Q1 2024 Evolent Health Inc Earnings Call

Operator: 2024 As a reminder, this conference call is being recorded. 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 the section titled Investor Relations. I will now hand the call to Seth Frank, Evolent's Vice President of Investor Relations. Please go ahead.

As a reminder, this conference call is being recorded.

Seth R. Frank: Your host for the call today from ever ones are Seth Blackley, Chief Executive Officer, and John Johnson, Chief Financial Officer.

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

Operator: I will now hand, the call to Seth Frank Vice President of Investor Relations. Please go ahead.

Seth R. Frank: Thank you and good evening. 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 are filed with the Securities and Exchange Commission, including cautionary statements included in our current and periodic files. For additional information on the company's results and outlook, please refer to our first quarter press release issued earlier today.

Seth R. Frank: Thank you and good evening. This conference call will contain forward looking statements under the U S federal laws.

Seth R. Frank: Statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations and.

Seth R. Frank: A description of some of the risks and uncertainties can be found in the company's reports that are filed.

Seth R. Frank: Securities and Exchange Commission, including cautionary statements included in our current.

Seth R. Frank: Eric filings for additional information on the company's results and outlook. Please refer to our first quarter press release issued earlier today.

Seth R. Frank: Finally, as a reminder, reconciliations of non-GATT measures discussed during today's call to the most direct comparable GATT measure 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 IR section of the company's website, ir.evolenthealth.com, and Form 8K filed with the company and with the SEC earlier today. Finally, in addition to the reconciliations, we've provided details on the numbers and operating metrics for the quarter in both our press release and our supplemental investor presentation on the IR website. With that done, I'm going to hand the call over to Evolent's CEO, Seth Blackley.

Seth R. Frank: Finally, as a reminder, reconciliations of non-GAAP measures discussed during today's call to the most direct comparable GAAP measure 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 IR section of the company's website.

Seth Barrie Blackley: I R everyone else Dot com and form 8-K filed with the company.

Seth Barrie Blackley: SEC earlier today.

Seth R. Frank: Finally in addition to the reconciliations we provide details on the numbers and operating metrics for the quarter and both our press release and our supplemental investor presentation on the IR website with that done I hand, the call over to Evelyn CEO Seth Blackley.

Seth Barrie Blackley: Good evening, and thanks for joining the call. Evolent had a strong first quarter with above-expected revenue growth and adjusted EBITDA in line with first quarter guidance. Tonight, we'll cover updates on various fronts, including new customer arrangements, new client Go-Lives, an announcement of the completion of our M&A integration work stream, and our technology innovation agenda. Let me first provide a few highlights from our first quarter results.

Seth Barrie Blackley: Good evening and thanks for joining the call.

Seth Barrie Blackley: I've only had a strong first quarter with above expectations revenue growth and adjusted EBITDA in line with the first quarter guidance.

Seth Barrie Blackley: Tonight, we will cover updates on various fronts, including new customer arrangements.

Seth Barrie Blackley: New client go lives and the announcement of the completion of our M&A integration work stream and our technology innovation agenda.

Seth Barrie Blackley: Let me first provide a few highlights from our first quarter results revenue totaled $639 $7 million growth of 49, 6% year over year.

Seth Barrie Blackley: Revenue totaled $639.7 million, growth of 49.6% year-over-year. This result exceeded the top end of our Q1 revenue guide of $610 million by almost $30 million. This high revenue growth is driven by strong membership in our performance suite arrangements and new specialty technology and services agreements. Evolent's specialty care offerings now account for 91% of total revenue, up from 60% just three years ago, enabling our organization to focus on our specialty strategy. Year over year, specialty care revenue grew approximately 69% as reported and 62% after normalizing for the NIA acquisition in January 2020.

Seth Barrie Blackley: This result exceeded the top end of our Q1 revenue guide of $610 million by almost $30 million.

Seth Barrie Blackley: This high revenue growth is driven by strong membership and our performance suite arrangements and new specialty technology and services agreements.

Seth Barrie Blackley: Everyone's specialty care offerings now account for 91% of total revenue up from 60% just three years ago, enabling the organization to focus on our specialty strategy.

Seth Barrie Blackley: Year over year specialty care revenue grew approximately 69% as reported and 62% after normalizing for the NII acquisition in January 2023.

Seth Barrie Blackley: On the membership front, we averaged 39.9 million unique members, net of Medicaid redeterminations and new implementations during the quarter. Total product numbers eclipsed $80.6 million in the first quarter, or just over two products per unique number on average.

Seth Barrie Blackley: On the membership front, we averaged $39 9 million unique numbers net of Medicaid redetermination and new implementations during the quarter.

Seth Barrie Blackley: Total product members eclipsed $80 6 million in the first quarter or just over two products per unique number on average.

Seth Barrie Blackley: On the profitability front, Adjusted EBITDA was in line with the midpoint of our guidance at $54.1 million. Our cash position remains strong with $165.1 million in cash and equivalents after what is always a historically high cash outflow quarter associated with higher working capital requirements that moderate as the year progresses. 2. Let me now update you on each of our three principles for shareholder value creation: 1. strong organic growth.

Seth Barrie Blackley: On the profitability front adjusted EBITDA was in line with the midpoint of our guidance at $54 $1 million.

Seth Barrie Blackley: Our cash position remains strong with $165 $1 million in cash and equivalents. After what is always a historically high cash outflow quarter associated with higher working capital requirements that moderate as the year progresses.

Seth Barrie Blackley: Expanding Profitability, and 3. Disciplined Capital Allocation On the first principle of organic growth, we announced today that we signed three new revenue agreements during the first quarter. Two of our new revenue agreements are with Molina, building on that highly successful long-term partnership. We will be implementing both cardiology and oncology performance suite across both Medicaid and exchange lives in South Carolina and Mississippi. We anticipate implementing these solutions by the fourth quarter of this year.

Seth Barrie Blackley: Let me now update you on each of our three principles for shareholder value creation of one strong organic growth.

Seth Barrie Blackley: Two expanding profitability and three disciplined capital allocation.

Seth Barrie Blackley: The first principle of organic growth, we announced we are announcing today that we signed three new revenue agreements during the first quarter.

Seth Barrie Blackley: Two of our new revenue agreements are with Molina ability on that highly successful long term partnership we will be implementing both cardiology and oncology performance suite across both Medicaid and exchange lives in South Carolina and Mississippi.

Seth Barrie Blackley: We anticipate implementing these solutions by the fourth quarter of this year.

Seth Barrie Blackley: Financially, we anticipate the impact of South Carolina and Mississippi to contribute together at least $50 million of new annual revenue once live. The addition of these states increases our presence with Molina to nine states after these two states go live.

Seth Barrie Blackley: Financially, we anticipate the impact of South Carolina, and Mississippi to contribute together at least $50 million of new annual revenue contribution once lives.

Seth Barrie Blackley: The addition of these states increases our presence with Molina to nine states. After these two states go live.

Seth Barrie Blackley: Our revenue will be below 50% of the total opportunity at Molina within the current scope of services we provide today, excluding new solutions like MSK Performance Suite, leaving what we believe to be a significant opportunity to continue expanding our partnership and impact for our partners. Our third new revenue agreement is a specialty technology and services contract we signed with a longstanding Evolent Medicaid health plan on the East Coast. This health plan will be adding our MSK specialty offering to help manage orthopedic surgery costs, utilization, and outcomes.

Seth Barrie Blackley: Our revenue will be below 50% of the total opportunity at Molina within the current scope and services. We provide today, excluding new solutions like M. S. K performance week, leaving what we believe to be a significant opportunity to continue expanding our partnership in impact for our partner.

Seth Barrie Blackley: Our third new revenue agreement is a specialty technology and services contract, we signed with a long standing excellent Medicaid health plan in the East Coast is.

Seth Barrie Blackley: This health plan, we'll be adding our M. S K specialty offering to help manage orthopedic surgery cost utilization and outcomes.

Seth Barrie Blackley: We anticipate implementing this solution in the third quarter across several hundred thousand Medicaid members. This contract will contribute towards the $4 million of quarterly adjusted EBITDA earnings GO-GET we provided in our bridge illustration for achieving the 2024 year-end adjusted EBITDA target. Today's announcements bring us to seven new revenue agreements year-to-date.

Seth Barrie Blackley: We anticipate implementing this solution in the third quarter across several hundred thousand Medicaid members. This contract will contribute towards the $4 million of quarterly adjusted EBITDA earnings go Gurt, we provided in our bridge illustration for achieving the 2024 year end exit adjusted EBITDA target.

Seth Barrie Blackley: Today's announcements bring us to seven new revenue agreements year to date.

Seth Barrie Blackley: In addition to new revenue agreements, Q1 was productive for successful go-lives. In total, we launched 25 specialty go-lives across multiple health plan customers for the performance suite and the technology and services. These included major go-lives and new geographies for the performance suite, including oncology and cardiology for Molina in Florida and cardiology for Florida Blue. During the quarter, we also began a national implementation with Centene for our MSK technology and services suite, covering several million members. Recall we announced this agreement back in February, fulfilling a significant portion of the promised initial revenue synergies from the NIA acquisition. From a macro perspective, industry demand remains very strong.

Seth Barrie Blackley: In addition to new revenue agreements Q1 was productive for successful go lives in total we launched 25 specialty go lives across multiple health plan customers for the performance suite and the technology and services.

Seth Barrie Blackley: These included major go lives in new geographies for performance suite, including oncology and cardiology for Molina in Florida, and cardiology for Florida Blue during.

Seth Barrie Blackley: During the quarter. We also began a national implementation with Centene Farhan M. S K technology and services suite covering several million members.

Seth Barrie Blackley: Recall, we announced disagreement back in February fulfilling a significant portion of the promised initial revenue synergies from Nia acquisition.

Seth Barrie Blackley: From a macro perspective industry demand remains very strong.

