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    EVH
    Earnings call· Jun 2026(Q2 FY26)

    Evolent Health Q2 FY26 earnings call EVH

    Aug 6, 2026 Source

    Executive summary

    Evolent Health Q2 FY26 — Strong Performance Suite Growth and Raised Full-Year Guidance

    Evolent Health delivered strong Q2 FY26 results, driven by significant Performance Suite growth and successful launches with Highmark and Aetna. The company raised its full-year revenue and adjusted EBITDA guidance, while also announcing a major new oncology partnership and demonstrating meaningful scale with its AI-powered Auth Intelligence platform. Despite anticipated headwinds from Medicaid and exchange membership attrition in 2027, management expressed confidence in delivering strong adjusted EBITDA growth through operational efficiencies and continued Performance Suite expansion.

    Highlights

    6

    • Total revenue of $653 million, up 31% versus Q1.

    • Adjusted EBITDA of $28 million, up 27% versus Q1.

    • Full-year revenue guidance raised to $2.6 billion to $2.7 billion.

    • Midpoint of adjusted EBITDA guidance raised to $120 million to $135 million.

    • New oncology Performance Suite partnership expected to generate $300 million in annualized revenue.

    • Auth Intelligence platform improved auto approval rates by up to 20 percentage points.

    Concerns

    4

    • Q2 2026 medical expense ratio (MER) was 95%, up from 93% in Q1, reflecting Highmark launch and higher reserves.

    • Operating cash flow was approximately $10 million cash used in operating activities in Q2, impacted by $20 million repayment of pass-through PBM proceeds.

    • Expected membership declines in Medicaid (approximately 20% decline of Medicaid expansion members) and exchange populations in 2027.

    • Specialty Tech and Services revenue decreased 3% sequentially due to code review scope changes.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full Year 2026 Revenue
    $2.6 billion to $2.7 billion
    high materiality
    High
    Full Year 2026 Adjusted EBITDA
    $120 million to $135 million
    high materiality
    High
    Full Year 2026 Medical Expense Ratio (MER)
    approximately 93%
    medium materiality
    High
    Q2 to Q3 Adjusted EBITDA Increase
    approximately $4 million to $7 million
    medium materiality
    High
    Q3 to Q4 Adjusted EBITDA Increase
    $7 million to $15 million
    medium materiality
    High
    Full Year 2026 Adjusted Cost of Revenue (ex-medical claims) + Adjusted SG&A
    approximately $675 million
    medium materiality
    High
    Full Year 2026 Cash Flow from Operations
    $10 million to $20 million
    medium materiality
    High
    Full Year 2026 Software Development and Capital Expenditures
    $25 million to $30 million
    medium materiality
    High
    Full Year 2027 Revenue Growth
    more than 25%
    high materiality
    High
    Full Year 2027 Adjusted EBITDA Midpoint
    at or above $150 million
    high materiality
    High
    Medicaid Expansion Members Decline
    probably a 20% decline
    medium materiality
    Medium

    Operational metrics

    16
    Total Revenue
    $653 millionup 31% versus Q1
    Q2 FY26

    Reported total revenue.

    Adjusted EBITDA
    $28 millionup 27% versus Q1
    Q2 FY26

    Reported adjusted EBITDA.

    Medical Expense Ratio (MER)
    95%compared to 93% in Q1
    Q2 FY26

    Reflecting the expected impact of the launch of Highmark on May 1, 2026.

    Performance Suite Revenue
    $485 millionup 50% quarter-over-quarter
    Q2 FY26

    Driven primarily by higher membership from the launch of Highmark on May 1.

    Specialty Tech and Services Revenue
    $78 milliondecrease of 3% compared with Q1
    Q2 FY26

    Driven by code review scope changes as part of AHIP commitments and not by client attrition or pricing pressure.

    Administrative Services Revenue
    $48 milliondeclined by 3% sequentially
    Q2 FY26

    Largely due to a prior year reserve true-up recorded in the first quarter.

    Adjusted Cost of Revenue (ex-medical claims) and Adjusted SG&A
    $163 millionimproving 5% sequentially
    Q2 FY26

    Improvement versus prior quarter driven by expense management.

    Unrestricted Cash
    $115.7 million
    Q2 FY26 end

    Cash balance at the end of Q2.

    Net Debt
    $808.3 million
    Q2 FY26 end

    Net debt balance at the end of Q2.

    ABL Revolver Paydown
    $10 million
    Q2 FY26

    Paid down the ABL revolver to bring the balance to its minimum draw of $62.5 million.

    Cash Used in Operating Activities
    approximately $10 million
    Q2 FY26

    Cash used in operating activities, reflecting the repayment of pass-through PBM proceeds.

    Capital Expenditures
    approximately $7 million
    Q2 FY26

    Capital expenditures during the quarter.

    Performance Suite Lives
    6.7 million
    Q2 FY26

    Total lives covered by Performance Suite.

    Auth Intelligence Auto Approval Rate Improvement
    up to 20 percentage pointse.g., from 55% to 75%
    Q2 FY26

    Improvement seen among customers where AI models have been deployed.

    Authorization Volume Evaluated by Auth Intelligence
    more than 1/3
    Q2 FY26

    Portion of authorization volume previously requiring manual clinical review now evaluated by Auth Intelligence platform.

    Oncology Drug Cost Percentage
    about 75%
    current

    Percentage of total oncology costs attributable to drugs.

