Q1 2022 Evolent Health Inc Earnings Call
[music].
Welcome to evolution Health earnings Conference call for the first quarter ended March 32022.
As a reminder, this conference call is being recorded.
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Call today from Apple It help our stock Blackley, Chief Executive Officer, and John Johnson, Our Chief Financial Officer.
This call will be archived and available beginning later this evening via the webcast on the company's Investor Relations website, which can be found at IR Dot Avalon dotcom.
I will now hand, the call to Seth Frank.
Vice President of Investor Relations. Please go ahead.
Thank you and good evening. This conference call will contain forward looking statements under the U S. Federal laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.
Description 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 our current and periodic filings for additional information on the company's results and outlook. Please refer to its first quarter press release issued.
Earlier today.
Finally, as a reminder, reconciliations of non-GAAP measures discussed during today's call to the most direct comparable GAAP measures are available in the summary presentation available in the Investor Relations section of our website or in the company's press release issued today and posted on the Investor Relations section.
<unk> of the company's website IR Dot Evelyn health Dot com.
And the form 8-K filed by the company with the SEC earlier today during management's presentation and discussion we will reference certain GAAP and non-GAAP figures and metrics that can be found in our earnings release as well as a summary presentation available on the events section of <unk> IR website.
I R.
Health Dot com and now I'd like to turn the call over to <unk> CEO Seth Blackley.
Good evening, everyone. Thank you for joining the call.
I'll start by summarizing our first quarter results and discuss progress on our three core operating priorities.
John will discuss the numbers in more detail and share our updated guidance as always we will close with Q&A.
Yes.
Turning to our results the first quarter marked a strong beginning of the year for the company on the heels of a successful 2021 with continued growth margin expansion and strategic product innovation.
For the first quarter of 2022 evident reported total revenue of $297 $1 million growth of 38% over Q1 2021.
Adjusted EBITDA for Q1, 2022 was $24 $3 million, 63% growth over Q1 2021.
Significant flow through of revenue growth resulted in adjusted EBITDA margin expansion of 130 basis points to eight 2% compared to six 9% in the first quarter of 2021.
Relative to guidance the quarter was also a success we exceeded the high end of our revenue outlook range for the quarter of $280 million to $295 million.
And we delivered at the high end of our outlook for first quarter, adjusted EBITDA, which was $20 million to $25 million.
We ended the quarter covering $20 3 million lives on all platforms compared to 11 6 million one year ago growth of 74% driven primarily by new century health care partners, which together constitute our clinical solutions from a segment reporting perspective.
Yeah.
Revenue from new century health and have on care partners combined grew 46% year over year, while everyone Health services aren't administrative segment grew 26% is highlights balanced growth across the enterprise with continued outsized growth from the clinical segment.
I want to take a moment to go little bit deeper into new century health specifically.
Specifically, given our strong continued growth in that area and what we believe to be significant potential growth ahead in that business.
Two dynamics driving the strong growth at new century.
First one is the addition of new lives to the platform new century today only touches approximately 6% of the U S population and so there remains a large opportunity to add revenue and margin to the addition of new client logos.
And geographic and product expansion with existing partners.
For example, new century's largest clients cover approximately 40 million lives across the country, but new essentially only serves approximately $10 million of those lives today and those mostly in the technology and services suite, representing a significant future opportunity.
The second growth dynamic as the upsell from our new century Tech and services suite to our risk based performance suite, and one or more specialty areas.
With almost 17 million lives on the Tech and services platform. Today. This upsell represents a significant ongoing opportunity for future growth.
We continue to look for opportunities to transition some of these oncology and cardiology lives in various states from tech and services to the performance suite.
Ourself from the technology and services to the performance suite drives more than a 50 fold increase in per member per month revenue and significant increases in adjusted EBITDA per member.
Now I'll turn to updating you on the continued progress across our core operating priorities are one strong organic growth.
Two expanding margins and three optimal capital allocation.
Looking at the first priority of organic growth I'll highlight a few of the new opportunities. We recently signed that help continue to drive our growth trajectory in 2022 and 2023.
Today, we're pleased to announce two new operating partnerships in the clinical segment and a significant life expansion in 2023 with an existing EHS client.
In February we announced four new partnerships and so these two new announcements take us the six thus far for the current year versus our annual target of six to eight so we're on track for 2022 and increasingly well set up for 2023.
As a reminder, we include new performance suite wins with existing clients towards our annual operating partner count given the financial size and buying dynamics of these relationships.