Seth Barrie Blackley: Beyond our normal product value proposition, healthcare utilization pressure and health plan margin pressure are accelerating our core inbound sales opportunity. Our belief is that typical savings levers outside of specialty care are more limited in the current environment, making high-cost specialty management a critical and growing focus for health plans. As a result of these factors, our sales pipeline remains very strong, driven by interest in both regional and large national health clinics. As a result of all of these dynamics, we are raising the midpoint of our revenue guidance for 2024 by $115 million, as John will detail shortly.

Seth Barrie Blackley: Beyond our normal product value proposition health care utilization pressure and health win margin pressure or accelerating our core inbound sales opportunities.

Seth Barrie Blackley: Our belief is that typical of savings levers outside of specialty care are more limited in the current environment, making high cost specialty management, a critical and growing focus for health plans.

Seth Barrie Blackley: As a result of these factors our sales pipeline remains very strong driven by interest at both regional and large national health plans.

Seth Barrie Blackley: As a result of all of these dynamics, we are raising the midpoint of our revenue guidance for 2024 by $115 million as John will detail shortly.

Seth Barrie Blackley: Moving to our second operating priority, Expanding Profitability, I'm excited to announce that in March, we successfully wound down the NIA transition services agreement we had in place since January of 2023 with NIA's former owner. The transition was the largest and most complex IT project in the company's history, involving hundreds of professionals globally.

Seth Barrie Blackley: Moving to our second operating priority of expanding profitability I'm excited to announce that in March we successfully wound down the N. I a transition services agreement we had in place since January of 2023 with NIH former owner.

Seth Barrie Blackley: Transition was the largest and most complex it project in the company's history involving hundreds of professionals globally most.

Seth Barrie Blackley: Most importantly, we were able to continue serving all of our customers with limited disruption. I want to thank the Evolent teams who worked tirelessly through weekends to achieve this important transition. This transition in the quarter marks another important step towards our year-end run rate EBITDA target and the achievement of our $15 million NIA cost centers. Next, I'm pleased to share that we continue investing in the artificial intelligence opportunity at Evolent through our initial product test.

Seth Barrie Blackley: Most importantly, we were able to continue serving all of our customers with limited disruption.

Seth Barrie Blackley: Want to thank the Avalon teams, who worked tirelessly the weekends to achieve this important transition.

Seth Barrie Blackley: This transition in the quarter marks another important step towards our year end run rate EBITDA target and the achievement of our $15 million of Nia cost synergies.

Seth Barrie Blackley: Next I'm pleased to share that we continue investing in the artificial intelligence opportunity are evident through our initial product testing.

Seth Barrie Blackley: Based on our work thus far, we believe that there is a significant opportunity to reduce the cost for specialty case review while maintaining or even enhancing service quality and providing a superior user experience. As an additional benefit of our AI investments, we expect we'll be able to redeploy our human capital pool to higher-value workstreams that improve our product and our value proposition. We expect these benefits to begin making a more significant impact in 2025.

Seth Barrie Blackley: And he still not work, thus far we believe that Theres, a significant opportunity to reduce the cost per specialty case review, while maintaining or even enhancing service quality and providing a superior user experience.

Seth Barrie Blackley: The additional benefit of our AI investments, we expect we'd be able to redeploy our human capital pool, the higher value work streams that improve our product and our value proposition. We expect these benefits to begin making a more significant impact in 2025.

Seth Barrie Blackley: Third, our results in Q1 demonstrate the benefit of our balanced approach to value-based specialty care, with earnings growth from both our non-risk and risk products, and our non-risk products continue to account for approximately 70% of our annual adjusted EBITDA. As John will share in detail, we saw increased utilization in our performance suite risk business in Q1, and we have lower data visibility than is typical for this point in the year. Those factors do impact our Q2 guide.

Seth Barrie Blackley: Third our results in Q1 demonstrate the benefit of our balanced approach to value based specialty care with earnings growth from both our non risk and risk products and our non risk products continued to account for approximately 70% of our annual adjusted EBITDA.

Seth Barrie Blackley: As John will share in detail, we saw increased utilization in our performance suite risk business in Q1, and we have lower data visibility than is typical for this point in the year.

Seth Barrie Blackley: Those factors do impact our Q2 guide.

Seth Barrie Blackley: But because our data visibility will increase across the year, because the increases in utilization have moderated in early Q2, and because of the contractual protections available to us around prevalence and other population changes that John will detail, we remain confident in our 2024 exit run rate adjusted EBITDA commitment of $300 million and our annual guidance. Finally, I'm proud of the team for continuing to drive efficiency as we grow, with our SG&A expense down sequentially versus Q4 despite substantial revenue growth.

Seth Barrie Blackley: But because our data visibility will increase across the year because the increases in utilization have moderated across early Q2, and because of the contractual protections available to us around prevalence and other population changes and John will detail, we remain confident in our 2024 exit run rate.

Seth Barrie Blackley: Adjusted EBITDA commitment of $300 million and our annual guidance.

Seth Barrie Blackley: Finally, I'm proud of the team for continuing to drive efficiency as we grow with our SG&A expense down sequentially versus Q4, despite sustained substantial revenue growth.

Seth Barrie Blackley: And I feel we've been able to drive these efficiencies while maintaining a strong culture and talent orientation. Regarding our third investment theme of disciplined capital allocation, our principles remain consistent with our communications over the last few years, which are ensuring strong organic innovation, carefully managing to our leverage targets, and pursuing accretive M&A to accelerate our leadership position in value-based specialty care. With respect to organic innovation, we have consistently talked about building more services to help members and their families navigate their conditions in their moments of need. Our strong belief is that shared decision-making with an engaged member helps drive the highest quality, most efficient care. We've addressed this opportunity thus far through our end-of-life solution, which we primarily bundle into our performance suite.

Seth Barrie Blackley: And I feel we've been able to drive these efficiencies, while maintaining a strong culture and talent orientation.

Seth Barrie Blackley: Regarding our third investment theme of disciplined capital allocation, our principles remain consistent with our communications over the last few years, which are ensuring strong organic innovation carefully managing to our leverage targets and pursuing accretive M&A to accelerate our leadership position in value.

Seth Barrie Blackley: Based specialty care.

Seth Barrie Blackley: With respect to organic innovation, we have consistently talked about building more services to help members and their families navigate their conditions and their moments of need.

Seth Barrie Blackley: Our strong belief is that shared decision, making with an engaged member helps drive the highest quality most efficient care.

Seth Barrie Blackley: We've addressed this opportunity thus far through our end of life solution, which we primarily bundle into our performance we.

Seth Barrie Blackley: Our data shows that when our end-of-life solution is integrated with our oncology and cardiology solutions, we have materially higher member engagement rates, generating greater referrals into palliative care, reducing the overall total cost of care versus the status quo, while, most importantly, aligning clinical care with patient-identified goals and values in order to improve their quality of life. Last August, we also announced a pilot program with a large Blue Cross Blue Shield plan partner to offer shared decision-making and better navigation of the healthcare system for patients diagnosed with cancer.

Seth Barrie Blackley: Our data shows that when our end of life solution is integrated with our oncology and cardiology solutions, we have materially higher member engagement rates generating greater referrals into palliative care, reducing the overall total cost of care versus the status quo, while most importantly, aligning clinical care with patients.

Seth Barrie Blackley: Identified goals and values in order to improve their quality of life.

Seth Barrie Blackley: Last August we also announced a pilot program with a large bluecross blueshield plan partner to offer shared decision, making and better navigation of the health care system for patients diagnosed with cancer.

Seth Barrie Blackley: Today we're accelerating this initial navigation work by announcing a strategic partnership with Careology, a privately held UK-based company with what we believe to be the most robust digital cancer care platform available. The Careology platform is being used extensively across the UK National Health Service to connect patients to caregivers, to monitor and report symptoms associated with chemotherapy, and to monitor vital signs of overall well-being.

Seth Barrie Blackley: Today, we're accelerating this initial navigation work by announcing a strategic partnership with Karyology, a privately held U K based company with what we believe to be the most robust digital cancer care platform available.

Seth Barrie Blackley: The Karyology platform is being used extensively across the U K National Health service to connect patients to caregivers to monitor and report symptoms associated with chemotherapy and to monitor vital signs and overall well being.

Seth Barrie Blackley: In addition, the platform manages schedules, appointments, and the overall care process. We believe this solution will help manage the cost and quality of our performance suite members as a bundled offering and potentially become an Evolent Technology and Services offering in the future. From a business perspective, Evolent has secured the exclusive long-term right to distribute and integrate the product in the United States for the payer market. We believe this patient navigation arrangement is another good example of both innovating our solution and doing so in a capital efficient way. Before I hand it to John to talk through our finances and guidance, I want to take a step back and comment on where I believe Evelyn is headed in the future.

Seth Barrie Blackley: In addition, the platform manages schedules appointments in the overall care process. We believe this solution will help manage the cost and quality of our performance. We've members as a bundled offering and potentially become an avalanche technology and services offering in the future.

Seth Barrie Blackley: From a business perspective evident has secured the exclusive long term right to distribute and integrate the product in the United States for the payer market.

Seth Barrie Blackley: We believe this patient navigation arrangements. Another good example of both innovating our solution and doing so in a capital efficient way.

Seth Barrie Blackley: Before I hand, it to John to talk through our financials and guidance I want to take a step back and comment on where I believe everyone is headed in the future.

John Paul Johnson: First, we are proud to have built an incredible and what we believe is a differentiated specialty platform, currently growing organically at over 50% annually, driving strong profitability and cash flow. The strong growth and profitability, we believe, are indicators of customer confidence and our ability to innovate and execute over the long term. Second, a rising utilization environment creates significant financial and operational pressures on health plans, requiring more innovative solutions given the need to aggressively manage utilization pressures in specialty care.

Seth Barrie Blackley: First we are proud to have built an incredible and what we believe is a differentiated specialty platform.

John Paul Johnson: Currently growing organically and over 50% or annually driving strong profitability and cash flow.

John Paul Johnson: The strong growth and profitability, but we believe our indicators of customer confidence in our ability to innovate and execute over the long term.

John Paul Johnson: Second a rising utilization environment creates significant financial and operational pressures on health plans, requiring more innovative solutions, given the need to aggressively manage utilization pressures and specialty care.

