Q4 2023 Evolent Health Inc Earnings Call

Operator: Welcome to the Evolent Earnings Conference Call for the quarter- and year-ended December 31, 2011. As a reminder, this conference call is being Your hosts for the call today from Evolent are Seth Blackley, Chief Executive Officer, and John Johnson, Chief Financial Officer. This call will be archived and available later this evening and for the next week via the webcast on the company's website in a section titled Investments. I'm going to hand the call over to Seth Frank, Evolent's Vice President. Thank you, and good evening.

Welcome to the Avalon earnings conference call for the quarter and year ended December 31 2023.

As a reminder, this conference call is being recorded.

Operator: This conference call will contain forward-looking statements under 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. A description of some of the risks and uncertainties can be found in the company's reports that have been filed with the Securities and Exchange Commission, including cautionary statements included in our current and periodic reports. For additional information on the company's results and outlook, please refer to our fourth-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, posted on the Investor Relations section of the company's website, ir.evolenthealth.com, and the form 8K filed by the company with the SEC earlier today. Now I'll turn Good evening, and thanks for joining us.

Mmm two days call to the most direct comparable GAAP measures are available in the <unk>.

Summary presentation available on the Investor Relations section of our web site.

We are in the company's press release issued today.

Posted on the Investor Relations section of the company's words website, <unk> dot <unk> dot com and.

In the form 8-K file by the company with the SEC earlier today.

And now I'll turn the call over to evidence CEO Seth Blackley.

Seth R. Frank: Good evening and thanks for joining us.

Seth R. Frank: I'm excited to share with you our results for the fourth quarter and the full year 2023. We had another outstanding year, achieving our profitability, cash flow, new business growth, and operating goals for all of our stakeholders. And we remain focused on our mission of improving care for people with complex conditions.

Seth R. Frank: Scientists share with you our results for the fourth quarter and the full year 2023, we had another outstanding year, achieving our profitability cash flow new business growth and operating goes for all of our stakeholders and we remain focused on our mission of improving care for people with complex conditions.

Seth R. Frank: Looking ahead, today we're providing a strong financial outlook for 2024, as well as reiterating confidence in our $300 million adjusted EBITDA run rate exit target for 2024. In addition, we'll be providing a detailed bridge between our Q4 2023 results and our $300 million run rate adjusted event. For all the details on the numbers and metrics, please review the press release and our supplemental investor presentation on the IR website, as mentioned. John and I will focus our comments on specific call-outs that merit comment or context from us, so we have plenty of time for your questions. With that said, let's move to the results.

Seth R. Frank: Looking ahead today, we're providing a strong financial outlook for 2024 as well as reiterated confidence in our 300 million dollar adjusted EBITDA run right exit target for 2024.

Seth R. Frank: In addition, we will be providing a detailed bridge between our queue for 2023 results and our 300 million dollar run rate adjusted EBITDA target.

Seth R. Frank: For all the details on the numbers and metrics. Please review the press release and our supplemental investor presentation on the I R website as I mentioned earlier.

Seth R. Frank: John and I will focus on comments on specific call outs merit comment or contacts from us. So we have plenty of time for your questions at the end.

Speaker Change: With that let's move to the results.

Seth R. Frank: Fourth quarter revenue totaled $556.1 million, growth of 45.4% year over year at the top end of our guidance. The Justin Diva Dot totaled $48.1 million, growth of 48.9%, and the midpoint of our. Year over year, specialty care revenue grew approximately 74% versus a year ago, with the NIA acquisition contributing approximately 19% to reporting. The balance of 55% came from organic farming.

Speaker Change: Fourth quarter revenue total total $556.1 million growth of 45.4% year over year at the top end of our guidance range adjusted.

Speaker Change: Adjusted EBITDA totaled $48.1 million growth of 48.9% in the mid point of our guide.

Speaker Change: I once core specialty care offerings drove 88% of total revenue in the quarter.

Speaker Change: Euro per year specialty care revenue grew approximately 74% versus a year ago with the Nia acquisition contributing approximately 19% to reported growth.

Speaker Change: The balance of 55% came from organic growth.

Seth R. Frank: Cash flow is a critical component of our sustainable financial model, and we ended the fourth quarter of 2024 in a strong position ahead of where we anticipated due to exceptionally strong cash collections. Cash flow from operations in the quarter totaled $89.4 million, and we ended the year with $193 million of cash flow. Our financial goal for 2023 was to increase our cash balance by more than $120 million before interest, debt activity, acquisition costs, earnouts, and dividends, and with the strong Q4, we ended the year at over $175 million on the. All of this growth is despite the Medicaid redeterminations headwind we've experienced in the back half of 2023. Before we get into some of our new growth announcements, let me say a few words about 2023 overall. For the year, we ended with revenue of $1.96 billion, 45% year-over-year growth. Justin Iveda for 2023 totaled $194.7 million, both at the high end of our initial guidance from a year ago.

Cash flow is a critical component of our sustainable financial model and we ended the fourth quarter in 2024, and a strong position ahead of where we anticipated due to exceptionally strong.

Speaker Change: Cash collections cash flow from operations in the quarter totaled $89.4 million and we ended the year with $193 million of cash on hand.

Speaker Change: Our financial goals for 2023 was the increase our cash balance by more than $120 million before interest that activity acquisition costs earn out some dividends and with the strong Q4, we ended the year at over $175 million on this metric.

Speaker Change: Our average chronic member screwed almost 80 million for the quarter.

Speaker Change: All of this growth is despite the Medicaid we determinations headwind we've experienced in the back half of 2023.

Speaker Change: Before we get into some of our new growth announcements, let me say a few words about 2023 overall for the ear, we ended with revenue of $1.96 million, 45% year over year growth.

Speaker Change: Adjusted EBITDA for 2023 totaled $194.7 million both at the high end of our initial guidance from a year ago.

Seth R. Frank: I'm incredibly proud of our team of approximately 5,000 committed, mission-driven professionals worldwide who work so hard to help us collectively deliver what we promise to both shareholders and customers here in a year when many in the industry face headwinds. As we've been communicating for some time, we believe the challenges in managed care represent opportunities for Evolent, given our unique value proposition and low penetration within our addressable market. Going forward, we continue to be focused on the principles of value creation that John, the team, and I have used to guide the company for the last three and a half years. As a reminder, those principles are one, strong organic growth.

Speaker Change: I'm incredibly proud of our team of approximately 5000 committed mission driven professionals worldwide, who work so hard to help us collectively deliver what we promise to both shareholders and customers during the year when many in the industry faced headwinds.

Speaker Change: As we think communicating for some time, we believed the challenges in managed care represent opportunities for Avalon, given our unique value proposition and low penetration within our addressable market.

Speaker Change: Hello, before we continue to be focused on the principles of value creation, John the team and I have used to guide the company for the last three and a half years.

Speaker Change: As a reminder, those principles are one strong organic growth.

Seth R. Frank: 2, grow in profitability, and 3, discipline capital allocation. On organic growth, we have consistently outperformed our new business targets, announcing an average of 11 new partners annually for the past three years, versus a target of six to eight per year. This statistic has been a useful directional indicator, but it has also underrepresented our growth.

Speaker Change: To grow in profitability and three disciplined capital allocation.

Speaker Change: On organic growth, we have consistently outperformed our new business targets announced in an average of 11, new partners annually for the past three years versus a target of six to eight per year.

Speaker Change: This statistic has been useful directional indicator, but has also under represented our growth.

Seth R. Frank: For example, counting important same-store expansions, which have become even more important since the NIA acquisition, we had 12 new revenue contracts in 2023 alone versus nine using the operating partner method. Given that context, beginning with this year, we are simplifying our disclosure and plan to count and track all material new revenue agreements, whether with new or existing partners, and we'll refer to this metric today and going forward as new revenue agreements. So far in 2024, we have added four of these agreements.

Speaker Change: For example, counting important same store expansion, which you have become even more important since the Nia acquisition. We at 12, new revenue contracts in 2023 alone versus nine using the operating partner metric.

Speaker Change: Given that context, beginning with this year, we are simple fine are disclosure.

Speaker Change: Plan to count and track all material, new revenue agreements, when with new or existing partners and will refer to this metric today and going forward as new revenue agreements.

Speaker Change: So far in 2024, we have added four of these agreements to we announced at the January Investor Conference and two additional new revenue agreements today.

Seth R. Frank: Two we announced at the January Investor Conference and two additional new revenue agreements today. Today we are announcing Evolent's first enterprise oncology technology and services, which we recently signed with an existing health plan. Specifically, we will now be providing radiation and surgical oncology management services to add to the medical oncology services we are already providing to this health plan, which is one of the 10 largest health plans in the country. We believe this is an important agreement, as it provides a path for us to bundle our radiation and surgical management capabilities with our medical oncology in the technology and services suite, creating a PMPM expansion opportunity for the future. For example, surgical oncology costs represent approximately 17% of the PMPM of the cost of oncology in a commercial population, according to a recent JAMA study.