Turning to the detail on the partner announcements, we're delighted to announce the expansion of our relationship with admin to add our new century health performance suite for oncology headquartered in Miami.
<unk> is a highly respected not for profit health plan that has been in operation for more than 50 years, providing its approximately 230000 members with high quality cost effective care.
<unk> has been a valued client for our technology and services and our cardiology solution and we're excited to now add <unk> Medicare members to our performance suite for oncology.
In addition, we're replacing another vendor to help avnet manage radiation oncology quality for a majority of their commercially insured membership through our tech and services platform.
Our second announcement today is our new Evelyn care partners agreement with a significant independent physician group headquartered in California. This is an organization with over 200 positions and it's the largest in the county, where it operates the physician group is looking for opportunities to improve care for their members provider Medicare fee for service popular.
<unk>.
After the evaluated different options, including the direct contracting model they elected to collaborate with Avalon care partners through our Medicare shared savings program ACO.
We've already begun working with this group for a portion of their primary care practices and seek to expand this relationship over time.
Based on our years of experience facilitating independent practices transition from fee for service to value. We think the Medicare shared savings program enhanced track ACO often provides the best initial value based care opportunities for providers payers and patients.
Said, we are increasingly adding private payer performance suite contracts as well as illustrated with our recently announced Blue Cross Blue Shield North Carolina arrangement. We also continue to evaluate the ACO reach program and other models as they mature.
Turning to everyone health services today, we announced that following the successful implementation of 330000, new individual family plan commercial lives and bright health care on January 1st of this year, we anticipate an expansion to include all of Brights ISP.
Commercial membership in 2023.
Across all of our solutions, we believe the macro environment continues to be a tailwind for growth across our enterprise with elevated medical expenses and inflationary pressures across the country, creating increased urgency for health plans and other risk bearing entities to drive quality of care, while lowering their overall cost burden, which.
The core proposition of our value based care solutions.
With strong revenue growth and new business opportunities progressing let's talk about our progress towards continued margin expansion, which is the second core operating priority for evolution health.
Going forward, we anticipate continued strong revenue growth in our clinical solutions and specifically from a higher number of lives on our care partners and new century Health performance suite solutions, both from net new logos and from technology and service suite Upsells.
As discussed previously growth of our performance suite solutions across new century health and care partners typically will drive higher growth rates solid year, one dollar adjusted EBITDA contribution slight.
Slightly lower year, one adjusted EBITDA margin percentages and higher annual adjusted EBITDA margin dollars in percent as contracts mature.
As shared last quarter, we continue to believe that adjusted EBITDA dollars are the best indicator to measure success relative to our margin expansion targets and we continue to feel good about our progress towards our medium term margin goals.
Let's turn to our third core operating priority optimizing shareholder capital allocation.
When we talk about investment we aim to drive innovation value and market leadership within our performance based solutions, while maintaining appropriate leverage and a flexible balance sheet to support growth incremental to long term growth.
Our first priority for capital deployment is always building and strengthening our internal capabilities.
In addition to organic development, we also consider M&A Avenue to address assets that make sense financially and strategically.
Our primary goal for acquisitions is to create shareholder value by adding capabilities that support our core strategic and operating objectives.
The acquisition of vital decisions, which closed in October and the successful integrated into everyone Health. We believe is illustrative of the types of accretive M&A opportunities available.
Through this transaction, we added important capabilities to both increase the value creation, and new century health and expanded our portfolio by adding a technology enabled advanced care planning solution.
In the early stages of post integration, we're seeing positive indications that pairing new century's core expertise in managing highly complex chronic and acute illnesses with vital decisions offerings will be very compelling to our performance with clients.
Two quarters after closing the acquisition the reception of the solution. The market has been positive we believe payers will see the value and economic benefits of incorporating these services into their approach to managing health populations. For example, vital decisions went live with a pilot program over the last few weeks with one of NUCYNTA.
<unk> largest performance suite clients potentially unlocking significant clinical and financial benefits, we look forward to expanding vital decisions advanced care planning solutions across several of our other new century clients later this year.
When we speak with our payer and risk based provider clients, we often hear them say that they prefer fewer partners or vendor touch points and value based care generally that is they would prefer a fewer partners who can each provide more comprehensive services, especially in the specialty care areas, where there is significant fragmentation in the <unk>.
Ecosystem.
<unk>, we also have our clients ask us directly if we can cover additional specialties or cover additional capabilities within our existing specialties, given that dynamic and given our market leadership with a new century health, we continue to see opportunities to expand our platform to accretive targeted M&A.
