Evolent Health, Inc · NYSE:EVH
Evolent Health — Investor Day (September 2020)
70 slides from Evolent Health's investor day presentation, Sep 29, 2020
Slide 1: Evolent Health 2020 Investor & Analyst Day
Exhibit 99.2 Evolent Health 2020 Investor & Analyst Day September 29, 2020 1
Slide 2: Agenda
Agenda 10-10:20 AM Introduction and Key Investment Themes • Frank Williams, Executive Chairman1 • Seth Blackley, CEO1 10:20-10:40 AM Theme 1: Focused Strategy to Create Shareholder Value • Seth Blackley, CEO1 10:40-10:45 AM Break 10:45-11:30 AM Theme 2: Our Solutions Create Differentiated Value • Se
Slide 3: Introduction & Key Investment Themes
Introduction & Key Investment Themes • Evolent Health Executive Chairman Frank Williams • Evolent Health CEO Seth Blackley 3
Slide 4: Executive Summary: Key Takeaways of 2020 Investor and Analyst Day
Executive Summary: Key Takeaways of 2020 Investor and Analyst Day Strong portfolio of “evergreen” solutions addresses clinical and administrative pain points for payers and providers 1 Focused Strategy to Drive continued organic growth in core Services business Create Expand Adjusted EBITDA marg
Slide 5: Evolent in Brief
Evolent in Brief WHAT WE DO WHO WE SERVE BY THE NUMBERS (Core Services) (Revenue Mix %)1 Clinical Solutions ~$239M Q2 Revenue2 Specialty Care Management ~40% Total Cost of Care $9M Management Q2 Adjusted EBITDA3 ~60% 35+ Administrative Solution partners Providers Payers Administrative Simplification
Slide 6: The Problems We Address in Health Care
The Problems We Address in Health Care Out of Control Highest Cost, Poor Customer Specialty Spending Lowest Life Expectancy Satisfaction U.S. spending on oncology drugs U.S. spends more on health care Health insurers ranked 21 out rose 60% from 2013 to 2017 ($38 than other high-income countries yet
Slide 7: Using Clinical Evidence to Better Manage Care
Using Clinical Evidence to Better Manage Care: Inpatient 21% Admissions1 Total Medical 22% Expense1 7 1. “Effective Care Management by Next Generation Accountable Care Organizations.” The American Journal of Managed Care, July 2020.
Slide 8: Market Context: The Structural Problem in Health Care
Market Context: The Structural Problem in Health Care Traditional fee-for-service payment pits payers and providers against each other and leaves patients caught in the middle ??? Payer Provider Patient 8
Slide 9: What Makes Evolent Unique: Bridging the Divide Between Payers and Providers
What Makes Evolent Unique: Bridging the Divide Between Payers and Providers Evolent is the bridge between payers and providers helping patients receive high quality care that is cost-effective, evidence-based and seamless Patient Payer Provider 9
Slide 10: Value-Based Care Market Landscape
Value-Based Care Market Landscape Payer-Provider New Payer Models New Provider Models Enablers Business Insurance / Consumers, Tech-enabled services / Risk / Owned practices Model / technology Clinical value Focus Example Bright Health (NYSE: EVH) Oak Street Health (NYSE: OSH) Companies Oscar Health
Slide 11: The Evolution of Evolent: Expanded Total Addressable Market
The Evolution of Evolent: Expanded Total Addressable Market via Offerings and New Customer Types Offerings Customer Types Specialty Total Care Total Addressable Management Addressable Payers Market Market Administrative Simplification Independent Physicians Total Cost of Care Management Health Syste
Slide 12: Core Services: Our Portfolio of Evergreen Solutions
Core Services: Our Portfolio of “Evergreen” Solutions Clinical Administrative Specialty Care Total Cost of Care Administrative Solution Management Management Simplification Proprietary Technology Platform: CareProSM | Identifi® Operating Model Scalable Clinical IP and Infrastructure Efficient Servic
Slide 13: Is Our Business Dependent on the Upcoming Election or Pace of Value-Based Care?