Speaker Change: Today, we are now in Saint <unk> first enterprise oncology technology and services agreement, which we recently signed with an existing health plan client.

Speaker Change: Specifically, we will now be provided radiation and surgical oncology management services to add to the medical oncology services. We are already provided into this health plan, which is one of the 10 largest health plans in the country.

Speaker Change: We believe this is an important agreement as it provides a path for us to bundle or radiation and surgical management capabilities and with a medical oncology and the technology and services sweet creating at P. M. P M expansion opportunity for the future.

Speaker Change: For example, surgical oncology cost represent approximately 17% of the P. M. P. M of the cost of oncology at a commercial population. According to recent Jama study.

Seth R. Frank: Most importantly, we believe bundling these services will allow us to provide better, more holistic care to patients. We expect this new agreement announced today to add approximately $10 million in annual technology and services revenue once it is at full run rate in the third quarter of this year. Our second new revenue agreement disclosed today is for the performance week. As we work to thoughtfully expand our risk model across a broader base of specialties, we rolled out Evolent's first performance suite contract for advanced imaging during the fourth quarter of 2023 with a legacy NIA client in Medicaid. This is a large health plan with a presence in multiple states. This performance suite arrangement, which we anticipate will contribute over $80 million in total annual revenue, is designed with many of the same features as our proven models in oncology and cardiology. This performance suite arrangement builds upon an already successful risk-sharing relationship that was in place at the time of the NIA acquisition, expanding it into our performance suite model. It's important to understand that the cost and scope of care in this arrangement are specific to outpatient advanced imaging, such as MRIs and PET scans, and medication.

Speaker Change: Most importantly, we believe bundling these services will allow us to provide better more holistic care to patients. We expect this new agreement announced today to add approximately $10 million in annual technology and services revenue once at full run rate in the third quarter of this year.

Speaker Change: Our second new revenue agreement disclosed today is for the performance Sweet.

Speaker Change: As we work to thoughtfully expand our risk model across a broader base of specialties, we rolled out <unk> first performance sweet contract for advanced imaging during the fourth quarter of 2023 with a legacy Nia client and Medicaid.

Speaker Change: This is a large health plan with a presence in multiple states.

Speaker Change: This performance Sweet arrangement, which we anticipate will contribute over $80 million in total annual revenue is design with many of the same features as our proven models in oncology in cardiology. This.

Speaker Change: This performance Sweet arrangement builds upon an already successful risk sharing relationship that was in place at the time of the Nia acquisition expanding into our performance we bottle.

Speaker Change: It's important to understand that the cost and scope of care and this arrangement are specific to outpatient advanced imaging such as M. R I's and pet scans and Medicaid as a result, the P. M. P M will be lower than in oncology or cardiology, but we expect with the same general margin profile as our existing performance sweet.

Seth R. Frank: As a result, the PMPMs will be lower than in oncology or cardiology, but we expect with the same general margin profile as our existing performance. Finally, as a reminder, we announced two new revenue agreements in January. The first was a multi-product NIA cross-sell to an existing Evolent Health Clinic client in the Northeast, and the second, a new logo health plan in the Southwest with over 100,000 unique lives in commercial and Medicare Advantage who will implement our oncology and advanced care planning services through our technology and services platform. So, with four new revenue agreements already signed, we're off to a great start with respect to our organic growth goals. Our pipeline also remains strong.

Speaker Change: Business.

Speaker Change: Finally, as a reminder, we announced to new revenue agreements in January the first was a multi product and I a cross sell to an existing Evelyn health clinic clients in the northeast.

Speaker Change: And the second a new logo health plan in the southwest with over 100000 unique lives in commercial and Medicare advantage to implement our oncology and advanced care planning services through our technology and services platform.

Speaker Change: So with four new revenue agreements already signed for off to a great start with respect to our grand organic growth goals.

Speaker Change: Our pipeline also remains strong during 2023, we began to see progress because of the Nia acquisition that we believe increases everyone's qualifications and competitiveness for large rfps.

Seth R. Frank: During 2023, we began to see progress because of the NIA acquisition that we believe increases Evolent's qualifications and competitiveness for large RFPs. We believe Evolent is positioned to have more conversations with key decision makers, both within existing legacy NIA clients and potential new customers. More importantly, health plans and risk-bearing physician groups are increasingly turning to us to help manage the cost and quality of specialty care. We have found that many plans have increased their focus on specialty care management over the past six months. Some citing the V28 risk adjustment changes and others because of general utilization pressure. We're seeing organizations placing particular importance on engaging partners that can help manage these costs in ways that improve patient experiences and, at the same time, will not increase friction with providers.

Speaker Change: We believe evidence position to have more conversations with key decision makers, both within existing legacy Nia clients and potential new customers.

Speaker Change: More importantly, health plans and <unk> physician groups are increasingly turning to us to help manage the cost and quality of specialty care.

Speaker Change: We've we've found that many plans have increased their focus on specialty care management over the past six months.

Speaker Change: Some side into the 28 risk adjustment changes and others because of general utilization pressures.

Speaker Change: We're seeing organizations place in particular importance on engaging partners that can help manage these costs and ways to improve the patient experience at the same time will not increase friction with providers we.

Seth R. Frank: We believe this is where everyone is truly differentiated. If you look at our work in oncology as an example, many health plans are struggling with the cost of cancer care, with many seeing annual cost increases of over 10%. Some of these cost increases are driven by new categories of drugs, as well as new indications for existing or new uses of existing medications. One example we've seen in the marketplace is that oncologists are increasingly using immunotherapies for a broad range of cancers. One such therapy, known as checkpoint inhibitors or PD-1s, is continuing to grow rapidly. In fact, just one popular PD-1 called Keytruda had annual revenue of $25 billion in 2020. While the cost per patient of these sorts of therapeutics is dramatic, in certain instances, they are worth the cost because they can be truly life-changing for patients. However, research shows that such treatments are often prescribed when it is known in advance, or can be known in advance, that they are unlikely to be effective.

Speaker Change: We believe this is where everyone is truly differentiated.

Speaker Change: If you look at our work in oncology as an example, many health plans are struggling with the cost of cancer care with many scene annual cost increases of over 10%.

Speaker Change: Some of these cost increases are driven by new categories of drugs as well as new indications for existing or new uses of existing medications.

Speaker Change: One example, we've seen in the marketplace that oncologist increasingly using immunotherapies for a broad range of cancers.

Speaker Change: One such therapy notice checkpoint <unk> or P. D ones are continuing to grow rapidly. In fact is one popular P. D. One called Keytruda at annual revenue of $25 billion in 2023.

Speaker Change: While the cost per patient of these sorts of therapeutics or dramatic in certain instances. They are worth the cost that they can be truly life changing for patients.

Speaker Change: However research shows that such treatments are often prescribed when it is known in advance or can be noted in advance that they are unlikely to be effective.

Seth R. Frank: To discern the effectiveness of therapies, our clinical research has shown that it's critical that a genetic test or other companion diagnostics are completed. Commonly, we partner with the treating oncologist to ensure these companion diagnostics are completed in the hope that the selected therapy will be the most effective for the patient. Our partnership model with oncologists is particularly well-suited for these more complex and high-cost situations when all the options under consideration are acceptable, and the only way to address cost and quality is by entering into a trust-based dialogue with the treating oncologist. Moving to our second operating priority of strong profitability, let me reiterate a few points, and John will also discuss this in more detail. I think the success we had in 2023 and our strong outlook for 2024 is driven by our diversification across Medicare, Medicaid, and commercial. In addition, we have a strong mix between our technology and services and the performance we deliver.

Speaker Change: It is certainly effectiveness of therapies are clinical research has shown that it's critical that a genetic tests or other companion diagnostics are completed <unk>.

Speaker Change: Commonly we partner with a treat and oncologists to ensure these companion diagnostics are completed and the hope that the selected therapy will be the most effective for the patient.

Speaker Change: Our partnership model with oncologist is particularly well suited for these more complex and high cost situations when all the options are.

Speaker Change: Under consideration are approvable, and the only way to address cost and quality is by entering into a trust based dialogue with the treating oncologist.

Speaker Change: Moving to our second operating priority of strong profitability, let me reiterate a few points and John will also discuss this in more detail.

Speaker Change: I think the success, we had in 2023 and our strong outlook for 2024 is driven by our diversification across Medicare Medicaid and commercial.

Speaker Change: In addition, we have a strong mix between our technology and services and performance we businesses.

Seth R. Frank: Within performance, we continue to see strong results in line with our expectations. While many in the industry have experienced higher than expected utilization, Q4 for us continued our prior trend of in-line performance. Our third investment theme is disciplined capital allocation.