Over time, we also see a significant opportunity to drive additional profitable long term growth as we build a durable leadership position as a top independent, especially platform in the market, while adhering to our principles around disciplined capital allocation.
To conclude we see continued strength across the business in terms of operational success growth and long term market leadership.
The three core operating priorities for managing the company continue to guide me.
Management team and our board of directors.
Executing on these priorities, we believe we'll be able to invest in product innovation, which will extend our market leadership, our financial results our shareholder returns and ultimately help us achieve our mission of using value based care to help change the way healthcare is delivered in the United States.
Now I'll ask Jon to give some detail on the numbers this quarter and provide our outlook for 2022 and the second quarter.
Yes.
Good afternoon, everyone.
We are pleased with our first quarter results with our key metrics coming in ahead or near the high end of the guidance. We communicated in February we are building upon the momentum we carried into 'twenty two.
In total our quality and cost management solutions cover 23 million lives during Q1, and we are well situated to grow that reach both across the remainder of this year as well as into 2023, we outperformed the high end of our revenue range for the quarter due to stronger than projected performance payments within both our <unk>.
Cynical solutions and everyone's health services segments.
Our adjusted EBITDA was likewise, driven by continued strong outcomes in our performance based arrangements.
With typical seasonality in working capital during the first quarter, our operating cash flow declined versus the beginning of the year in line with our expectations and we anticipate during the remainder of 2022 to build upon our cash flow momentum from 2021 with continued focus on our disciplined capital allocation strategy.
Now let me take you through consolidated results before turning to segment specific results and ending with an update on guidance.
Revenue in the quarter with $297 1 million, a 38, 1% increase compared to the same period in the prior year. This was due to growth from new partner additions as well as same store sales growth across our enterprise.
Adjusted EBITDA for the quarter was $24 3 million compared to $14 9 million in the same quarter of the prior year.
This represents year over year, adjusted EBITDA growth of 62, 7% and margin expansion is 123 basis points.
Turning to our segment results within our clinical solutions segment revenue in the first quarter increased 46, 1% to $190 2 million up from $130 2 million in the same period of the prior year. This strong revenue growth is due to continued same store sales and new client growth.
Including the previously announced partnership with Blue Cross Blue Shield of North Carolina, where we are now managing over 10000 Blue Premier members on our Edelman care partners platform.
Q1, adjusted EBITDA from clinical solutions was $22 2 million compared to $16 8 million in the prior year driven by continued strong performance at new century health.
As previously discussed the growth at Epsilon care partners is expected to have lower than average year, one margin progressively ramping to more meaningful profitability over approximately three years.
Membership in our performance suite for clinical solutions was $1 5 million compared to $1 4 million in Q1 of the prior year with the PMT empty of $38.07 versus $26 32.
This increase in PMT EM was principally driven by the addition of the Blue Cross Blue Shield of North Carolina lives with a full revenue premium is recognized.
<unk> and our technology and services suite for clinical solutions with $16 7 million relative to $8 2 million in Q1 of the prior year with a <unk> 38 versus 43 in Q1 of the prior year.
Within our Evelyn Health services segment first quarter revenue net of intercompany eliminations of 500000 increased 25, 9% to $106 9 million up from $84 8 million in the same period of the prior year.
Growth in this segment was driven by new clients go lives, including the previously mentioned addition of approximately 330000 incremental bright health care less.
Also benefited from higher than projected performance based revenue from Macquarie, which is largely offset by certain pass through at one time costs.
Membership in our performance suite for everyone's health services was $2 1 million compared to $2 2 million in Q1 of 2021 with the PMT empty at $19 17.
Versus $14 60.
Adjusted EBITDA from our everyone's health services segments for the quarter was $8 2 million compared to $5 9 million in the prior year demonstrating the progress we have made in driving significant unit cost reductions across our operating model.
Finally, corporate costs decreased 12, 2% to $6 2 million from $7 1 million in the same period of the prior year.
The steps, we have taken to lower overhead costs and become more efficient continue to benefit our consolidated adjusted EBITDA margin, even in the face of continuing growth.
Turning to the balance sheet, we finished the quarter with $210 2 million in cash cash equivalents and investments, including $53 9 million in cash held in regulated accounts related to the wind down of passport.
Excluding cash held for passport, we have $156 3 million available cash a decrease of $59 $3 million versus the end of the fourth quarter.