Is Our Business Dependent on the Upcoming Election or the Pace of Value-Based Care? 2020 Bi-partisan support for controlling health care costs Election Results Election and reducing waste Industry Shift < 10% of current Evolent pipeline dependent on pace of Toward Value- value-based care Based Care
Slide 14: Theme 1: Focused Strategy to Create Shareholder Value
Theme 1: Focused Strategy to Create Shareholder Value • Evolent Health CEO Seth Blackley 14
Slide 15: Where We Are Going: Reaffirming Our Strategy
Where We Are Going: Reaffirming Our Strategy to Create Shareholder Value Pillars of Our Strategy 1 Drive continued organic growth in core Services business 2 Expand Adjusted EBITDA margin 3 Optimize the capital structure and simplify the portfolio 15
Slide 16: Where We Are Going: Medium-Term Targets
Where We Are Going: Medium-Term Targets MEDIUM-TERM TARGETS 1 Adjusted Mid-teens annual growth rate on core Adjusted Services Services Revenue* Revenue 2 Adjusted Mid-teens Adjusted EBITDA margin via annual EBITDA 200-300 bps expansion from 2021 base 3 Capital Use proceeds to de-lever Structure *Exc
Slide 17: Reaffirming Our Strategy: Medium-Term Targets
Where We Are Going: Reaffirming Our Strategy to Create Shareholder Value MEDIUM-TERM TARGETS Mid-teens annual growth rate Drive continued organic growth in core 1 on core Adjusted Services Services business Revenue* Mid-teens Adjusted EBITDA 2 Expand Adjusted EBITDA margin margin via 200-300 bps exp
Slide 18: How We Get There: Organic Growth Drivers
How We Get There Organic Growth Drivers Add New Further Penetrate Customers Existing Customers Growth Historic Organic Target Growth Rate1 New Customers Cross-Sell / Expansion (Six to Eight)2 (Two to Four) 1) Organic revenue growth excludes the impact of acquired revenue. Calculated through December
Slide 19: Over $130B in Target Addressable Market
Over $130B in Target Addressable Market Administrative Simplification3 Total Cost of Care Management2 $23B Estimated Target $60B Addressable Market Specialty Care Management1 $50B 1) Includes MA HMO and MSSP 2) Includes MA Part A, Part B and Medicaid 19 3.) Estimated market size based on internal as
Slide 20: Strong Track Record of Organic Growth
Strong Track Record of Organic Growth Adjusted Services Organic Growth Drivers Revenue ($M)1 $915 $670 a) Add new customers $554 $436 b) Further penetrate existing customers (Same Store Growth): i. Cross-sell ii. Expand into additional geographies 2 2017 2018 2019 2020P Adjusted Services Revenue CAG
Slide 21: Add New Customers
a) Add New Customers Recent New Partnership Examples Announcing Today: Two New Provider Customers 21
Slide 22: Further Penetrate Existing Customers: Cross-Sell or Expand Geographies
b) Further Penetrate Existing Customers: Cross-Sell or Expand Geographies (Case Study) Cross-selling specialties or expanding nationally with one existing NCH customer (< 1M Medicare Advantage lives) would yield an additional $462M in annual revenue for Evolent $1.4B $447 $462 $15 Cross-sell cardiol
Slide 23: Reaffirming Our Strategy: Medium-Term Targets
Where We Are Going: Reaffirming Our Strategy to Create Shareholder Value MEDIUM-TERM TARGETS Mid-teens annual growth rate Drive continued organic growth in core 1 on core Adjusted Services Services business Revenue* Mid-teens Adjusted EBITDA 2 Expand Adjusted EBITDA margin margin via 200-300 bps exp
Slide 24: Streamline Overhead and Drive Annual Margin Improvement
Streamline Overhead and Drive Annual Margin Improvement One-Time Targeted Cost Targeted Annual Margin Improvement Reductions for 2021 100-200 bps 200-300 bps 100 bps $20-25M Gross Incremental Growth Leverage Gross Margin: Targeted SG&A Cost Reduction on SG&A Product Mix and Annual Margin Automation
