Q2 2021 Evolent Health Inc Earnings Call

Welcome to Evelyn Health earnings Conference call for the quarter ended June 30, 'twenty 'twenty 1.

As a reminder of this conference call is being recorded your host for the call today is Mr. Seth Blackley, Chief Executive Officer of Evelyn Health.

This call will be archived and available later this evening and for the next week via the webcast on the company's website in the section entitled Investor Relations.

Here is some important introductory information.

This call contains forward looking statements under the U S. Federal Securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations a day.

Ascription of some of the risks and uncertainties can be found in the company's reports that are filed with the securities and Exchange Commission, including cautionary statements included in the current and periodic filings for additional information on the company's results and outlook. Please refer to its second quarter News press release issued earlier today.

As a reminder of reconciliations of non-GAAP measures discussed during today's call to the most direct comparable GAAP measures are available in the company's press release issued today and posted on the Investor Relations section of the Companys website I R.

The Avalere health Dot Com and the 8-K filed by the company with the SEC earlier today.

At this time I will turn the call over to of the company's Chief Executive Officer, Mr. Seth Blackley. Please go ahead.

Thank you and good evening.

Blackley, Chief Executive Officer of everyone Health and I'm joined by John Johnson, Our Chief Financial Officer.

I'll open up the call. This evening with a summary of our recent results, including an update on our key investment themes, which are 1 strong organic growth.

2 expanding EBITDA margins and 3 efficient capital allocation.

Next I'll share highlights from across the business and how our differentiated solutions drive value for our partners.

Before providing details on our recently announced the transaction with vital decisions of.

Then handed the John to take us through a more detailed financial review of the second quarter results as well as provide third quarter guidance.

I'll close of the summary of our key focus areas as always we'll be happy to take questions at the end of the call.

We've shared a summary of our quarterly financials and highlights and an overview of the vital decisions transaction for your reference in the presentation available on the events section of our IR website.

<unk> dot everyone health Dot com.

In terms of the financial overview of results for the quarter total revenue for the quarter ended June 32021 was $222.1 million.

The EBITDA for the quarter ended June 32021 was $13.3 million.

As of June 32021, we had a total of $12.2 million lives on the platform, including approximately 3 million lives on the full platform.

Just an additional $9.2 million lives on our new century health technology and services suite platform.

Overall, we're very pleased that we achieved our key financial objectives for the quarter and we feel good about our visibility into the quarters ahead.

Turning to an update on our 3 investment themes are revenue result represents year over year organic growth of 42, 3%, which excludes the divested assets as we continue to deliver on our first investment theme of strong organic growth.

Our subscription based model gives us a high level of visibility into our forward revenue and we're happy to be increasing our guidance for this year and we believe were very well position headed into 2022.

I'm also excited to announce today 3 additional partnerships, bringing our total this year to 7 on a weight of meeting or exceeding our target of 6 to 8.

First of all care partners has entered into new partnerships with patient physician network and bond clinic. These 2 new high quality physician groups represent an exciting expansion of ethylene of care partners presence in Texas and initial market entry into Florida, and both present opportunities for future growth.

Patient physician network represents a new relationship and everyone of care partners existing Texas market and we've had entered a new state with the addition of bond clinic in Florida.

In addition to the lives of launching in January 2022, as part of visa arrangements. The total addressable population for these 2 geographies is approximately 2 million lives, providing strong expansion opportunities across 2022, 2023 and beyond with the expansions announced today, we have 1 of care partners now has the.

Our presence in 7 states.

Second we signed an agreement with Molina, Ohio to provide new century health Cardiology services for approximately 160000, Medicaid and exchange members through the new century health performance suite product expecting the launch during the first half of next year.

The signing is particularly exciting because it demonstrates our ability to expand organically with our base of large national payers and risk bearing providers.

It also serves as proof of concept for our ability to expand our relationship from the technology and services suite to the full performance, we as we prove our value proposition to our customers.

As a reminder, our performance <unk> or over an order of magnitude higher than the technology and service we'd be mpls.

Inclusive of Ohio, Kentucky, Washington State and other accelerating state level conversations within Molina, we see a path to approximately $75 million in annualized revenue by early to mid 2022 across our Molina new century relationship with.

With over 9 million lives on our technology and services suite, the new century health opportunity to expand.

Performance suite for both cardiology and oncology is a very large growth opportunity for our company <unk>.

Conversion of new century's 9 million technology and service, we'd live to the performance, we would represent over $3 billion and increased annual revenue at typical P. M. P. EMS.

Given this opportunity given the size of any 1 new state going forward, we will treat new state level performance suite signings within our existing payors as new partner announcements for the purposes of our 6 to 8 annual signing target in.