As I mentioned this decrease was principally driven by seasonality in working capital, including year end incentive compensation and do we expect to be meaningfully cash flow positive across the remainder of the year.
Cash deployed for capitalized software development in the quarter with $6 4 million.
Finally, turning to guidance based on continued strong performance. We now expect total revenue for the year to be in the range of $1. One six to 121 billion and we are raising our outlook for adjusted EBITDA to between 85 and $95 million for the year.
For the second quarter, specifically, we are forecasting adjusted revenue of $290 million to $305 million and we are forecasting adjusted EBITDA of 18 million to $23 million.
As a reminder, I continue to expect quarters, one and three to be high points for adjusted EBIT. This year based on timing of performance revenue.
We continue to forecast between 25, and 30 and annual capitalized software development expenses.
With that I will turn the call back to the operator to take your questions.
Thank you we will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Richard close with Canaccord Genuity. Please go ahead.
Great. Thanks for the questions and the time today and congratulations on the progress.
I was wondering or south or John I was wondering if you could talk a little bit about the oncology care partners relationship and then you also announced strive how you know here recently, so I was just wondering if you could just walk us through the structure of each of those <unk>.
<unk> ships, what the opportunity is and maybe.
I'm, a finance financial perspective.
Are they relevant for 2022 or how should we be thinking about 2023 contribution.
Yes, great Richard Thanks for the question. So I think the way we think about this part of our business is around innovation right. So across all three parts of the business that won't care partners Health services, New century, we think about innovation in kind of three buckets. One is well things we can build internally and that we do build into.
Finally software development and alike.
Second is M&A right accretive M&A that we use and then the third bucket we have partnerships from time to time like the couple that you mentioned there may be an Avalon care partners. They may be in new century. They may be in evolution health services. They tend to be very capital light or zero capital deployed but add some sort of innovation in the case of EB won't care partners are risky.
Oncology care partners that you mentioned.
We see in certain markets places, where there needs to be new oncology capacity and having a separate company and this company you mentioned to be able to help.
To help us in that way in those markets as a value add doesn't take our capital up and so it's really part of our broader innovation methodology that we use again internal development M&A and then we have select partnerships in targeted areas that.
Debt or capital light and yet continue to innovate our product that's all with an eye towards.
Market leadership across all three products.
But yeah I think the financial point to your question Richard I mean, it's more about.
Market leadership, and therefore, our ability to continue to grow at really fast rates over time, but also our ability to deliver on our you know our targets and expectations on the earnings front, so which really fits within that framework. So I wouldn't think of it as an additive thing.
From a financial perspective necessarily in the short term.
Okay.
I guess I'm trying to understand is oncology care partners you would be I think that's a JV. So would you be is that like a revenue share and then strive health. It seems like that's some somewhat sort of like your cardiology or encore.
<unk> performance, we bought on the kidney care, so is that a revenue share as well.
Hey, Richard This is John I'll take some of that.
On a on both you know think of them as in our network.
<unk> in our network. So just like we partner with a number of oncology groups across the country.
In a new.
New century.
Oncology care partners, who will be part of our network as they grow.
And so we're happy to support them in that way as Seth mentioned its not.
Investments that we've made.
On stride I think of that as a classic sub capitation agreement.
We're in these <unk>.
<unk> care partners lives, which as you know are mostly in the Medicare shared savings program.
We were seeking a partner to help us manage the costs kidney care.
And selected strives to do that and so we're excited to roll that out as a pilot with them in a couple of markets and see what kind of savings that can drive on our population.
Okay. Thank you.
Welcome.
Our next question comes from Ryan Daniels with William Blair. Please go ahead.
Hey, guys. Thanks for taking the questions and I'll add my congratulations on another strong quarter.
So you talked about in your prepared comments the massive opportunity you have both.
So new century, and then cross sell solutions into that marketplace. So I'm curious if you can speak a little bit to <unk>.
Specifically, what youre seeing there with clients and with existing clients that are only using you and seeing such good results. You know how do you push the needle forward more rapidly there to drive growth in that segment from a sales or investment standpoint. Thanks.
Yeah. Good question, Ryan So, yes, I mean, we it is down two vectors right to your 0.1 is we've got across our biggest clients we only have.
Okay.
10 million lives covered out of their 40%. So there is an opportunity to go to.
Different geography or different specialty or something like that we're not touching at all today and then the other vector is.
