Evolent Health, Inc. Q4 FY2025 earnings call

• Organic growth: Expanded a large oncology partnership with Highmark, launched Performance Suite in oncology in an additional state, saw high renewal rates with specialty T&S logos covering over 98% of 2025 revenue. • Profitability: Focus on medical and operating expenses, 2025 MER excluding ECP was 89%, 2026 MER expected to be ~93% with assumptions on new business and legacy cohort. • Capital structure: Ended 2025 with strong cash generation, net debt of $782 million, and strategic divestiture of Evolent Care Partners. • Macro environment: Demand for Evolent services high, managed care industry in margin recovery cycle, using the moment to capture share, drive operating efficiency with AI/automation, innovate product, and prioritize debt paydown.

In 2025, excluding Evolent Care Partners, medical expense ratio (MER) was 89%, an improvement of nearly 700 basis points vs 2024. For 2026, forecasting approximately 65% of revenue from oncology, up from 36% in 2025. Q4 2025 revenue was $469 million, adjusted EBITDA was $37.8 million. 2025 baseline fiscal year revenue was $1.77 billion, adjusted EBITDA would have been ~$141 million. 2026 revenue forecast is $2.4 - $2.6 billion, adjusted EBITDA guide is $110 - $140 million midpoint. Performance Suite launches in 2026 expected to generate ~$900 million revenue with go-live in Q1 and Q2, representing 37% of 2026 revenue. Specialty T&S 2026 affected by exchange membership declines, with a ~$40 million headwind. Administrative services had churn but offset by workforce reduction and efficiencies.

• 2026 revenue forecast: $2.4 billion to $2.6 billion, driven by Performance Suite launches offset by some lost revenue from existing clients. • Adjusted EBITDA guide: $110 million to $140 million midpoint. Performance Suite new launches create temporary headwind due to reserving and timing. Specialty T&S affected by exchange membership decline with $40 million headwind. Administrative services churn offset by workforce reduction. • 2026 run rate adjusted EBITDA expected over $150 million in Q4. MER expected to be ~93% at midpoint, with progression throughout the year. • 2026 cash flow: Anticipate generating at least $10 - $20 million in cash flow from operations after interest expense, invest $25 - $30 million in software development and CapEx.

• Exchange membership contraction impact on Specialty T&S revenue. • Conservatism in reserving for new Performance Suite contracts leading to temporary headwinds. • Market valuation declines leading to noncash goodwill impairment. • Debt market dynamics and trading of debt at significant discount affecting liability management. • Uncertainty around future changes in subsidies or exchange enrollment affecting Specialty T&S business.

Q: Help us understand rationale and conservative approach to reserving for new contracts.

A: New contracts have more conservative reserves due to new data flow implementation and GAAP reserve accounting, with explicit margin added.

Q: What's seen with new membership early 2026 compared to last year?

A: Exchanges showing ~40% reduction consistent with client indicators, MA mixed with some clients losing and gaining membership, Medicaid status quo.

Q: Stock-based comp modeling and capital deployment for deleveraging?

A: Stock comp to be in line with past, focusing on deleveraging through execution, having strong balance sheet with cash and undrawn capacity, but currently focused on business.

Q: Swing factors in EBITDA guide high end vs low end?

A: MER is main swing factor, with good view on membership aside from exchange issues and ability to accelerate savings.

Q: Mature Performance Suite EBITDA margins and revenue growth vs margin/free cash flow?

A: Existing book has good care margin, aiming for 7% - 10% margins, choosing Performance Suite for long-term value creation despite short-term pressure.

Q: Status of 10% of Performance Suite contracts not migrated to enhanced model?

A: Expected most to migrate to enhanced model eventually.

Q: Time line and run rate benefit of 2026 cost efforts?

A: $50 million cost efforts largely run through early in the year, with $20 million done at end of 2025 and remaining $30 million in early 2026.

Q: IRR/ROIC modeling for new business?

A: Underwriting around Evolent's cost of capital, aiming for at least 20% hurdle rate.

Q: Swing factors in oncology cost trends affecting MER?

A: ~80% exposed to managing therapeutics, 20% other costs, with therapeutic exposure including decisions on drug duration, dosage, etc.