John Paul Johnson: This will create, I believe, an important opportunity for our company for years to come. And third, our innovation across areas like patient navigation, artificial intelligence, and specialty expansion all provide meaningful opportunities to accelerate our platform. We understand the investing environment for small and mid-cap publicly traded healthcare organizations has been challenged as of late, and Evolent is no exception. However, we remain very optimistic about our future and fully committed to using all the tools available to ensure shareholder value creation. With that, let me hand it to John.

John Paul Johnson: This will create I believe an important opportunity for our company for years to come.

John: And third our innovation across areas like patient navigation artificial intelligence and specialty expansion all provide meaningful opportunities to accelerate our platform.

John: We understand the investing environment for small and mid cap publicly traded healthcare organizations has been challenged as of late and everyone is no exception. However, we remain very optimistic about our future and fully committed to using all the tools available to ensure shareholder value creation.

John Paul Johnson: With that let me hand, it to John.

John Paul Johnson: Thanks, Seth. We are pleased with our first quarter results and anticipate a continued solid outlook for 2024. We are raising the midpoint of our revenue guidance by $115 million and reiterating both our in-year adjusted EBITDA outlook of $235 to $265 million and our 2024 year-end exit run rate of $300 million in adjusted EBITDA. Revenue growth was nearly 50% year-over-year versus the same quarter last year, outperforming internal and external expectations on two factors.

John: Thanks, Seth we're pleased with our first quarter results and anticipate continued solid outlook for 2024, we are raising the midpoint of our revenue guidance by $115 million and reiterating both our in year adjusted EBITDA outlook of $235 million to $265 million.

John Paul Johnson: And our 2020 who're yearend exit run rate of $300 million adjusted EBITDA.

John Paul Johnson: Revenue growth was nearly 50% year over year versus the same quarter last year outperforming internal and external expectations from two factors first about $25 million from membership growth across our performance suite.

John Paul Johnson: First, about $25 million for membership growth across our performance suite. We expect this level to be the new quarterly baseline for the rest of the year. Second, based on CMS data we received in the quarter and our consistent revenue recognition policies, we recognize an additional $18 million in shared savings for MSSP performance year 2023, along with an offsetting expense accrual of $14 million in gained share for our physician partners for $4 million of adjusted EBITDA.

John Paul Johnson: We expect this level to be the new quarterly baseline for the rest of the year.

John Paul Johnson: Second based on CMS data, we received in the quarter and our consistent revenue recognition policies. We recognized an additional $18 million in shared savings or M. S. S. P performance year 2023, along with an offsetting expense accrual of $14 million and gained share for our physician partners.

John Paul Johnson: For $4 million of adjusted EBITDA.

John Paul Johnson: Those items were ahead of our expectations for this time of the year. Note that, consistent with our past practice, our cumulative accrual for PY 2023 shared savings remains at the conservative end based on data received to date, and we anticipate an incremental step up once final settlement data is received in Q3. Demand for our technology and services product also continues to be strong.

John Paul Johnson: Those items were ahead of our expectations for this time of the year.

John Paul Johnson: Note that consistent with our past practice, our accumulative accrual for <unk> 2020 three shared savings remains at the Conservative end based on data received to date and we anticipate an incremental step up once final settlement data is received in Q3.

John Paul Johnson: Demand for our technology and services product also continues to be strong.

John Paul Johnson: We generated Q1 revenue of $89 million, despite losing an estimated $6 million in quarterly tech and services revenue due to Medicaid redeterminations and conversions to our performance suite, representing underlying year-over-year growth of nearly 25%. Regarding Medicaid redeterminations, we estimate that the process for our Medicaid population was over 80% complete as of 3-31, and we estimate a same-store weighted membership decline of 10% as of the same date. Recall that our biggest Medicaid states started the process later, so our commentary here differs slightly from national MCOs.

John Paul Johnson: We generated Q1 revenue of $89 million, despite losing an estimated $6 million in quarterly second services revenue to Medicaid Redetermination and conversions to our performance suite.

John Paul Johnson: Presenting underlying year over year growth of nearly 25%.

John Paul Johnson: Regarding Medicaid Redetermination, we estimate that the process for our Medicaid population with over 80% complete as of $3 31.

John Paul Johnson: And we estimate our same store weighted membership decline of 10% as of the same date.

John Paul Johnson: Called it our biggest Medicaid states started the process later, so our commentary here differs slightly from national Ncos.

John Paul Johnson: Our outlook continues to anticipate a gross decline in the mid-teens when the process is complete in the summer, consistent with our expectations and our initial forecasts in 2023. Turning to profitability, we continue to drive efficiencies in our cost structure as we grow, with adjusted SG&A costs of 8% of revenue, down by 166 basis points sequentially versus Q4. Adjusted gross margin in the quarter was 16.4%, down 185 basis points sequentially versus Q4.

John Paul Johnson: Our outlook continues to anticipate a growth decline in the mid teens and that process is complete in this summer.

John Paul Johnson: With our expectations and our initial forecast in 2023.

John Paul Johnson: Turning to profitability, we continue to drive efficiencies in our cost structure as we grow with adjusted SG&A costs at 8% of revenue down by 166 basis points sequentially versus Q4.

John Paul Johnson: Adjusted gross margin in the quarter was 16, 4% down 185 basis points sequentially versus Q4.

John Paul Johnson: The change in growth margin is principally driven by growth in our performance-suite products combined with higher unit medical expenses. The drivers of medical expenses in the quarter are as follows. First, net favorable prior year claims development in the quarter was approximately $15 million, consistent with our expectations and demonstrating our continued prudent actuarial processes and conservative approach to reserving in our risk business. This $15 million was associated with revenue refunds to our clients from corridors of approximately $10 million, for an approximate net $5 million benefit to gross profit. Again, consistent with our expectations.

John Paul Johnson: The change in gross margin is principally driven by growth in our performance suite products combined with higher unit medical expenses.

John Paul Johnson: The drivers of medical expenses in the quarter are as follows.

John Paul Johnson: First net favorable prior year claims development in the quarter was approximately $15 million consistent with our expectations and demonstrating our continued prudent actuarial processes and conservative approach to reserving in our risk business.

John Paul Johnson: This $15 million with an associated with revenue refunds to our clients from corridor of approximately $10 million.

John Paul Johnson: Alright, and approximate net $5 million benefit gross profit.

John Paul Johnson: Again, consistent with our expectations.

John Paul Johnson: This favorability was offset by higher estimated medical expenses for Q1, driven both by lower data visibility and our continuous review of leading indicators. On the first, because of dynamics impacting our partners, including the change health care outage, we closed the quarter with lower claims visibility than is typical, even for long-standing clients. This is exacerbated by the volume of recently launched performance suite revenue, approximately two and a half times more than the same quarter last year, which typically has lower visibility overall.

John Paul Johnson: This favorability was offset by higher estimated medical expenses for Q1, driven both by lower data visibility and our continuous review of leading indicators.

John Paul Johnson: On the first because of dynamics impacting our partners, including the change healthcare outage, we closed the quarter with lower claims visibility than its typical even for long standing clients.

John Paul Johnson: This is exacerbated by the volume of recently launched performance suite revenue approximately two five times more than the same quarter last year, which typically has lower visibility overall.

John Paul Johnson: The mechanics of this lower visibility and R-reserving approach, combined with macro-commentary across the industry regarding elevated utilization, creates incremental conservatism for the first quarter and our guide for Q2. Second, we incorporate leading indicators like volume and disease prevalence from authorization requests into our reserving models, and our reliance on these leading indicators is higher if our claims visibility is lower, like it was for this quarter. During the latter part of the first quarter, we saw increasing activity on these indicators, rising to a peak in March. This observed activity from our authorization data was in both oncology and cardiology specialties for particular markets in both MA and Medicaid. Note that these indicators declined in April from their March peak.

John Paul Johnson: The mechanics of this lower visibility in our reserving approach combined with macro commentary across the industry regarding elevated utilization create.

John Paul Johnson: Create incremental conservatism for the first quarter and our guide for Q2.

John Paul Johnson: Second we incorporate leading indicators like volume and disease prevalence from authorization requests into our reserving models and our reliance on these leading indicators is higher if our claims visibility is lower like it was for this quarter.

John Paul Johnson: During the latter part of the first quarter, we saw increasing activity on these indicators rising to a peak in March.

John Paul Johnson: As observed activity from our authorization data was in both oncology and cardiology specialties.

John Paul Johnson: Particular markets in both MAA and Medicaid.

John Paul Johnson: Note that these indicators declined in April from their March P.

John Paul Johnson: Now, as a reminder, we've previously highlighted two distinctive features of our model. The first is that we have intentionally built a diversified business that balances both risk and non-risk products, and we continue to generate close to 70% of our expected adjusted EBITDA across the year from our technology and services business. And so any potential impact of higher utilization in our performance suite is buffered by the other two-thirds of our EPA doc guide. The second is that our performance suite products typically contain certain contractual protections that may adjust our capitation rates based on population changes outside of our control.

John Paul Johnson: Now as a reminder, we previously highlighted two distinctive features of our model.

John Paul Johnson: The first is that we have intentionally built a diversified business that balances both risks and non risk products.

John Paul Johnson: We continued to generate close to 70% of our expected adjusted EBITDA across the year from our technology and services business.

John Paul Johnson: And so any potential impact of higher utilization in our performance suite is buffered by the other two thirds of our EBITDA guidance.

John Paul Johnson: The second is that our performance suite products typically contain certain contractual protection that may adjust our capitation rates based on population changes outside of our control.

John Paul Johnson: So, have Q1 claims been completed, and our visibility improved? If these elevated leading indicators translate into elevated paid claims, we estimate that over 70% of the reported cost increases in Q1 can be addressed by contractual adjustments resulting in rate changes over the next 3 to 12 months. It is important to note that this is a normal course part of our business.

John Paul Johnson: So is Q1 claims complete and our visibility improves.

John Paul Johnson: If these elevated leading indicators translate into elevated paid claims we estimate that over 70% of the reported cost increases in Q1 can be addressed by contractual adjustments, resulting in rate changes over the next three to 12 months.