Out of the base of the technology and services lives up selling them to the performance we can even if they're already our lives a 50 fold increase that we've talked about those are the two opportunities they're each a little bit different right on the upsell opportunity of going from Tech services the performance.
Already have the data we already are supporting the partner in some way shape or form and we can make very specific.
Credible.
Data in front of them about the opportunity to upsell to the performance suite and so those those things are happening on an ongoing basis. We've obviously talked about several of those with a couple of our big National payers in the last few calls those are going well and it's really about increased savings Ryan for them in those markets and particularly where they might have the biggest.
Pain points within their business.
The other dimension, where we're touching a lot of that all today, it's a brand new market or something like that the same messages are true, but the sales cycle, a little bit different right. Because we don't yet performed services on those markets and I think.
Across both the common theme is hey, where is there a pain point for our customer which is the growth of oncology and cardiology are end of life, which stitches into both of those and I think the good macro news for US is theres a lot of challenge.
In managing those segments and I think we have a unique ability to help manage them at a lower rate.
And then they can on their own and so we're seeing a lot of strong progress across both of those dimensions you asked about.
I really appreciate that color.
And then you mentioned vital decisions relationship I think with an existing client where they're doing a pilot can you dig into that a little bit more or is that something where theyre doing just a small amount of lives and the potential is for expansion or is it.
Just I guess more color on that would be helpful.
Yeah. Yeah. So this is one of our larger performance suite relationships today. So we're already you're kind of managing the population and the cost and we have relationships with these these physicians and their patients today. So it's only natural that we would be able to stitch in the capabilities. The vital brings to help manage that.
Aspect of a cancer patient or a cardiology patient and our team at vital is fantastic in all the right abilities from an entity perspective getting them with the physician and the patient and their families to have those conversations. So I think we're seeing a lot of positive receptivity in terms of the clinical leader.
Ship of these plans said, yes that makes a lot of sense, let's bring it in and stitch. It at and so the pilot is with one of our bigger partners.
It is rolling out pretty broadly across that population quickly and again, we don't really sell it I think we've talked about this early in the vital.
On a sales thing and we're bringing the capabilities to bear because it's the right thing for the patient first and foremost.
It often results in better care and longer life span the like for the patient.
But also has a savings opportunity that can accrue back to us over time quality first always.
And that's how we that's how we do it and it's working quite well.
Okay, perfect and then.
Two more and I'll get off on for John very quickly on the performance based fees were those generally in line with your expectations during the quarter or was there any pull forward that helped drive the upside to sales and EBITDA.
Yeah. Good question Ryan.
Yeah, I would say they came in slightly ahead of our projections.
But not from a pull forward, but based on the final read of the data that we got two.
Two to debase those performance fees on.
Nice to see those in Macquarie.
Okay, and then the last one.
Seth you always talk about.
The third.
Kind of investment platform being M&A opportunity I'm curious with the weakness we've seen in the public equity markets and in particular with the digital health companies avoid have you seen a reset in.
Seller expectations, such that Youre seeing more attractive opportunities to enhance your product or service offering through M&A going forward and might that.
Cause a reallocation of capital from internal to external M&A opportunities going forward. Thanks.
Yes.
Yes, I think what we'd say about the M&A, we don't we don't need to do it Ryan we've kind of had this really good organic path and that's ahead of us and we feel really confident in that path. So we don't need to do it I think you know what we the times when we will do it Ryan it's there's got to be a couple of things present, one as we'd see a strategic fit.
It fits with what we're doing and in the core.
It needs to be a short term wins that needs to be accretive.
Quickly and then the third thing is needs to be.
A win in the long term, which is sort of strategic upside from the transactions I think that that's our main framework for it.
When the prices of the assets go down a little bit it can help on the short term accretion thing and I think we are seeing a little bit of that right now.
But I think just the broader point is the type of especially within the specialty space.
Really interesting opportunities to meet all three of those criteria. So it helps the business in the short and the long term.
We definitely see some opportunities out there and I think to your point it should be more attractive even.
In the six to 12 months ahead as the markets adjust a little bit.
Alright, great. Thank you so much guys.
Thanks, Brian .
Your next question comes from Anne Samuel with Jpmorgan. Please go ahead.
Hey, guys. Thanks for taking the question.
Maybe just a follow up to Ryan's question, you talked about opportunity to expand beyond your existing specialties.
What areas are your customers asking for that might make sense to round out the portfolio.
Yeah.
So I think it's interesting and we certainly thankfully hear a lot about oncology and cardiology at end of life. So it feels like the ones that were and are spot on there are some other ones that are just big and they're also growing musculoskeletal is an example of that.