In addition to adding new logos will be putting continued focus on expanding with our larger installed customers. For example out of our largest 10 customers buy membership. We currently address only approximately $10.5 million lives of the more than 35 million lives covered by those relationships.

Yeah.

Finally, we continue to see strong same store growth across the rest of the business for.

For example, everyone care partners of signed agreements with the large national payer to expand its existing footprint life base and the state of Texas, providing our total cost of care management services across a portion of the payers Medicare advantage and commercial plans. We're excited about the shared savings based partnership because it is everyone care partners.

First contract supporting Medicare advantage and presents an opportunity to drive clinical quality and financial performance across our growing Medicare advantage eligible population of the state of Texas. In addition to expanding our commercial presence in the state.

Ensuring that the strong growth drops to the bottom line is our second investment theme.

As we continue to drive expanded adjusted EBITDA margins.

We're at a margin of 6.5% year to date, an improvement of 320 basis points over last year, and we continue to make nice progress on our strategic cost initiatives.

Finally, turning to our third theme, we remain focused on efficient capital allocation, John will discuss our capital strategy in further detail as we continue to focus our priorities on 1 enhancing our core business through organic product investments to disciplined targeted and accretive nonorganic investments.

To accelerate our core business and 3 maintaining a strong balance sheet with reasonable debt coverage.

In conclusion, we've made significant progress on our 3 key themes and feel very good about the momentum for the second half of this year and headed into 2022.

Turning to updates on our 3 solution areas I couldnt be prouder of how our employees continue to deliver for our customers and the 12 million members on our platform the.

The dedications day bring underpins our ability of the main strong customer relationships, which we continue to see across the business.

Starting with new century health, we're excited that 2021 marks our 10th anniversary supporting Humana, 1 of the most sophisticated and high growth payers and the health insurance market.

Fortunately, we have consistently expanded our work with humana over the last several years, which speaks to our strong ROI and focus on customer satisfaction.

Just recently, we have added new capabilities like our dose rounding module within care pro expanded our performance suite into neighboring geographies and added cardiology in other geographies with the rapidly accelerating pressures from the specialty drug pipeline expansion of part D spending in oncology and the increasing importance.

Of genomics across cardiology and oncology.

We look forward to continuing to support humana's growth member quality cutting edge innovation and cost management.

Turning to of won't care partners. We're excited to now support independent physician groups covering close to $1 billion in health care spend.

Our support of these physicians drives increased quality and increase physician compensation, leading the strong patient outcomes and very high year over year physician retention of our network in Q2.2021 alone. The Everland care partners network addressed approximately 18000 clinical improvement opportunities of which 6.

We're high impact of interventions.

Leveraging our proprietary real time stratification models through our identified technology platform ensures that each physician in the network is prioritizing the highest impact interventions of.

Optimizing health outcomes for their patients and maximizing their own compensation.

Finally, I'll highlight a few examples of how we're driving value for our customers that have on health services.

We recently deployed 2 new innovation through machine learning optical character recognition and natural language processing that automate steps in the claims process resulted in improved quality faster delivery and lower unit cost structure, enabling partners like Maryland physicians care, who went live with US earlier this year to ensure top notch.

Service to their members and network providers. Additionally.

Additionally, our work with 2 large acos has yielded shared savings, resulting in an operating margin of 28 and 29% respectively.

Across the last 4 years of operations and of similar vein, our partnership with County care, which began in 2016 has enabled that plan to grow significantly while sustaining the lowest administration expense ratio of among Medicaid MCR in Illinois with a solid operating margin.

Everyone Health services operational performance and high partner satisfaction of County care were important factors in the plan as decision to expand with us, adding new century health in 2019, which tripled the size of the partnership.

Most recently, we finalized an amendment with county care for additional quality related services, including risk adjustment and provider scorecards through everyone Health services.

In addition to driving value for our partners. We also collaborate on creative strategies to support the organizational and community focused goals recently, we issued a request for information for Certifier of both African American minority organizations to support our health plan operations accounting care this opportunity aligns closely with our deep commitment.

Promoting diversity equity and inclusion as well as the supplier diversity goals of Cook County in the state of Illinois.

Now, let me say a few words about our renewal environment, which has been strong so far across this year.

Across the business, our average annual renewal rate, excluding divested assets has been 109% since 2019, driven both by the value that we create for our customers and by the way our product offerings of work well together.

Of all care partners, our model of physician engagement is performing well.

And it has enabled us to retain 98% of our network physicians between 2020 in 2021.

And that won't health services, our contracts are typically 3 to 5 years in length. We're happy that we've recently renewed and expanded our work of Somos, an independent physician group in New York to coincide with their significant membership expansion also as we passed the 5 year, Mark serving county care, we expect to hit our normal course renewal discussions for our administrative.

Services later this year for the contract period started in 2023 of.

