What Evolent Health (EVH) Said on Its Q3 Earnings Call

Key Points

• Evolent raised the lower end of its 2026 adjusted EBITDA outlook to $130 million–$135 million, while maintaining revenue guidance of $2.6 billion–$2.7 billion. Third-quarter revenue rose 11% sequentially to $725 million, and adjusted EBITDA increased 22% to $34.3 million.
• Performance Suite revenue grew 16% sequentially, supported by the Highmark partnership, and the medical expense ratio improved to 93% from 95%. Favorable claims development helped results, though some benefit shifted into Q3, limiting the expected Q4 improvement.
• Evolent renewed a major surgical-care contract and announced customer expansions, while investing in AI prior-authorization automation. It expects 2027 adjusted EBITDA guidance midpoint of at least $150 million; quarter-end net debt was $776 million.

Evolent Health NYSE: EVH raised the lower end of its 2026 adjusted earnings outlook after third-quarter revenue and profitability improved from the preceding quarter, helped by growth in its Performance Suite business and favorable claims development.

The company reported revenue of $725 million for the quarter ended September 30, up about 11% from the second quarter. Adjusted EBITDA rose approximately 22% sequentially to $34.3 million, while the medical expense ratio improved to 93% from 95%.

Evolent reaffirmed its full-year revenue forecast of $2.6 billion to $2.7 billion and increased its adjusted EBITDA guidance to $130 million to $135 million, from $120 million to $135 million previously. Chief Financial Officer Mario Ramos said the company expects fourth-quarter adjusted EBITDA to rise by approximately $11 million to $16 million from the third quarter, an increase from its earlier projected step-up of $7 million to $15 million.

Performance Suite Drives Growth

Performance Suite revenue increased approximately 16% sequentially to $564 million, primarily reflecting a full quarter of revenue from the Highmark partnership and contractual adjustments, Ramos said. Specialty Technology and Services revenue fell about 7% to $73 million, while Administrative Services revenue was roughly flat at $48 million. Cases revenue was approximately $40 million.

Ramos said the medical expense ratio benefited from favorable current-year claims development that emerged earlier than expected, as first-quarter medical expenses came in better than anticipated after claims were processed. He distinguished that benefit from prior-year development recognized in the second quarter.

Because some of the anticipated fourth-quarter benefit appeared in the third quarter, Ramos said Evolent expects a smaller sequential improvement in the medical expense ratio in the final three months of the year. The company maintained its full-year forecast of approximately 93%.

Customer Renewals and Expansions

Chief Executive Officer Seth Blackley said Evolent renewed its largest Surgical Management customer contract for four years. The business manages musculoskeletal and cardiovascular care.

An existing client also agreed to expand its oncology offering into several additional states, adding approximately 1 million commercial members, with a January 1, 2027 launch expected. The agreement includes Evolent’s Member Navigation service for both existing and new members. Blackley said the expansion is primarily a Specialty Technology and Services opportunity and described its revenue contribution as relatively modest.

Separately, Evolent expanded its Specialty Technology and Services relationship with a national payer into 11 additional states, bringing the relationship to 50 states and approximately 7 million members. Blackley did not name the payer or provide the number of members added by the expansion.

The company also introduced a cancer care model with the American Oncology Network intended to reduce providers’ prior authorization burden. Blackley said it has initially been rolled out across clinics in eight states.

AI Investments and 2027 Outlook

Blackley said Evolent’s AuthIntelligence platform, which uses AI in prior authorization reviews, is currently touching approximately 1 million cases annually. He expects more than 80% of cases previously requiring manual authorization review, or approximately 2 million cases, to run through the platform by the end of 2027.

Where the technology has been deployed, auto-approval rates have improved by as much as 20 percentage points for some customers and case types, Blackley said. He added that Evolent expects to share some savings with clients while using the technology to support margins and potentially gain market share.

Ramos said AI-related capital spending will be higher in 2027, with initial returns expected late in the year, primarily through cost reductions. Some anticipated automation efficiencies are included in the company’s outlook for next year.

Evolent continues to expect the midpoint of its eventual 2027 adjusted EBITDA guidance to be at least $150 million. Ramos cited maturing contracts, membership growth and cost reductions as potential tailwinds, partly offset by membership attrition, contract scope adjustments and investment spending. The company expects to provide detailed 2027 guidance with its fourth-quarter results in February.

Blackley said the outlook assumes no changes to the One Big Beautiful Bill. He said potential changes to Medicaid work requirements or exchange subsidies could benefit Evolent, but the company is not incorporating such changes into its current expectations.

Cash and Debt

Evolent ended the quarter with $148 million in unrestricted cash and $776 million in net debt. It generated approximately $26 million in operating cash flow during the quarter and spent about $7 million on capital expenditures.

The company continues to forecast full-year operating cash flow of $10 million to $20 million, subject to the timing of reconciliation payments expected in late December. It targets deploying up to $50 million to reduce outstanding debt by year-end, while retaining flexibility over the timing and form of the reduction.

About Evolent Health (NYSE:EVH)

Evolent Health, Inc NYSE: EVH is a healthcare services and technology company that helps health plans and healthcare providers transition to value-based care. Its platform is designed to support the management of clinical programs, improve patient outcomes and coordinate care while helping customers manage healthcare costs.

The company provides specialty and total-cost-of-care solutions across areas such as cardiology, oncology, musculoskeletal care, radiology and other complex conditions.

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