John Paul Johnson: It is important to note that this is a normal course part of our business.

John Paul Johnson: Over the last few years, we have regularly used these mechanisms to work with our partners to update rates for changes at the market and line of business levels. You will also recall that we included in our original adjusted EBITDA guidance for 2024 a $10 million buffer for changes in medical utilization based on dynamics in the market. If the leading indicators from Q1 persist beyond March and translate into claims, we will be quickly implementing the contractual changes available to us.

John Paul Johnson: Over the last few years, we have regularly used neat mechanism to work with our partners to update rates or changes at the market and line of business levels.

John Paul Johnson: You will also recall that we included in our original adjusted EBITDA guidance for 2020 for a $10 million buffer for changes in medical utilization based on dynamics in the market.

John Paul Johnson: If the leading indicators from Q1 persist beyond March and translate into claims.

John Paul Johnson: We will be quickly implementing the contractual changes available to us.

John Paul Johnson: However, there may be a timing lag between that elevated cost and increased fees to Evolent, which could cause our results for Q2 to be adversely impacted. As a result, we are taking a conservative approach to our adjusted EBITDA guidance for Q2, with a range of $48 to $62 million. Let me be specific about what could take us to the high or the low end of this range for the second quarter.

John Paul Johnson: However, there may be a timing lag between that elevated cost and increased fees to Evelyn which could cause our results for Q2 to be adversely impacted.

John Paul Johnson: As a result, we are taking a conservative approach to our adjusted EBITDA guidance for Q2, with a range of $48 million to $62 million.

John Paul Johnson: Let me be specific about what could take us to the high with a low end of this range for the second quarter.

John Paul Johnson: In scenarios where the leading indicator data in late Q1 is transitory and or we obtain increases in our capitation rates for the quarter, we could see the top end of our range for the quarter or beyond. In scenarios where that leading indicator data translates into persistently elevated claims expense and the process for obtaining corresponding rate increases extends beyond the quarter, we could see the lower end of the range.

John Paul Johnson: In scenarios, where the leading indicator data in late Q1 is transitory <unk>, we obtain increases in our capitation rates for the quarter.

John Paul Johnson: We could see the top end of our range for the quarter or beyond.

John Paul Johnson: In scenarios, where that leading indicator data translates into persistently elevated claims expense and the process for obtaining a corresponding rate increases extend beyond the quarter, we could see the lower end of the range.

John Paul Johnson: Because trends mitigated in April and because we have several levers to drive profitability across the year, including but not limited to these contractual protections I mentioned, we remain confident in our full year, adjusted EBITDA guidance, and our $300 million exit run rate target.

John Paul Johnson: Because trends have leveled off in April, and because we have several levers to drive profitability across the year, including, but not limited to, these contractual protections I mentioned, we remain confident in our full-year adjusted EBITDA guidance and our $300 million exit run rate target. Let's go through the path to that exit run rate target, further updating the bridge we provided on the February call. On Medicaid redeterminations, currently, we are running in line relative to our forecast for a three and a half million quarterly headwind versus Q4 of 23, with one quarter to go.

John Paul Johnson: Let's go through the path to that exit run rate target further updating the bridge we provided on the February call.

John Paul Johnson: On Medicaid Redetermination currently we are running in line relative to our forecast for three and a half million quarterly headwind versus Q4, 'twenty three with one quarter to go.

John Paul Johnson: We estimate a Q1 in-quarter impact of about $2.5 million. On NIA Synergies, as Seth discussed, we are on track to realize the total $8.75 million in quarterly benefits by the end of this year, across both cost and revenue items, with about half of this value included in Q1 results. On the performance suite, we are still early in our journey to capture the first leg of maturation that drives the $12.5 million quarterly expectation here.

John Paul Johnson: We estimate a Q1 in quarter impact that's about $2 5 million.

John Paul Johnson: On NIH synergy as Jeff discussed we are on track to realize the totaled $8 $75 million quarterly benefit by the end of this year across both cost and revenue items with about half of this value included in Q1 results.

John Paul Johnson: On the procurement suite, we are still early in our journey to capture the first leg of maturation that drives the 12 5 million quarterly expectation here, but.

John Paul Johnson: But we are pleased with the leading indicators of value creation in populations launched in 23 and 24. Authorization data suggests that new plan members under our management are on average experiencing higher quality, more cost-effective treatment regimens in oncology and cardiology, and we look forward to seeing these shifts reflected in the claims data.

John Paul Johnson: But we are pleased with the leading indicators of value creation and populations launched in 'twenty, three and 'twenty four.

John Paul Johnson: Authorization data suggests that new plan members under our management are on average experiencing higher quality more cost effective treatment regimens in oncology and cardiology and we look forward to seeing these shifts reflected in the claims data.

John Paul Johnson: Finally, on the organic growth side, we estimate that the combination of strong membership performance and recently announced tech and services deals closes approximately 25% of our quarterly adjusted EFITDA go-get, leaving just under $3 million as a go-get. Shifting to cash generation, first, we remain on track to meet or exceed our target of $150 million in cash flow from operations for calendar 24. Recall that the first quarter of the year is seasonally our biggest use of cash given the timing of working capital changes.

John Paul Johnson: Finally on the organic growth side, we estimate that the combination of strong membership performance and recently announced that can services deals close is approximately 25% of our quarterly adjusted EBITDA they'll get leaving just under $3 million as it go get.

John Paul Johnson: Shifting to cash generation first we remain on track to meet or exceed our target of $150 million in cash flow from operations for calendar 'twenty four.

John Paul Johnson: Recall that the first quarter of the year is seasonally our biggest use of cash given the timing of working capital changes.

John Paul Johnson: Second, after the quarter closed, we closed out the NIA earnouts for $88.75 million, slightly ahead of our initial expectations based on what has been a very successful acquisition that was additive to our corporate performance during 2023. We elected to fund 100% of this earnout in cash, avoiding dilution to our common shareholders. Turning to guidance, for the full year, we are raising our revenue outlook to between $2.53 and $2.6 billion and reiterating our adjusted EBITDA outlook of between $235 and $265 million, as mentioned above.

John Paul Johnson: Second after the quarter closed we closed out the NIH earn outs or $88 $75 million slightly ahead of our initial expectations based on what has been a very successful acquisition that was additive to our corporate performance during 2023.

John Paul Johnson: We elected to fund 100% of this earn out in cash avoiding dilution to our common shareholders.

John Paul Johnson: Turning to guidance for the full year, we are raising our revenue outlook to between $2 five three and $2 6 billion and reiterating our adjusted EBITDA outlook of between 235 and $265 million as mentioned above.

John Paul Johnson: We continue to expect capitalized software development of approximately $30 million and total cash flow from operations in excess of $150 million, including the technology initiatives Seth discussed. For the second quarter, we are anticipating revenues between $625 and $645 million and adjusted EBITDA between $48 and $62 million. In closing, we remain confident in the value of our unique and diversified platform, and we are excited to continue driving value for shareholders, employees, and the partners and patients we serve.

John Paul Johnson: We continue to expect capitalized software development of approximately $30 million and total cash flow from operations in excess of $150 million, including the technology initiatives discussed.

John Paul Johnson: For the second quarter, we are anticipating revenues between 625 $645 million and adjusted EBITDA between 48 and $62 million.

John Paul Johnson: In closing we remain confident in the value of our unique and diversified platform.

John Paul Johnson: We are excited to continue driving value for shareholders employees and the partners and patients we serve.

John Paul Johnson: With that, we will now open it up for Q&A. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speaker phone...

Speaker Change: With that we will now open it up for Q&A.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.

John Paul Johnson: We will now begin the question and answer session.

Operator: To ask a question you May press Star then one on your telephone keypad.

Operator: If youre using a speakerphone please pick up your handset before pressing the keys.

Operator: To withdraw your question. Please press Star then two.

Operator: Please limit yourself to one question.

Operator: If you have additional questions you may rejoin the queue.

Operator: To withdraw your question, please press star then 2. Please limit yourself to one question. If you have additional questions, you may rejoin the queue. Our first question today comes from Anne Samuel on behalf of J.P. Morgan. Please go ahead.

Operator: Our first question today comes from Anne Samuel with Jpmorgan. Please go ahead.

Operator: Hi, This is Kylie Minogue for any congrats on the quarter and thanks for taking my question I was wondering if you could touch more on the macro payer landscape.

Anne Elizabeth Samuel: Things that you could point to that are pressuring these health plans because its gotten incrementally worse in the quarter.

Anne Elizabeth Samuel: And does this mean that deals are closing quicker how is it benefiting avalon to the long term. Thank you.

Seth Barrie Blackley: Yeah, sure. I'm happy to take that one.

Anne Elizabeth Samuel: Yeah sure happy to take that one so look I think it's a.

Anne Elizabeth Samuel: A bit of a perfect storm on the payers over the last.

Seth Barrie Blackley: Handful of quarters, one pieces reimbursement.

Seth Barrie Blackley: So look, I think it's been a bit of a perfect storm for payers over the last handful of quarters. One piece is reimbursement. One piece is around V-28 risk adjustment. One piece is around pricing and benefits, and one piece is around utilization.

Anne Elizabeth Samuel: One piece is around the 28 risk adjustment one pieces around pricing benefits in one piece is around utilization.

Seth Barrie Blackley: And, you know, I think the fact that those are all hitting kind of hard over the last six, nine months has created a lot of pressure that we all know about. And I think one of the remaining levers that's available to the payer community is obviously around specialty management. So that's become, I'd say, one of the top one or two issues when we talk to most of these payers is, how do I better manage specialty costs if I can't do as much on-risk adjustment or as much with primary care or much go down the list.

Seth Barrie Blackley: The fact that those are all hitting kind of over the last six to nine months is.

Seth Barrie Blackley: Create a lot of pressure as we all know about and I think one of the remaining levers that's available to the payer community is obviously around specialty management. So that's become a.

Seth Barrie Blackley: I'd say one of the top one or two issues. When we talk to most of these payers is how to better manage specialty costs, if I can't do as much on risk adjustment or as much with primary care much go down the list and so it has definitely increased interest in what we're doing I think it's increased the imbalance of the top of the funnel.