These services account for a little less than a third of our revenue from county care and we feel we're well positioned for the renewal and to continue to grow our relationship with county care.

For new century health of our customers are typically on evergreen annual contracts, whether the average annual customer tenure exceeding 5 years, demonstrating strong renewal dynamics further our recent expansions of Centene Molina and Humana are additional evidence for the ROI of our service and the satisfaction of our payer partners.

Overall, we feel very good about our performance headed into 2022, and we feel very well positioned to drive strong continued growth across our client portfolio.

Next I want to provide a summary of the acquisition of vital decisions that we announced today.

As mentioned earlier I'll reference the presentation posted on the events section of our IR website for this portion of the call starting with slide number 8.

We're obviously very excited to be acquiring vital decisions, a leading technology enabled services business specializing in advanced care planning to address a critical unmet need in the broader end of life space.

Founded in 2006 vital decisions ensures that the care received by individuals with advanced illness aligns with their values and changing preferences throughout the last years of life.

Today here in the last 12 months of life incredibly accounts for over 20% of total health care spend in the United States.

And up to 35% of cost at the end of life or from unwanted care driving excess spending and significant patient harm.

Vital decisions addresses this issue with behavioral health specialists advanced technology data science, and motivational interviewing to elicit document and share patient preferences and goals of care, which play a critical role in the end of life care continuum similar.

Similar to new century health vital decisions sell services, the payors and deliver strong ROI out of those clients, while improving patient quality and satisfaction.

Vital decisions of the business model is fee based and drive recurring revenue.

<unk> will cover in a moment of the acquisition is EBITDA per share accretive before assuming any synergies.

The strategic rationale for the vital decisions acquisition is threefold.

First we believe the transaction will strengthen vital decisions existing offering which of day focuses on the patient, but does not engaged directly with the provider of.

Of course, new century health today focus is primarily on influencing providers, but often not the patient directly.

Putting these 2 parts together creates a significant opportunity given the cancer and heart disease, where new century health is focused today accounts for more than 50% of the end of life care opportunities in the United States. We believe new century health can drive meaningful cost and quality improvements in these 2 specialties.

Second we expect vital decisions to accelerate the growth opportunity and profitability of new century health.

The company is highly complementary of the new century health existing business, which presents near and long term growth and cross sell opportunities only 27% of vital decisions customers. Our current new century health customers and only 18% of new century health customers are vital decisions customers.

We believe we will be able to continue the strong track record of the new century sales team driving growth.

Additionally, we believe vital decisions capabilities can drive higher EBITDA at the end of life capabilities patient engagement and telehealth have the ability to reduce the total cost of care driving margins of our performance suite product.

Third we see strong go forward product opportunity for the combined solutions, given we expect vital decisions to act consumer patient engagement and telehealth capabilities. The new century health, So with new century health 19 years of physician engagement and vital decisions 15 years of patient engagement and Tele health.

Experience, we believe this product integration should increase the product stickiness sales conversion and profitability of both products.

Turning to the transaction overview, which is profiled on page 8.

The transaction has an $85 million purchase price of close plus an earn out of up to $45 million based on Q4.2020 to run rate EBITDA from maximum purchase price of $130 million. The upfront consideration will be funded with 50% cash of 50% equity with the cash consideration of funded with.

Cash on hand.

The earn out will be funded with up to 50% of 1 equity at our discretion and the remainder of funded with cash the true.

<unk> is subject to certain customary closing conditions and we expect it to close later this year with no impact on our top and bottom line guidance, given the size and timing of the transaction.

1 of the transaction closes the talented vital decisions team and management will integrate into new century health.

In terms of a quick overview of vital decisions financial profile as of June 32021, vital has annual revenue of approximately $20 million and approximately $3 million to $5 million of go forward EBITDA. The business has 55% to 60% gross margins and strong top line trajectory with year to date revenue.

Through June 32021 up over 40% versus the same period in the prior year.

<unk> currently covers approximately $2.9 million members across 12 health plans nationally. Additionally, we believe this transaction has an attractive valuation profile vital as anticipated 2022 contributions of approximately $5 million of adjusted EBITDA before any synergies.

The upfront valuation of approximately 17 times EBITDA before any synergies and a total maximum valuation of 15 times Q4, 2020 to run rate EBITDA, which would be up to a $130 million of total purchase price.

Together, we believe this will be a nicely accretive acquisition that connects to our key investment themes of emission.

Coming back to the problem vital decisions addresses and the end of life care space I'll refer to slide 10.

The company drives reduced spend at the end of life by adhering to patient preferences again over 20% of expenses occur in the last year of of members life and 35% of costs at the end of life or from unwanted intensive care for patients who prefer hospice and homecare. The fact, 71% of adults have no knowledge of.

