Evolent Health: Yeah. So, you know, as we go with line of business, we see Medicare Advantage trend likely stabilized, return to normal industry growth next year that we expect to be a membership tailwind. On the Medicaid side, we’re anticipating the impacts from OB three, to mostly be in start in ’27. Certain states, you may see it earlier. Depends on how specific states implement those provisions.

But sitting here today, we’re anticipating that to be mostly a ’27 item. And then exchanges will will come next year, both with the expiration of the premium tax credits and some of the other changes that are both driven by the current dynamics in those risk pools, which are elevating expenses, which will then elevate premiums next year, and some of the policy changes. I think as we sit today, we’re fortunate that the exchange business is the smallest part of our business. It represents about 20% of our overall revenue And a smaller percentage as we think about EBITDA for next year when this would be relevant. Even absent changes, would be a smaller percentage of our EBITDA given where our growth is coming from and the the fact that in large part, the specialties in that population are on the lower margin specialties.

So radiology, for example, is a little lower gross margin for us than an oncology product, for example. Little early to stipulate what will happen to the exchanges. What we have sought to communicate clearly is given the depth of the weighted pipeline, which is over a billion dollars on a weighted baselist, both across performance suite opportunities and tech and services opportunities, we see a clear path to delivering on our goal, which is 20% EBITDA growth year over year in a wide range of potential outcomes for the exchanges. Okay.

Richard Close, Analyst, Canaccord: You know, a lot of the managed care does some of this themselves, and I’m just curious, you know, you guys have been effective in it, delivering the value to them in controlling specialty costs. Why, you know, why doesn’t managed care just turn everything over to you? Why why do are some people reluctant to to do it themselves or use competitors?

John Johnson, CFO, Evolent Health: Yeah. So let me say two things on that. We are seeing a trend this year. It’s a novel trend of a number of these managed care organizations that have historically done this work in house. Look for, an outside partner like Evolent.

Why are they doing that? I think it’s two reasons. One is really feeling the crunch on the medical expense side. And two, and this piece is a little bit newer this year, there are increasing regulatory requirements around shorter turnaround times, electronic, sort of response times, and other commitments, for example, that that AHIP came out with a few weeks ago around prior authorization. And it’s our view and what we’re hearing at the market that, the meeting those commitments, in a lot of cases, will take a partner like Evolent.

A health plan, we don’t think can do it themselves in a lot of search circumstances. And so that is one of the reasons why we think we have the size of the weighted pipeline that we have. There’s some entities in that pipeline, very active prospects that currently are doing this work internally, and looking to partner with an Evolent both to increase the clinical value, and clinical quality, but also to ensure that they’re meeting those commitments on turnaround time, provider friendliness, and member friendliness.

Richard Close, Analyst, Canaccord: Okay. So what you’re talking about is the prior auth pledge and reform that was people were talking about a month or two ago. And then maybe tying that back to the data integration, obviously, a lot of the pledge is to, you know, have that automation Mhmm. Digital, connectivity, and you’re saying that this could be a tailwind for Evolent.

John Johnson, CFO, Evolent Health: That’s right. That’s right. We already drive more than 80% of the requests that come into Evolent come through our portal. That’s our vastly preferred approach. And we have important investments in, the data connectivity and interoperability, which becomes an industry standard in 2027 Mhmm.

That we think will further differentiate our platform.

Richard Close, Analyst, Canaccord: Have you guys been part of any of the talks with AHIP and Yeah. HHS or

John Johnson, CFO, Evolent Health: Absolutely. In that? Yeah. You know, we seek to in part because we we’re we’re headquartered in, Arlington just outside of DC. We seek to be involved in those conversations and make sure our voice is heard in what we think are the the best directions for for value based care.

Richard Close, Analyst, Canaccord: Okay. Maybe moving on to new business, Year to date, I think it’s 11 new relationships, if The I’m not pipeline sounds like it’s pretty robust. You gave some high level, I don’t want to say guidance because you didn’t say it was guidance, but thoughts on 2026. And maybe, you know, talk about that a little bit and then the confidence level, what’s in there as a go get that you haven’t signed?

John Johnson, CFO, Evolent Health: Yeah. So we put a stake in the ground that given the business that we’ve already signed plus the size of the weighted pipeline, we feel very confident in meeting or exceeding $2,500,000,000 of revenue next year. The the way you get there is with 1,900,000,000.0 approximately in 2025, plus 250,000,000 from the announcements that we made last Thursday, and then 350,000,000 of net growth from that weighted billion dollar pipe. And that space, right, you’ve weighted it to a billion and you’re further hair cutting it by a lot, is one of the reasons that we get comfortable with that expectation setting even this early in the year. And it is our aspiration and expectation that we will be making incremental growth announcements across the fall.

Richard Close, Analyst, Canaccord: And any thoughts on EBITDA?

John Johnson, CFO, Evolent Health: Other than, you know, we continue to see this opportunity of growing adjusted EBITDA by 20% a year, is the growth algorithm. There’s a number of ways to drive that, both organic growth and margin expansion, both through AI in the tech and services suite where we have a lot of initiatives driving value and in margin maturation in the performance suite.

Richard Close, Analyst, Canaccord: Maybe hitting that on the AI really quickly. You know, when you acquired the Machinify technology

John Johnson, CFO, Evolent Health: Mhmm.

Richard Close, Analyst, Canaccord: Couple years ago, I believe Seth had laid out some targets. Yeah. Where do you stand on reaping the benefits of AI versus maybe those initial targets?

John Johnson, CFO, Evolent Health: Yeah. So we have a target to exit this year with a $20,000,000 net improvement in our unit costs, and that is on target. We feel good about hitting that number. Over the longer term, we’ve set an expectation that we can drive $50,000,000 of net EBITDA benefit over a multiyear time frame. So that would the 20 is getting us part of the way there, and then we would expect to exit ’26 at a higher savings number and so on.

So we feel really good about that hitting that target and in the ways that we’re using that kind of technology to further differentiate the platform.

Richard Close, Analyst, Canaccord: Alright. We have about a minute left. It’s probably good to hit the balance sheet and cash flow

John Johnson, CFO, Evolent Health: Yeah.

Richard Close, Analyst, Canaccord: How you’re thinking about those trends in terms of cash flow and, you know, use of capital Yeah. Over time.

John Johnson, CFO, Evolent Health: Yeah. Three important things to hit. You know, we have an expectation that we will generate about $65,000,000 of cash from operations across the rest of the year. The that will we would consider back to normal. We did have in the first half of the year about $85,000,000 of onetime uses of cash settling up for losses in the performance suite last year that have since been restructured and can’t recur structurally with the the way the contracts are and some lease termination penalty or payments that have been that have been made.

So that’s $85,000,000 of cash used in the first half that won’t recur. And as we look at the back half and into next year, we typically expect to generate cash from operations of 60 to 70% of EBITDA. Feel really good about that. On other sort of capital allocation priorities, look, we are focused on delevering, and I think we will seek to execute on that plan with an expectation that we can delever by about one turn per year with a combination of EBITDA

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