Seth Barrie Blackley: And so it has definitely increased interest in what we're doing. But I think it's increased the imbalance to the top of the funnel. I wouldn't say it necessarily has accelerated the sales cycle, but I think there's just generally a lot more in the funnel. And it may, we'll see, it may increase the sales cycle in certain situations, but it definitely added a lot more to the funnel. And I think, you know, what I really like about this dynamic is even setting aside the more immediate pressures, I think it's very clear that managing these high-cost specialties is a very long-term issue. A lot of it's driven by, you know, pharmacy innovation and the like that's not going away.

Seth Barrie Blackley: I wouldn't fit necessarily has accelerated the sales cycle, but I think it's there's just generally a lot more in the funnel.

Seth Barrie Blackley: It may we will see increased sales cycle in certain situations, but it's definitely added a lot more of the funnel and I think it.

Seth Barrie Blackley: What I really like about this dynamic is even setting aside the more immediate pressures I think it's clear. This management of these high cost specialties is a very long term issue a lot of it's driven by pharmacy innovation and the like that's not going away.

Speaker Change: Amazing Thank you.

Operator: The next question is from Jeff Garro with Stevens. Please go ahead.

Seth Barrie Blackley: The next question is from Jeff Garro with Stephens. Please go ahead.

Jeffrey Robert Garro: Yeah. Good afternoon. Thanks for taking the questions, maybe we can dig in a little bit on the topic of the contractual protections in the you mentioned the three to 12 month lag on capturing any potential rate changes.

John Paul Johnson: on the topic of contractual protections, and you mentioned the three to 12-month lag in capturing any potential rate changes. You know, that's a bit of a wide range of time, and some of it could fall outside of FY25 at the high end of that range. So maybe you could help us further understand how that timing would most likely play out and how a rate change would also play out in terms of either retrospective or prospective adjustments to your rates and, in turn, revenue. Thanks. Good questions, Jeff.

John Paul Johnson: That's a bit of a wide range of time and some of it could fall out of FY 'twenty five at the high end of that range. So maybe you could help us further understand how that timing will most likely play out in an hour rate change what would also play out in terms of either re.

John Paul Johnson: Retrospective or prospective adjustments to your rates and in turn revenue. Thanks.

John Paul Johnson: Good questions, Jeff. So, I'll hit on three things. First, on the retrospective question, many of these changes do occur retroactively. That's an important piece here. The second thing I'd note is that in each of these contracts, the way it's treated is different, and that has to do with the particular payer's needs and how that particular contract is structured. The last piece that I'd say is that 12 months is from 331, right, from the end of Q1, so in place by Q1 of next year as we're exiting this year.

Speaker Change: Yes, good questions, Jeff So I'll have three things.

John Paul Johnson: First on the retrospective question at many of these changed it changes do occur at retroactively.

John Paul Johnson: It's an important piece here.

John Paul Johnson: And the second thing I'd note is that in each of these contracts the way its treated as different.

John Paul Johnson: That has to do with that particular payers needs and how that particular contract is structured.

John Paul Johnson: The last piece that I would say is that.

John Paul Johnson: 12 months is from $3 31, right from the end of Q1 and so in place by Q1 of next year as we're exiting this year.

Operator: The next question is from Kevin Caliendo with UBS. Please go ahead.

John Paul Johnson: The next question is from Kevin Caliendo with UBS. Please go ahead.

Operator: Hi, good afternoon, everyone. It's Andrea Alfonso here in for Kevin.

Kevin Caliendo: Hi, good afternoon, everyone as Andre Alfonzo Wang for Kevin.

John Paul Johnson: John, thank you so much for providing all that color on why the inputs for that wider range in 2Q. I wanted to just dig into that a little bit. I think the key question is, how much is that directly related to sort of that lower claims visibility on change versus that leading indicator volume? You had talked about guidance building in the 10 million buffer for EBITDA. How does that tie in, you know, versus sort of these renewed expectations for 2Q?

Andrea Alfonso: John Thank you so much for providing all that color on.

John Paul Johnson: Why.

John Paul Johnson: The inputs for that wider range in <unk>.

Speaker Change: I wanted to just dig.

John Paul Johnson: They get into that a little bit I think the key question being how much of that directly related to sort of that lower claims disability unchanged versus that leading indicator of volume you could talk about guidance.

John Paul Johnson: 10 billion buffer for EBITDA, how does that tie end versus sort of expectations for <unk> and then just as a follow up for the anabolic each with a longer term question, but.

John Paul Johnson: And then, just as a follow-up to that, apologies for the loaded question, but are you embedding, you know, onboarding costs for some of these customers versus prior expectations that could be depressing that number as well? Thank you so much.

John Paul Johnson: Are you embedding.

John Paul Johnson: Onboarding costs for some of these customers versus prior expectations that could be depressing that number as well. Thank you so much.

John Paul Johnson: Yeah, good questions, Andrea. On the mixed question, how much of this for the outlook and conservatism is from leading indicators that we're seeing, in particular, this in March versus, you know, lower claims visibility? I think the truth of the matter there is they're inextricably linked, and in situations where we have lower claims visibility, we have to rely more on leading indicators. And the leading indicator reserving is naturally more. And so they sort of reinforce each other.

John Paul Johnson: Yeah, good questions.

Speaker Change: Yeah good questions.

John Paul Johnson: On the mix question how much of this.

John Paul Johnson: So the outlook and conservatism is from leading indicators that we're seeing in particular that we saw in March versus lower claims visibility I think the truth of the matter. There is they're inextricably linked and in situations, where we have lower claim the visibility we have to rely more.

John Paul Johnson: On leading indicators and the leading indicator reserving is naturally more conservative and so they sort of reinforce each other.

John Paul Johnson: And what I would also say is, in a quarter where we have what we'll call a normal level of visibility, where that's less of an issue, we would place less reliance on a change, you know, one month's worth of change in leading indicators. That's how we think about that. On your second question around startup costs and otherwise, those are incorporated in the outlook. Typically, not that significant sort of operational lift to get these contracts.

John Paul Johnson: And what I would say also is in a quarter, where we have an adult we'll call it normal level of visibility at where that's less of an issue we would place less reliance on change one month's worth of change in leading indicators.

John Paul Johnson: That's how we think about that.

John Paul Johnson: On your second question around startup costs and otherwise.

John Paul Johnson: Incorporated in the outlook.

John Paul Johnson: Typically not that significant set of operational lift to get these contracts slide.

Operator: The next question is from Charles Rhyee with T.D. Cowan. Please go ahead.

John Paul Johnson: The next question is from Charles <unk> with TD Cowen. Please go ahead.

John Paul Johnson: Yeah, thanks for taking the question, guys. I wanted to talk a little bit more about these leading indicators and just sort of, because I know in the last couple quarters when you've been asked about how utilization is trending, you've kind of commented that it's been in line with your expectations. Here, you're kind of talking that you're seeing some change, but that you've also seen it start to moderate. I guess in the context of when you're signing new partnership deals, particularly, let's say, the new ones here with Molina, how do you factor in then the trend that you're seeing at the moment as it gets factored into the agreement? Is that a moving target then for each new partner as it gets signed at that moment in time? That's a good question, Charles.

Charles Rhyee: Yeah. Thanks for taking the question guys.

Charles Rhyee: Wanted to talk a little bit more about the leading indicators and just sort of because I know the last couple of quarters when when you've been asked about.

John Paul Johnson: How utilization is trending you've kind of commented that it's been in line with your expectations.

John Paul Johnson: Yeah here, you're kind of talking that you're seeing some change but that you've also seen it start to moderate.

Speaker Change: I guess when you're in.

John Paul Johnson: In the context of when you are signing new partnership deals, particularly let's say the new ones here with Molina.

John Paul Johnson:

Speaker Change: How do you factor in then.

John Paul Johnson: The trend that Youre seeing at the moment as it gets factored into the agreement is that is that a moving target than for each new partner as it gets signed at that moment in time.

John Paul Johnson: That's a good question, Charles. I'll reiterate what I said earlier, that it does depend on the specific contract with a specific partner. It varies. But in most cases, for these sorts of moments, we will have what we call a true up embedded in the contract that resets the capitation rate upon go live, based on trends to that point, so for example, if we go live on September 1st or October 1st, we would reset the capitation rate for that contract based on claims through that period.

John Paul Johnson: That's a good question Charles.

Speaker Change: I'll reiterate what I said earlier that it does depend on the specific contract with a specific partner berries.

John Paul Johnson: But in most cases.

John Paul Johnson: For these sorts of moments, we will have what we call true up.

John Paul Johnson: Embedded in the contract.

John Paul Johnson: That resets the capitation rate.

John Paul Johnson: Upon go live based on.

John Paul Johnson: Trends to that point. So for example, if we'd been alive on September 1st start to the first.

John Paul Johnson: We would reset the capitation rate for that contract based on claims through that point.

Operator: The next question is from Jessica Tassan with Piper Sandler. Please go ahead.

John Paul Johnson: The next question is from Jessica Tucson with Piper Sandler. Please go ahead.

Operator: Hi guys, thanks so much for taking the questions. I just want to verify that you guys saw a positive prior year development related to MSSP in the first quarter of 24, and then can you just, I guess our understanding was that these MSSP reconciliations hit in the third quarter, so just can you verify that you had not, that you had not recognized any prior year development related to MSSP in 3Q23 and that I guess this first quarter recon was the first that you've seen.

Jessica Elizabeth Tassan: Hi, guys. Thanks, so much for taking my question.

Operator: Verify you guys saw positive prior year development related to an FSP in the first quarter of 'twenty four and then.

Operator: Can you just.

Operator: Our understanding was that on these MSP reconciliations hit and that's third quarter.

Operator: So.

Operator: Just can you verify that you had not.

Speaker Change: But you have not.

Operator: Recognized any prior year development related to NFS pen 323 in that I guess, that's first squarely Congress that's the first that you've seen.

John Paul Johnson: Yeah, let me go through just how we do revenue recognition for MSSP. Typically, we will start recognizing revenue in the third quarter of the performance year. And so the first dollar of revenue we recognized for the 23rd performance year was in Q3 of last year.