Palliative care, 89% wanted to discuss end of life issues with their doctors, but only 70, 17% do these.

These issues of highlighting the toga, 1 days book being mortal.

Which places a sharp focus on the human suffering associated with the end of life mismanagement. The quote on the right side of slide 10 highlights the opportunity in cancer care to alleviate suffering reduce health care costs, while actually increasing expected lifespan.

Palliations enrollment by 25%.

Next I want to turn to slide 11, and a deeper summary of the vital decisions capabilities vital has the dedicated virtual team that leveraged its market, leading predictive analytics models and member facing digital platform to facilitate advanced care plan of patients. We look forward to leveraging the strong track record of the new century health team.

To achieve cross sell opportunities in both directions and also expand the integrated offering.

Turning to slide 12, we believe the acquisition will add important capabilities to the new century health portfolio and presents strong opportunities for our company going forward in the consumer space.

Not factored into any of the financial numbers shown today. There are a number of strategic product extensions. We can consider in the future to build off of vital decisions patient engagement and telehealth platforms that could further strengthen our core business.

Closing out the vital decisions discussion on slide 13, we think this is an exciting acquisition that is fully consistent with our 3 investment themes. We believe the vital decisions can accelerate new century health growth opportunity through strong 2 way cross sell opportunities and enhanced core offering vital decisions of margin profile.

Higher than Avalanche of average and we would expect it to increase core new century health margins as well lastly, the use of capital for this transaction, we believe will accelerate our company's growth and margins, while being accretive and keeping our leverage ratios in line with our expectations with that ill turn it over to John to give more details on.

Of our financial performance in the quarter as well as to provide guidance.

Thanks, Pat and good evening, everyone. Overall, we are pleased with another strong quarter of execution across our enterprise year over year organic growth, excluding divested assets was 42, 3% compared to the same period in the prior year growth is ramping across all areas of the business and has been particularly strong within our clinics.

<unk> solutions segment, which has benefited from multiple new go lives and customer expansions at new century health of.

These new go lives drove the net sequential increase in revenue of $7 million over our consolidated first quarter results.

Year over year, adjusted EBITDA margin expanded by 117 basis points to 6% for the quarter consistent with our plan margin expansion trajectory. We are pleased to report that our cost reduction effort, bringing further automation and machine learning to the administration of health care is proceeding ahead of schedule of setting up the compelling unit cost.

Profile for our future growth, especially in our excellent health services segment.

As importantly continued strong growth in our clinical solutions segment brings with it further margin expansion tailwind as our newer partnerships mature in the coming years and ramp to full impact from our value based approach recall that our flow through margin in these businesses can increase by 2 to 3 ex over the first couple of years.

As we stand up our clinical programs and drive the highest clinical quality and outcomes through the network.

Cash usage in the quarter was minimal with Q2 ending available cash of $141 million, excluding cash held in regulated accounts for passport down <unk> 5 million from Q1.

Cash deployed for software development and purchases of PP&E, which 5.5 million net debt, which we define as the face value of our convertible notes less available cash was $176.2 million at quarter end, resulting in a net debt leverage of 2.8 ex versus LTM adjusted EBITDA.

Now let me take you through consolidated and segment specific results before briefly discussing our capital allocation strategy than ending with an update on guidance.

Revenue of $222.1 million in the quarter represents an increase of 2.2% year over year more importantly revenue less divested assets of $218 million increased 42, 3% from $153.2 million in the prior year due to growth from new partner additions.

<unk> as well as same store sales growth adjusted.

The adjusted EBITDA grew to $13.3 million relative to $10.5 million in the same period of the prior year.

Turning to our segment results within our clinical solutions segment revenue in the second quarter increased 12, 6% to $147.2 million up from $130.8 million in the same period of the prior year ex.

Excluding revenue from divested assets clinical solutions revenue grew 52%.

Adjusted EBITDA from our clinical solutions segment for the quarter was $13.6 million compared to $12.2 million in the prior year.

Membership in our full platform for clinical solutions was $1.5 million relative to $1.4 million in Q2 of the prior year with the PM TM fee of $32.39.

First is $31 and <unk> <unk> for the same period of the prior year.

Membership in our new century health technology and services suite for clinical solutions.

With $9.2 million relative to $4.9 million in Q2 of the prior year with the Pn PMT of 37.

Versus the <unk> of <unk> 40 in the same period of the prior year.

Within our everyone's health services segment second quarter revenue decreased 13, 6% to $75.3 million down from $87.2 million in the same period of the prior year and largely driven by the disposition of passport, partly offset by new partner additions ex.

Excluding revenue from divested assets at <unk> Health services revenue grew 28%.

Adjusted EBITDA from our <unk> Health services segment for the quarter was $6.5 million compared to $6.9 million in the prior year membership and our full platform for Avalon Health services was $1.5 million relative to $1.8 million in Q2 of the prior year with the <unk> of $13.81.