Speaker Change: Within the performance, we continue to see strong results in line with our expectations, while many in the industry had experienced higher than expected utilization Q for for US continued our prior trend of inline performance.

Speaker Change: Our third investment theme is disciplined capital allocation and in 2023, we made great strides in generating cash delevering, the business and lowering our cost of debt financing.

John Paul Johnson: And in 2023, we will make great strides in generating cash, delivering the business, and lowering our cost of debt finance. We ended the quarter at 2.2 times net leverage, well ahead of the exit 2023 target we set at the time we acquired NIA of less than three times. Further, in December, we conducted a successful convertible offering that allowed us to completely swap out our existing term loan, so our only senior facility outstanding consists of $37.5 million through our revolver. And with those comments, let me hand it to John, who will provide a deep dive into our profitability and cash story now and for 2024, as well as our financial health. Thanks, Seth.

Speaker Change: We ended the quarter at 2.2 times net leverage well ahead of the exit 2023 target. We set at the time, we acquired in I E of less than three times.

Speaker Change: Further in December we conducted a successful convertible offering that allowed us to completely swap out our existing term loan star only senior facility outstanding consists of $37.5 million through a revolver.

Speaker Change: And with those comments, let me hand into John will provide a deep dive into our profitability and cash story now and for 2024 as well as our financial outlook.

John Paul Johnson: First, some metrics around our growth. Second, adjusted EBITDA growth, where it's coming from and our path to our $300 million target. Third, a perspective on our 2023 cash flow performance and a look ahead to what we expect for cash production in 2024.

John: <unk> I'll focus my remarks Tonight, and five areas first some metrics around our growth second adjusted EBITDA, rather where it's coming from and our past two or 300 million dollar target.

John: Third of perspective on our 2023 cash flow performance and to look ahead to what we expect for cash production in 2024.

John: For our view on key factors affecting the managed care environment in 2024, and how they might affect Evelyn.

John Paul Johnson: Our view on key factors affecting the managed care environment in 2024 and how they might affect Evelen. And finally, I will close with our Q1 2024 Outlook and Guidance. Beginning with top-line growth, I believe Q4 of 23 demonstrates the value of our balanced growth strategy with our cross-sell delivering growth in product members despite a quarter-over-quarter decline in unique members due to Medicaid redetermination. We're excited to continue delivering on our strategy of more products per unique member, and we ended the year at two products per unique member, up from an average of 1.6 in the first quarter of 2023. With the expansion of Evolent's Performance Suite into Advanced Imaging, as Seth discussed, I want to give investors a few reference points on Performance Suite PMPM.

Speaker Change: And finally, I will close with our queue, one and 2024 outlook and guidance.

Speaker Change: Beginning with top line growth I believe Q4 of 23 demonstrate the value of our balanced growth strategy with our cross-sell delivering growth and product numbers, despite a quarter over quarter decline and unique members due to meditate redeterminations where.

Speaker Change: We're excited to continue delivering on our strategy more products per unique number and we ended the year at two products or unique member up from an average of 1.6 in the first quarter of 2023.

Speaker Change: With the expansion of evidence performance sweet into advanced imaging F. F discussed I want to give investors a few reference points on performance Sweet Pnp M's.

John Paul Johnson: Our capitation fees are based on the actual underlying costs of the scope that we manage, and so PMPMs can vary by population, geography, and specialty. For example, oncology performance suite fees in Medicare are typically between $40 and $70 per member per month. However, since cancer prevalence is relatively lower in Medicaid populations, fees for a similar scope of work might be between $10 and $20 per member per month. Similarly, we anticipate advanced imaging performance suite Bs will vary by line of business with a smaller average based on typical costs, from $3 at the low end to $10 at the high end.

Speaker Change: Our capitation fees are based on the actual underlying costs of the scope that we manage and so P. M. P. M can vary by population geography and specialty.

Speaker Change: For example, oncology performance sweet fees and Medicare are typically between 40 and $70 per member per month.

Speaker Change: Cancer prevalent is relatively lower in Medicaid populations fees for a similar scope of work might be between 10 and $20 per member per month.

Speaker Change: Similarly, we anticipate advanced imaging performance Sweet peas will vary by line of business with a smaller average based on typical costs from $3 at the low and the $10 at the high end.

John Paul Johnson: Turning to adjusted EBITDA expansion, which remains a consistent long-term pillar for shareholder value creation, we are pleased to be on track with our profit targets as we exit the year, delivering adjusted EBITDA growth of almost 49% relative to Q4 of 2022. In May 23, at our Investor Day, we articulated three primary sources of adjusted EBITDA growth. First, we adjusted the DIVA doc from our recent acquisition.

Speaker Change: Turning to adjusted EBITDA expansion, which remains a consistent longterm pillar of shareholder value creation.

Speaker Change: We are pleased to be on track with our profit target as we exit the year delivering adjusted EBITDA growth that almost 49% relative to Q4 of 2022.

Speaker Change: In may of twenty-three at our Investor Day, we articulated three primary sources of adjusted EBITDA currently.

Speaker Change: First adjusted EBITDA from our recent acquisition.

John Paul Johnson: Second, the maturation of our performance suite contracts, and third, new growth. As you can see on slide 8 of the presentation, our year-over-year performance for Q4 resulted from these same sources of core business performance, with over $12 million of quarterly adjusted EBITDA growth from our core organic business drivers versus the same quarter last year, nearly $50 million in annualized improvements. For example, looking at 2022 performance suite launches, we saw an improvement of over 10 percentage points in our margins between Q4 of 22 and Q4 of 23, consistent with our targets, and the result was both initial actuarial conservatism and quality and cost improvements through our model. During 2023, this performance in our core business was offset in part by expected headwinds from Medicaid redeterminations and the runout of certain legacy administrative services clients during 2023. Importantly, these headwinds are well understood and time-bound, with the administrative services impact complete as we exit 23. Meanwhile, our core business drivers will continue to propel us towards our $300 million adjusted EBITDA exit run rate target for 2024. You can see this in detail on slide nine of the presentation.

Speaker Change: Second the maturation of our performance week contract and third new growth.

Speaker Change: As you can see on slide eight of the presentation or year every year performance for Q4 resulted from these same sources of core business performance with over $12 million of quarterly adjusted EBITDA growth from our core organic business drivers first in the same quarter last year.

Speaker Change: Nearly $50 million an annualized improvements.

Speaker Change: For example, looking at 2022 performance sweep launches, we saw an improvement of over 10 percentage points in our margins between Q4 of 22 and Q4 of 23 <unk>.

Speaker Change: Consistent with our targets and the result of the initial actuarial conservativism and quality and cost improvements through our model.

Speaker Change: During 2023 this performance and our core business was upset in part by expected headwinds for Medicaid Redetermination in the run out a certain level legacy administrative services clients during 2023.

Speaker Change: Importantly, these headwinds are well understood and <unk> with the administrative services impacts complete as we exit 23.

Speaker Change: While our core business drivers will continue to propel us towards our $300 million adjusted EBITDA exit run rate target for 2024.

Speaker Change: You can see this detailed on slide nine at the presentation.

John Paul Johnson: First, we anticipate an approximate $4 million headwind to quarterly adjusted EBITDA from Medicaid redeterminations relative to Q4 of 2023, which I'll discuss more in a bit. Second, realizing the contractual synergies from the NIA deal by the end of this year adds approximately $35 million in annual adjusted EBITDA, or approximately $9 million on a quarterly basis. For our performance suite, we are projecting approximately an incremental $13 million in quarterly adjusted EBITDA exiting this year. And finally, on new profitable growth, we have already announced deals that we expect will contribute approximately an additional $5 million in quarterly adjusted EBITDA once they are live, leaving the range of $4 million in quarterly adjusted EBITDA as our go-get. Let me provide some additional color on each element of this bridge.

Speaker Change: First we anticipate an approximate 4 million dollar headwind quarterly adjusted EBITDA for Medicaid Redeterminations relative to Q4 of 23, which I will discuss more in a bit.

Speaker Change: Second realizing the contractual synergies from the Nia deal by the end of this year at approximately $35 million in annual adjusted EBITDA, where approximately $9 million on a quarterly basis.

Speaker Change: For our performance Sweet, we're projecting approximately an incremental $13 million and quarterly adjusted EBITDA exiting this year.

Speaker Change: And finally, a new profitable growth, we have already announced deals that we expect will contribute approximately an additional $5 million in quarterly adjusted EBITDA, one stay alive, leaving in the range of $4 million and Corporately adjusted EBITDA as hours Okay.

Speaker Change: Let me provide some additional color on each element of this bridge.