Slide 25: How We Get There: Margin Expansion
How We Get There Expanded Adjusted EBITDA margins by 700+ basis points across last four quarters (Q2’20 vs.Q2’19) Overhead • Substantial reduction in SG&A • Greater yield/productivity in tech development Cost • Disciplined targets on customer profitability (e.g., scale efficiencies) Reduction Co
Slide 26: Reaffirming Our Strategy: Medium-Term Targets
Where We Are Going: Reaffirming Our Strategy to Create Shareholder Value MEDIUM-TERM TARGETS Mid-teens annual growth rate Drive continued organic growth in core 1 on core Adjusted Services Services business Revenue* Mid-teens Adjusted EBITDA 2 Expand Adjusted EBITDA margin margin via 200-300 bps exp
Slide 27: Focused Strategy Driving Significant Deleveraging
Focused Strategy Driving Significant Deleveraging June 30, 2020 Cash and Investments: $115M $260 $130-170 2021 Convertible Notes1: $125M 2025 Convertible Notes: $175M 2024 Senior Term Loan: $75M $90-130 Total Debt Less Cash: $260M Debt Less Cash on Expected Passport 6/30/20 Debt Less Cash 6/30/2020
Slide 28: Portfolio Simplification Plan
Portfolio Simplification Plan • Molina transaction closed 9/1/20 Passport • Anticipate $130-170M1 return of capital • New Century Health relationship and expansion opportunity with Molina • Strategic process with each of our partners in Florida across 2020 to identify optimal path forward Florida •
Slide 29: Deep Leadership Team and Continued Evolution of Governance Profile
Deep Leadership Team and Continued Evolution of Governance Profile Substantial Talent Across Management Team Board Expertise Closely Aligned with Strategy2 Seth Blackley John Johnson Jonathan Frank Williams Bruce Felt • Chief Executive • Chief Financial Weinberg • Executive • Presiding Lead 1 1 Dire
Slide 30: 5 Minute Break
Evolent Health 2020 Investor & Analyst Day September 29, 2020 5 MIN BREAK 30
Slide 31: Theme 2: Our Solutions Create Differentiated Value
Theme 2: Our Solutions Create Differentiated Value • Evolent Health CEO Seth Blackley 31 Confidential – Do Not Distribute
Slide 32: Our Solutions: Deep Dive on Specialty Care Management
Our Solutions: Deep Dive on Specialty Care Management Clinical Administrative Specialty Care Total Cost of Care Administrative Solution Management Management Simplification Payers and Payers and Risk-Bearing Providers Target Market Risk-Bearing Providers Risk-Bearing Providers $60B2 $50B1 $23B3 Imme
Slide 33: The Industry Problem: Escalating Complexity and Cost in Oncology and Cardiology
The Industry Problem: Escalating Complexity and Cost in Oncology and Cardiology Rapidly increasing clinical innovation and complexity escalate costs and challenge payers and providers to consistently deliver high quality, efficient care ONCOLOGY1 $240B $100K Oncology spending is 11 of the 12 drugs F
Slide 34: Our Value Proposition: Immediate and Ongoing Savings
Our Value Proposition: Immediate and Ongoing Savings via a Performance-Based Business Model Total Medical Expense on Oncology & Cardiology Illustrative Savings for Medicare Advantage Population (Part B), PMPM ($) Immediate medical 1 expense savings to $100 customer in Year 1 $98 $95 Ongoing medical
Slide 35: Key Solution Components: Overcoming Traditional Barriers to Success
Key Solution Components: Our Solution Overcomes Traditional Barriers to Success Most payers attempt to manage complex specialties through traditional utilization management, but they struggle to bend the cost curve. Evolent's approach overcomes key barriers to success. Traditional Barriers to Succes
Slide 36: Key Solution Components: High-Performance Provider Networks