There is some needs around patients and helping the patient navigate a little bit more that is has talked about quite a bit.
<unk>.
I think there are a few others like I'd put neurology on that list that are also higher cost and so.
There's certainly opportunities and across the ones that I, just mentioned and I think the most important fact is we are getting a lot of our customers coming to us to your point, saying, Hey, we want you to do more I think we're doing a good job delivering on what we've got in front of US which is always job one in life, but I think theres also a dynamic which is.
They'd prefer to buy more from one place.
And so our ability to add more is certainly part of the commentary around M&A, but also it could be organic additions and <unk>.
Quite excited about the opportunities around new century in general.
That's great.
You continue to add new partnerships at the rate you always have but you've also got a nice base now of larger existing clients. So I was just wondering how should we think about the composition of same store versus new growth going forward and you know might that look different.
Or is that some part of us maybe kind of higher growth than you've seen in the past.
Hey, Andy This is John I'll take that one.
Hey.
<unk>.
Typically 60% of our growth has come from new partner ads and about 40% has come from same store expansions.
And I do think that given the dynamic that you described.
<unk> in front of us to further penetrate our existing customer base, we expect that to shift a little more towards the same store side.
And now that 50, 50 or 64 to the other way, it's not going to go 80 20.
We continue to believe that high and there's a lot of new flagged out there to plants, but we do see that dynamic happening I think the other thing that youll see across this year is to mention it is.
That conversion of lives that are in the tech and services suite today.
Up to the performance suite, and so maybe not as much change on the total life count.
And more of a change in the aggregate <unk> as we're able to drive more revenue more profitability and ultimately more value for the customer and the patient through that performance suite.
That's really helpful. Thanks, and maybe just one more housekeeping I, perhaps I missed it but was hoping maybe you could provide some just some color on the lives in P. M. P M of the.
New partnerships and then also just how to think about the expansion at.
Bright house.
And maybe timing of that.
Yeah.
Do those and backwards order so on Brighthouse had as we mentioned anticipating to have all of their ISP lives on our platform.
In January of next year.
So I believe on the call. This morning, they mentioned about 1 million lives.
Plus or minus there growth.
That will be our membership so really excited to continue to grow with them and provide really strong service.
On a couple of other announcements today.
As Mad.
As we mentioned the main focus of this performance suite is in the.
Medicare advantage book of business, which is a fraction of their lives. So think of it in the $20 million to $30 million of code.
In terms of total revenue.
And on the ECP.
AD.
That is a longer.
It takes longer to show up in the revenue since it is a shared savings models. So really there were talking about revenue impact for next year.
Where we see that.
The anticipated.
Very helpful. Thank you.
Our next question comes from Charles <unk> with Cowen. Please go ahead.
Yes, thanks for taking the questions maybe just a follow up question around vital decisions.
So that's what the pilot.
Maybe I missed it from Brian's question when how long do you expect these kind of pilots to lab and do you see pilots as the primary way youre going to get vital decisions into your existing client base or or do you see maybe this one pilot being a reference site in effect for us.
Declines to just starting on for vital decisions going forward.
Yeah. It's.
Good question Charles So this pie a little flip into I think a full.
Relationship later this year.
And it's rolling out pretty quickly and then we expect a couple more of these this year too. So we're not having issues getting our partners to adopt it and I don't think we're going to really need to use a pilot methodologies thats just sort of where we are with this first big one.
The timing of the integration, but generally speaking theyre going to just roll in and become part of the operational.
That form that is new century health and so it feels it feels really good and we're not having any issues in terms of adoption.
Yes.
And then as we move forward for potential new clients or new century health sort of new logos is the bundled decision going to be.
Part of the package or is it an option they can select into as they sign up.
Yes, I think it will often be part of it it will be a conversation and so sometimes they can opt out of it but I think it'll be more of an opt out then an opt in in most cases and it just makes so much sense right when youre contacting the oncologists cardiologists already.
In the same platform and so it'll be I think part of the default relationship.
Great and then last question for me just in terms of I think on the fourth quarter call you guys talked about.
Our lives from the Molina expansions ramping up and the performance we lives but.
<unk> I think we're still at $1 5 million.
How should we think about the ramp of those lives flowed through as that should be more back half weighted and then maybe similarly for.
Blue Cross Blue Shield I know you had mentioned, but I think I missed that.
Yeah Yeah.
The Blue Cross Blue Shield lives are in the number as of one one.