John Paul Johnson: First, recall that the NIA-related synergies are both revenue- and cost-based. We feel high confidence in achieving them, but they are contractual in nature. New services agreements that have already started phasing in on the revenue side. On the cost side, we continue to expect to exit the transition services agreement later this quarter. For the performance suite, the forecasted improvement is primarily driven by initial margin expansion of just over 10% on the over $400 million in performance suite revenue launched during 2023, and is consistent with what we experienced for 22 launches across 2023. And on the new business front, recall that we initially targeted $50 million of our $300 million run rate adjusted EBITDA from new growth in May of 23, or about nine months. We have in the range of $16 million, or approximately $4 million per quarter, of that gap remaining.

Speaker Change: First recall that the Nia related synergies are both revenue and cost based.

Speaker Change: We feel high confidence in achieving them that they are contractual in nature, new services agreements that have already starting pacing in on the revenue side on.

Speaker Change: On the cost side, we continue to expect to exit transition services agreement later this quarter.

Speaker Change: For the performance Sweet the forecasted improvement is primarily driven I initial margin expansion of just over 10% on the over $400 million in performance Sweet revenue launched during 2023 and.

Speaker Change: And it is consistent with what we experienced for 2002 lunches across 2023.

Speaker Change: And for the new business front recall that we initially targeted $50 million of our $300 million run rate adjusted EBITDA from new growth in May of 2003 are about nine months ago.

Speaker Change: We have in the range of $16 million approximately $4 million per quarter of that gap remaining.

John Paul Johnson: Continuing at the same sales pace would likely get us beyond our year-end target. Turning now to cash, when we announced the NIA transaction, we set a goal for 2023 to increase our cash balance by more than $120 million before paying interest, net debt activity, acquisition costs, earnouts, and dividends. Our fiscal discipline delivered more than $175 million on this metric, resulting in a year-end cash balance of $193 million.

Speaker Change: Continuing at the same sales pace would likely get us beyond our year end target.

Speaker Change: Turning now to cash when we announced the Nia transaction, we set a goal for 2023 to increase our cash balance by more than $120 million for paying interest net debt activity acquisition costs, I pronounce and dividends.

Speaker Change: Our fiscal discipline delivered more than $175 million on this metric, resulting in a year and cash balance of $193 million.

John Paul Johnson: We are pleased to have delivered this in a year when we were also investing heavily in integration and business restructuring to align our organization with our go-forward strategy in value-based specialty care. Going forward, we plan to provide an outlook for the cash from operations line on our cashless data. Our cash from operations in 2023 was $142 million, which included a benefit from networking capital of approximately $37 million.

Speaker Change: We are pleased to have delivered this in a year. When we were also investing heavily in integration and business restructuring to align our organization with our go forward strategy and value based specialty care.

Speaker Change: Going forward, we plan to provide an outlook for the cash from operations wine on our cashless statement.

Speaker Change: Our cash from operations in 2023 with $142 million, which included a benefit from networking capital of approximately $37 million.

John Paul Johnson: As we've previously noted, our working capital can fluctuate based on the timing of customer payment. Our target for 2024 of at least $150 million in operating cash flow includes an expectation for a modest use of cash for working capital during the year. Overall, net of working capital, we would expect growth of $80 million in our cash from operations in 2024 relative to 2023. Our capital allocation priorities for cash flow remain the same as they have been for several years.

Speaker Change: As we've previously noted are working capital can fluctuate based on timing customer payments.

Speaker Change: Our target for 2024 of at least $150 million in operating cash flow.

Speaker Change: Includes an expectation for a modest use of cash for working capital during the year.

Speaker Change: Overall net of working capital fluctuations, we would expect growth of $80 million in our cash from operations in 2024 relative to 2023.

Speaker Change: R capital allocation priorities for cash flow remain the same as they have been for several years.

John Paul Johnson: To reiterate, first, we will continue to invest in capitalized product development to advance our core strategy of value-based specialty care. Second, targeted strategic M&A that accelerates this strategy. And third, a disciplined capital structure that balances reasonable net leverage, share count, and cash interest.

Speaker Change: To reiterate first we will continue to invest in capitalized product development to advance our core strategy value basis specialty care.

Speaker Change: Second targeted strategic M&A that accelerates this strategy.

Speaker Change: And third a disciplined capital structure, the balances reasonable net leverage share count and cash interest.

John Paul Johnson: We continue to anticipate approximately $30 million annually in capital expenditures, primarily capitalized software development costs, to continue our reinvestment in the business and competitive leadership in complex specialty care. The environment for managed care organizations, our primary customer base, has recently been characterized by two important changes in Medicaid, representing 35% of our revenue. The primary question has been the impact of redeterminations on the top and bottom lines. In Medicare Advantage, representing about 42% of our revenue, the primary question has been elevated utilization. We'd like to reiterate today our views on how these trends impact health. First, Medicaid redeterminations continue to meet our expectations. We ended the year with a gross Medicaid membership decline of 8.5% on a same-store basis, compared to our forecast of 8 to 10 percent.

Speaker Change: We continue to anticipate approximately $30 million annually and capital expenditures, primarily capitalized software development costs to continue our reinvestment in the business and competitive leadership and complex specialty care.

Speaker Change: The environment for managed care organizations are primary customer base has recently been characterized by two important themes and.

Speaker Change: And Medicaid representing 35% of our revenue. The primary question has been the impact of Redeterminations on the top and bottom lines.

Speaker Change: And Medicare advantage, representing about 42 per cent of our revenue. The primary question has been elevated utilization.

Speaker Change: We'd like to reiterate today, our views on how these trends impact tablet.

Speaker Change: First Medicaid Redeterminations continued to track our expectations.

Speaker Change: We ended the year with a gross Medicaid membership decline of 8.5% on the same store basis compared to our forecast of eight to 10 per cent.

John Paul Johnson: And we continue to forecast a total decline in the mid-teens by the middle of this year. As the membership has changed, we've seen an expected modest increase in utilization metrics in our performance suite business. For example, we saw an average of 4.89 authorizations for cardiology services per 1,000 Medicaid members in a typical population leading up to the start of redetermination.

Speaker Change: And we continue to forecast a total decline in the mid teens by the middle of this year.

Speaker Change: As the membership has changed we've seen an expected modest increase in utilization metrics in our performance week business. For example, we saw an average of 4.89 authorizations for cardiology services per thousand Medicaid members in a typical population leading up to this dark redeterminations.

John Paul Johnson: That same stat in Q4 of 23 was up by 1% to 4.94 authorizations per 1,000 members. We estimate that the total year-over-year impact on the bottom line from Medicaid redeterminations was approximately $3 million in Q4, again consistent with our expectations. Importantly, sitting here in February, we are now more than 50% of the way through this process and believe we have very good insight into how it is playing out. We have assumed in our guide an additional 3.5 million in quarterly impact being fully in place by the summer, which we believe is a reasonable estimate of our total gross exposure. Next, regarding utilization, particularly within Medicare Advantage, there are several significant shifts underway in the MA population. The V28 risk model has prompted many payers to revise their plan benefit design beginning in 2024. Additionally, there is growing preference among MA members for PPO plans versus HMO plans, which tend to have more limited networks.

Speaker Change: That same stats in Q4 of 23 was up by 1% to 4.94 authorizations per thousand members.

Speaker Change: We estimate that the total year over year impact on the bottom line for Medicaid Redeterminations was approximately $3 million in queue for again consistent with our expectations.

Speaker Change: Importantly, sitting here in February we are now more than 50 per cent of the way through this process and believe we have very good insight into how it is playing out we.

Speaker Change: We have assumed in our guide an additional $3.5 million and quarterly impact being fully in place by the summer, which we believe is a reasonable estimate of our total gross exposure.

Speaker Change: Next regarding utilization, particularly within Medicare advantage.

Speaker Change: There are several significant shifts underway and the M. A population.

Speaker Change: The V 28 risk model has prompted many payers to revise their plan benefit design beginning in 2024.

Speaker Change: He's growing preference among M. A members for P. P O plans or is it H M O plans, which tend to have more limited networks.

John Paul Johnson: And, the commentary from many MCOs indicates elevated utilization during Q4, particularly for inpatient and supplemental benefit cost drivers. As we think about evidence, recall that most of the risk that we take in specialty care requires prior authorization. This gives us substantial insight into trends without having to wait for claims to develop. I want to be very clear that we have not seen in our Q4 data any statistically significant trends on the key leading indicators that would suggest elevated costs in our risk areas. With that said, and at the same time, given the number of moving pieces and unknowns in Medicare Advantage for 2024, we believe it prudent to take a thoughtful approach to our annual guidance for this year, with a wider range than we typically give.

Speaker Change: And the commentary for many M C O as in the case elevated utilization during Q4, particularly for inpatient and supplemental benefit cost drivers.

Speaker Change: As we think about <unk>.

Speaker Change: Call that most of the risks that we take and specialty care requires a prior authorization.

Speaker Change: This gives us substantial insight into trends without having to wait for claims to develop.

Speaker Change: I want to be very clear that we have not seen in our queue for data any statistically significant trends on the key leading indicators it would suggest elevated costs and our risk areas.