Key Solution Components: High-Performance Provider Networks 1 Develop high-performance provider networks with tools, capabilities and incentives to align and support physicians Specialty Network Provider Financial Physician Engagement Development Incentive Alignment & Support & Management • Direct c
Slide 37: Key Solution Components: Network Effects Strengthen Our Business
Key Solution Components: Network Effects Strengthen Our Business Over Time 1 In Florida from 2015 to 2020, New Century Health increased its number of oncologists in its network by 25% and payer lives under contract by over 50% Benefits of the Two-Sided Network Effect Oncologists in Network Payer Cus
Slide 38: Key Solution Components: Precision Pathways
Key Solution Components: Precision PathwaysSM 2 Design evidence-based clinical pathways to drive provider behavior towards improved quality of care at a lower cost ROOTED IN CLINICAL EVIDENCE BASED FOREMOST ON QUALITY WITH SUBSTANTIAL COST SAVINGS Level 2 Pathways Anti-Cancer Regimens Average Cost P
Slide 39: Key Solution Components: Scalable Technology Platform
Key Solution Components: Scalable Technology Platform 3 Platform provides clinical decision support and manages providers to high-quality care while achieving significant cost savings DATA PREDICTIVE AGGREGATION STRATIFICATION AND PRIORITIZATION CareProSM CONTINUOUS IMPROVEMENT AND CLAIMS INNOVATION
Slide 40: Large Opportunity within Oncology
Large Opportunity within Oncology Estimated Annual Oncology Market 66K+ cancer patients managed by NCH1 ~1.8M new cancer cases diagnosed in the U.S.2 1) NCH internal data on oncology; active cancer patients equates to those receiving chemotherapy treatment from August 2019-July 2020. 2) American Can
Slide 41: Case Study: Regional Payer, Rhode Island
Case Study Customer Overview Opportunity • Ensure high-quality, evidence-based care for adult and pediatric patients • Bend the oncology cost curve for the plan Why Evolent • Holistic oncology management solution Type of Organization: Regional payer • Deep clinical expertise • High-value specialist
Slide 42: Market Strategy: Specialty Care Management
Market Strategy Why Evolent is Well- Target Addressable Market Est. Market Size & Share Positioned • Target Customer: Payers Performance-based model and Risk-Bearing Providers Specialty Care delivers immediate and Management1 ongoing savings • Lines of Business: Medicare Advantage, $50B Model rooted
Slide 43: Our Solutions: Deep Dive on Total Cost of Care Management
Our Solutions: Deep Dive on Total Cost of Care Management Clinical Administrative Specialty Care Total Cost of Care Administrative Solution Management Management Simplification Payers and Payers and Risk-Bearing Providers Target Market Risk-Bearing Providers Risk-Bearing Providers $60B2 $50B1 $23B3
Slide 44: The Industry Problem: Primary Care Physicians Face Financial and Clinical Challenges
The Industry Problem: Primary Care Physicians Face Financial and Clinical Challenges Financial Challenges • 61% see declining reimbursement from third party payers1 Clinical Challenges • 75% find increasing demands on provider time are impacting care delivery1 • Only 44% feel confident in their abil
Slide 45: Our Value Proposition: Driving Financial and Clinical Results
Our Value Proposition: Driving Financial and Clinical Results Financial Results Clinical Results1 ~$100M+ Total Savings Generated with Next Generation ACO Partners in 2017 and 20182 Partner Ranked #3 Next Generation ACO in U.S. for 2018 by CMS1 and 21% Inpatient Admissions has been a Top 5 Next Gene
Slide 46: Key Solution Components: Integrated Clinical Programs and Technology
Key Solution Components: Driving Results Requires Integrated Clinical Programs and Technology Clinical Programs & Technology Platform and Technology supports providers to achieve high-quality Care Network care and realize significant cost savings Management Initiatives Quality Risk Actuarial & Platf