Versus $14.78 in the prior year.

Finally, corporate costs decreased 21, 4% to $6.8 million down from $8.6 million in the same period of the prior year the.

This decrease was the result of continuing to execute on our commitment to reduce overhead while still delivering strong operational and clinical performance for our partner organizations.

Before I turn to guidance, let me walk you through how we are prioritizing our capital allocation strategy.

Consistent with our investment themes, our capital allocation is focused on driving profitable growth in our core services business, while maintaining a reasonable amount of leverage for a company of our scale with the ultimate goal of driving the best result for our shareholders.

Our first priority is towards internal product development and enhancement. We believe we have an industry leading set of solutions and we continue to invest to make them industry, leading this year alone, we expect to deploy more than $45 million in product development, and R&D of which approximately $25 million will be capitals.

<unk> of software development, we believe this development cost leveraged across the 12 million lives on our platform is critical to driving customer performance, which in turn propels our growth and profitability.

Our second priority is towards strategic acquisitions that accelerate and complement our current the solution framework.

We believe the vital decisions transaction is a superb example of this objective and that it adds important capabilities to our platform of patient engagement.

Accelerates our growth within new century health and is accretive on a go forward basis.

Our third priority is to ensure an efficient capital structure.

To this end, we will generally seek to maintain a reasonable net leverage level and prudently manage our cash interest maturity of timing and other financing costs.

Finally, turning to guidance, we are increasing our full year revenue guidance to between 870 million of $900 million, an increase of $22.5 million at the midpoint versus prior guidance principally driven by the momentum established during the first half of the year across both new customer go lives.

And existing customer expansions. We are also increasing our annual adjusted EBITDA guidance to between 50 and $58 million, an increase of $7 million or 15% at the midpoint versus our prior guidance.

We expect our second half EBITDA will be slightly weighted towards Q3 with Q4 modestly impacted by onetime go lives of expenses for our previously announced large health plan clients that will go live in January 2022.

Regarding vital decisions, we expect minimal impact from the acquisition on our guidance in 2021. After the transaction closes we will report vital decision results in our clinical solutions segment as a part of the Tech and services suite and for clarity in terms of cash usage. The initial consideration of provider will be force.

The $2.5 million in cash with the rest in equity.

For the third quarter, specifically, we are forecasting total adjusted revenue between 215 and $230 million and we are forecasting total adjusted EBITDA of 11 million to $15 million.

With that I will turn it back over to Seth.

Thank you John in summary, we remain confident in the execution of our investment themes of 1 driving strong organic growth and achieving our mid teens growth target too.

To scaling the business to drive enhanced margins and 3 efficiently allocating capital.

Thanks to everyone for participating in tonight's call with that we'll end our formal remarks, and we're happy to take questions.

We will now begin the question and answer session to ask a question you May Press Star then 1 on your telephone keypad.

If you are using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then 2.

At this time, we will pause momentarily to assemble our roster.

Yes.

And our first question will come from Ryan Daniels of William Blair. Please go ahead.

Hey, guys. Congrats on the strong first half of the year and all of the progress and on the final decisions transaction I wanted to dive a little bit deeper into that can you talk a little bit more about the background of that product and how it leverages not just communications with patients and engagement, but also kind of care guidelines and how are you.

Thank you can enhance that perhaps with your oncology and cardiology offerings to kind of integrate more of best practices.

Not only of better patient experience, but maybe lower cost and better outcomes, especially the patient's approached the end of life care.

Yeah, Hey, Ryan it's a great question. So if you think about what what vital does today they.

They use their algorithms and their technology to identify a group of patients out of a larger population that they want to reach out to communicate with build out of care plan around that individual's preferences and they do that directly on behalf of the payer reaching out directly to the consumer of the patient.

And they do it.

Basically of telehealth platform and it works well and they have great results and it's.

<unk> performed well for the payer clients that they have but if you think about what new century does and think about the cancer. As an example, and I mentioned cancer cardiology of 50% of end of life situations, we have incredibly deep relationships with the cardiologist and the oncologists and so our ability to coordinate let's say let's.

These cancers of for instance, with the oncologist and get aligned between the oncologist vital decisions new century, and the patient and get that entire group on the same page and the families. Frankly, we just think we can have considerably higher levels of engagement and an overall lower.

Costs in general what happens is patients are on average in many cases cancer being a good example, receiving far more care far more chemotherapy as an example, and they really want at the end of life and so the ability to get those things aligned and as I've said add our ability to bring the oncologist into that conversation and get everybody on the same page.

We think is the big a Big addition, and again, we connect directly with patients today through new century, but the.