Speaker Change: Yeah, Yeah, let me go through how we do revenue recognition for MSP typically we will start recognizing revenue in the third quarter of the performance here and so the first dollar of recognized revenue that we recognized for the.

John Paul Johnson: The 23 performance here with the Q3 of last year.

John Paul Johnson: And each quarter, we receive from CMS an updated claims file, other external factors, regional benchmarks, risk adjustment information, and so on. That allows us to narrow our actuarial range. And each quarter, we're then doing a true-up based on that narrowed range. You know, our orientation is to be conservative here. And so as we're doing that true-up each quarter, we're remaining on the conservative end. We're still booked well below where the percent shared savings came out for QI-22, for example. And we'd expect to true-up to the final number in Q3 when we get the final settlement.

John Paul Johnson: And each quarter, we received from CMS and updated claims file and.

John Paul Johnson: Other external factors regional benchmarks and risk adjusted information and so on that allows us to narrow our actuarial range and each quarter. We're then doing a true up based on that narrowed range.

John Paul Johnson: Our.

John Paul Johnson: Orientation is to be conservative here and so as we're doing that true up each quarter. We're remaining on the conservative end.

John Paul Johnson: We're still booked 12 below where the.

John Paul Johnson: Sent shared savings came out.

John Paul Johnson: For <unk> 22 for example.

John Paul Johnson: And we'd expect to true up to the final number in this Q3, when we get the final settlement information.

John Paul Johnson: And then my quick last question is on the Medicaid redeterminations. Did you see an incremental sequential headwind related to Medicaid redeterminations, or was the number you cited in aggregate? Thank you. Yeah, good question.

Speaker Change: Awesome. That's very helpful. And then my last question is on the Medicaid Redetermination did you see an incremental sequential headwind related to Medicaid redetermination or was the number you cited in aggregate.

John Paul Johnson: Yeah, good question. That was incremental. And to set another way, cumulatively, since the whole process began, we have seen a headwind of five and a half million dollars per quarter, a headwind to adjust EBITDA. That's consistent with our expectations. It's about where we thought the quarter would end.

Speaker Change: Yes. Good question that was incremental and so said another way a cumulatively since the whole process began we have seen a headwind of five and a half million dollars.

John Paul Johnson: Per quarter.

John Paul Johnson: The headwind to adjusted EBITDA that is consistent with our expectations. However, we thought the quarter would end.

Speaker Change: Perfect. Thanks.

Operator: The next question is from Ryan Daniels with William Blair. Please go ahead.

John Paul Johnson: The next question is from Ryan Daniels with William Blair. Please go ahead.

John Paul Johnson: Yeah, guys. Thanks for taking the questions. Congratulations on the strong start to the year. I hate to ask another question on this, but you probably anticipated it. In regards to the leading indicators kind of peaking in March and then declining in April, if we take a broader view and look at the data through the first four months of the year, acknowledging it's somewhat limited due to change, but if we look at the four-month period, how does that period reflect upon your guidance for the full year and assumptions for the performance week?

Ryan Scott Daniels: Hey, guys. Thanks for taking the questions. Congrats on the strong start to the year I hate to ask another one on this but you probably anticipated.

John Paul Johnson: In regards to the leading indicators kind of peaking in March and then declining in April if we.

John Paul Johnson: Take a broader per view and look at the data through the first four months of the year acknowledging it is somewhat limited due to change, but if we look at the four month period, how does that period reflect upon your guidance for the full year and assumptions for the performance.

John Paul Johnson: Yep. It's a good question, Ryan.

Speaker Change: Yes, hi.

Speaker Change: It's a good question right.

Speaker Change: I think what you're seeing here in our second quarter Guide is the is that $10 million of buffer that we talked about for the full year.

Speaker Change: So the.

Speaker Change: If march is a new normal right.

John Paul Johnson: I think what you're seeing here in our second quarter guide is that $10 million buffer that we talked about for the whole year. If March is a new normal, then we would initiate some of these contractual protections, and we may be in the lower end of that guide. If March was an aberration and April was more normal, more like the rest of the year, then we could be close to the higher end of the guide. It's always a little tricky in a risk business to draw a line between just two points, so we've sought not to do that. But given the lower visibility, it feels appropriate at this time.

John Paul Johnson: And then we would initiate some of these contractual protections.

John Paul Johnson: And we may be in the lower end of that.

John Paul Johnson: That guide is.

John Paul Johnson: March was an aberration in April as more normal more like the rest of the year.

John Paul Johnson: And then we could be closer to the higher end of the guidance.

John Paul Johnson: So it's always a little tricky in a risk business to draw a line between just two points.

John Paul Johnson: We've.

John Paul Johnson: So it's not to do that but given the lower visibility.

John Paul Johnson: So as appropriate at this time.

John Paul Johnson: And then a quick thought, if I could. Regarding the contract provisions you have, are those kind of automatic, where you just go back with the data, and there's an agreement for things like, you know, if there's increased cancer prevalence, you know, that's not your fault. You're paid to manage the cases, not to avoid them. So is it automatic, or do you have to go back and actually kind of negotiate things with these payers?

Speaker Change: And then as a quick follow up if I could.

John Paul Johnson: Regarding the contract provisions you have are those kind of automatic where you just go back with the data and there is an agreement.

John Paul Johnson: For things like increased cancer prevalence.

John Paul Johnson: Paul you are paid to manage the cases not to avoid cases. So is it automatic or do you have to go back and actually kind of negotiate things with these payers.

John Paul Johnson: Yes.

John Paul Johnson: It depends on the specific contract generally speaking the contracts will outline.

John Paul Johnson: It depends on the specific contract. Generally speaking, the contracts will outline the specific calculations and corridors, and there is a real mathematical element to it.

John Paul Johnson: The specific calculations and corridor and there is a real mathematical element to it.

John Paul Johnson: Okay.

Seth Barrie Blackley: Ryan, it's Seth. I'll add one other comment to your question, but also to Jeff's question earlier. You know, as we said in the prepared remarks, this is not sort of a new territory for us. This is something we regularly participate in each year. It's a little bit different this year, given the data, but it's not really a different process, so we understand how it works. We've done it, you know, multiple times in the past and are able to, I think, pretty accurately bake all that into our forecast.

Brian: Ryan It's Brian.

Seth Barrie Blackley: I'll add one other comment to your question, but also jeffs question earlier.

Seth Barrie Blackley: As we said in our prepared remarks. This is not sort of in new territory for US. This is something we've regularly.

Seth Barrie Blackley: Participate in each year, it's a little bit different this year, given the data, but it's not really a different process. So we understand how it works we've done it multiple times in the past.

Seth Barrie Blackley: <unk> I think pretty accurately bake all of that into our forecast when we reiterate this or just Q2 its with a lot of experience having done this many times before and have a pretty good sense of how to play out.

Seth Barrie Blackley: So when we, you know, reiterate this or adjust Q2, it's with a lot of experience having done this many times before and have a pretty good sense of how it will play out. Yeah, that's a good call.

Seth Barrie Blackley: Yeah, that's a good call, and I think there's just heightened sensitivity to it, but that makes a ton of sense, so thank you.

Speaker Change: Yes, that's a good call on I think there is heightened sensitivity to it but that makes a ton of sense. So thank you.

Seth Barrie Blackley: Yep.

Operator: The next question is from Jailendra Singh with Truist Securities. Please go ahead.

Speaker Change: The next question is from a jail and dressing which was securities. Please go ahead.

Operator: Thank you, and thanks for taking my question. I actually want to go back to the gross margin discussion. Can you speak to your 180 basis point decline in the quarter? So, MSSP revenue, which came through, likely helps the gross margin, but offsetting, you called out, more performance with revenue, higher reserves on claims, visibility, and authorization. Can you provide a little bit more granularity, like on the individual buckets of those gross margin impacts? And related to that, what do you think about gross margin trends for the rest of the year?

Jailendra P. Singh: Thank you and thanks for taking my question I actually want to go back to the gross margin discussion can you speak to you.

Operator: 180 basis point decline in the quarter, So MSP revenue, which came through nicely helps the gross margin, but offset and you called out more pro forma revenue higher because of some claims within lithium operation can you provide little bit more granularity.

Operator: On the individual buckets on both gross margin impact related to that how do you think about gross margin trends put us to meet you.

John Paul Johnson: Yeah, let me take that last question first, Jailendra, and then I can add a little bit more color. As we've gone through before, the biggest driver of our enterprise percent gross margin is the mix between performance suite and tech and services. And so what you saw in Q1, what you saw in Q4, true, but it also was the impact of continued rapid growth in the performance suite, which has a lower gross margin. It's also true that the Q1 gross margin was depressed because of a lot of new go-lives.

Speaker Change: Yeah, Let me take that last question first Islander, then I can add a little bit more color and as we've gone through before the biggest driver of our enterprise percent gross margin is the mix between performance suite and tech and services and so what you saw in Q1, what we saw in Q4 true.

John Paul Johnson: It also was the impact.

John Paul Johnson: Continued rapid growth in that performance suite, which has a lower gross margin.

John Paul Johnson: It's also true that the Q1 gross margin is depressed because of a lot of new go lives.

John Paul Johnson: For example, we had over $125 million of performance revenue in the quarter that was still relatively new and contributing minimally to the gross profit line. If you were to pro forma that closer to target margins, that would increase enterprise gross margins by 230 basis points plus. So as we think about gross margin trends across the year, absent new go-lives in the performance suite, we would anticipate them ticking up. As we think longer term, it's going to continue to be driven by the mix of our growth between the performance suite and the tech and services suite, which, as I sort of highlighted in the prepared remarks, we seek to have a balance.

John Paul Johnson: For example, we had over $125 million at performance revenue in the quarter. It was still relatively new and contributing minimally to the gross profit line.

John Paul Johnson: If you were to pro forma that closer to target margins that would increase enterprise gross margins by 230.

John Paul Johnson: Basis points plus.

John Paul Johnson: And so as we think about gross margin trends across the year.