On the Molina performance suites.
Contracts two went live in April .
And we expect the other two will phase in at some point this quarter.
Okay. So we should we should be stepping up should we step up the full 500000 in the second quarter or so we have some of that step up in the third quarter.
I would expect that is the magnitude of the step up in the second quarter.
Great Alright.
But just to be really precise about the trials that is a move from tech services' lives to <unk> nanometer five step.
Yes, okay perfect.
Perfect. Thanks, I appreciate it and congrats on the quarter.
Thank you thanks, Josh.
Our next question comes from Jessica Thompson with Piper Sandler. Please go ahead.
Hi, Thanks for taking my question.
And I think just we had estimated that there was a one one molina and Kentucky launch, but for new century.
At performance suite I guess.
Which would have added roughly 165000 lives, but I guess just are there any kind of underlying dynamic behind the flat sequential reported by <unk> performance.
Performing suite within clinical solution.
Yeah.
No underlying dynamics they are still on track for Kentucky to slip to the performance suites and also just in aggregate as we've talked about the Molina relationship this year.
We continue to expect that $75 million revenues that code.
That is on track.
Got it.
And then and then I guess just within clinical solutions performance, what's the mix between Medicare and Medicaid and within the base should we be expecting just those populations to grow roughly in line overall.
And year over year.
Alright.
Or in Haynesville.
Yeah.
Yes.
Medicare revenue in the quarter represented a little more than half of the total clinical solutions revenue.
Yes.
Medicaid is the next largest commercial was.
<unk>.
Yeah.
10 ish percent.
Overall in terms of how that shapes I think it's going to depend on specific deal cadence generally speaking Medicare is a bigger markets.
For the oncology and cardiology services.
And so I would expect that probably to grow that faster.
Okay.
Got it and then can you maybe like help us.
Think about what the potential impact of Medicaid Redetermination Nike.
To that number saying, possibly convert cat exchange deal.
Yes.
What the potential impact of that.
Yes.
So just to.
<unk> at the end of 2020, when most of that impact happened, we made an estimate that our members but aggregate membership.
At the time was about two to three percentage points higher than it might have been absent the public health emergency and the Redetermination pause.
Then the question is how much of that might we give back.
When the Redetermination turned back on.
<unk> that most of the forecasts that are out there have a reasonably slow ramp.
In terms of that membership rolling off whether it's across six months or 12 months.
And that's consistent with our forecast as well.
So we have incorporated that into our guidance, we do expect to see it. We don't think it will be that big of an impact given that 2% to three percentage points initial impacts to the positive.
Thank you.
Mhm.
Our next question comes from David Larsen with BTG. Please go ahead.
Hi, congratulations on a very good quarter for the Molina $75 million.
How much of that was actually in <unk> 'twenty two.
Very little data.
Very little Okay. The majority of the.
Relationships went live on 401 and are going live later this quarter.
Okay. So one of the reason the revenue.
Yes, just to be precise on it that's one of the reasons for the step up in the revenue guidance.
Moving from where it was to where it is in Q2.
Yes, so the revenue beat.
Despite the fact that most of that momentum will be in future quarters, Okay and then.
With the bright lives those 1 million lives what exactly are those are you providing to the image at the cardiology or is it the oncology service I'm just trying to get a sense for the P. M. P. M. P. Yes of course of course.
Core services that we're providing to bright or out of the Avalon health services segment and that the administrative platform.
Claims payments.
U M cm et cetera for a portion of those lives.
And so pm PM, that's going to vary by market.
Both the services and so on obviously.
Somewhat of a vast relationships.
That number of different pricing models and there, but overall I think we said on the last call.
Somewhere between seven and 11 blocks <unk> is a decent place to start.
So.
So if we assume 10 bucks per member per month.
That's like a 100, how much of it on an annual basis is that like a $120 million.
A little less.
Use the midpoint of minus 7% to 11 range.
But yes, it's a large contract we're excited to grow with them.
Okay.
That's a very large contract okay.
And then.
What were the performance fees in the quarter that you recognized.
Yes, the dollar amount.
Yeah and recall in our excellent health. This is in our Evelyn Health services segment principally.
Where we saw that outperformance.
That line this quarter.
And those are.
Relationships, where we have.
Upside with our customers based on value that we're able to drive for them usually.
In this case that is based on savings that we're able to drive relative to our benchmark.
And so we were.
Got some final data in the quarter that allowed us to recognize.
That amount.
In those areas.