The masters level behavioral specialists. The vital has we think we'll be able to take that to another level of particularly around the end of life conversation. So it really is 1 of these wonderful examples of bringing 2 things together that really should belong together and are very excited about it.

Is that the type of offering where even if you don't cross sell you can probably see integrate some of the solutions into your current business to drive that.

Outcomes and cost savings and maybe benefit financially of benefit through expanded contracts because of the enhanced value proposition.

Yes, absolutely.

So we are going to be trying to do both but if you just to answer your question specifically the answer is absolutely, yes, particularly when you think about our performance suite right well, we're accountable for managing the total cost of care on behalf of the payer and the ability to engage the patient in these end of life opportunities has we think of very significant opportunity.

Peter.

Frankly, reduce the cost and as I mentioned, the prepared remarks that often amazingly.

Ends up in the happier patients longer lifespan and so it's 1 of those win win situations and being able to bring that in 2 of the cardiologists and we would be in integrating and embedding this outreach into care pro right. So the the oncologist is brought into the process from a technology perspective data perspective.

Ultimately ended the end of the conversation directly with the patient and their family.

Okay very helpful. And then switching gears you've discussed the Molina contract, that's quite impressive and I wanted to get a better feel our understanding for the revenue the Tac.

Actually likely to hit a run rate versus what could be of potential.

<unk> revenue. So I think you mentioned something like $75 million is that.

Do you think you will actually be on a run rate upon full implementation or is that the opportunity longer term. If you can continue to penetrate within the client.

Yes, so just just with a little context and I'll answer your question specifically Ryan look we're excited about <unk>, it's a great team we've had.

Been there for now over 6 months in terms of doing work with them and have had a chance to.

Prove out the value proposition that we have and so we're really excited about it we're excited about now being in 3 states, but probably most excited about kind of the proof case of going from.

The Tech services suite with our relationship into the full performance suite and so that is a big deal. We think given that we have $9 million Tech services lives in the that conversion is very interesting to us and we think it's very attractive for our partners as well so thats playing out like we hoped the 75 million as of.

A specific number that we'd be at on a run rate basis next year, and we gave a little bit of timing guidance around that so it's not a pie in the sky. We hope we get there, but it's something we see direct line of sight to based on the things that we're doing right now.

Okay perfect. Thanks for all of the color and again excellent performance guys. Congratulations thanks, so much.

Thanks Ryan.

Yes.

The next question comes from Charles <unk> of Cowen. Please go ahead.

Yes, thanks for taking the questions.

Wanted to ask about.

The renewals.

I think al Cook County is 1 that you talked about youre doing some initiatives for the hit some.

ESG related metrics.

That contract in particular is there anything about that in terms of renewal of debt.

Some of that.

Is worth calling out here or or is that a is that 1 that's on sort of a continuous.

Evergreen kind of status.

Yeah, let me.

Give you a little context on county care were were about 5 years into that relationship on the of 1 health services side and partnership has gone actually very well and.

Excited to be kind of lowest cost of administrative ratio. If you look at the moment of benchmarks in the market.

Highest quality and the likes of Theyre, great partner of Theyre, very happy partner and we spend a lot of time with them.

Generally speaking.

The end of 5 years, the county guidelines call for renewing all contracts. So we're kind of at that normal course renewal process at all.

Our expectation would be that they would.

Have a more formal vendor procurement process across the next few months and so it's kind of normal course, what we expected and again this is for 2023 renewal.

Charles will be clear and also just focused on everyone health services, which is kind of a third of that overall county care relationship.

We feel feel very well set up for.

Okay. That's helpful.

And then maybe if I.

When we look at on the clinical solution side.

The performance suite versus the Tech and services you kind of highlighted that if you can transition all of the tech and services.

Members of the lives over to performance suite, that's about $3 billion in revenue.

So far like what has that kind of conversion rate looked like for you sort of on an annual basis and.

What do you what do you see helping you drive maybe of faster conversion of that and then secondly, when we think about lives between Medicaid and Medicare can you give us kind of a split.

I know you talked at <unk>.

<unk> services is driven more by the growth of Medicaid versus performance of it which has been driven more of the Medicare book.

Maybe you can give us a split of what that kind of looks like currently in terms of lives.

Yes, sure Charles Let me take the first 1 and I'll pass the second 1 day, John So on the on the conversion question. We just got got announced with going live with this tech services piece right. The beginning of this year and I think it's going to take.

$6.12, plus months of performance to really show the value and then have the opportunity to come back have those conversations and then look at a given state of market, particularly where there may be some pain for that given payer or risk bearing provider and they need our support in greater detail and so I wouldn't expect to have a lot of data point.

6 months into it although it's nice to have 1.

But I think later in the year and into next year, we'll have a lot of additional data on the opportunity to continue converting that but that's part of the design is to be able to move quickly get out across the market of generates nice operating income as well, but it also is going to get us.