Speaker Change: With that said and then at the same time, given the number of moving pieces and unknown and Medicare advantage of 2024, we've.

Speaker Change: We believe it prudent to take a thoughtful approach to our annual guidance for this year and with a wider range and we typically give.

John Paul Johnson: So let's then turn to 2024 guidance. On the top line, we are projecting full-year revenues of between $2.4 and $2.5 billion, representing approximately 25% organic growth at the midpoint, well ahead of our baseline mid-teens long-term outlook and driven by continued strong uptake of our Performance Suite product. On the bottom line, we are projecting full-year adjusted EBITDA of between $235 and $265 million, representing approximately 30% year-over-year growth in the mid-20s.

Speaker Change: So left then turned to 2024 guidance.

Speaker Change: On the top line, we are projecting full year revenues of between 2.4 and $2.5 billion, representing approximately 25 per cent organic growth at the midpoint well ahead, our baseline mid teens longterm outlook and driven by continued strong uptake of our performance wheat products.

Speaker Change: On the bottom line, we're projecting full year adjusted EBITDA of between 235 and $265 million, representing approximately 30% year over year growth at the midpoint.

John Paul Johnson: The bottom one-third of this outlook includes a buffer for potential unexpected increases in medical utilization in 2024, given the industry factors I mentioned a moment ago. For the first quarter, we are expecting revenues between $595 and $610 million and adjusted EBITDA between $52 and $58 million. We expect sequential quarter-to-quarter growth in both revenue and adjusted EBITDA across this year as we ramp towards our exit adjusted EBITDA target of $300 million, with the first half accounting for about 45% of our adjusted EBITDA for the year. This spread of adjusted EBITDA between the first and second half of the year is consistent with Evolent's performance in 2021 and 2022. We are targeting cash from operations of $150 million or better for the year and expect to deploy approximately $30 million in capitalized software development.

Speaker Change: The bottom one third of this outlook includes a buffer for potential unexpected increases in medical utilization in 2024, given the industry factors I mentioned a moment ago.

Speaker Change: For the first quarter, we are expecting revenues between 595 and $610 million and.

Speaker Change: And adjusted EBITDA between 52 and $58 million.

Speaker Change: We expect sequential quarter to quarter growth in both revenue and adjusted EBITDA across this year as we ramp towards our exit adjusted EBITDA target of $300 million with the first half accounting for about 45% of our adjusted EBITDA for the year.

Speaker Change: This spread of adjusted EBITDA between the first and second half of the year is consistent with evidence performance in 2021 and 2022.

Speaker Change: We are targeting cash from operations of $150 million or better for the year and expect to deploy approximately $30 million and capitalized software development.

Operator: With that, we will open it up for questions. Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before...

Speaker Change: With that we will open it up for questions.

Speaker Change: Yes. 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.

Speaker Change: Speaker phone please pick up your handset before pressing the case if anytime of your questions to that address you would like to withdraw. Please press star then two.

Operator: If at any time your question has been addressed and you would like to withdraw it, please press star 1. With consideration of the others, please limit yourself to one minute. For follow-up or additional questions, you may re-enter the... This is a production of the U.S. Department of Health and Human Services. For more information, call 1-800-637-8475.

Speaker Change: Consideration of the others.

Speaker Change: Off to one question.

Speaker Change: Fall off or additional questions you may re enter the question queue and those will be taken time pending.

Speaker Change: At this time, we will pause momentarily till some other roster.

Speaker Change: And the first question comes from Kevin Calando with UBS.

Kevin Calando: Hi, <unk> it definitely I'm very helpful I'm, calling for Kevin. Thank you. So much for taking my question I appreciate all the color thinking about <unk>.

Operator: This is a production of the U.S. Department of Health and Human Services, and the first question comes from Kevin Colando. Hi, guys. It's actually Andrea Alfonso and Sir Kevin.

Kevin Calando: <unk> you know into.

Kevin Calando: You.

Speaker Change: You know we talked about you know as soon as the admin service fly now.

Andrea Alfonso: Thank you so much for taking my question. I appreciate all the color on thinking about the sequential trends, you know, into the year. I guess, you know, you talked about some of the admin service running out, etc.

Speaker Change: And I guess maybe.

Speaker Change: Maybe if you sort of extra it's all those things and extracted Medicaid redetermination sent back to the first half how do we think about just kind of the <unk> Ah Captor, and then I guess embedded within sort of the the expectation for new business went in passing that is that sort of more of a.

Andrea Alfonso: And I guess maybe if you sort of extract all those things and extract the Medicaid redeterminations impact in the first half, how do you think about just kind of the cadence of capture? And then I guess embedded within sort of the expectations when new business was impacting that, is that sort of more of a, you know, a third quarter or fourth quarter contribution? Hey, Andrea, happy to take that one. You know, I'd say two things.

Speaker Change: A third or fourth quarter contribution.

Speaker Change: Hey, Andrea having to take that one yeah.

Andrea: Say two things first relative to cadence across the year performance overall, and then specific to your question I new business wins.

Andrea: As we look at EBITDA performance in 23 and compare to our key drivers in 24, one of the core observations that we would make is the some of the headwinds that we experienced in twenty-three from the administrative services run out and Medicaid Redeterminations.

John Paul Johnson: First, relative to the cadence across the year of the performance overall, and then specific to your question on new business. As we look at EVADOT performance in 23 and compare it to our key drivers in 24, one of the core observations that we would make is that some of the headwinds that we experienced in 23 from the administrative services run out and Medicaid redeterminations are mostly now behind us with a little bit to go on the Medicaid side. And our expectation for continued organic specialty performance, such as increased adjusted EBITDA, is very consistent with our recent performance. Yeah, so that's how I characterize our outlook here as we move towards the $300 million exit run. On the new business side, I'd split that into what is already contracted, which you see on the page, about $5 million in quarterly contribution there. That'll be phasing in largely across the first half of this year.

Speaker Change: Are mostly now behind us.

Speaker Change: With a little bit to go in on the Medicaid side.

Speaker Change: And our expectation for continued organic specialty performance in terms of increased adjusted EBITDA is very consistent with our recent performance.

Speaker Change: So that's how I would characterize our outlook here as we move towards the 300 million dollar exit run right.

Speaker Change: On the new business side, you know I'd split that into what is already contracted a what you see on the pages about $5 million a quarterly contribution there that'll be facing in largely across the first half of this year and the remainder that you see on the page about $4 million per quarter.

John Paul Johnson: And the remainder that you see on the page of about $4 million per quarter is likely phasing in more across the full year. Thank you, and the next question comes from Jailendra Singh with Truist. Thank you, and thanks for taking my questions. First, a quick clean-up question, this Medicaid plan for imaging contract is rolled out intra-quarter in Q4. We calculated PMPM in the range of $5. Are we in the ballpark, and should we expect the number of lives to kind of increase from Q4 to Q1 because it was rolled out intra-quarter? That's one clarification.

Speaker Change: It's likely facing in more across the full year.

Speaker Change: Thank you and the next question comes from Jill Undressing with true it's true securities.

Jill Undressing: Thank you and thanks for taking my questions for some quick cleanup question. The this Medicaid plan to put imaging contracted rollout intra quartered Q4, we got great like B M. P. As in mid range of $5 ought to be in the ballpark and should we expect the life's too kind of increase from <unk>.

Jill Undressing: Was ruled out anti quite upset when clarification. My main question is around the new contract with an existing health plan to add radiation and surgical oncology services to existing medical College services do you see opportunities with your other medical oncology social contract add these additional and call your services or do you think there was something unique about this <unk>.

Jailendra P. Singh: My main question is around the new contract with an existing health plan to add radiation and surgical oncology services to existing medical oncology services. Do you see opportunities with your other medical oncology services contracts to add these additional oncology services, or do you think there was something unique about this health plan, and if there is an opportunity, are you willing to quantify? Hey, Jailendra, I'll take the first part.

Speaker Change: Plan and if there is an opportunity are you willing to quantify.

Speaker Change: Hey, Linda and I'll take the first part you are in the zone on the P. A T m's and we would expect.

John Paul Johnson: You're in the zone on the PMPMs, and we would expect an increase in the average performance suite life in Q1 since we'll have a full quarter of that go live. I'll turn to the chat for the other question. Yeah, Jailendra, I think the answer to the second question is, yes, we do see additional opportunities for both radiation and surgical oncology, you know, across the technology and services side. We do very little of that today.

Speaker Change: Increase in the average performance Sweet lives in Q1 essential have a full clutter of that good alive <unk>.

Linda: Yeah, <unk> I think the answer to the second question is yes, we we do see additional opportunities for both radiation and surgical oncology you know across the technology and services side Uhm, we do very little of that today and saw across all of our technology and services arrangements, where we have <unk> <unk> I think that's a clear up.