Slide 47: Case Study: Risk-Bearing Provider, Michigan
Case Study Customer Overview Opportunity • Rapidly establish and leverage a value-based infrastructure and comprehensive solution within months to hit the ground running in CMS’s Pathways to Success ACO program Why Evolent Type of Organization: Risk-bearing provider • Successful track record support
Slide 48: Market Strategy: Total Cost of Care Management
Market Strategy Why Evolent is Well- Target Addressable Market Est. Market Size & Share Positioned • Target Customer: Risk- Proven track record in Bearing Providers ACO programs Total Cost of Care Management1 • Lines of Business: Current: Medicare, Integrated clinical program and technology Commerci
Slide 49: Our Solutions: Deep Dive on Administrative Simplification
Our Solutions: Deep Dive on Administrative Simplification Clinical Administrative Specialty Care Total Cost of Care Administrative Solution Management Management Simplification Payers and Payers and Risk-Bearing Providers Target Market Risk-Bearing Providers Risk-Bearing Providers $60B2 $50B1 $23B3
Slide 50: The Industry Problem: Costly and Inefficient Health Plan Administration
The Industry Problem: Costly and Inefficient Health Plan Administration Problem Result Antiquated Infrastructure Waste / Unnecessary Spend o Administrative cost pressures from process inefficiencies, outdated systems ~$760-935 billion o Clinical and administrative silos estimated total annual costs
Slide 51: Our Value Proposition: Modernizing Administrative and Clinical Operations
Our Value Proposition: Modernizing Administrative and Clinical Operations Health Plan Member / Patient Impact Administration Results 21% Inpatient 99%+ Admissions3 Financial and 22% Total Medical Procedural Accuracy1 Expense3 • First Organization to Earn NCQA Population Health Accreditation2 • NCQA
Slide 52: Key Solution Components: Comprehensive Health Plan Administration Services
Key Solution Components: Comprehensive Health Plan Administration Services End-to-end administrative and clinical processes powered by a modern and integrated platform Front Office Middle Office Back Office Corporate Plan design & promotion Provider network & clinical Claims intake & processing to H
Slide 53: Case Study: Regional Payer, Maryland
Case Study Customer Overview Opportunity • Desire for a true partnership versus purely a vendor agreement • Focus on enhancing health plan reporting capabilities • Sought comprehensive provider engagement and quality improvement Type of Why Evolent Organization: Regional payer • Evolent’s partnershi
Slide 54: Market Strategy: Administrative Simplification
Market Strategy Why Evolent is Well- Target Addressable Market Est. Market Size & Share Positioned • Target Customer: Payers Scaled infrastructure and differentiated technology platform that integrates administrative and • Lines of Business: Administrative clinical services 1 Medicaid, Medicare Simp
Slide 55: Theme 3: Attractive Financial Profile
Theme 3: Attractive Financial Profile • Evolent Health CFO John Johnson 55 Confidential – Do Not Distribute
Slide 56: Attractive Financial Model
Attractive Financial Model 1 Recurring revenue model with diversified customer base 2 Multiple growth channels 3 Margin profile drives strong cash flow at scale Capital investment strategy has enhanced Services differentiation and more than 4 doubled Total Addressable Market 5 Positive cash generati
Slide 57: Recurring Revenue Model with Diversified Customer Base
1 Recurring Revenue Model with Diversified Customer Base Recurring Revenue Model EXAMPLE CONTRACT FIXED PER MEMBER PERFORMANCE TOTAL PLATFORM & MEMBERSHIP x PER MONTH FEES + PAYMENTS = OPERATIONS REVENUE Diversified Customer Base Membership by Line of Business1 Customer Mix By Channel1* 13% 11% 17%