To a position of bit of have those conversations later this year and into next year.

And Charlie maybe.

Go ahead.

So I'm sorry to jump in and out of your last question.

Yeah. So on the lives of question.

A little over 50% Medicaid right now.

Hey, if you want a more detailed breakout we do have that within our Q and then page 19 of the pack that we put up on our website that breaks down by segment by line of business.

That should give you some color there generally what we see on the PM TM basis is Medicare of Medicare advantage and Medicare fee for service tends to have a higher RPM PM the services of more complex.

Medicaid so that's some of the.

The dynamics that Youll see in our <unk> of our time and hopefully that gives you the answer you're looking for.

Okay, Yeah all.

Look through that and maybe just lastly on vital decisions.

So if you you talked about being poorly managed what to pay.

Here's what our peers doing too.

Manage sort of end of life cost currently yours or is it just not doing much at all.

Yes look I mean, they're there on <unk>.

Fortunately there is not that much going on if you look broadly in that as you look at some of the data points that I mentioned at 89% of people want to have the end of life conversation of 17% are actually having those conversations.

So.

Unfortunately, the market is incredibly immature here and there are some players that are doing the actual palliative care work, but we see a bigger part of the problem is upstream from that meaning how does the family and their patient.

Coordinate with their position to make these decisions right and get clear on those decisions before you're in the in the crisis itself and that to US is the very big opportunity. It's incredibly mission driven and it's a pretty open space right. Now. So we're excited about it and I think our team is energized by the mission.

The component of it as well.

Great I appreciate it congrats.

Thanks, Josh.

Yes.

The next question comes from Richard close of Canaccord Genuity. Please go ahead.

Yes. Thanks, congratulations great presentation of all of the progress you guys are making.

Yeah.

<unk>.

Your target the mid teens organic growth.

Slide that can be pretty conservative based on some of the things you've laid out here.

Are you thinking about that or you just.

Just trying to remain conservative as the mid teens.

The 2 to 3 year outlook or how are you thinking about that.

Yeah. It's a great question I mean, obviously at this point in the year, it's a little early to start talking about specifics around 22 and lots of things still in the pipeline that are exciting and so it's just early to talk about that I think if you think about our business coming up closer to 1 billion of revenue and adding.

The mid teens to that it's a significant number and we think an exciting path, obviously, we well exceeded that this year.

Kind of of true organic basis, and we're always going to try to exceed all of our targets and so as we get closer to next year, we'll have a view into that but that's sort of how we're thinking about it right now.

Okay. That's helpful and then.

The 6 to 8 new clients.

<unk>.

Doing well already through half of the year, how does the pipeline look.

Maybe on each of the segments as we are.

Enter here of the second half.

Yes, the the pipelines in a great place and it's across all 3 of which we really like the balance across all 3 and each of each of the 3 businesses have a slightly different set of characteristics Richard so within the.

Everyone Health services space for example that tend to be fewer but very significantly sized in.

The 1 we announced on the last quarter, which we haven't disclosed the name yet, but there is really significant opportunities there to continue expanding and that feels really good and theres a lot of other things coming behind that 1 on new century.

And that won't care partners, frankly, it's more broad based and larger numbers and both again in a really good spot to set up of 2022.

So it feels great overall at the at the macro environment as part of that which is just that.

The issues were solved and the ability to commit to driving real savings.

As always an evergreen issue, but I think.

Right now is particularly resonating coming off of Covid and all of the things that are going on the macro environment. So overall feels quite good and it really is balanced across all 3.

Okay. That's helpful. Congratulations.

Thanks Richard.

The next question comes from David Larsen of <unk>. Please go ahead.

Hi, congratulations on the very good quarter can you maybe just remind me what the inshore potential is dollar basis for.

Like.

Think molina.

And if you have 9 million lives on the platform at 20 Bucks.

Per member per month.

That sum.

That's a very significant number of right are we talking of the billions of dollars Im sorry can you. Please just thinking through that math.

Yeah sure David So on that second question first and I'll come back around on your other 1 the.

The $9 million as in our new Tech services suite, which has the <unk> that are published in the pack, but under a dollar and that opportunity is really about going broad across lots of payers across the country. As we have done and it gets a really nice foot in the door. If you will build the relationship and prove it out also has very nice.

Contribution margin as we've talked about and so thats. The 9 million lives the $3 billion opportunity is converting those 9 million lives into the typical performance suite <unk>, which would be in the billions. We spent $3 billion on the call and so that opportunity and then if you can talk about the in cell opportunity.

Some of Molina or any of these various partners. Some of it is converting the $9 million of the performance suite, which we've sized that at $3 billion, but we also size. The if you think about our top 10 relationships of about 10 million lives out of I think we said 35 million total lives within those payers so the the opportunity.