John Paul Johnson: Absent new go lives in the performance suite, we would anticipate them ticking up right.

John Paul Johnson: As we think longer term, it's going to continue to be driven by the mix of our growth between the performance fee and the tech and services suite, which as I sort of highlighted in the prepared remarks, we seek to have a balance.

John Paul Johnson: With my quick follow-up, actually, I want to go back to the 2025 MA final notice. There's clearly a lot of focus there. I want to ask a question in two ways. First, how are your conversations with payers progressing in terms of carving out some risks for new customers or taking more risks with existing customers because of the cost pressure they're seeing? And we'd be curious about your thoughts regarding potential membership changes that might occur in 2025 as some plans focus on pricing for margin. Just maybe provide some color there.

Speaker Change: Then my quick follow up actually I wanted to go back to 2025 and a final notice maybe a lot of focus there.

John Paul Johnson: To ask a question to the SEC.

John Paul Johnson: How are your conversations with what they're seeing in terms of cutting out some of the new customers are taking modest with existing customers because of the golf specialty best team and would be curious on your thoughts regarding potential membership changes that might have got in 2035 as some clients focus on pricing for margin just maybe.

John Paul Johnson: Some color there.

Operator: Yeah, Seth, do you want to talk about the conversation? Yeah, look, I think, Jailendra, what I would do.

Speaker Change: Yes, that's you want to talk about the conversation.

Seth Barrie Blackley: Yeah, look, Jailendra, what I would say is that, um... As I mentioned in the prepared remarks, there is just a lot of pressure on the payer community right now, which is driving good demand for the product. And I continue to think that our ability to more effectively manage these categories, whether it's under performance suite or tech services, that is a platform opportunity that I think we will accumulate over time, and we continue to take market share and grow for that reason. In terms of the negotiations on your very specific question, you know, I don't think a lot has changed there. We have always had a number of different protections.

Seth: Yeah look I think John or what I would say is that.

Seth Barrie Blackley: As I've mentioned in the prepared remarks, just a lot of pressure on the payer community right now which is driving good demand in the product.

Seth Barrie Blackley: We continue to think that.

Seth Barrie Blackley: Our ability to more effectively manage these categories, whether its underperformance suite. Our tech services that that is a platform opportunity that I think we accrue over time.

Seth Barrie Blackley: And we continue to take market share and grow for that reason in terms of the negotiations to your very specific question.

Seth Barrie Blackley: I don't think a lot has changed there we have always had a number of different protections. It's always part of the conversation is always part of a negotiation to get those aligned in terms of how it's set up one of the things. That's also true is that we can do it different ways. We have relationships were baked in the trend is much higher.

Seth Barrie Blackley: It's always part of the conversation. It's always part of a negotiation to get those aligned, you know, in terms of how it's set up. One of the things that's also true is that, you know, we can do it different ways. We have relationships where the trend is much higher, our trend on our fee, meaning our annual inflation on the fee is pretty significant because we're taking fewer protections, and the opposite can also be true.

Seth Barrie Blackley: Our trend on our fee, meaning our annual inflator on the fee is pretty significant because we're taking fewer protections and the opposite can also be true.

Seth Barrie Blackley: And there's not been a huge change there, you know, in the earlier question. Obviously, we have to take in the most recent data and pick the right market-based trend to use in that negotiation. But that's a fact that's not that hard to get our hands around and get aligned on.

Seth Barrie Blackley: I mean theres not been a huge change there to the earlier question. Obviously, we have to take in the most recent data and pick the right market based trend to using that negotiation, but that's a it's a fact, it's not that hard to get our hands around it.

Seth Barrie Blackley: Get a liability so that's that's sort of the dynamic in the marketplace and again.

Seth Barrie Blackley: So that's sort of the dynamic in the marketplace. And again, you know, there's some puts and takes on these kinds of moments. But I think, as we've been saying for a while, we think it's a net positive, the pressure that exists in the market in terms of the demand side.

Seth Barrie Blackley: There's some puts and takes on these kinds of moments I think as we've been saying for a while we think it's a net positive the pressure that exists in the market in terms of the demand side.

Speaker Change: Great. Thanks, a lot.

Operator: Thanks a lot. The next question is from Sean Dodge with RBC Capital Markets. Please go ahead. Yeah, thanks.

Operator: The next question is from Sean Dodge with RBC Capital Markets. Please go ahead. Yeah, thanks.

Seth Barrie Blackley: The next question is from Sean Dodge with RBC capital markets. Please go ahead.

Sean Wilfred Dodge: Yeah. Thanks, just on the performance suite indicators I guess can you give us any more detail on why you think it's stepped up in March was it concentrated concentrated in any particular geography or a.

Sean Wilfred Dodge: Mayor or population and was it.

Sean Wilfred Dodge: You said volume so it sounds like it was more tied to prevalence.

Sean Wilfred Dodge: And then it was cost, but correct me if I'm wrong there.

John Paul Johnson: Yeah, you're not wrong, Sean. We see in that authorization data that the majority of the increase is driven by what we see as changes in the population. So things like disease prevalence. I'd say they're not localized to a particular geography or line of business. They're pockets here, pockets there. And, you know, something obviously that we're watching closely as we go through this quarter.

Sean Wilfred Dodge: Yeah, you're not wrong Sean.

Sean Wilfred Dodge: We see in that authorization data the majority of the increases driven by what we see as changes in the population so things like disease prevalence.

John Paul Johnson: I would say, they're not localized to a particular geography or line of business. There are pockets here pockets there.

John Paul Johnson: And something obviously that we're watching closely as we go through this quarter.

John Paul Johnson: Yeah.

Speaker Change: Okay. Thanks.

Operator: The next question is from Daniel Grossleit with Citi. Please go ahead.

Daniel Grosslight: The next question is from Daniel gross light with Citi. Please go ahead.

Operator: Hi, thanks for taking the question. Last quarter you mentioned that you would expect to see around 10 percentage points of margin improvement on 2023 performance suite launches in 2024, similar to what you saw from 22 to 23. Given some of these utilization pressures, are you still comfortable with the assumption around margin improvement for 2023 performance suite launches? And as you look at utilization and some of these pressures, is there any difference between newer launches versus more mature launches or more mature performance suite arrangements? Yeah, both good questions.

Daniel Grossleit: Hi, Thanks for taking the question.

Operator: Last quarter, you mentioned that you would expect to see around 10 percentage points of margin improvement of 2023 performance suite launches and 24 similar to what you saw.

Operator: From 'twenty two to 'twenty three given some of these utilization pressures or are you still comfortable with the the assumption around margin improvement of 2023 performance suite launches and as you look at utilization in some of these pressures.

Operator: Is there any difference between.

Operator: Newer launches versus more mature watches or more mature performance suite arrangements.

John Paul Johnson: Yeah, both good questions. Let me take the second one first.

John Paul Johnson: There is not, this isn't specific to a new population or more recent growth. It really is a sort of pockets of both older clients and newer populations. To your first question, are we still confident in that 10%? Based on execution and the margin maturation for the performance suite as we're exiting this year, the answer is definitively yes. We feel very good based on what we're seeing in terms of the interventions that we're doing, the value that we're creating, and the incremental quality that we're delivering to those members. It is true that we may need to adjust a capitation rate or two, as we sometimes do, but our ability to create value by lowering the cost of care is something that we feel very good about.

Speaker Change: Yes, both good questions, let me take the second one first.

John Paul Johnson: There is not so this isn't a.

John Paul Johnson: Specific to our new population or more recent growth it really isn't.

John Paul Johnson: Sort of.

John Paul Johnson: Pockets of both older.

John Paul Johnson: Older clients and newer populations.

John Paul Johnson: To your.

John Paul Johnson: First question.

John Paul Johnson: We still confident in that 10%.

John Paul Johnson: The execution in the margin maturation for the performance suite as we're exiting this year the answer is definitively yes.

John Paul Johnson: We feel very good based on what we're seeing in terms of the interventions that we're doing the value that we're creating the incremental quality that we're delivering to those members.

John Paul Johnson: It is true that the.

John Paul Johnson: We may need to adjust the capitation rate or too.

John Paul Johnson: As we sometimes do.

Speaker Change: Right on.

John Paul Johnson: Our ability to create value by lowering the cost of care.

John Paul Johnson: Very good about that.

John Paul Johnson: Okay.

Speaker Change: Got it thank you.

John Paul Johnson:

Operator: The next question is from Jack Wallace with Guggenheim. Please go ahead.

John Paul Johnson: The next question is from Jack Wallace with Guggenheim. Please go ahead.

Operator: Hey, thanks for taking my questions. I just wanted to get an idea for the end market, which sounds like the end market is building up quite a bit of demand, and thinking about the performance suite if you're able to pull in more. Transcripts provided by Transcription Outsourcing, LLC. Demand would put an impact on your end, even a target, and said differently with any of the upfront costs and actuarial assumptions for the incremental performance suite lives, potentially be a drag in a good scenario for the medium and long term.

Jack Dawson Wallace: Hey, Thanks for taking my questions.

Operator: Just wanted to get an idea for the sounds like the end market.

Operator: Building, a quite a bit of demand.

Operator: <unk>.

Operator: Thinking about the performance suite, if you're able to pull in more.

Operator: New customers for the performance suite and transfer our transition some of your tech and services customers to performance suite is there a potential that enough of that.

Operator: Demand would put an impact on your year end EBITDA target or said differently, what any of the upfront costs and actuarial assumptions for the incremental performance REIT lives potentially be a drag in a good scenario for the medium and long term. Thank.

Speaker Change: Thank you.

John Paul Johnson: Yeah, Jack. So good question. I don't think so for this year. You know, we continue to First of all, have a nice pipeline across performance suites, and the tech and services side, it's pretty balanced if I looked at what's in there, and so I don't see a skew, you know, 0.1, and then I'd say the second point would be just that, You know, I don't think at this stage in the year, there's, from a timing perspective, likelihood that that would happen.

Speaker Change: Yes, Jack Good question I don't think so for this year.

John Paul Johnson: We continue to.

John Paul Johnson: First of all have a nice pipeline across performance wheat, and the tech services side, it's pretty balanced if I looked at whats in there and so I don't see a skew.