Contributing to the top line B now as I mentioned in my prepared remarks that was offset by some onetime costs associated with that revenue.
Has a certain amount of that downstream for example, so the EBITDA impact in EHS.
Was a little lower.
But.
Really pleased with the magnitude of that result.
Okay.
Very helpful. I think theres, a little bit of a delay in some performance revenue and like three Q21, or something like that was was it related to that like you. Finally got all the data ANC collected all of that.
Yes, it was not okay.
At the.
Ed.
Outside of the year and I mentioned again today, we do expect quarters, one and three of this year to be high points for performance revenue.
The third quarter impact is largely driven by the timing of.
The Medicare shared savings.
Element files, so we received for Pam on care partners.
Okay, and then just the last one and I'll hop off.
In terms of like your your Tam or you're in cell potential I heard the phrase 50 fold.
What can you put a dollar amount on that is it 4 billion just.
What are we looking at in terms of dollars.
Yeah. So the way that we've tried to paint that picture Dave.
If you.
We're to assume that we could penetrate.
Our top customers by 25%.
With both oncology and cardiology performance suite products that would represent revenue in excess of $4 billion.
So a significant opportunity there that we are obviously highly focused on.
Attacking.
Okay.
Fantastic quarter, congratulations thanks, I'll hop back in the queue. Thank you.
Thanks, David.
Our next question comes from Sandy Draper with Guggenheim. Please go ahead.
Thanks, very much and good afternoon, and glad to be back on the back on the calls and as usual I'm slow in the in the queue. So really no detailed question, but maybe a high level. Since you guys are right outside of DC.
We come into the midterm elections in thinking about the second half of the by the administration is there anything that you guys are particularly watching it could be.
An upside risk or downside risk or do you think it's pretty much status quo no changes over the next couple of years coming out of DC.
Hey, Sandy, Yes, I think the short answer is it's pretty much status quo with respect to our business and that the reason is the <unk>.
Almost everything that we're talking about today in all of our opportunities are really oriented back to the.
Private payer risk bearing provider market and the dynamics that are driving them or just the core dynamics of managing care.
And those have been around for a long time, and we're going to be around for a long time, we use value based care to solve it but if policy changes a lot or a little that opportunity is going to still be there. So I think because of those dynamics.
For us in Forever, one no no big changes that we're thinking about up or down really to what we have going on I could give you more nuanced answer around what we see in the macro environment with inside the beltway and I think there's probably net positive on value based care, but even those things are they are helpful to us, but it's moderate.
And I think the core thesis for <unk> is.
A little bit less connected to what happens in elections and the like.
Great that's helpful and congrats on a quarter.
Thanks.
Our final question is a follow up from Richard close.
Canaccord Genuity. Please go ahead.
Thanks for the follow up.
So I was wondering maybe if you could just comment a little bit.
About the pipeline, obviously, you guys have been adding a higher level of new partnerships, but maybe some just.
Commentary on the pipeline how it maybe compares.
Last year, and then second on that and maybe a little follow up on Sandy's question, but really more on the economic side. So I'm curious.
No.
We go into recession or whatnot, how do you think that's going to maybe impact the pipeline.
Does that stopped people from maybe adding performance services or performance, we just any thoughts in and around that would be helpful.
Yep.
Yes, so I'd say first on the pipeline.
At the highest point, it's been at and it feels very very good so thats a positive and it's as John said, it's weighted a bit more towards our existing customers.
And that up sell opportunity that we've been talking about versus net new logos is of course, new logos in there too, but the weighting has shifted a little bit per John's earlier answer.
And it just feels quite good I think it's a bunch of different dynamics, including just general pressure on the growth in oncology cardiology end of life et cetera with respect to your second question.
It is one of the positive elements of evident from a profile perspective that don't think that the macroeconomic environment affects us that much one way or the other.
When a recession happens people Unfortunately still get cancer that cancer needs to be managed health plans are still trying to make their numbers.
And need help doing so.
The differentiation of our product and the ability to do that in a way that it saves money, but also is good for the patient. These things are evergreen issues and they don't really ebb and flow with the economy and so.
We feel we feel good about our pipeline been in a really nice place a year from now as well two years from now kind of.
Independent of what happens in the macro environment.
Okay. Thank you.
Youre welcome.
Okay.
This concludes our question and answer session I would like to turn the conference back over to Mr. Barclays for any closing remarks.
Thanks for everybody's time and look forward to connecting in the days ahead.
Have a good evening.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.