Evolent Health, Inc.

Welcome to Evelyn Hill's earnings conference call for the first quarter ended March 30, 2022. As a reminder, this conference call is being recorded. Your hosts for the call today from Evelyn Hill are Seth Blackley, Chief Executive Officer, and John Johnson, Chief Financial Officer. This call will be archived and available beginning later this evening via the webcast on the company's investor relations website. which can be found at ir.evelynhealth.com. I will now hand the call to Seth Frank, Evelyn's Vice President of Investor Relations. Please go ahead.

Thank you and good evening. This conference call will contain forward-looking statements under the U.S. federal laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. 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 filings. For additional information on the company's results and outlook, please refer to its first quarter press release issued earlier today. Finally, as a reminder, reconciliations of non-GAAP measures discussed during today's call to the most direct, comparable GAP measures are available in the summary presentation available in the investor relations section of our website or in the company's press release issued today and posted on the investor relations section of the company's website, ir.evalenthealth.com, and the Form 8-K filed by the company with the SEC earlier today. During management's presentation and discussion, we will reference certain GAAP and non-GAAP figures and metrics that can be found in our earnings release, as well as a summary presentation available on the events section of Evelyn's IR website, ir.evelynhealth.com. And now, I'd like to turn the call over to Evelyn's CEO, Seth Blackley.