John Paul Johnson: And so, across all of our technology and services arrangements where we have MedOnc, I think that's a clear opportunity. And then on the performance suite side, we actually do a little bit of radiation oncology today, but we don't do surgical oncology.

Speaker Change: <unk> and then on the performance Sweet side, we actually do a little bit of radiation oncology today, and and we don't do surgical oncologist I think their surgical oncology as an opportunity we wanted to quantify the P. M. P M around surgery, which we did and the script just to give you a sense to your plan of it's not <unk>.

John Paul Johnson: So, I think surgical oncology is an opportunity. We wanted to quantify the PMPM around surgery, which we did in the script, just to give you a sense of your point of, it's not immaterial what the opportunity is here just for surgery and radiation is also attractive. So, this is, you know, I think it's a real development for the company and will benefit us both on the technology and the performance suite side. Thank you. And the next question comes from Jeff Guerra with... Yeah, good afternoon, and thanks for taking the questions.

Speaker Change: Material what the opportunity is here just for surgery and radiation is also attractive. So this is you know I think it's a real development for the company and will benefit us both on the technology and the and the performance.

Speaker Change: Thank you and the next question comes from Jeff Carol Stevens.

Speaker Change: Yeah. Good afternoon, thanks for taking the questions maybe ask a little bit more on the 4 million EBIDTA go get and you know certainly some positive comments from you guys about the pipeline and the setup to achieve that target, but was hoping to get more comments on.

Jeff Guerra: Maybe ask a little bit more on the 4 million EBITDA target and certainly some positive comments from you guys about the pipeline and the setup to achieve that target. But we're hoping to get more comments on visibility and whether there are multiple paths to achieve that 4 million target and any color you could provide on the types of contracts that you think could get you there. We'd assume it's more technology and services, but we wait to hear what you have to say. Thanks. Yes, sure, Jeff. Good question.

Speaker Change: <unk> and and whether there's multiple paths to achieve that 4 million target and any color you can provide on the the types of contracts that you think could get you there would assume it's more technology and services, but wait to hear what you have to say thanks.

Speaker Change: Yes sure Jeff Good. Good question I think look at the thing we tried to do in the scrub towards I'll. Just reiterate is that we have been pacing ahead of schedule that we would need to achieve to get there you know all the time one for the 300 billion dollar exit where we've been pacing slightly ahead of that.

John Paul Johnson: I think, look, the thing we tried to do in the script, which I'll just reiterate, is that we have been pacing ahead of the schedule that we would need to achieve to get there, you know, on the timeline for the $300 million exit. We've been pacing slightly ahead of that. So, you know, I think the bottom line is we need to kind of continue what we're doing, and we'll easily get there. You know, in terms of the paths to get there, there are multiple ways to get there.

Speaker Change: So you know I think the bottom line is we need to kind of continue what we're doing and will will easily get there.

Speaker Change: You know in terms of the past to get there there are multiple ways to get there I would say tech services is the is the main part of that but if you go back to when we talked about this gap and what's there. There's some performance we've maturation opportunity as well that's not in the numbers on the page and will break down what's what on that but ill morbid.

John Paul Johnson: I would say tech services is the main part of that, but if you go back to when we talked about this gap and what's there, there's some performance rematuration opportunity as well that's not in the numbers on the page. And, you know, I won't break down what's what on that, but more of one or more of the other could both get us there, to your point. And just in terms of the pipeline, which I'm sure we'll talk about at some point in this call in a little more detail, we've got a lot in the pipeline, lots of opportunities, whether they're RFPs or net new opportunities or same-store growth. So we feel really good about the path to kind of closing that gap by the end of the year. Thank you. And the next question comes from Stephanie Davis with our... Hi guys, this is Anna Grudensky on behalf of Stephanie.

Speaker Change: One or more of the other could both get is there to your point.

Speaker Change: Yeah, just in terms of the pipeline, which I'm sure we'll talk about at some point in this call. It a little more detail we've got a lot in the pipeline.

Speaker Change: Lots of opportunities, whether they're rfps or new opportunities are the same store growth. So we feel really good about the.

Speaker Change: The past kind of closing that gap by the end of the year.

Speaker Change: Thank you and the next question comes to Stephanie Davis with Barclays.

Stephanie J. Demko: Hi, guys assist any pretence keep calling for Stephanie. Thank you. Thank you.

Stephanie J. Demko: Mmm. Thank you noted that the wider guidance range <unk>.

Stephanie J. Demko: <unk>.

Stephanie J. Demko: Asian, just curious if you can speak to what the high end and let the <unk> and just any <unk> you can share it beyond the for Ya that'd be okay.

Anna Grudensky: Thank you for taking our questions. So you noted that the wider guidance range reflects the unknowns around utilization. Just curious if you could speak to what the high end and what the low end of guidance assumes and just, yeah, any level of visibility you can share beyond the four new revenue agreements. Okay.

Speaker Change: Yeah, Let me take that first faced you know as we think about what can take it to the bottom what can take us to the top end of the range.

Speaker Change: As I noted in the prepared remarks that bottom thirds about $10 million is what we're viewing as our buffer for unexpected medical utilization once again, we're not seeing but given what we have seen in the industry writ large we believe it's prudent to have in our outlook.

John Paul Johnson: You know, as we think about what could take us to the bottom, what could take us to the top end of the range. As I noted in my prepared remarks, that bottom third, about $10 million, is what we're viewing as our buffer for unexpected medical utilization, which again, we're not seeing.

Speaker Change: On the top side of the range and what can take US two 265 and beyond this year really is two things. One is timing of go lives largely of our technology and services sweet clients.

John Paul Johnson: But given what we have seen in the industry writ large, we believe it's prudent to have in our health. On the top side of the range, and what could take us to 265 and beyond this year, really, there are two things. One is timing of go lives, largely for our technology and services suite clients, and two, outcomes during the year on the performance suite. And that's how we think about the range.

Speaker Change: And two outcomes during the year on live performance Sweet and that's how we think about the range.

Speaker Change: Thank you and the next question comes from Ryan Daniels with William Blair.

Ryan Daniels: Yeah. Thanks for taking my questions guys. Congrats on the strong performance. So if you've set this one up but I do want to hit on the pipeline and let me actually phrase it with a little bit more detail.

John Paul Johnson: Thank you. And the next question comes from Ryan Daniels. Yeah, thanks for taking the questions, guys. Congratulations on the strong performance. Seth, you set this one up, but I do want to hit on the pipeline.

Ryan Daniels: <unk> some of the Medicaid plans getting hit with Redetermination, you mentioned M. A plans they've got higher utilization and be 28, and then you've got things like prior authorization and pressure on utilization management, hitting all pair types, including commercial so maybe you could unpack the pipeline a little bit and how these various things are kind of driving demand.

Ryan Daniels: Let me actually phrase it with a little bit more detail. Obviously, some of the Medicaid plans are getting hit with redetermination. You mentioned MA plans that got higher utilization and B-28, and then you've got things like prior authorization. Pressure on Utilization Management Hitting All Payer Types, Including Commercials

Speaker Change: For solutions, such as yours, and where you're seeing kind of different puts and takes in the pipeline for your product offerings. Thanks.

Speaker Change: Yep happy to arrive so look I'd I'd, probably put it into three categories.

Seth R. Frank: So maybe you can unpack the pipeline a little bit and how these various things are kind of driving demand for solutions such as yours and where you're seeing kind of different puts and takes in the pipeline for your product offerings. Yeah, happy to Ryan. So look, I probably put it into three categories. One is, you know, the things that we have been seeing for the last three years have continued, which is, you know, kind of traditional demand for the product. I think that the second category, which is newer, is around what I would call more acute medical loss ratio and pressure, right?

Seth R. Frank: One is you know the the things that we have been seen for the last three years have continue which is you know kind of traditional demand for the product.

Speaker Change: The second category, which is newer is around what I would call more acute medical loss ratio on pressure right, where <unk> a as under underwriting pressure and has a gap to their goal for their fourth quarter of this year and beyond and that deal.

Speaker Change: Would have taken a year six months to work on before all of a sudden it's a much shorter sales cycle more focus team on their side and frankly more rfps and also organic opportunities. So that's kind of you know the <unk>.

Seth R. Frank: Where Payer A is under underwriting pressure and has a gap to their goal for the fourth quarter of this year and beyond, and that deal would have taken a year or six months to work on before all of a sudden, it's a much shorter sales cycle, a more focused team on their side, and frankly, more RFPs and also organic opportunities. So that's kind of a, you know, the second category that's newer for us over the last six months. And then the third category, I would define around more integrated bundled offerings that are available to us now because of NIA and IPG and Vital and Evolent all kind of pulled together in a fully integrated fashion that were really not available to us, you know, call it a year ago. And those have ramped up. We now have several of those in different pockets and things like that along the way. But I think that third category is going to kind of be an evergreen category for us at this point and looks very promising. Does that help, Ryan? Yeah, that's a great color.