John Paul Johnson: One and then I'd say the second point would be just that.

John Paul Johnson: I don't think at this stage in the year.

John Paul Johnson: There is from a timing perspective likelihood that that would happen.

John Paul Johnson: And even as we look into next year, if you ask the question differently, I think it's the same response, which is that we continue to have a pretty balanced pipeline. We like it that way. We've sort of, you know, always liked the balance between the two segments for the reasons that we've been talking about. And that continues to be what it looks like.

John Paul Johnson: And even as we look into next year.

John Paul Johnson: Ask the question differently I think it's the same response, which is we continue to have a pretty balanced pipeline, we like it that way we've sort of.

John Paul Johnson: Always like the balance between the two segments for the reasons that we've been talking about.

John Paul Johnson: <unk> continues to be what it looks like.

John Paul Johnson: Excellent. Thank you.

Speaker Change: Excellent. Thank you and then how should we be thinking about the economics from the neurology deal. It sounds like it's a pretty interesting partnership.

John Paul Johnson: Should we think about that is some potential upside for this year is that really more of a 25 story.

John Paul Johnson: And then, yeah, how should we be thinking about the economics of the aerology deal? Sounds like it's a pretty interesting partnership. You know, should we think about that as some potential upside for this year? Is that really more of a 25 star? Yeah, Jack,

John Paul Johnson: Yeah, Jack, so we're very excited about Careology too. The team is, our team has done a great job, their team, it's an exciting partnership. You know, I think that it's not going to have an effect on this year.

Speaker Change: Yeah. Jack So we are very excited about care allergy to the team is our team has done a great job. There team. It's exciting partnership I think that it's not going to have an effect on this year.

Jack: <unk> go live with our first health plan partner late this year, if I had to guess so it's down the road a little bit.

John Paul Johnson: And.

Jack: We're going to really be targeting our performance suite relationships first.

John Paul Johnson: We'll probably go live with our first, you know, health plan partner late this year, if I had to guess, so it's down the road a little bit. And, you know, we're really going to be targeting our performance suite relationships first. And at some point, it may become a tech and services product as well, but it's really about embedding it into our performance suite relationship, similar to what we do with our end-of-life products.

Jack: And at some point it may become a tech and services products as well, but it's really about embedding it into our performance suite relationship similar to what we do with our end of life product.

Speaker Change: Got it thank you.

John Paul Johnson: Sure.

Operator: The next question is from Stephanie Davis with SVB Lyric. Please go ahead. Hey guys.

John Paul Johnson: The next question is from Stephanie Davis with SVP Leerink. Please go ahead.

Stephanie Davis: Hey, guys, it's actually like Barclays.

Operator: Hey guys, I'm actually Hood Sparklers. Glad to be in my new home. But thank you for taking my question. You provided a really helpful bridge on profitability. I was hoping to split hairs a little bit more and ask which of these, like the new wind mix, would have more of an impact on gross margins and which of these we should think of as a headwind to gross profit dollars.

Operator: Glad to have you in my New home Bye. Thank you for taking my question you provided really helpful branch unprofitable.

Operator: I was hoping to split hairs, a little bit more asked which is the like the new wind mix would be more of an impact to gross margin and which of these you should think of as had been to gross profit dollars.

Speaker Change: I'm not sure I understand the question Stephanie sorry.

Operator: I'm not sure I understand the question, Stephanie; sorry.

Operator: So is there a reason you would see a year-over-year decline in gross profit dollars as opposed to just a headwind to gross margin?

Speaker Change: So is there a reason you would see a decline.

Operator: Profit dollars as opposed to just hop into gross margin.

John Paul Johnson: Ah, good question. Yes.

Stephanie: Good question, yes. So.

John Paul Johnson: From Q4 to Q1 gross profit relatively flat.

John Paul Johnson: Largely driven by the elevated indicators in March as I mentioned.

John Paul Johnson: So, from Q4 to Q1, gross profit was relatively flat, largely driven by the elevated indicators in March, as I mentioned. As we go through this year, continue to drive performance in the performance suite, and those cost improvements that I mentioned, get the benefit of some of the new launches that we've seen, which are mostly in the tech and services suite in the first half of this year, that should drive it forward.

John Paul Johnson: The <unk>.

John Paul Johnson: As we go through this year continue.

John Paul Johnson: Continue to drive performance in the performance suite.

John Paul Johnson: These cost improvements that I mentioned.

John Paul Johnson: The benefit of some of the new launches that we've seen which are mostly in the tech and services suite in the first half of this year.

John Paul Johnson: That should drive it forward and then when the newly announced Molina deals go live later this year you could see another dip on the percentage side.

John Paul Johnson: And then, when the newly announced Molina deals go live later this year, you'd see another dip on the percentage side, but I wouldn't necessarily anticipate a dip there on the dollar side. Expect that to continue to grow as we sort of laid out the ETH Dow ramp.

John Paul Johnson: Didn't necessarily anticipate a dip there on the dollar side, we expect that to continue to grow.

John Paul Johnson: We sort of laid out the EBITDA ramp continuing to grow.

John Paul Johnson: All right, helpful. Thank you. And just a quick one, the Molina contracts. How should we think about what would happen if Molina loses Florida? Does that have any impact on your business?

Speaker Change: All right helpful. Thank you and just a quick one on the Montana contracts how are you.

Speaker Change: Should we think about what would happen.

John Paul Johnson: What.

John Paul Johnson: Does that have any impact to your business.

John Paul Johnson: Yeah, too early to say what happens. We're not close to it. I think we previously specced out Molina, Florida, revenue from Medicaid at less than $15 million. So that would be the top line impact if something were to change.

John Paul Johnson: Yeah.

Speaker Change: Too early to say what happens where.

John Paul Johnson: Not close to it and I think that we.

John Paul Johnson: Previously previously it's backed out that sort of Molina, Florida.

John Paul Johnson: Revenue in Medicaid at less than $50 million, so that would be the top line impact.

John Paul Johnson: If something were to change that.

John Paul Johnson: Alright, helpful. Thank you so much.

Speaker Change: Alright, thank you so much.

Operator: Again, if you have a question, please press star then 1. The next question is from David Larsen with BTIG; please go ahead.

John Paul Johnson: Again, if you have a question. Please press Star then one the next question is from David Larsen with BTG. Please go ahead.

Operator: Hi, congratulations on the good quarter. For the $300 million of annualized EBITDA, should we be thinking about $75 million of EBITDA for the fourth quarter of 2024, or does the $300 million of annualized EBITDA mean that in December of 2024, you'll be trending at like one twelfth of $300 million of annual EBITDA? Thanks very much.

David Michael Larsen: Hi, congratulations on the good quarter for the 300 million of annualized EBITDA should we be thinking about 75 million of EBITDA for the fourth quarter of 'twenty four or does the 300 million of annualized EBITDA mean in December of 'twenty, four you'll be trending at like 112th of 300 million.

Operator: Dollars of annual EBITDA, thanks, very much.

John Paul Johnson: Yeah, Dave, the way that we think about it is it's an exit number. And so Q4 is probably a little under that, and Q1 is probably a little over that.

Speaker Change: Yeah, Dave the way that we think about it is it's an exit number.

Speaker Change: And so Q4 is probably a little under that in Q1 is probably a little over that.

John Paul Johnson: Okay, and then in terms of the different components to getting to the $300 million, there's performance suite maturation, there's new growth, and then there's earnings from NIA and IPG. Just any update on those numbers would be great. In particular, like the new growth figure, I think that was $50 million. Just are those all tracking in line with or ahead of expectations?

Dave: Okay, and then in terms of the different components to getting to the $300 million. There's performance suite maturation Theres new growth and then there is earnings from Nia in IPG, just any update on those numbers would be great in particular like the new growth.

John Paul Johnson: I think that was $50 million just are those all tracking in line with or ahead of expectations.

John Paul Johnson: Yeah, in line. So we mentioned from the NIA synergies, anticipating 8.75 million in quarterly benefits there, and about half of that is already in Q1. And, you know, well on track to achieve the rest of that. Comments on the performance suite already and on the new growth mentioned that, you know, we're With the seven new agreements we've already announced this year and strong membership, taking that GO-GET is under just under $3 million a quarter.

John Paul Johnson: Yeah.

Speaker Change: In line.

John Paul Johnson: We mentioned that from the Nia synergies anticipating $875 million and clearly benefit there about half of that is already in Q1.

John Paul Johnson: And well on track to achieve the rest of that.

John Paul Johnson: Some comments on the performance suite already and on the new growth mentioned that.

John Paul Johnson: Okay.

John Paul Johnson: With the seven new relationships, we've already announced.

John Paul Johnson: 70 agreements have already announced this year and strong membership taken that go get to under.

John Paul Johnson: Just under $3 million a quarter.

Speaker Change: Great. Thanks, a lot and then just quickly on cash just expectations for cash flow for the year of free cash for the year and then how should we be thinking about that for Q2 Q3 Q4 Q.

John Paul Johnson: Great, thanks a lot. And then just quickly on cash, just expectations for cash flow for the year, free cash for the year, and then how should we be thinking about that for 2Q, 3Q, 4Q, and how does that compare to EBITDA, please?

Speaker Change: And how does that compare to EBITA. Please thank you.

John Paul Johnson: We have reaffirmed our expectation of $150 million or more in operating cash flow for the year. Q1 is right in line with our expectations on that metric, and we'll build cash across the year.

Speaker Change: Yes, reaffirmed our expectation of $150 million or more in operating cash flow for the year.

John Paul Johnson: In Q1, right in line with our expectations on that metric.

John Paul Johnson: We'll build cash across the year.

Speaker Change: Thanks very much appreciate it.

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

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

Seth Barrie Blackley: All right, thank you for the questions tonight, and we'll look forward to catching up offline. Have a good evening.

Seth Barrie Blackley: Alright. Thank you for the questions Tonight, and we look forward to catching up offline and have a good evening.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Seth Barrie Blackley: The conference has now concluded thank you for attending today's.

Operator: Presentation, you may now disconnect.

Operator: [music].