All right, we'll go ahead and get started with Evolent Health. Good morning. Thank you for attending the conference. I'm Richard Close and I cover digital and tech-enabled health here at Canaccord. Excited to have Evolent here again. Excited to have CFO John Johnson here. I don't think you've been to this conference usually. Every fifth year does this come. Yeah, usually Seth is here, so we'll probably get into a little bit more numbers than we usually do. With that being said, John, thanks for attending the conference and the support Evolent has given us over the years attending these. Last week was extremely hectic for us on the sell side. Most of my company's reporting last week, you guys did on Thursday, which we had a bunch. Just, you know, give us a quick snapshot on the quarter. Yeah. There was some volatility in the stock. We'll dig in deeper on specifics, but maybe just the high level, what we should take away from the second quarter and then looking forward. Yeah. The headlines for the quarter from our perspective started with outperformance on EBITDA, which we telegraphed a little bit in June. It is our policy this year to be as transparent as possible on what's going on in the business on a regular basis between the quarters, given some of the dynamics that are facing the industry broadly, in particular with our customers in the MCO side. Our second beat on the EBITDA line, two for two so far this year. We're feeling really good about the rest of the year, raised the bottom end of our EBITDA guidance as a result of that. That beat was really based on performance across the business, strong performance on the fee-based side of the business, the tech and services side, and a continued favorable performance in the risk-bearing side of the business, our Performance Suite, where, as I suspect we'll talk more about, we remain pretty conservative in our reserving posture for this year, with forecasting a 12% trend in oncology for the rest of the year, but having experienced so far this year about a 10.5% trend. Leaning conservative. The last thing that I'll note on the quarter, on the EBITDA side, and then I'll talk a little bit about revenue, new piece of news today since we reported, we have closed, completed our review of claims paid in July. It's one more month of data, and are seeing that trend continue. We've seen favorable development on claims from the first half of the year in July, and continue to see trends a little bit below our 12% forecast. That's feeling really good. Obviously, one month out of the quarter, but nice to see that favorable development. When you say new news, was that in a filing? Nope, I just said it on the transcript. Okay, good deal. Yep. Good to hear. You talked about the, you know, EBITDA beat, you raised the low end of the guidance, but revenue came down, it did for 2025. That more or less is some timing of Performance Suite, the risk-based contracts. You know, what changed there? Is there anything to be concerned with? Yeah. Just thoughts on that. Yeah, I'd highlight three things on the revenue line that changed our outlook for the year. The first two are go live timing, and the third is shifting our guidance philosophy. The first two, we announced on Thursday, last Thursday, a large new partnership with Aetna for their MA population in Florida that we had anticipated would go live in Q3. We now expect that to go live in the First Quarter of next year. It's a little bigger. We've added the group MA lives to that deal, in addition to the individual MA lives, so nice to see that expand. The reason for that timing shift really gets down to ensuring that we have the right data exchange mechanisms set up between the two entities. As you know, these risk arrangements live and die by data visibility. We've done a ton of work with all of our partners over the last nine months to ensure that we have really good monthly visibility into paid claims. Together with the new partner, we concluded we needed a little bit of extra time to ensure that that was exactly where we needed it to be with Aetna before we went live to ensure a good go live that we can then hopefully earn the right to expand with them into other states. That's the biggest change in the guide. A smaller piece of the change was one Performance Suite state we expected to go live actually during Q2 that got held up in a regulatory item with the state, was unrelated to Evolent. That item has been resolved and that will now go live on September 1st. The third thing that I just note about the guidance this year, our typical guidance philosophy for the top line is to give a bottom end of the range that we would view as fully contracted, and then space for new go-get growth beyond that as you go up in the range. When we updated the guidance for the rest of this year, we shifted the fully contracted point to the midpoint of our guidance to ensure that we had space if there were, for example, a faster deterioration in exchange membership than we are currently forecasting. That’s the third piece of the waterfall on the revenue side. You know, talking about the Aetna contract moving to January 1st of next year and the reason being the data, does that prevent something from, you know, take off the table something happening like last year where you got claims dumped on you, I think several times if I'm not mistaken. Yeah, it does. That's an area, as I noted, where I have spent an inordinate amount of time over the last 11 months, or 10 months since October of last year, really ensuring across the board, both with existing Performance Suite customers and new contractual arrangements, that we have both the right operational setup in terms of the data feeds, the right operational reviews to sit down between our teams and our customers' teams on a monthly basis, often including actuaries from both sides to review, here's how we're seeing the claims develop, and ensure that we're having that regular communication, make sure that we're not missing anything. More and more, having contractual protections in place to limit that liability. We feel really good about having closed the door on that particular risk. You're saying the changes