Seth R. Frank: Second category, that's newer for us over the last six months uhm.

Seth R. Frank: And then the third category I would define around.

Speaker Change: More integrated bundled offerings that are available to us now because of N. I a N I P G and vital and have won all kind of pulled together in a fully integrated fashion, we're really not available to US you know call. It a year ago and those have ramped with now several of those are different pockets.

Seth R. Frank: Things like that along the way, but I think that third category is I'm gonna kind of be evergreen category for us at this point and it looks it looks very promising.

Ryan Daniels: Does that help Brian.

Ryan Daniels: Yeah, that's a great color. Thank you so much.

Speaker Change: Mhm.

Seth R. Frank: And the next question person man Samuel without J P. Morgan.

Speaker Change: Hey, guys of Kyle onto any Tonight, Congrats on the great quarter I was just gonna ask about the performance we'd offering an imaging does this change how you size. Your total market within your cross sell Tan that you laid out your Investor day I'm, just trying to think about how we frame. This in terms of future partnerships. Thank you.

Ryan Daniels: Thank you so much. Thank you. And the next question comes from Anne Samuel with... Hey guys, this is Kyle on Franny tonight.

Kyle: Congratulations on a great quarter. I was just gonna ask about the performance suite offering and imaging. Does this change how you size your total market within your cross sell plan that you laid out in your investor day? Just trying to think about how we frame this in terms of future partnerships. Thank you. Hey Kyle.

Ryan Daniels:

Kyle: Yeah. It does increase our total addressable market, we haven't really quantify that are updated that formally does increase it a little bit.

Speaker Change: We're a couple billion dollars out of 150 billion dollar market. So I think it doesn't really change the big picture for US, which is we have a lot of running room, but yes. It does make make the market a little bit bigger.

John Paul Johnson: Yeah, it does increase our total addressable market. We haven't really quantified that or updated that, you know, formally, but it does increase it a little bit. You know, we're a couple billion dollars out of a $150 billion market.

Speaker Change: Thank you and the next question comes to Jessica Tassin with Piper Sandler.

Speaker Change: Hi, guys. Thanks for the question I wanted to clarify and understand if this scope of your Florida contract with Humana has changed at all I think initially it with limited to certain counties. Just curious to know if that contract now statewide and then beyond that just maybe I'm, hoping you could talk a little bit about the thought process.

John Paul Johnson: So I think it doesn't really change the big picture for us, which is that we have a lot of running room. But yes, it does make the market a little bit bigger. Thank you. The next question comes from Jessica Tassin with Piper Sound. Hi, guys.

Jessica Tassin: Kind of the pricing precautions that you took in order to price the advanced imaging performance Sweet solution, and just whether you're expecting kind of equivalent margins in in those products in your 123 at <unk> and the rest of the <unk> perform asleep. Thanks, so much.

Jessica Tassin: Thanks for the question. I wanted to just clarify and understand if the scope of your Florida contract with Humana has changed at all. I think initially it was limited to certain counties.

Jessica Tassin: Just curious to know if that contract is now statewide? And then, beyond that, maybe you could talk a little bit about the thought process and kind of the pricing precautions that you took in order to price the advanced imaging performance suite solution and just whether you're expecting kind of equivalent margins in those products in year one, two, three, as you would in the rest of the performance suite book. Thanks so much. Yeah, hey, Jess. I'll answer the first one.

Jessica Tassin: Yeah, Hey, Jess about the hours are the person know that Humana, Florida has not changed since we announced it and it's kind of.

Speaker Change: Launched N on track relative to what we shared last year yeah.

Speaker Change: Underwriting principles.

Speaker Change: <unk> the new advanced imaging performance, we product very similar to the way that we think about the rest of the risks that we take a looking to be quite specific around the scope for example at around protections for evidence in terms of the way that we like to manage our risk.

John Paul Johnson: No, Humana Florida has not changed since we announced it, and it's kind of... launched and, you know, on track relative to what we shared last year. Underwriting principles on the new advanced imaging performance suite product, very similar to the way that we think about the rest of the risk that we take, looking to be quite specific around the scope, for example, around protections for evolution in terms of the way that we like to manage our risk and be responsive to the customer's needs in terms of delivering to them a guaranteed outcome, which is one of the key buying factors that we see customers opting for performance.

John Paul Johnson: And it'd be responsive to the customers needs in terms of delivering to them and guaranteed outcome and it was just one of the key at buying factors that we see a customer's opting for the performance sweet.

John Paul Johnson: Thank you and the next question comes from Charles re with Teeny Cowan.

John Paul Johnson: Oh, yeah. Thanks for taking my question wanted to follow up on an earlier question around sort of.

John Paul Johnson: What can kind of get you to the higher end of the range. This year I think you mentioned sort of on pharmacy maturation.

John Paul Johnson: Let me think about that higher end of the range.

John Paul Johnson: Are you kind of assuming performance read maturation that kind of mirrors sort of what we saw in 22 and 23 or would you consider it to be more conservative to sort. The recent maturation experiences that you've had so far.

John Paul Johnson: Thank you. And the next question comes from Charles Rhyee with TD Cal. Yeah, thanks for taking the question. I wanted to follow up on an earlier question around sort of, what can kind of get you to the higher end of the range this year? I think you mentioned sort of performance rematuration. Maybe when we think about that higher end of the range. Are you kind of assuming performance-weak maturation that kind of mirrors sort of what we saw in 22 and 23? Or would you consider it to be more conservative with regard to the recent maturation experience that you've had so far?

Speaker Change: Yeah. That's a good question Charles I think at at the top end of the range that would be experienced consistent with what we saw in 22 and 23 <unk>.

Speaker Change: And I think one of the items, that's giving us confidence they're both for 24 and as we look at the exit run rate of $300 million is that performance that we saw crossed 23 on the 22 launches similar to the performance that we.

John Paul Johnson: He saw across 22 on the 21 launches. So I've now got several years here stacked up if performance that that's been consistent.

Charles Rhyee: Yeah, it's a good question, Charles. I think at the top end of the range, that would be experience consistent with what we saw in 22 and 24. And I think one of the things that's giving us confidence there, both for 24 and as we look at the exit run rate of $300 million, is the performance that we saw across 23 on the 22 launches, similar to the performance that we saw across 22 on the 21 launches. So we've now got several years here stacked up of performance that has been consistent with over 400 million of new performance suite revenue that was launched in 2023, driving performance and margins and quality on that book of business across this year, obviously a very important focus and consistent with, I think, our performance over the last couple of years. Great, thank you. And the next person, Customer Richard Close with Canaccord.

Richard Close: With over $400 million of new performance Sweet revenue. That's that was launched in 2023, <unk>, a driving performance and margins and quality on that book of business across this year, obviously, a very important focus and consistent with I think our performance over the last couple of years.

Richard Close: Alright, thank you.

Richard Close: Thank you and the next question customer close with Canaccord Genuity.

Richard Close: Yeah. Thanks for the question congratulations on the corner and I appreciate all the details maybe Seth on the cross-sell that you mentioned to.

Richard Close: Ryan's question on the pipeline can you talk a little bit more about the cross selling are you seeing strength.

Richard Close: And any particular product on the cross selling or where do you think most of the low hanging fruit is there.

Richard Close: Hey, Richard Yah I look I think it comes in a couple of different areas, but limited. So let me give you a few examples one place we're seeing some strange there's if your traditional imaging customer and that's what you had for a minute I a perspective.

Charles Rhyee: Yeah, thanks for the question. Congratulations on the quarter and appreciate all the details. Maybe Seth on the cross-sell that you mentioned, and Ryan's question on the pipeline. Can you talk a little bit more about the cross-selling? Are you seeing strength in any particular product on the cross-selling? Or where do you think most of the low-hanging fruit is there?

Charles Rhyee: And we have a conversation about the fact that we can incorporate imaging and genetics into a broader condition management model around cardiology oncology eventually around M. S. K. It's obviously just a better proposition for the number and for the plan to look at things Holistically, rather than just looking to get.

Richard Close: Hey Richard, Yeah, look, I think it comes in a couple of different areas, but let me give you a few examples. You know, one place we're seeing some strength is if you're a traditional imaging customer, and that's what you had from an NIA perspective, and we have a conversation about the fact that we can incorporate imaging and genetics into a broader condition management model around cardiology or oncology, eventually around MSK, it's obviously just a better proposition for the member and for the plan to look at things holistically rather than just look So I think that's one good example. Another good example, though, is where, historically, it's been an Evolent-only customer, and we have not included imaging because that was not part of our scope traditionally, and now we step into this radiation oncology, excuse me, imaging, or other types of imaging that make sense for cardiology or oncology, right? Critical for managing those two conditions and understanding the imaging as, for instance.