Good evening, everyone. Thank you for joining the call. I'll start by summarizing our first quarter results and discuss progress on our three core operating priorities. John will discuss the numbers in more detail and share our updated guidance. As always, we will close the Q&A. Turning to our results, the first quarter marks a strong beginning of the year for the company on the heels of a successful 2021 with continued growth, margin expansion, and strategic product innovation. For the first quarter of 2022, Evelyn reported total revenue of $297.1 million, growth of 38% over Q1 2021. Adjusted EBITDA for Q1 2022 was $24.3 million, 63% growth over Q1 2021. The significant flow through of revenue growth resulted in adjusted EBITDA margin expansion of 130 basis points to 8.2% compared to 6.9% in the first quarter of 2021. Relative to guidance, the quarter was also a success. We exceeded the high end of our revenue outlook range for the quarter of $280 to $295 million. And we delivered at the high end of our outlook for first quarter adjusted EBITDA, which was $20 to $25 million. We ended the quarter covering 20.3 million lives on all platforms, compared to 11.6 million one year ago, growth of 74%, driven primarily by New Century Health and Evelyn Care Partners, which together constitute our clinical solutions from a segment reporting perspective. Revenue from New Century Health and Evelyn Care Partners combined grew 46% year-over-year, while Evelyn Health Services, our administrative segment, grew 26%. This highlights balanced growth across the enterprise with continued outsized growth from the clinical segment. I want to take a moment to go a little bit deeper into New Century Health, specifically given our strong continued growth in that area and what we believe to be significant potential growth ahead in that business. There are two dynamics driving the strong growth at New Century. The first one is the addition of new lives to the platform. New Century today only touches approximately six percent of the U.S. population and so there remains a large opportunity to add revenue and margin to the addition of new client logos and geographic and product expansion with existing partners. For example, New Century's largest clients cover approximately 40 million lives across the country But New Century only serves approximately 10 million of those lives today, and those mostly in the technology and services suite represent a significant future opportunity. The second growth dynamic is the upsell from our New Century tech and services suite to our risk-based performance suite in one or more specialty areas. With almost 17 million lives on the tech and services platform today, this upsell represents a significant ongoing opportunity for future growth. We continue to look for opportunities to transition some of these oncology and cardiology lives in various states from tech and services to the performance suite. The upsell from the technology and services to the performance suite drives more than a 50-fold increase in per member per month revenue and significant increases in adjusted EBITDA per member. Now, I'll turn to updating you on the continued progress across our core operating priorities of one, strong organic growth, two, expanding margins, and three, optimal capital allocation. Looking at the first priority of organic growth, I'll highlight a few of the new opportunities we recently signed that help continue to drive our growth trajectory in 2022 and 2023. Today, we're pleased to announce two new operating partnerships in the clinical segment and a significant life expansion in 2023 with an existing EHS client. In February, we announced four new partnerships, and so these two new announcements take us to six thus far for the current year versus our annual target of six to eight. So we're on track for 2022 and increasingly well set up for 2023. As a reminder, we include new performance suite wins with existing clients towards our annual operating partner count, given the financial size and biodynamics of these relationships. Turning to the detail on the partner announcements, we're delighted to announce the expansion of our relationship with AVMED to add our new century health performance suite for oncology. Headquartered in Miami, AVMED is a highly respected, not-for-profit health plan that has been in operation for more than 50 years, providing its approximately 230,000 members with high-quality, cost-effective care. AVMED has been a valued client for our technology and services and our cardiology solution, and we're excited to now add AVMED's Medicare members to our performance suite for oncology. In addition, we're replacing another vendor to help AVMED manage radiation oncology quality for a majority of their commercially-insured membership through our tech and services platform. Our second announcement today is our new Evolent Care Partners Agreement with a significant independent physician group headquartered in California. This is an organization with over 200 physicians and is the largest in the county where it operates. The physician group was looking for opportunities to improve care for their member's provider Medicare fee-for-service population. After they evaluated different options, including the direct contracting model, they elected to collaborate with Evelyn Care Partners through our Medicare Shared Savings Program, ACO. We've already begun working with this group for a portion of their primary care practices and seek to expand this relationship over time. Based on our years of experience facilitating independent practices transition from fee-for-service to value, we think the Medicare Shared Savings Program Enhanced Track ACO often provides the best initial value-based care opportunities for providers, payers, and patients. That said, we are increasingly adding private payer performance suite contracts as well, as illustrated with our recently announced Blue Cross Blue Shield North Carolina arrangement. We also continue to evaluate the ACO REACH program and other models as they mature. Turning to Evelyn Health Services, today we announced that following the successful implementation of 330,000 new individual family plan commercial lives of Bright Healthcare on January 1st of this year, we anticipate an expansion to include all of Bright's IFP commercial membership in 2023. Across all of our solutions, we believe the MACO environment continues to be a tailwind for growth across our enterprise, with elevated medical expenses and inflationary pressures across the country creating increased urgency for health plans and other risk-bearing entities to drive quality of care while lowering their overall cost burden, which is the core proposition of our value-based care solutions. With strong revenue growth and new business opportunities progressing, let's talk about our progress towards continued margin expansion, which is the second core operating priority for Evelyn Health. Going forward, we anticipate continued strong revenue growth in our clinical solutions, and specifically from a higher number of lives on our Evelyn Care Partners and New Century Health performance suite solutions, both from net new logos and from technology and service suite upsells. As discussed previously, growth of our performance suite solutions across New Century Health and Evelyn Care Partners typically will drive higher growth rates solid year one dollar adjusted EBITDA contribution, slightly lower year one adjusted EBITDA margin percentages, and higher annual adjusted EBITDA margin dollars and percent as contracts mature. As shared last quarter, we continue to believe that adjusted EBITDA dollars are the best indicator to measure success relative to our margin expansion targets, and we continue to feel good about our progress towards our medium-term margin goals. Let's turn to our third core operating priority, optimizing shareholder capital allocation. When we talk about investment, we aim to drive innovation, value, and market leadership within our performance-based solutions while maintaining appropriate leverage and a flexible balance sheet to support growth, incremental to long-term growth. Our first priority for capital deployment is always building and strengthening internal capabilities. In addition to organic development, We also consider M&A an avenue to address assets that make sense financially and strategically. Our primary goal for acquisitions is to create shareholder value by adding capabilities that support our core strategic and operating objectives. The acquisition of Vital Decisions, which closed in October, and is successfully integrated into Evelyn Health, we believe is illustrative of the types of accretive M&A opportunities available. Through this transaction, we added important capabilities that both increased the value creation in New Century Health and expanded our portfolio by adding a technology-enabled advanced care planning solution. In the early stages of post-integration, we're seeing positive indications that pairing New Century's core expertise in managing highly complex chronic and acute illnesses with vital decisions offerings will be very compelling to our performance weaklines. Two quarters after closing the acquisition, the reception of the solution to the market has been positive. We believe payers will see the value and economic benefits of incorporating these services into their approach to managing health populations. For example, Vital Decisions went live with a pilot program over the last few weeks with one of New Century's largest performance suite clients, potentially unlocking significant clinical and financial benefits. We look forward to expanding vital decisions, advanced care planning solutions across several of our other New Century clients later this year. When we speak with our payer and risk-based provider clients, we often hear them say that they prefer fewer partners or vendor touchpoints in value-based care generally. That is, they would prefer fewer partners who can each provide more comprehensive services, especially in the specialty care areas where there is significant fragmentation in the vendor ecosystem. In fact, we often have our clients ask us directly if we can cover additional specialties or cover additional capabilities within our existing specialties. Given that dynamic and given our market leadership within New Century Health, we continue to see opportunities to expand our platform through creative, targeted M&A. Over time, we also see a significant opportunity to drive additional profitable long-term growth as we build a durable leadership position as a top independent specialty platform in the market, while adhering to our principles around disciplined capital allocation. To conclude, we see continued strength across the business in terms of operational success, growth, and long-term market leadership. The three core operating priorities for managing the company continue to guide me, the management team, and our board of directors. By executing on these priorities, we believe we'll be able to invest in product innovation, which will extend our market leadership, our financial results, our shareholder returns, and ultimately help us achieve our mission of using value-based care to help change the way healthcare is delivered in the United States. I'll now ask John to give some detail on the numbers this quarter and provide our outlook for 2022 and the second quarter.