Slide 58: Multiple Growth Channels
2 Multiple Growth Channels Customer Revenue Example Add New Customers New • Targeted six-to-eight in 2020, with seven announced YTD in 2020 Partnership • Broader service offering and end markets provide increased confidence Expand with Existing Customers • Same store growth has accounted for ~40% of
Slide 59: Margin Profile Drives Strong Cash Flow At Scale
3 Margin Profile Drives Strong Cash Flow At Scale Target SG&A Gross Margin Improvement Fixed Cost Leverage Cost Reductions • Significant ($65M+) reductions • High flow through on new life • Sales and overhead infrastructure in achieved in 2020 vs. 2019 additions. Gross margin on place to drive growt
Slide 60: Capital Investment Strategy Has Enhanced Services Differentiation
4 Capital Investment Strategy has Enhanced Services Differentiation and More than Doubled Total Addressable Market Services Differentiation and Expansion Share of Capital Deployment1 • Vast majority of deployed capital into both internal product development and core M&A • Modest capital deployed in
Slide 61: Positive Cash Generation Focused on Strengthening Balance Sheet
5 Positive Cash Generation Focused on Continuing to Strengthen Balance Sheet 6/30/2020 Cash and Debt Actions 2021+ Cash and Investments: $115M • August 2020 Convertible Note Pay off Senior Term Loan Refinancing eliminated near-term maturity Senior Term Loan: $75M No maturities until 2024 2021 Co
Slide 62: 2020 Outlook
2020 Outlook Q3: We expect to be within our previously stated guidance ranges of Adjusted Revenue between $258-272M and Adjusted EBITDA between $10-14M 2020: We continue to expect full year Adjusted Revenue to be in the range of $995-1,035M (Adjusted Services Revenue $900-930M) and full year Adjuste
Slide 63: Wrap-Up
Wrap-Up 63 Confidential – Do Not Distribute
Slide 64: Executive Summary: Key Takeaways of 2020 Investor and Analyst Day
Executive Summary: Key Takeaways of 2020 Investor and Analyst Day Strong portfolio of “evergreen” solutions addresses clinical and administrative pain points for payers and providers 1 Focused Strategy to Drive continued organic growth in core Services business Create Expand Adjusted EBITDA marg
Slide 65: Q&A
Q&A 65 Confidential – Do Not Distribute
Slide 66: Appendix
Appendix 66 Confidential – Do Not Distribute
Slide 67: Safe Harbor Statement
Safe Harbor Statement Certain statements made in this presentation and in other written or oral statements made by us or on our behalf are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). A forward-looking statement is a statement tha
Slide 68: Non-GAAP Financial Measures and Disclaimer
Non-GAAP Financial Measures and Disclaimer In addition to disclosing financial results that are determined in accordance with GAAP, we present and discuss Adjusted Revenue, Adjusted Transformation Revenue, Adjusted Platform and Operations Revenue, Adjusted Services Revenue, Adjusted EBITDA, and Adju
Slide 69: Appendix A – Adjusted Revenue Reconciliation
Appendix A – Adjusted Revenue Reconciliation Evolent Evolent Evolent Health, Evolent Health LLC Health, Inc. Evolent Health, Evolent Health LLC Health, Inc. ($ in millions) Inc. as Reported Operations Adjustments as Adjusted ($ in millions) Inc. as Reported Operations Adjustments as Adjusted Q2 2020
Slide 70: Appendix B – Adjusted EBITDA Reconciliation
Appendix B – Evolent Health, Inc. Adjusted EBITDA Reconciliation Three Months Ended Guidance ($ in millions) 6/30/2020 Q3 2020 FY 2020 Net loss attributable to common shareholders of Evolent Health, Inc. $(203.5) $(16.2) $(316.1) Less: Interest income 0.8 0.9 3.5 Interest expense (6.3) (6.4) (25.3)