    Industry KPIs

    5
    MetricValueDetails
    Free cash flowapproximately $10 millionUSD
    Adjusted EBITDA$28 millionUSD
    Healthcare client count6.7 millionlives
    Revenue adjusted EBITDA guidanceFY26 Revenue: $2.6B-$2.7B; FY26 Adjusted EBITDA: $120M-$135M; FY27 Revenue Growth: >25%; FY27 Adjusted EBITDA: >=$150M (midpoint)USD
    Subscription recurring revenue growth$485 millionUSD

    Product announcements

    1
    ProductTypeDetails
    Auth Intelligence platformupdate

    Deals & partnerships

    2
    Existing advanced imaging clientOncology Performance Suite partnershipapproximately $300 million annualized revenue

    Partnership will cover approximately 1.5 million lives across Medicaid and Medicare populations spread through 11 states. Includes full enhanced contractual protections.

    Current regional Blue Cross plan and former NIA customerBroaden use of Evolent specialty technology and services platform by adding new products and extending existing products to additional populations.less than $5 million annualized revenue

    Proves out cross-sell opportunity across customer base. Includes MSK and cardio products.

    Risks & headwinds

    5
    Higher Medical Expense Ratio (MER) due to new launchesQ2 FY26, expected to be higher in Q3 FY26

    95% in Q2, up from 93% in Q1

    Mitigation: Expected to improve meaningfully into Q4 as clinical programs take effect and favorable contractual true-ups flow through.

    Lower operating cash flow due to one-time itemsQ2 FY26, majority of items expected to move beyond in 2027

    approximately $10 million cash used in operating activities in Q2, impacted by $20 million pass-through PBM proceeds repayment

    Mitigation: Expect cash flow performance to improve in 2027.

    Medicaid membership declines2027

    approximately 20% decline of Medicaid expansion members, translating to 4% to 5% membership impact for Evolent

    Mitigation: Strong Performance Suite growth and small market share allow growth past these headwinds; T&S next year will probably be flat to down a bit.

    Exchange membership attrition and client-specific market exits2027

    expected membership attrition

    Mitigation: Strong Performance Suite growth and small market share allow growth past these headwinds; management is staying close to clients and believes the industry rationalization is far along.

    Year 1 investments for new Performance Suite growth and AI investments2027

    earnings drag from signing additional Performance Suite contracts

    Mitigation: Underpinned by improved Performance Suite care margins, significant cost reduction and productivity initiatives, and proven performance of Auth Intelligence platform.

    What to watch in Q3 FY26

    5

    Highmark claims performance visibility

    next few months
    CurrentPositive early indicators, clinical engagement rates trending above targets, provider engagement exceeded expectations.
    TargetGreater visibility into claims performance.

    Why it matters

    Highmark is a significant partnership, and claims performance is a key indicator of its financial impact and success.

    We expect to have greater visibility into claims performance over the next few months, but we're incredibly happy with our progress so far.

    Q&A highlights

    6

    How is the reserving process for new contracts holding up, and are there any discernible changes in utilization, especially for Part B drugs in oncology?

    Mario Ramos stated that reserving is in line with industry trends, showing comfortable optimism. On utilization, Evolent sees nothing different from the broader industry, with trends modulating where acuity hasn't changed. However, client-specific market changes and membership mix create noise, making direct comparisons difficult.

    “I would say we're probably in line with everything that I've seen in the industry where we're definitely -- if I look at favorable prior period development as a way to think through whether we're over under reserving. We've all -- industry came out of a period of very tough utilization numbers and expenses, and I think we're all kind of rebounding from that.”

    asked by Kevin Caliendo · answered by Mario Ramos

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Growth and Renewals

    Evolent continues to experience a positive sales environment, securing a new oncology Performance Suite partnership covering 1.5 million lives across 11 states, expected to launch by December 2026 and generate $300 million in annualized revenue. Additionally, a regional Blue Cross plan expanded its use of Evolent's specialty technology and services platform, demonstrating cross-sell opportunities. The company also successfully renewed three of its largest customers in 2026, providing significant visibility into the 2027 outlook.

    02

    Successful Performance Suite Launches

    The launches with Highmark (May 1, 2026) and Aetna (earlier this year) have shown strong early indicators. Clinical engagement rates are trending above targets, and provider engagement has exceeded initial expectations for Highmark. Aetna also shows strong clinical engagement and claims-based performance in line with expectations, supporting the overall strength of the business given the scale of these partnerships.

    03

    AI Platform and Cost Improvement

    Evolent's Auth Intelligence platform, built on the 2024 Machinify acquisition, is reaching meaningful scale, with Q2 being a "tipping point." The platform has improved auto approval rates by up to 20 percentage points (e.g., from 55% to 75%) without clinical quality degradation, completing cases in minutes instead of days. Over one-third of authorization volume previously requiring manual clinical review is now evaluated by AI, contributing to long-term margin targets and employee satisfaction.

    04

    2027 Outlook and Strategic Priorities

    The company expects strong revenue growth of over 25% in 2027, driven by renewing business and new contracts, despite anticipated membership headwinds from Medicaid work requirements and client-specific market exits. Management is committed to delivering meaningful adjusted EBITDA growth, targeting at least $150 million at the midpoint, supported by improved Performance Suite care margins, significant cost reduction initiatives, and accelerated AI investments.

    05

    Capital Structure and Debt Refinancing

    Evolent is actively pursuing strategies to improve its capital structure and address 2029 maturities within the next 12 to 24 months. This involves a combination of adjusted EBITDA growth, improved cash flow conversion, disciplined capital allocation, and exploring capital markets and strategic options. The goal is to significantly improve leverage ratios and the maturity profile, enhancing financial flexibility for future opportunities.

    AI-generated summary of the company’s earnings call. Not investment advice.