Richard Close: <unk> vertical like energy right. So they think that's one. Good example, another good example, though is where historically to level and only customer and we have not included imaging because I was not part of our scope traditionally now we step into this radiation oncology excuse me imaging or.

Richard Close: Other types of imaging that makes sense for cardiology your oncology right critical for managing those two conditions to understanding the imaging as a for instance, so I think it's largely around the Nia opportunity I'd also give you. Some examples though around end of life at around I P. G and so it's a little a little bit across the board, but I think the imaging.

Richard Close: And I ate examples probably leading the pack and those others or been attractive as well.

Speaker Change: Okay. Thank you.

Richard Close: Thank you. The next question comes from David Larsen with P. T O G.

Richard Close: Hi, This is Jenny Shan on Friday, so it sounds like utilization has been good with you just what the overall increase in hip and knee procedures in a broader things can you talk about what you're seeing in your M. S. K business, specifically and also your longer term.

Seth R. Frank: So I think it's largely around the NIA opportunity. I'd also give you some examples, though, around end of life and around IPG. And so it's a little bit across the board, but I think the imaging NIA example is probably leading the pack, and those others have been attractive as well.

Seth R. Frank: Outlet.

Speaker Change: Interesting the amount of risks that you take not business. Thanks.

Speaker Change: Yeah happy to take it so we do not currently take risks and M. S. K I so any.

Jenny Shen: Thank you. Thank you. And the next question comes from David Larsen with BTI. Hi, this is Jenny Shen on for days.

Seth R. Frank: Increases in that kind of utilization do not impact us on the risk side, we have talked about building a risk taking product N muscular skeletal conditions.

John Paul Johnson: So it sounds like utilization has been good with you. Just with the overall increase in hip and knee procedures in the broader space, can you talk about what you're seeing in your MSK business specifically and also your longer-term outlook of increasing the amount of risk that you take in that business? Thanks. Yeah, happy to take it. But we do not currently take risk in MSK.

Speaker Change: That would look like <unk>, the rest of our performance sweet products and that's on the roadmap for likely a 2025 launch as it continues to be an important product at focus, but but not for this year.

John Paul Johnson: So, increases in that kind of utilization do not impact us on the risk side. We have talked about building a risk-taking product for musculoskeletal conditions that would look like the rest of our performance suite products, and that's on the roadmap for a 2025 launch.

John Paul Johnson: Thank you and then ask a question Shah Dodge with the RBC capital markets.

John Paul Johnson: Hey, Good afternoon. This is Thomas Keller on for Sean Thanks for taking the question and thanks for all the details and slides.

John Paul Johnson: So, it continues to be an important product focus, but not for this year. Thank you, and the next question comes from Sean Dodge with RBC Capital. Hey, good afternoon. This is Thomas Keller on for Sean.

John Paul Johnson: I just wanted to follow up on the earlier Humana question.

Thomas Keller: Sure what you think about the potential performance sweet expansion outside of Florida, and Arizona is they're they're fairly structured trial period sort of required before you can expand further where is this something that could be pushed into some other new states in relatively short order.

Thomas Keller: Thanks for taking the question. And thanks for all the detail in the slides. Just wanted to follow up on the earlier Humana question. How should we think about the potential performance suite expansion outside of Florida and Arizona? Is there a fairly structured trial period sort of required before you can expand further? Or is this something that could be pushed into some other new states and relatively short order?

Speaker Change: Hey, there.

Speaker Change: Great question. So you know I think it's actually very akin to.

Thomas Keller: Our experience with other pairs over the last several years in terms of expanding from performance, Sweden, one or two states to other states, which is certainly there's an opportunity there.

John Paul Johnson: Hey there! Great question. So, you know, I think it's actually very akin to our experience with other payers over the last several years in terms of expanding from the performance suite in one or two states to other states, which is certainly an opportunity there and an intention to consider that. The first order of priority for us is always six to nine months of outstanding performance. We're kind of in that outstanding performance phase right now and really heads down on delivering for our partner there. And I think when we do a good job on delivery, that earns the right to expand into new states. And so that's our expectation that we'll have the opportunity to do that. And it's, you know, the right answer generally for the payer partners to not just do something in a couple of states but do it more broadly.

Speaker Change: And and attention to consider that the first order priority for US is always six to nine months of outstanding performance, what kind of in that outstanding performance phase right now and really <unk>.

John Paul Johnson: Head down on delivering for our partner there and I think when we do a good job on.

John Paul Johnson: On delivery that earns the right to expand into new states. So that's our expectation that will have the opportunity to do that and it's you know bright answered generally for the payer partners to to not just do something in a couple of states, but do it more broadly, but right now our priorities on the on the execution delivery for.

Speaker Change: Alright, I appreciate it thanks a lot.

John Paul Johnson: Welcome.

Speaker Change: Thank you and last question has some Jack Walsh.

Speaker Change: Congrats on the quarter, thanks for taking my questions.

Thomas Keller: But right now, our priorities are on the execution delivery. All right, appreciate it. Thanks a lot. Thank you. And that's pressing us on Jack Wallace.

John Paul Johnson: Thinking about the imaging opportunity when you're.

Speaker Change: Upselling the capability how quickly does that typically turned a revenue and then I've got a a follow up question.

Jack Wallace: Hey team, congrats on the quarter. Thanks for taking my questions. Thinking about the imaging opportunity and when you're when you're upselling the capability, how quickly does that typically turn to revenue?

Jack Wallace: [noise] Yeah jacket, you know look I think we're already seeing some of that opportunity come to bear fruit for us we've been it's been about a year now since we closed the Nia transaction and we've seen several cross cells that we've analysis and so I think.

John Paul Johnson: I've got a follow-up question. Yeah, Jack, you know, look, I think we're already seeing some of that opportunity come to bear fruit for us. We've been, it's been about a year, since we closed the NIA transaction, and we've seen several cross-sells that we've announced. And so I think we're in that zone now where those opportunities are paying off. You know, it often takes, if you get into one of those conversations, I'll call it six months, you know, to have a sales cycle around it. And, again, it could be a legacy NIA client or a legacy Evolent client. They could go in either direction.

John Paul Johnson: We're in that zone now where those opportunities are are paying off you know it often takes if you get into one of those conversations I'll call at six months, you know to have a sales cycle around it and again can be it a legacy nia client or legacy of old client could go in either direction, but it's you know it is it is.

John Paul Johnson: Is bearing fruit now.

John Paul Johnson: Thanks, and then.

John Paul Johnson: Really haven't talked about as much blood tests.

Speaker Change: Okay for business <unk> to pick up a bit more fourth quarters one O.

Speaker Change: Hey, what was driving that'd be if you think that's.

John Paul Johnson: But it's, you know; it is bearing fruit now. Thanks. And then, you know, really, we haven't talked about it much, but Casey's business, revenue from Casey's, has picked up a bit in the fourth quarter. A, what was driving that, and B, if we can get up to be persistent going forward. Thank you. I had a tough time understanding you there, Jack. Jack, could you repeat what you just said? It is just an echo. Yeah, apologies. I'm at an airport.

John Paul Johnson: That's gonna be per second.

Speaker Change: Thank you.

Speaker Change: Had a tough time understanding you there Jack Jack could you repeat what you just said they just do some echo.

Jack Wallace: Yep apologize in an airport wondering about the cases business looked like a retinue court cases up a little bit in the fourth quarter wanting if there's anything structurally going on there just going for it or just the timing of.

Speaker Change: <unk>. Thank you.

John Paul Johnson: Yep, nothing, particularly structural there's a seasonal components and also just regular organic growth.

John Paul Johnson: [laughter].

Speaker Change: Alright, well thank you.

Jack Wallace: I was wondering about the cases business. It looked like revenue for cases was up a little bit in the fourth quarter. Wondering if there's anything structurally going on there that's just going forward or not. That's the timing of activity in the quarter. Yeah, nothing particularly structural. There's a seasonal component and also just regular organic growth.

Speaker Change: Thank you and once again. Please press Star then one if you would like to ask a question.

Jack Wallace: Which one is more pressing star and one will allow you to ask a question.

Speaker Change: Alright. This does conclude the question and answer session.

Jack Wallace: Turn the floor back to assess Frank for any closing comments.

Speaker Change: Great. Thanks for joining Tonight, and look forward to connecting with you often have a good evening.

John Paul Johnson: Thank you. Thank you, and once again, please press star, then 1 if you would like to ask... more pressing stars than one will allow you to ask. Alright, this does conclude the question and answer session. I would like to return the floor to Seth Frank for any closing comments. Thanks for joining us tonight. I look forward to connecting with you all. Have a good evening. The conference is now concluded. Thank you for attending today's presentation, and we now disconnect. www.evolenthealth.info BF-WATCH TV 2021 BF-WATCH TV 2021

Speaker Change: Thank you the conference Sestos concluded. Thank you for attending today's presentation, and we noticed transfer lines.

John Paul Johnson: [music].