Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Evolent Health Inc (NYSE:EVH) reported a 30% revenue growth in 2024, reaching $2.55 billion.
• The company secured $115 million in projected adjusted EBITDA improvement through renegotiated contracts.
• Evolent Health Inc (NYSE:EVH) achieved a 100% logo renewal rate for its top customers in 2024.
• The company extended its contract with Centene, reflecting confidence in their partnership.
• Evolent Health Inc (NYSE:EVH) is investing in automation and efficiencies, expecting over $50 million in annual cost improvements once fully ramped up.

Negative Points

• Adjusted EBITDA for 2024 was at the low end of guidance due to elevated oncology expenses.
• The company anticipates a $10 million drag on 2025 adjusted EBITDA due to one-time investments in AI-based automation.
• Evolent Health Inc (NYSE:EVH) projects a 12% increase in oncology costs for 2025, higher than historical trends.
• The company faces a $25 million headwind from elevated oncology trends in 2025.
• Cash used in operations was $26.2 million in Q4 2024, driven by working capital needs.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Signs with EVH.

Q: Seth, it seems like you're trying to signal the degree of confidence of the assumptions on the 2025. Is it fair to say that coming from the oncology trend in the higher weighting of even on higher and then the changes you've made on performance is that kind of how to think about it, or are there other areas of service that you call out for you? A: Hey Matt, yeah, I think that's the right way to think about it. Yes, and that is our intent. You're right to come into the year with a lot of confidence for the reasons I said at the end of the call, of being very committed to being able to hit and, hopefully exceed our expectations throughout the year. And I'll let John talk a little bit about I think it's an important data point Matt around what would happen if trend was higher or lower.

Q: Maybe just a little digging into sort of the sort of the trend again, and John appreciate the, sort of the ranges of the 300. If we think about that now you have about 75% of your performance revenue covered by sort of these enhanced features including sort of rate adjustments for prevalence. Is it still right to think that the comparison between the 11% and 4Q of 24 and 12% of 25 trend, are these still really apples to apples comparison when we think about sort of the potential impact for you guys? A: Yeah, it's a good question, Charles, because I think that they are different, right? If you look at the incremental protections that we've negotiated for this business beginning this year. And that is you know cover the majority of our performance we revenue. And so, well, there's certainly still motion, within that book, in terms of where does that land unmanaged and how do we manage it down. The corridors on both the cap and the other side found that range a little more than we experienced last year.

Q: Just wanted to hear a little bit more of an update on cardiology, just sort of the trends that you're seeing here, given that, I think it was Cigna that called out cardiac trend pressure on their call just the other week. So just trying to get a little bit of a better sense of what you're seeing here in this area. A: Yeah, cardiology. I'll take that one this starts. It's a smaller trend clearly than in oncology, and what we saw a bit of elevation across 2024 that was explainable by our prevalence metrics. And so on. I will say that, you know, consistent with the oncology approach. And our overall sort of outlook here. We are taking, we think a conservative approach for cardiology trend as well in our forecast for 25. And sort of modestly above what we experienced in 24, and it's certainly not nearly as large of a move here Charles, as we're seeing in oncology.

Q: I just wanted to follow up and sort of just thinking about the puts and takes the EIA guidance for 25, just curious which inputs, could screen most conservative to you, such that it would represent the greatest swing factor, to the downside because I'm sort of just looking at the bridge inputs and stress. I'm curious what really gets you to that lowest end of the 130, the $135 million ballpark, particularly after signing, the new contracts. Is it just sort of a lack of organic growth? Is it, oncology spend be just far worse than expectations? A: Yeah, it really is around feeling a desire to have a buffer for surprise medical cost inflation, that is meaningly beyond our current expectation. We feel, and I can comment on this really good about the, what's in the bag and, and what's the pipeline in terms of organic growth this year. And a lot of the other items that you see on the page, are knowable. So, that's really the source of potential variability in the year.

Q: Can you maybe talk a bit about what your expected pricing increases are going to be in 25 and going forward because it seems to me like a 12% trend in oncology is that your new normal, and it also seems like a lot of the plans are raising premiums by Anywhere from 10 to 15%. So I would think your starting point for any year going forward would be at least 10% growth in the PMPM rates you're collecting from plans. A: Let me say a couple of things and fill in as well. The first thing, whether it's in our business narrow to oncology and cardiology, or in the broader managed care market, there's no world in which 10 to 12% annual healthcare inflation is sustainable. And so that's part of what we're seeking to do, that's part of the mission of the company. I do not believe sitting here today that a 12% annual oncology trend is the new one. I think there's another forecast out there that would suggest that. It's certainly though is what we are projecting for 2025 based on a variety of factors.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.