2 fold right, it's to take the $9 million into the performance suite and then is to take the total of $10.5 million that we have closer to the 30 plus million that we have so you can kind of do the math on those 2 but it's.

It's obviously.

Now over $10 billion, probably when you do the math and think about the expansion opportunity.

<unk> has multiple dimensions.

So you said over $10 billion of opportunity.

Sort of the.

With the clients that Youre working with now if they bought everything you had.

If they bought everything we had across all of the solutions correct.

Well, we don't want to think about it that way, we think about the opportunity to convert first the performance suite and then incrementally add.

From $10.5 million lives further towards that $30 million plus lives.

Okay and then can you just please remind me how many Molina lives do you have on your platform right now and I think they have around $4 million in total net they manage.

Right now Dave it's John.

A little less than 200000 range.

Lee in Kentucky.

Okay. So I mean is there anything preventing you from going from say $200 and up to 2 million of our 4 million melding of lives over time.

No I mean, it's the same dynamic David it no. The answer is no nothing preventing us from doing it we have to do a great job. We're in 3 states, we need to do an incredible job in those 3 states, where we have been entrusted to manage the care for those members and we're going to do that and then being able to go back to that partner share of that.

With them as we build their confidence further.

Continue to go forward and that's what we've done with Centene and Humana.

We think now doing it with Molina, it's not a silver bullet doesn't happen overnight, but it really does we think help us towards our medium term objectives that we've been talking about.

Okay, congratulations out of great quarter. Thank you.

Thanks, a lot.

The next question comes from Sean Weiland of Piper Sandler. Please go ahead.

Hi, Thanks, a couple of more on vital decisions if I could what's the what's the revenue model here, how do they get paid.

Hey, Sean Seth Yes, so the.

Effectively the way, we think about it is really on a <unk> basis across the the close to 3 million lives that they touch today and we've talked about that in the pack on the call the.

I actually have a slightly different way to monetize which is they they get paid on an engaged member basis, but its effectively the same thing.

That we do which is of <unk> across the population it is fee based today.

We talked about it a little bit on the call, but as we integrated with new century, Sean I'll give you some other ways for us to capture the value that we are helping create including on the new century margin side, certainly also an opportunity from a product perspective.

Take more of a <unk> arrangement around.

That population as well they don't do that today at vital but that would be an opportunity, but I would think of it in the simplest form is the kind of a <unk> approach today and Sean just to put a bit of a fine point on the numbers.

They do the bill based on engaged members and what that translates to in terms of an average of <unk> across their life basis of around 60.

And that's how we'll reported after the close of the transaction in our Tech and services suite.

What percentage of the member's did they actually wound up getting engaged.

Okay.

You know I'd have to look at that number of specifically, but it's.

It really have to look at it on a percentage basis, Shawn of those who should be engaged and I want to say that numbers in the 20% to 30% range of.

Of those who the target now as we think about adding new century health, we think that ability to go to 20% 30% of engagement up to <unk>.

The north of that is very significant as you bring say, an oncologist and of that conversation.

That's a really significant opportunity as the benchmark you probably know this but the payer inc. Traditional payer engagement rates of often under 5% for programs. So they actually we think of a very good engagement track record now and we think we can move that number up in the ways that we've described in this call.

Okay, and then over the next 18 months during the earn out are there any limitations in terms of what you can do with the business or are you going to let it kind of run at this zone until the earn out of silver.

No limitations and we plan to really tightly integrated.

All of the reasons. We described in this call. So we're not going to put a firewall up and holders of the side, we're going to be very focused on integration right out of the gates and its look.

I mentioned, a little bit short on the call, but it's a great team.

Really talented team and we're excited to work with them and they're going to I think the of great cultural fit for our organization as well.

So.

As I think about this it's a tough call to make its probably a tougher called the receive I'm sure. It's a tougher called the receive shouldnt the doctor be having this conversation with the patients and not someone.

On the phone that you can never talk too.

Yes look our view Sean is the it's a combination of the 2 is what should be happening sadly physicians are incredibly radisson to have this conversation, it's sort of surprising but theyre not trained to have these hard conversations either and if you think about what vital does they have masters trained behavioral.

The specialists and this is their expertise in life.

Now wouldn't it be better if the oncologist introduced that behavioral specialists to the patient and their family as a member of his or her team that we think of the sweet spot and that's exactly what we're going to be doing with vital.

Got it that's super helpful. Thank you.

Sure the welcome.

This concludes our question and answer session I would like to turn the conference back over to Seth Blackley for any closing remarks.

Thanks, everybody for joining and we'll look forward to connecting in the days and weeks ahead.

The conference.

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

Okay.

Yes.

Okay.

Yes.

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