that you made last year, the more narrow corridors, getting the data, you feel like you're in a good spot overall on all Performance Suite contracts? We do. do. That's right. Okay. Good deal. Maybe talking a little bit about the cost trend in oncology, 12% is in the guidance. You've been trending below that. How do you think about the opportunity, or not the opportunity, but the potential for spikes and how that's factored in to guidance? Yeah. If you look at the drivers of trend, you boil it down to two things. There's the prevalence of the disease and there's the cost per active month to treat. We have really good insight into the prevalence number because the vast bulk of the expenses that we're on risk for require a prior authorization, which happens before the cost is incurred. We know it's happening. You then make an assumption on how those prior authorizations translate into claims, at what rate, and then you see that as the claims complete. I'd note two things on the possibility for surprise. One is that the trends that we're seeing in the authorization data have been nicely consistent across the board, even here into the first couple of weeks of August. That is quite distinct from what we saw and the industry saw last year, which was pretty significant volatility in that prevalence line across the quarters last year. We're seeing a lot more stability in the underlying driver of trend that is prevalence. On the cost side, we're also seeing stability relative to our forecast. At the same time, as we've noted, we remain pretty conservative in our reserving posture. Despite having seen that trend in Q2 from the authorization data be around 10.5% or 10%, we reserved higher than that on the cost side, just to ensure that we're adequately covered in case there is some adverse deterioration. Both through stability so far this year in these drivers of trend and through an increase in our aggregate conservatism, we feel quite good about where we're positioned for the rest of the year. Do you guys have any insight into what specifically caused the spikes last year and maybe the easing of that this year? Yeah, you know, I think the prevalence side, where we and the industry saw such a spike in the number of cancer cases per thousand members, we have concluded at this point that it's largely pandemic-driven. I think we and the rest of the industry had expected a sort of COVID bounce-back that you saw in a number of other specialties, and it never materialized until last year. I'm candidly not sure why it happened in 2024 and not 2023, but we believe that was the primary driver of that, and that's supported a little bit by the moderating of trend that we're now seeing this year on the prevalence side. Just to jump back maybe on the Aetna contract, CVS Aetna, obviously, it looks like a great relationship. You have relationships with Centene and Molina, previously, other large nationals as well. Can you talk a little bit about maybe the difference between the Aetna partnership and relationship versus some of the existing relationships? The thing that I'd say, the philosophy that we try to bring to this, is we would love to be the enterprise partner of choice in our specialties. We think one of the things that we hear from partners, whether it's some of the big nationals that you mentioned or regional plans, is there is a preference for vendor consolidation. You've heard even some of the big nationals mention that. We see Evolent as nicely positioned to be that consolidating enterprise partner, both through our breadth, having coverage of the biggest specialties that drive cost trend, and the depth of our clinical value creation, which we believe to be industry leading. That's the aspiration. We think we have to also earn that growth. If you look at what we have been able to do and deliver on with some of these larger partners, you've seen us start relatively small and then expand meaningfully over time to new states, new populations, new specialties. That is the playbook. That's what we would love to do for each new partner over time as we're demonstrating the value that we can bring and earning that growth. Obviously a lot of news and uncertainty coming out of D.C., the signing of the one big beautiful bill. You talked to some on the various aspects, expectations, or on how it impacts your book of business. Can you talk a little bit about the Medicaid and how you think about that? Oh, and that's a two, three-year process down the road. Then ACA and what is the potential impact on your business? How have you factored that into your thinking? Yeah. As we go line of business, we see Medicare Advantage, trend likely stabilized, return to normal industry growth next year that we expect would be a membership tailwind. On the Medicaid side, we're anticipating the impacts from OB3 to mostly be in, start in 2027. Certain states you may see it earlier. It depends on how specific states implement those provisions. Sitting here today, we're anticipating that to be mostly a 2027 item. Exchanges will come next year, both with the expiration of the premium tax credits and some of the other changes that are both driven by the current dynamics in those risk pools, which are elevating expenses, which will then elevate premiums next year, and some of the policy changes. I think as we sit today, we're fortunate that the exchange business is the smallest part of our business. It represents about 20% of our overall revenue, and a smaller percentage as we think about EBITDA for next year when this would be relevant. Even absent changes, it would be a smaller percentage of our EBITDA given where our growth is coming from and the fact that in large part the specialties in that population are on the lower margin specialties. Radiology, for example, is a little bit lower gross margin for us than an oncology product, for example. It's a little early to stipulate what will happen to the exchanges. What we have sought to communicate clearly is given the depth of the weighted pipeline, which is over $1 billion on a weighted basis, both across Performance Suite opportunities and Technology and Services Suite opportunities, we see a clear path to delivering on our goal, which is 20% EBITDA growth year -over- year in a wide range of potential outcomes for the exchanges. Okay, you know, a lot of the managed care does some of this themselves. I'm just curious, you know, you guys have been effective in it, delivering the value to them and controlling specialty costs. Why, you know, why doesn't managed care just turn everything over to you? Why are some people reluctant to do it themselves or use competitors? Yeah, so let me say two things on that. We are seeing a trend this year. It's a novel trend, of a number of these managed care organizations that have historically done this work in-house, look for an outside partner like Evolent. Why are they doing that? I think it's two reasons. One is really feeling the crunch on the medical expense side. Two, and this piece is a little bit newer this year, there are increasing regulatory requirements around shorter turnaround times, electronic, sort of response times, and other commitments, for example, that AHIP came out with a few weeks ago around prior authorization. It's our view and what we're hearing in the market that meeting those commitments in a lot of cases will take a partner like Evolent. A health plan, we don't think, can do it themselves in a lot of circumstances. That is one of the reasons why we think we have the size of the weighted pipeline that we have. There's some entities in that pipeline, very active prospects that currently are doing this work internally and looking to partner with an Evolent, both to increase the clinical value and clinical quality, but also to ensure that they're meeting those commitments on turnaround time, provider friendliness, and member friendliness. Okay, so what you're talking about is the prior authorization pledge and reform that people were talking about a month or two ago, and then maybe tying that back to the data integration. Obviously, a lot of the pledges to, you know, have that automation, digital connectivity, and you're saying that this could be a tailwind for Evolent. That's right. That's right. We already drive more than 80% of the requests that come into Evolent come through our portal. That's our vastly preferred approach, and we have important investments in the data connectivity and interoperability, which becomes an industry standard in 2027, that we think will further differentiate our platform. Have you guys been part of any of the talks with AHIP and HHS? Yeah, absolutely. You know, we seek to, in part because we're headquartered in Arlington, just outside of D.C., we seek to be involved in those conversations and make sure our voice is heard, and what we think are the best directions for value-based care. Okay, maybe moving on to new business. You know, year to date, I think it's 11 new relationships, if I'm not mistaken. The pipeline sounds like it's pretty robust. You gave some high level, I don't want to say guidance because you didn't say it was guidance, but thoughts on 2026 and maybe, you know, talk about that a little bit and then the confidence level, what's in there as a go-get that you haven't signed? Yeah, we put a stake in the ground that given the business that we've already signed, plus the size of the weighted pipeline, we feel very confident in meeting or exceeding $2.5 billion of revenue next year. The way you get there is with approximately $1.9 billion in 2025, + $250 million from the announcements that we made last Thursday, and then $350 million of net growth from that weighted billion-dollar pipe. In that space, you've weighted it to a billion and you're further haircutting it by a lot, which is one of the reasons that we get comfortable with that expectation setting even this early in the year. It is our aspiration and expectation that we will be making incremental growth announcements across the fall. have any thoughts on EBITDA? Other than, you know, we continue to see this opportunity of growing adjusted EBITDA by 20% a year, is the growth algorithm. There's a number of ways to drive that, both organic growth and margin expansion, both through AI and the Technology and Services Suite, where we have a lot of initiatives driving value, and in margin maturation in the Performance Suite. Maybe hitting that on the AI really quickly. You know, when you acquired the Machinify technology a couple of years ago, I believe Seth had laid out some targets. Yeah. Where do you stand on reaping the benefits of AI versus maybe those initial targets? Yeah, so we have a target to exit this year with a $20 million net improvement in our unit costs, and that is on target. We feel good about hitting that number. Over the longer term, we've set an expectation that we can drive $50 million of net EBITDA benefits over a multi-year timeframe. The $20 million is getting us part of the way there, and we would expect to exit 2026 at a higher savings number, and so on. We feel really good about hitting that target and in the ways that we're using that kind of technology to further differentiate the platform. All right. We have about a minute left. It's probably good to hit the balance sheet and cash flow. How you're thinking about those trends in terms of cash flow and, you know, use of capital over time. Yeah. Three important things to hit. You know, we have an expectation that we will generate about $65 million of cash from operations across the rest of the year. That will, we consider back to normal. We did have in the first half of the year about $85 million of one-time uses of cash, settling up for losses in the Performance Suite last year that have since been restructured and can't recur structurally with the way the contracts are, and some lease termination penalties or payments that have been made. That's $85 million of cash use in the first half that won't recur. As we look at the back half and into next year, we typically expect to generate cash from operations of 60%- 70% of EBITDA. Feel really good about that. On other sort of capital allocation priorities, look, we are focused on delevering. I think we will seek to execute on that plan, with an expectation that we can delever by about one turn per year, with a combination of EBITDA.